In defense of refinery rehabilitation
By Alexandre Adejoh
Mixed reactions continued to follow the federal government’s decision to rehabilitate the Port-Harcourt Refining Company (PHRC).
The Federal Executive Council (FEC) recently approved $ 1.5 billion for the immediate rehabilitation of the Port Harcourt refinery.
This followed a note from Minister of State for Petroleum Resources Timipre Sylva on its rehabilitation, which was presented to the FEC and subsequent approval on March 17, 2021.
Indeed, Nigeria’s refineries have suffered years of neglect.
In particular, the PHRC has experienced a performance decline over the past two decades due to delays in implementing Mandatory U-Turn Maintenance (TAM).
The last time a TAM was performed on the refinery was 21 years ago (2000)! Isn’t it time for the country’s refineries to regain their peak capacity?
Some critics have argued that it is more economical to build a new refinery than to “waste $ 1.5 billion” to rehabilitate the PHRC, which holds 210,000 b / d of the 445,000 b / d of refining capacity. from Nigeria.
On the contrary, a quick review of brand new refineries built around the world reveals that building a refinery of similar capacity as PHRC is estimated at over $ 6 billion depending on a number of technical factors and non-technical. For example, $ 10 billion was spent on the construction of the Aramco oil refinery (250,000-300,000 bpd) in Pakistan, $ 12 billion was spent on the construction of the Abrue Lima project (230 000) in Brazil; while $ 27 billion was spent on the construction of the Pengerang refinery and integrated petrochemical development, the naphtha steam cracker RAPID (300,000 b / d + 3 mtpa) in Indonesia. In Nigeria, $ 19 billion has been spent so far on the Dangote refinery (650,000 bpd) before commissioning and start-up of the plant.
It is interesting to note that despite the abundance of hydrocarbon resources, Nigeria is unfortunately the only oil producer in the world that does not refine petroleum products. Instead, the country is heavily dependent on imports for most of its local oil needs. It is not a good record to be proud of. Armchair critics also make a superficial argument that it is better to sell these refineries because they can no longer meet the country’s refining needs. Which country is giving up its strategic national assets, such as refineries, to the highest bidder? Chair reviewers generally think a mere mention of TAM means another cycle of work as usual, where resources are depleted with nothing to show at the end of the day.
While some of these arguments are genuine, it is instructive to note that this TAM is different as it will allow for the replacement of aging / obsolete equipment and ensure that the refinery is operating at a minimum of 90% of capacity utilization. On the other hand, Nigerians will benefit immensely as PMS and other petroleum products will be available locally, jobs will be created from the business value chain and the current pressure on Forex to import products. will decrease. In addition, interested parties who have profited from long-standing import largesse and wiped the nation dry will potentially be bankrupt.
The same goes for critics of the administration of President Muhammadu Buhari. These critics have probably forgotten that this was an administration which, from its inception, made it clear its intention to bring refineries back to peak capacity. The Buhari presidency also gave its full weight and support to the NNPC to implement the project.
It should be noted that for the African Import-Export Bank (Afreximbank), which is the reliable lender for the project to raise $ 1 billion for the initiative, this shows that the multilateral institution understands how much the project is crucial. In the same vein, the federal government will raise the sum of $ 550 million. Obviously, a credible and competent lender like Afreximbank would never agree to put such an amount of money where there is no value. In addition, good governance structures have been instituted around the implementation of the project to ensure its success. Likewise, Tecnimont SpA, the original refinery builder (ORB) which is also the engineering, procurement, construction, installation and commissioning (EPCIC) contractor, is globally renowned and competent, with the requisite experience in similar jobs around the world.
There are still a number of other real reasons why the current refinery rehabilitation project is different.
First, the governance structure for the implementation of the project includes key independent external stakeholders: Ministry of Finance, NEITI, ICRC, the two unions in the oil and gas industry – PENGASSAN and NUPENG.
Second, it involves the significant replacement of key equipment within the main units and components of the refinery.
Third, it is financed partly by a loan and partly from the government, with the financiers actively monitoring the execution of the project. KBR and NETCO also act as NNPC engineers who will oversee the EPC contract to ensure that the project is delivered on time, on budget and with the right quality.
Sylva urged Nigerians who oppose the project to hold him accountable for every dollar that is spent to rehabilitate the refinery.
“They (Nigerians) can hold me accountable and hold this government accountable for every dollar, every penny on this refinery and make sure we deliver a working refinery,” he said.
Sylva also explained that the rehabilitation will take 18 months and that the first phase will bring the refinery to 90% of its operational capacity, stressing that President Muhammadu Buhari is determined to leave a legacy, including ensuring that the refineries are functioning.
“It will not be just debts, we are not going to borrow all the money that goes into rehabilitation.”
In addition, the minister explained that the project would be in three phases, adding that the first phase would fall under the mandate of this administration.
“You should hold us. It’s been 18 months and we’re going to bring the refinery to 90% of its main capacity and that’s what you should stick to, ”he said.
While defending the project, the former governor of Bayelsa state noted that the federal government is also planning to rehabilitate other refineries in the country, explaining that the move was not a waste of funds as many believe. Nigerians.
According to him, the refinery will benefit Nigerians and will be commercially viable to bring profits to the government and meet the country’s domestic needs, especially in addition to the Dangote refinery.
“This rehabilitation will bring a lot of gains to Nigerians. First, we benefit from savings in foreign currency, savings from importing premium motor gasoline (PMS); and we will benefit from the operations of the refineries themselves, ”he noted.
The minister also denied hints that the rehabilitation could have taken less than 500 million naira, saying that the rehabilitation of the refinery was professionally managed.
It is also expected to result in job creation along the entire value chain (crude supply, refinery operation and maintenance, product supply, etc.), including several third-party subcontractors who will provide services or subcontracted goods.
Refined products are also raw materials for local small-scale manufacturing. The biggest and most visible benefit is the country’s energy security. Imagine if the COVID 19 lockdown went global and we couldn’t import it would have been a disaster as there had been no capacity to refine crude in the country and as such there would be no no products.
A group like the Ijaw Youths Council (IYC) Worldwide, which understands the importance of this laudable decision, described it as a signal that the federal government has woken up from its slumber.
IYC President Peter Igbifa said that although the re-launch and optimization of the refinery was long overdue, it is better late than never.
Igbifa, who called the move a welcome development, said it would create jobs for the teeming unemployed youth of the Niger Delta region and increase the country’s refining capacity.
The IYC boss also expressed optimism that the project, when completed, would reduce unrest and youth crime in the region. He advised the federal government not to play politics with the project.
Igbifa called on the government to take immediate action by immediately releasing money to support his approval.
Igbifa said: “It should not end with the approval of funds, the money should be released as it goes. We don’t want to hear the usual excuse that the project is delayed for lack of funds. We have listened intently as the Minister of State for Petroleum, Chief Timipre Sylva, rolled out the project schedule and we expect the rehabilitation to follow the schedule.
“As a council, which fights for the interests of the Ijaw youth and other youth in the Niger Delta, we will form an action committee to work closely with the oil ministry and the entrepreneurs who will be in charge of rehabilitation project. We will be monitoring the execution of this project from start to finish and if we notice any foul play, we will surely sound the alarm bells.
Igbifa said it smacked of the lack of seriousness and irresponsibility for an oil-producing country like Nigeria to sell crude oil and import refined products, adding that the decision to rehabilitate the Port Harcourt refinery would gradually end. to economic disaster.
For his part, environmental justice activist Mr. Fyneface Dumnamene Fyneface hailed the planned rehabilitation of the Port Harcourt refinery, saying it will create jobs and also curb the relentless rise in fuel when completed.
Fyneface also urged the government to consider funding artisanal refiners to own modular refineries, in order to contribute to the country’s energy self-sufficiency.
“The approval, coming at a time when Nigerians are complaining about relentlessly rising fuel prices and the energy crisis, would go a long way in resolving these issues when over. During the rehabilitation, jobs will be created for young people and experts at all levels, ”he added.
Therefore, the federal government must receive all the support necessary for the Port Harcourt refinery to be restarted and operational again in order to save the government from its scarce foreign exchange revenues and to create the jobs it so badly needs.
Adejoh writes from Lokoja, Kogi State.