24032021 - Insecurity threatens 2023 elections, Ortom tells Buhari

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20 — Vanguard, WEDNESDAY, MARCH 24, 2021 By Obas Esiedesa Last week’s approval of $1.5 billion (about N600 billion) for the rehabilitation of Port Harcourt Refinery by the Federal Executive Council, FEC, has sparked off some controversies as independent reports show that the federal government has spent over N10 trillion so far on the refineries in the country without any result. First, the approval was the culmination of two years effort by the Nigerian National Petroleum Corporation, NNPC, to bring the refinery back on stream amidst rising import bills for refined petroleum products. Nigeria, one of the world’s largest crude oil exporting countries, has, over the years become a net importer of refined petroleum products with trillions of Naira spent annually in the importation of premium motor spirit, PMS, (popularly known as petrol) alone. But it was not always this way. Armed with four refineries located in Kaduna, Warri and Port Harcourt which has two refining plants, Nigeria has in the past refined all its domestic needs with the allocation of 445,000 barrels of crude oil per day for domestic use. However, years of negligence and failed turn around maintenance, TAM, have left the refineries in state of comatose with the country relying 100 percent on imports to meet domestic demand for PMS and other petroleum products. State of the refineries The old refinery in the Port Harcourt Refinery complex was built in 1965 with a capacity of 60,000 barrel per stream day, BPSD. The new refinery was commissioned in 1989 with a capacity of 150,000bpsd, giving a combined Port Harcourt total capacity to 210,000bpsd. During the administration of former President Goodluck Jonathan, the government contacted Chiyoda Group of Japan, which built the refinery to carry out a TAM, but the company declined due to the prevailing insecurity in the Niger Delta. The Japanese conglomerate, instead, recommended Maire Tecnimont of Italy for the job. In 2012, top management of Maire Tecnimont Group had visited Port Harcourt for an onthe-spot assessment, but the TAM never took place. Latest data from the Nigerian National Petroleum Corporation, NNPC, shows that the refinery has not refined any crude in the past two years. The story is not quite different for the 110, 000bpsd Kaduna Refinery. Commissioned in 1980, it has been in state of disrepair and has also not refined any crude since 2017. The Warri Refinery commissioned in 1978 is the first wholly owned Nigerian refinery. At commissioning, it had a capacity to process 100,000 barrels of crude per day. In 1987 it was debottlenecked to process 125,000bpsd. *Chief Sylva Timipre, Minister of State for Petroleum *Malam Mele Kyari, GMD, NNPC Endless road to refineries’ maintenance *Experts see drain pipe investments, corruption In May, 2020, a $7.6 million contract was awarded to Italian firm, Comerint SPA for the repair of the plant which had been comatose due to an explosion in its crude distillation unit that damaged the main crude oil heater. Nothing came out of this, and the refinery has been dormant for years before the failed attempt. Expectedly, the refineries are in poor financial state following years of huge accumulated losses. Latest data from NNPC showed that the refineries remain the highest loss making centres in the NNPC Group. According to NNPC data, the refineries, combined, made a total of N118.048 billion loses in a year from October 2019 to September 2020. A breakdown of the loses showed that Kaduna Refinery incurred N44.124 billion loss during the period while Warri Refinery and Port Harcourt Refinery recorded loses of N35.083 billion and N38.841 billion, respectively. In addition to these losses, huge amount, mostly unbudgeted, is said to have been spent in maintaining the refineries over the years. Between 2013 and 2015, $396.33 million was said to have gone into financing TAM for the refineries with another N276.87 billion spent between 2015 and 2018 for the same purpose. Botched privatization At the twilight of the former President Olusegun Obasanjo administration, the Port Harcourt Refinery and the Kaduna Refinery were sold to Bluestar Oil Services Company, owned by a consortium of Nigerian companies, for a combined sum of $721 million, $561 million for Port Harcourt Refinery and $160 million for Kaduna Refinery. The amount gave the company a 51 percent stake in the refineries. The Bluestar consortium was made up of Dangote Group, Transcorp Plc, Zenon Petrol & Gas, Rivgas Petroleum and Jovis Nigeria Ltd. China Petroleum & Chemical Corporation (SINOPEC) was engaged as technical partner. The deal which was signed a day before Obasanjo’s exit on May, 29th 2007, generated huge public furor and led to a strike action by labour unions the following month. Sensing that the new government of former President Umaru Musa Yar’Adua was considering the revocation of the deal, Bluestar wrote to the Bureau of Public Enterprises on 17th of July 2007 to withdraw from the agreement. The Federal Government subsequently refunded the company and the refineries reverted to NNPC ownership. Focus on Port Harcourt Last December, NNPC in a detailed explanation on the plan to rehabilitate the refinery, set a January 7, 2021 deadline for the re-tender of the project to all the prequalified seven Engineering Procurement and Construction (EPC) companies. It explained then that the shift in deadline for the submission was to enable it have a competitive commercial offer. The bid process which ought to have concluded last year was delayed following the decline of selected EPC companies to continue with the Continues on page 21
Vanguard, WEDNESDAY, MARCH 24, 2021 — 21 Endless road to refineries’ maintenance Continued from page 20 tender process. NNPC explained: “A total of four EPC companies declined further participation arising from their inability to submit competitive tenders due to a variety of reasons including challenges with their subcontractors, the Covid-19 and the tight bid submission period. “Following clarification meetings held with the bidders, the bid closing deadline was extended to 30th November 2020. Along the tendering process, 12 clarification requests were received from the bidders and responded to accordingly. “However, due to requests from the bidders for submission of alternative bids, the ITT document was amended to accommodate alternative bids and communicated to the bidders. Furthermore, the refinery’s Technical Audit Report was shared to all the seven EPC Companies as well. “At the bid submission deadline of 30th November 2020, only one company, Messrs Technimont, submitted a proposal for the Refinery Rehabilitation. The submission of a proposal by just one company was considered not satisfactory”, the Corporation added. Early January, 2021, it emerged that the NNPC was seeking a facility of $1 billion from the Afrieximbank for the rehabilitation of the refinery. The facility, a prepayment with trading firms, would be repaid over seven years through deliveries of Nigerian crude and products from the refinery once the refurbishment is complete. A spokesman at the bank said “Afreximbank is looking into a facility for the refurbishment of the Port Harcourt Refinery. However, the borrower is yet to be determined”. That move has now been *Refinery *Minister of Finance, Budget and National Planning, Zainab Ahmed confirmed by the approval of $1.5bn for the rehabilitation of Port Harcourt Refinery. The Minister of State for Petroleum Resources, Timipre Sylva, told journalists that the rehabilitation which would be in three phases will commence immediately and to be handled by an Italian firm, Tecnimont SPA. He explained that the first phase would be completed in18 months, the second phase in 24 months and the final phase would be within 44 months. He said the funding has three components from Nigerian National Petroleum Corporation, NNPC, Internally Generated Revenue, IGR, the budgetary allocations provisions and the Afreximbank loan. The Minister, who assured that the other three refineries will be put in place before the end of the <strong>Buhari</strong>-led administration, further said that the local content was fully involved in the job. He said: “The Ministry of Petroleum Resources presented a memo on the rehabilitation of Port Harcourt refinery for the sum of 1.5 billion, and that memo was $1.5 billion and it was approved by council today. “So we are happy to announce that the rehabilitation of productivity refinery will commence in three phases. The first phase is to be completed in 18 months, which will take the refinery to a production of 90 percent of its nameplate capacity. “The second phase is to be completed in 24 months and all the final stage will be completed in 44 months and consultations are approved.” On the contractor handling the rehabilitation, he said: “The contractor that was approved by Council today is Messrs. Tecnimont SPA, of Italy, it’s an Italian EPC company that won the bid and that was approved by Council.” Fielding question on the operations and maintenance, Sylva said: “That has been a big problem for our refineries, as we all know, that was also exhaustively discussed in Council and the agreement is that we are going to put a professional Operations and Maintenance company to manage the refinery when it has been rehabilitated. “In any case, it is actually one of the conditions presented by the lenders, because the lenders say they can only give us the money if we have a professional operations and maintenance company, and that already is embedded in our discussions with the lenders and we cannot go back on that.” Controversy as experts, stakeholders react In an interview with Vanguard Business Magazine, energy expert, Henry Adigun described the move by the government as a waste of money, noting that government has no business in managing the refineries. “I think it is a waste of money and I think it is money not well utilized because I do not see how this will add value to the economy”. Mr. Adigun explained that the problem is not with the refineries and that is why the private sector is not doing it. “Why is government spending money to do what the private sector can do if it is viable”. He said government needs to deregulate the sector, concession the refineries to the private sector or sell them off to people that will buy them, even at scrap value. “But government must get out of the business because it is not a business that the government should be involved in”, he insisted.He stressed that refining is not a profitable business for the government, pointing out that “government has spent over $25 billion on repairs of refineries in the last 15 years. Government has lost over N775 billion on the refineries. So, why are they putting another $1.5 billion (about N600 billion)? “This same government told us a few months ago that they were going to concession the refineries; what changed their minds? There is a lot of corruption and inefficiencies in the system”, he added. Also speaking in a telephone interview on the $1.5 billion contract award, the Executive Director of Women in Extractives, Faith Nwadishi, urged the government to make the terms of the contract available to the Nigerian public. Nwadishi explained that this would allow Nigerians examine the deal to establish if it was worth the money it was signed for. She noted that the government has, in the past, spent so much money on the TAM of the refinery with minimal or no returns for the investments. According to her, “We are concerned about the details of the contract. It is good that Nigeria has signed on to the EITI (Extractive Industry Transparency Initiative) and they are supposed to be implementing the contract transparency requirement 2.4. That contract was just signed in 2021, so we expect that the Federal Government and NNPC will make this contract available to us. “But my concern is that in 2017, the same Federal Government approved about $300 million for the repair of the Port Harcourt Refinery and between 2018 and 2019, they approved about N1.2 trillion for Port Harcourt refinery TAM. Now in 2021, we are having another $1.5 billion for the same Port Harcourt refinery maintenance. “Meanwhile there is a report that came out showing that people have been receiving salaries without producing anything. Now, if you put all of these monies together, what is the return on investment in all of these? Why do we keep putting monies into a place that is not yielding any result?”, she queried. Nwadishi argued that rather than pump such huge sum into the refinery, government should think of privatizing them to allow competent people manage them. “How can we have four refineries in the country and we are not able to process crude? The reason for having these four refineries was for them to process 445,000 barrels per day and we are not even getting 5,000 barrels from them. “A private refinery would soon come on stream and we are still pumping money into government owned refineries. Why not give them out to people who can manage or better still we can have private people run the refineries on behalf of government”. C M Y K
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24032021 - Insecurity threatens 2023 elections, Ortom tells Buhari

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