The Nigerian National Petroleum Corporation (NNPC) disclosed on September 3 that none of the country’s four oil refineries will be sold. The NNPC advised the government based on the assessment of the Stock Reconciliation Committee, which disclosed that the refineries are not in any shape to profit the country. Additionally, the NNPC advised that the military should be in charge of protecting the pipelines that link the refineries.
As of August 2015, the NNPC cancelled delivery of crude oil to the refineries. This part of an effort to reduce the exorbitant costs that the company was incurring and to renegotiate their terms of contract with the refineries. President Buhari also granted the NNPC permission to go ahead with the process to evacuate crude oil equity from the different crude and condensate production agreements. The tendering process is meant for the 2015/2016 crude oil term contract.
Nigeria’s four refineries are located in Kaduna, Warri, and Port Harcourt respectively. The first one was built in Port Harcourt at Alesa Emese from 1963 to 1965 by Shell and British Petroleums. Port Harcourt operates two refineries for the country as well as two oil plants. The first plant was comissioned in 1965, and the second was commissioned in 1989.
The building of the Warri and Kaduna refineries commenced in quick succession in 1975 and 1976. Snamprogetti Spa Milan from Italy was awarded the Warri refinery project by the late general Yakubu Gowon, and the refinery became operational in 1978. Under the government of Murtala Mohammed, Chiyoda Engineering and Construction Company from Japan was given license to build the Kaduna refinery. It was completed in 1979 by former general Olusegun Obasanjo.
Former President Ibrahim Babangida expanded the capacities of the Port Harcourt, Warri, and Kaduna refineries in 1985. By 1989, the refineries had a collective capacity of 450,000 barrels per stream day (bpsd), and that capacity has been maintained up till date.
The poor state of the Nigerian refineries today has been an impediment in the growth of the Nigerian economy, which is heavily dependent on oil for sustenance. Government revenues owe 40 percent of their earnings to oil, and 95 percent of export earning comes from oil sales. Over 2 million barrels of oil are produced in Nigeria per day, most of which end up being exported to Asia, America, and Europe for refining.
Maintenance of the refineries is one of the core issues surrounding the lack of a satisfactory output in the Nigerian oil industry. On September 3, 2015, the Minister of Petroleum Resources, Dr. Diziani Alison-Madueke reported findings on her tour to Nigeria’s refineries. According to her, the equipment had neither been changed or maintained in over 20 years.
Just a little over three months ago, in June, the NNPC declared that it was going to witness an overhaul in the refineries as far as equipment were concerned. Shortly after that, by the end of August the corporation advised the Nigerian government to sell the refineries due to financial constraints.
Corruption and mismanagement have also played roles in the quality of the refineries. In 2012, the government tried to end subsidies placed on oil pricing in Nigeria, causing citizens to pay more than twice the amount they could afford. Subsidies were placed in the first place to ensure that Nigerian citizens did not have to pay the price for the government’s lack of working refineries.
Privatisation of the refineries has also been turned down by the Nigerian government. Dr Ibe Kachikwu, the Group Managing Director of the NNPC made a declaration on September 3 that the Federal Government will hold on to the country’s refineries, and the ongoing rehabilitation of them would be accelerated. Joint ventures with partners renowned for expertise in oil refinery, however, will take place to aid this rehabilitation process.
According to the Managing Director of the Port Harcourt Refinery Company, Dr. Bafred Audu Enjugu, rehabilitation of the company will cost less that $10 million. This rehabilitation is being carried out entirely by indigenous engineers, as proudly announced by the MD.
Refining of crude oil and other petroleum products translates into an economic boost and development for any nation. Developed countries like the United States, China, and Russia are an example of this. In ‘thousand barrel capacity’ of oil refinery, the United States refined 17, 736 barrels in 2014 alone.
Dr. Ibe Kachikwu stated that the rehabilitated Nigerian refineries could supply the country with as much as 20 million litres of petrol to complement the total volume of fuel supply on a daily basis.
