By Yusuf Akinpelu In 13 months, three refineries in Nigeria cost the country ₦148 billion in expenses, but produced less than 40,0...
By Yusuf Akinpelu
In 13 months, three refineries in Nigeria cost the country
₦148 billion in expenses, but produced less than 40,000 metric tonnes of crude
oil, a June report published by NNPC has shown.
The Nigerian National Petroleum Corporation attributed the
operational shortfall to the ongoing rehabilitation of the oil refineries.
The refineries have a combined production capacity of
445,000 barrels per day (bpd).
The Port Harcourt refinery has the capacity of 210,000 bpd,
the Kaduna refinery, 10,000 bdp, and the Warri refinery, 125,000 bpd.
But from June 2019 to June this year, the three
petrochemical companies could only manage 38,977 metric tonnes of crude
production.
This was produced in July 2019 by the Kaduna refinery, which
amassed an operating deficit of ₦62 billion in 13 months, according to PREMIUM
TIMES’ review of the published details.
With zero production, the Warri and Port Harcourt refineries
respectively gulped ₦42.1 billion and ₦43.8 billion from the country’s coffers.
All through, only the Kaduna refinery had its capacity
utilised for once. It had an 8.09 per cent capacity utilisation in July 2019.
During the remaining months, itself and the other refineries had zero capacity
utilisation.
“The declining operational performance is attributable to
ongoing revamping of the refineries which is expected to further enhance
capacity utilization once completed,” the NNPC wrote in its report.
In June alone, the refineries cost the country ₦10.23
billion in expenses, despite not processing any oil for the month, this
newspaper earlier reported.
While only 2.07 per cent of the consolidated capacity of the
three refineries was utilised in June, for the 13 months under review, they
functioned only at 0.16 per cent of their optimal capacities.
Although the NNPC said this was due to the ongoing repair of
the refineries, its audit report published in June — the first in 43 years —
showed that the refineries posted a cumulative loss of ₦1.64 trillion from 2014
to 2018.
Both Port Harcourt and Kaduna refineries recorded a combined
loss of ₦208.6 billion in 2014; ₦252.8 billion in 2015; ₦290.6 billion in 2016;
₦412 billion in 2017, and ₦475 billion in 2018.
The audit report also showed that a cumulative loss of about
₦412.8 billion was incurred from the operations of the nation’s four refineries
in 2017 and 2018.
Critics have called for their privatisation, often countering
the logic in the federal government’s avowed commitment to sink more public
funds to repair the refineries, which have been left to rot for decades.
Yet, both the state petroleum minister, Timipre Sylva, and
the NNPC chief, Mele Kyari, have at different fora spoken about the
government’s resolve to rehabilitate the refineries before considering
privatisation.
Periodic turnaround maintenance has over the years been
carried out to increase capacity, but production remains low and cost, high.
The capacity of the three refineries pales significantly
when compared with the nation’s required consumption because Nigeria’s rate of
importation is over 80 per cent of its consumption.
PREMIUM TIMES found that the bulk of the losses from the
refineries was from the operating costs and administrative expenses accumulated
by them despite that some have since been shut down or operating at grossly
below installed capacities.
Also, all the refineries spent huge earnings on
administrative expenses, which included head office overhead funding, public
relations and publicity, staff training expenses, local/international travels
and hotels, employee benefits, director’s remuneration, and consultancy fees.
Other factors responsible for the losses incurred, NNPC
said, include spillages, explosions, and theft.
“Products theft and vandalism have continued to destroy
value and put NNPC at a disadvantaged competitive position. A total of 1,067
vandalised points have been recorded between June 2019 to June 2020,” the NNPC
wrote.
Implication
Nigeria has 36.97 billion barrels of proven oil reserves,
according to the 2019 Oil Producing Exporting Countries (OPEC) annual
statistical bulletin. This is eighth highest among OPEC members, representing a
share of 3.1 per cent.
As of March, Nigeria was Africa’s largest oil producer (and
sixth in the world), pumping about 1.78 million bpd, sales from which the
country earns 90 per cent its foreign exchange, 60 percent of its revenue, and
8 percent of its GDP.
On the downside, however, the country’s non-performing
refineries have made it a major importer of oil products, despite its huge
production potential.
As a result, upstream oil explorers export the crude product
to foreign refiners before importing it back to the country for sale to the
downstream players.
While that is an extra strain on the government’s revenue, a
report by a watchdog organisation, Stakeholder Democracy Network (SDN), showed
that the imported fuels are unsafe and unclean, as they fall far below
officially recommended standards and cannot be sold anywhere in Europe.
The report found that fuels refined illegally by vandals in
Nigeria’s creeks are ‘cleaner’ than those legally imported from Europe.
Nigeria’s maximum stipulated sulphur content in premium
motor spirit (petrol) is 150 per per million (ppm), that of automotive gas oil
(diesel) is 50ppm, and that of dual purpose kerosene (DPK) is 150ppm.
On the contrary, SDN found that while illegal diesel refined
in the creeks has 1,523ppm on the average, samples of those refined abroad have
2,044ppm sulphur content. This is about 14 times more sulphuric than the limit
set as safe.
For petrol, samples collected contain 43 times more than EU
fuel sulphur standards, the report said, adding that household kerosene was
found to be better.
“Official kerosene was found to be much better quality than
unofficial samples, but is generally in short supply. The low quality of
unofficial samples indicate artisanal camps face challenges achieving a pure
kerosene product,” the SDN report said.
Yet, the officials of the Department of Petroleum Resources
(DPR), Standard Organisation of Nigeria (SON), and the Nigerian National
Petroleum Corporation (NNPC), have failed to take responsibility to ensure that
regulatory rules and procedures are complied with by players in the sector.
To this end, the Global Air Report published by the Health
Effects Institute (HEI) said the air quality in Nigeria is one of the worst
with more than 114,000 Nigerians dying from air pollution in 2016 alone.
As a way forward, SDN’s senior project officer on
environment, Jesse Martin, earlier told PREMIUM TIMES that there is a need to
engage artisanal refiners in the bid to hatch out a more effective domestic
refining in the country.
Mr Martin said Nigeria’s ministry of petroleum resources and
petroleum technology development fund (PTDF) should consider engaging artisanal
oil refiners in plans for domestic refining, “given they are often producing
fuels with better characteristics than official fuel supplied to Nigeria.”
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