Why Nigeria’s refineries are in a terrible shape – Kachikwu

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• Why Nigeria’s refineries are in a terrible shape – Kachikwu
  

 
By STEPHEN ONYEKWELU& DIPO OLADEHINDE On Jun 4, 2019
Why Nigeria’s refineries are in a terrible shape - Kachikwu

 
Ibe Kachikwu, minister of state for Petroleum Resources, has explained why the country’s four refineries in Port Harcourt, Warri and Kaduna are still terrible shape despite huge investments and many attempts to make them productive.

In an interaction with journalists including BusinessDay, the minister who is usually at the forefront, mostly representing and speaking on behalf of President Muhammadu Buhari who also doubles as the minister of petroleum resources admitted that the refineries are still performing poorly and that it is one area the administration did not deliver its mandate on.

Kachikwu explained that the first problem the administration had when it came on board was that the refineries were not even functioning or producing at all and because of the apparent huge fuel scarcity it was a major challenge for him “because if I have to wait for vessel each time to meet the delivery timelines we always have a problem.”
 
“The pipelines that were supplying petroleum products had all being destroyed, and the previous government had then entered into a contract to buy products by vessels however the cost of those vessels supplying were more than the crude that was being supplied so it wasn’t making any financial sense,” Kachikwu said.

Kachikwu narrated that with the president permission he cancelled the contracts and challenged Nigerians who were concerned to use their own money to repair the pipelines and if after three months its works the Nigerian National Petroleum Corporation would pay or give maintenance contracts to the companies.


“By March 2016, the refineries started producing not obviously by 90 percent capacity but at least they were adding close to 2 or 3 million barrels. However the years of Turn Around Maintenance (TAM) were all a failed exercise as billions and billions of naira were spent and every time the thing packs up,” Kachikwu said.


The NNPC has four major refineries, two in Port Harcourt, Rivers State, which combine to form the Port Harcourt Refining Company (PHRC) with a combined installed capacity of 210,000 barrels per stream day (bpsd); the Kaduna Refining and Petrochemical Company Limited (KRPC) with an installed capacity of 110,000 bpsd; and the Warri Refining and Petrochemical Company Limited (WRPC) with an installed capacity of 125,000 bpsd. All the refineries have a combined installed capacity of 445,000 barrels per day.



After series of deliberation, Kachikwu explained how he created a business model whereby investors can invest in the refineries and make the refinery to start working at about 90 percent capacity which would move production from an average of 50,000 bpd to an average of 300,000 bpd. The profit from it would be used to offset the loan taken over a period of four to five years which was the next best situation because the best situation would have being sell the refineries.


“The president approved it however as at that time I left as GMD of NNPC and handed over. NNPC owns the refineries so the minister’s role is not to come in and head the negotiations with investors on how refineries are run, the minister’s work is to push for policy approval and make sure they stay on track,” Kachikwu said.


Kachikwu said as chairman of the board, he worked hard in pushing NNPC on this but it didn’t deliver however by December last year, when he got worried NNPC were not meeting the mandate that are expected from the refineries he called a meeting and tried to resolve the meeting with investors themselves over the contractual terms.


“I thought I did, eventually NNPC still rejected the terms we agreed. So when people say I didn’t deliver I don’t know what else they were expecting from me,” Kachikwu said.
Kachikwu explained that the future of refining is not in public sector but in private sector which was why they supported Dangote wholeheartedly.


“I have visited the refinery about four times some of my guys have been their over 20 times and we set a timeline working with them as if it was a public sector project. So they have never being that kind of corporation before, Kachikwu said.
As uncertainty continues to surround their proposed rehabilitation, Nigeria’s refineries extended their losses, recording an operating deficit of N133.9 billion from January 2018 to January 2019.


According to data compiled from Nigeria National Petroleum Commission (NNPC) within a thirteen month period, the three refineries incurred a combine operating deficit of N133.9 billion.


In spite of promises by successive governments to improve the performance of the refineries and commit significant resources to their rehabilitation, the four refineries continue to operate at zero percent capacity utilisation, as data from NNPC 2019 monthly bulletin showed.