Nigeria: U.S.$1.5 Billion for Port Harcourt Refinery Rehabilitation
The eyebrows that were raised when the federal government penultimate week approved a whopping sum of $1.5 billion for the rehabilitation of Port Harcourt Refinery was not exactly unexpected. To many Nigerians, it seems like a journey on the same bumpy road that leads to nowhere.
Minister of State for Petroleum Resources, Timipre Sylva, who announced the new deal after the weekly Federal Executive Council, (FEC), meeting said the rehabilitation will be done in three phases of 18, 24 and 44 months. He disclosed that the contract was awarded to an Italian company, Tecnimont spa, who are experts in refinery maintenance, on the recommendation of the Japanese firm that built it.
He also noted that the funding would be in three components, namely, Nigerian National Petroleum Corporation (NNPC) Internally Generated Revenue (IGR), budgetary allocations and facility from Afreximbank.
In the considered opinion of this newspaper, spending $1.5 billion on the refinery at a time when the resources of the country are few and far between has left much to be desired.
Indeed, experts have adduced that the inability of our refineries to function for years is a national shame that has left the country at the mercy of prices in the international oil market .
Regrettably, in our view, Nigeria has spent about $25 billion in turnaround maintenance of the country’s refineries in the past 25 years with virtually nothing to show for it. We also recall the decision of the senate last year to probe the (NNPC), over alleged $396 million expended on Turn-Around Maintenance (TAM) of the refineries between 2013 and 2015. There is no doubt that TAM has become synonymous with sleaze and corruption as many Nigerians see it as an avenue for some penny pinching government officials to loot the treasury.
The contradiction in this new deal is that it is coming at a time when government is supposed to hands off downstream oil business, courtesy of deregulation. Again, we recall that last year, the federal government announced a total deregulation of the downstream sector and the removal of subsidy, in the midst of fuel importation for local consumption.
What many industry watchers consider amazing is why successive administrations had failed to build more refineries in the years of oil boom, yet left the existing four refineries to die.
That does not happen in other climes. It is noteworthy that as at January 1, 2020, there were 135 functional petroleum refineries in the United States of America. Also, Singapore, a country with a population of the Federal Capital Territory ( FCT) has three refineries.South Africa on the other hand has functioning six refineries.
In the case of Nigeria, according to an NNPC report last year, three of Nigeria’s four refineries gulped N1.64 trillion in cumulative losses recorded in their operations since 2014. Two of these refineries are the 210,000 barrels per day capacity Port Harcourt Refining and Petrochemical Company Limited and 110,000 barrels per day Kaduna Refining and Petrochemical Company Limited.The audit reports showed that combined losses from the two refineries were N208.6 billion in 2014; N252.8 billion in 2015; N290.6 billion in 2016; N412 billion in 2017, and N475 billion in 2018.
As we have consistently advocated, government has no business in business.This is an axiom that must be internalised by the nation’s decision makers if we desire a shift from this merry-go-round approach to development issues.
It is, however, gratifying to note that Vice President, Yemi Osinbajo recently said the only way to effectively address the massive infrastructural deficit that the country faces is by Public-Private Partnership (PPP) arrangement in one form or the other. This, in our considered opinion, is the way to go.
Before now, experts in the oil industry had suggested that the best option for the country would have been to sell the refineries or enter into a PPP arrangement. Individuals and corporate bodies, especially the oil majors, should have been encouraged to build refineries through appropriate legislations. It is instructive to note that Dangote oil refinery, a 650,000 barrels per day (bpd) integrated refinery and petrochemical project, expected to be Africa’s biggest oil refinery and the world’s biggest single-train facility is expected to come on stream next year. Government should encourage other well to do Nigerians to invest in the downstream sector.
Besides, we understand the nationalistic deposition of the present administration to have a government owned refinery, but previous experiences have shown that government cannot manage such investments. And the earlier this reality is accepted, the better for the country.
It is from this position that we are obligated to urge the government to halt the planned rehabilitation and sell the refineries or go into a PPP arrangement with interested firms.
by Leadership.
