In 13 months, three refineries in Nigeria cost the country ₦148 billion in expenses, but produced less than 40,000 metric tonnes of crude oil, a June report published by NNPC has shown, according to Premium Times report.

The Nigerian National Petroleum Corporation attributed the operational shortfall to the ongoing rehabilitation of the oil refineries.

The refineries have a combined production capacity of 445,000 barrels per day (bpd).

The Port Harcourt refinery has the capacity of 210,000 bpd, the Kaduna refinery, 10,000 bdp, and the Warri refinery, 125,000 bpd.

But from June 2019 to June this year, the three petrochemical companies could only manage 38,977 metric tonnes of crude production.

This was produced in July 2019 by the Kaduna refinery, which amassed an operating deficit of ₦62 billion in 13 months, according to PREMIUM TIMES’ review of the published details.

With zero production, the Warri and Port Harcourt refineries respectively gulped ₦42.1 billion and ₦43.8 billion from the country’s coffers.

All through, only the Kaduna refinery had its capacity utilised for once. It had an 8.09 per cent capacity utilisation in July 2019. During the remaining months, itself and the other refineries had zero capacity utilisation.

“The declining operational performance is attributable to ongoing revamping of the refineries which is expected to further enhance capacity utilization once completed,” the NNPC wrote in its report.

In June alone, the refineries cost the country ₦10.23 billion in expenses, despite not processing any oil for the month, this newspaper earlier reported.

While only 2.07 per cent of the consolidated capacity of the three refineries was utilised in June, for the 13 months under review, they functioned only at 0.16 per cent of their optimal capacities.

Although the NNPC said this was due to the ongoing repair of the refineries, its audit report published in June — the first in 43 years — showed that the refineries posted a cumulative loss of ₦1.64 trillion from 2014 to 2018.

Both Port Harcourt and Kaduna refineries recorded a combined loss of ₦208.6 billion in 2014; ₦252.8 billion in 2015; ₦290.6 billion in 2016; ₦412 billion in 2017, and ₦475 billion in 2018.

The audit report also showed that a cumulative loss of about ₦412.8 billion was incurred from the operations of the nation’s four refineries in 2017 and 2018.

Critics have called for their privatisation, often countering the logic in the federal government’s avowed commitment to sink more public funds to repair the refineries, which have been left to rot for decades.

Yet, both the state petroleum minister, Timipre Sylva, and the NNPC chief, Mele Kyari, have at different fora spoken about the government’s resolve to rehabilitate the refineries before considering privatisation.

Periodic turnaround maintenance has over the years been carried out to increase capacity, but production remains low and cost, high.

The capacity of the three refineries pales significantly when compared with the nation’s required consumption because Nigeria’s rate of importation is over 80 per cent of its consumption.

PREMIUM TIMES found that the bulk of the losses from the refineries was from the operating costs and administrative expenses accumulated by them despite that some have since been shut down or operating at grossly below installed capacities.

Also, all the refineries spent huge earnings on administrative expenses, which included head office overhead funding, public relations and publicity, staff training expenses, local/international travels and hotels, employee benefits, director’s remuneration, and consultancy fees.

Other factors responsible for the losses incurred, NNPC said, include spillages, explosions, and theft.

“Products theft and vandalism have continued to destroy value and put NNPC at a disadvantaged competitive position. A total of 1,067 vandalised points have been recorded between June 2019 to June 2020,” the NNPC wrote.

Implication

Nigeria has 36.97 billion barrels of proven oil reserves, according to the 2019 Oil Producing Exporting Countries (OPEC) annual statistical bulletin. This is eighth highest among OPEC members, representing a share of 3.1 per cent.

As of March, Nigeria was Africa’s largest oil producer (and sixth in the world), pumping about 1.78 million bpd, sales from which the country earns 90 per cent its foreign exchange, 60 percent of its revenue, and 8 percent of its GDP.

On the downside, however, the country’s non-performing refineries have made it a major importer of oil products, despite its huge production potential.

As a result, upstream oil explorers export the crude product to foreign refiners before importing it back to the country for sale to the downstream players.

While that is an extra strain on the government’s revenue, a report by a watchdog organisation, Stakeholder Democracy Network (SDN), showed that the imported fuels are unsafe and unclean, as they fall far below officially recommended standards and cannot be sold anywhere in Europe.

The report found that fuels refined illegally by vandals in Nigeria’s creeks are ‘cleaner’ than those legally imported from Europe.

Nigeria’s maximum stipulated sulphur content in premium motor spirit (petrol) is 150 per per million (ppm), that of automotive gas oil (diesel) is 50ppm, and that of dual purpose kerosene (DPK) is 150ppm.

On the contrary, SDN found that while illegal diesel refined in the creeks has 1,523ppm on the average, samples of those refined abroad have 2,044ppm sulphur content. This is about 14 times more sulphuric than the limit set as safe.

For petrol, samples collected contain 43 times more than EU fuel sulphur standards, the report said, adding that household kerosene was found to be better.

“Official kerosene was found to be much better quality than unofficial samples, but is generally in short supply. The low quality of unofficial samples indicate artisanal camps face challenges achieving a pure kerosene product,” the SDN report said.

Yet, the officials of the Department of Petroleum Resources (DPR), Standard Organisation of Nigeria (SON), and the Nigerian National Petroleum Corporation (NNPC), have failed to take responsibility to ensure that regulatory rules and procedures are complied with by players in the sector.

To this end, the Global Air Report published by the Health Effects Institute (HEI) said the air quality in Nigeria is one of the worst with more than 114,000 Nigerians dying from air pollution in 2016 alone.

As a way forward, SDN’s senior project officer on environment, Jesse Martin, earlier told PREMIUM TIMES that there is a need to engage artisanal refiners in the bid to hatch out a more effective domestic refining in the country.

Mr Martin said Nigeria’s ministry of petroleum resources and petroleum technology development fund (PTDF) should consider engaging artisanal oil refiners in plans for domestic refining, “given they are often producing fuels with better characteristics than official fuel supplied to Nigeria.”

 

Credit: Premium Times