NNPC begins rehabilitation of refineries
The Nigerian National Petroleum Corporation (NNPC) has audited the government’s ailing refineries and mobilised funds and technical resources to restore them to full operating capacity within the shortest possible time to crash fuel prices and guarantee energy security.
The Group Managing Director of the NNPC, Mr Mele Kyari at a recent interview said the nation’s four refineries (Kaduna, Warri, Port Harcourt and Indorama Petrochemical, Eleme), are set for major rehabilitation. The refineries have a combined capacity of 444,000 barrels per day (bpd).
The NNPC chief said they were shutdown having been starved of the mandatory routine turnaround maintenance (TAM) and major rehabilitation; despite the huge chunk of money voted for them over the years.
Kyari said “What you call rehabilitation is different from TAM, a routine endeavour. When you talk about rehabilitation, that means you have colossal loss of capacity in the refineries. It means you’ve not done TAM properly, you’ve not replaced parts as and when due and it has gotten to a point where you’re not able to operate the refineries in the full installed capacities.
“Every refinery is expected to operate at least 90per cent of installed capacity. With all the TAM down, it was impossible to run any of these refineries at 90 per cent capacity. Our estimate was that we could run at 60 per cent capacity but if we do that, it’s simply value destruction. You take a $100 crude and bring out $70 product, it doesn’t make sense.
“We want to make them work and that’s why we’re doing full rehabilitation. Refineries are like aircraft. I’ve visited refineries that are over 100 years old that are still functioning. Refineries don’t die like cars or other assets,” he explained.
To save cost and hefty consultancy fees, in the programme to rehabilitate refineries, the NNPC has looked inwards and leveraged local competence by appointing its engineering subsidiary, National Engineering and Technical Company, NETCO/KBR as Owners Engineer (OE) for the Port Harcourt and Warri refineries in May.
The NNPC management has also invited tender for the repair of Port Harcourt refinery and signed a $1.5 billion prepayment deal that will see it selling crude to some oil trading firms in exchange for the prepaid money. The financing package, called Project Eagle, was backed by the African Export Import Bank (Afreximbank).
Another major effort to revamp the refineries was the signing the engineering, procurement and construction (EPC) contract to boost the country’s liquefied natural gas output by more than 30 per cent.
Construction will begin in the first quarter of next year and financial close will be achieved for the Port Harcourt by this November.
For the Warri and Kaduna refineries, following the conclusion of stopping, Owners Engineers have been selected for the refinery and NETCO. The financing of Warri and Kaduna has advanced to term sheet level with Luke Oil and other commercial banks. This process will lead to issuing of tenders for EPC contract to list EPC contractors that have been cleared by BPP. These are for the refineries.
For the associated pipelines for crude and produce transportation, public tenders have been done to partners on build, operate and transfer. The completion target is before 2023.