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Refineries Record Deficit as NNPC Lifts $407.15m…

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Refineries Record N5.4bn Deficit, As NNPC Lifts $407.15m Crude

Amidst controversy over the state of the nation’s refineries the latest report of the Nigerian National Petroleum Corporation, NNPC, has indicated that Nigeria’s three refineries guzzled a total of N5.86 billion in overhead expenses on zero output in the month December 2020 alone.

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This expenditure eventually resulted in operating deficit of N5.37 billion by the refineries, the report stated. The three refineries are those of Kaduna, Warri and Port Harcourt.

The Federal Government has awarded contract for rehabilitation of Port Harcourt refinery at a cost of USD1.5 billion, a figure considered by most industry experts as outrageously high while condemning the high cost of maintaining the offices in the refineries with zero output over the years.

According to the NNPC report “in December 2020, NNPC lifted 7,538,735 barrels of crude oil from the daily allocation for domestic utilization translating to an average volume of 243,185 barrels of oil per day.”

The report further stated that in order to meet domestic product supply requirement for the month of December 2020, the entire 7,538,735 barrels were processed under the Direct Sales-Direct Purchase, DSDP, scheme while no deliveries to the domestic refineries for processing, meaning no crude was processed by the country’s three refineries.

Meanwhile, the report said the total value of crude oil lifted on the account of Nigerian National Petroleum Corporation, NNPC, in December 2020 was $407.15 million latest report by the Corporation has shown.

NNPC in its Monthly Financial and Operations Report for January, 2021 said of the 12.16 million barrels lifted on its account in December 2020, 7.54 million barrels and 0.50 million barrels were for domestic and export markets respectively.

The report explained that at an average oil price of $50.78/barrel and exchange rate of N379/$, the domestic crude oil lifted by NNPC “is valued at $382.8 million or a Naira equivalent of N145.1 billion for the month of December 2020.

The remaining crude oil lifted for export was valued at $24.3 million at an average price of $48.92/barrel. The report added that from December 2019 to December 2020, a total volume of 708 million barrels of crude oil and condensate was lifted by all parties.

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NNPC

NNPC Signs $1.5bn PH Refinery Rehab.

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The drive by the Management of the Nigerian National Petroleum Corporation (NNPC) to boost in-country refining capacity was bolstered Tuesday with the signing of the Engineering, Procurement, Construction, Installation and Commissioning (EPCIC) contract for the rehabilitation of the 210,000 barrels per day capacity Port Harcourt Refinery in Alesa-Eleme, Rivers State.

READ ALSO: 612 Nigerian microfinance banks may close shop over recapitalisation

The rehabilitation project which generated criticisms from several quarters has a completion timeline of between 18 and 44 months under a three-phase arrangement was awarded to Milan based Tecnimont SpA at a lump sum contract price of US$1.5 billion, inclusive of VAT and other statutory payments.

An elated Group Managing Director of the NNPC, Mele Kyari, described the PHRC rehabilitation project as a dream come true, noting that the project was in line with President Muhammadu Buhari’s promise to the Nigerian people to make the refineries work.


Tecnimont SpA, the Corporation emerged from a transparent tender process that can withstand any forensic audit, and the corporation will employ the same transparent process for the rehabilitation of the Warri and Kaduna Refineries whose EPCIC contracts to be awarded in June 2021.

READ ALSO : Nigeria’s Fortune Under Risk Over Big Oil Focal ShiftThe GMD explained that the rehabilitation exercise was very different from a routine Turn-Around Maintenance as it would entail a total retrofitting of the plant with major part and equipment replaced with new ones.


Managing Director of Port Harcourt Refining Company Limited, Engr. Ahmed Dikko, providing further insight into the project, explained that Phases 1 and 2 of the project would get the refinery ready to receive hydrocarbon, while Phase 3 will focus on the start-up the refinery for operation, stressing that the entire work shall be delivered in 44 months from today.

Vice President, Sub-Saharan Africa Region of Tecnimont SpA, Davide Pelizzola, pledged the readiness of his company to work assiduously with the NNPC to comply with the terms and obligations of the contract.

The signing ceremony of the PHRC rehabilitation project was witnessed by the Nigeria Extractive Industries Transparency Initiative (NEITI), Infrastructure Concession Regulatory Commission (ICRC), Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the Nigeria Union of Petroleum and Natural Gas Workers NUPENG amongst others.

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$1.5bn for Port Harcourt refinery repair can build 12 world-class hospitals – Peterside

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The founder of Stanbic IBTC and Anap Foundation, Atedo Peterside, says the $1.5 billion earmarked for rehabilitating the Port Harcourt refinery can build 12 world-class hospitals in different geographical zones across the country.

READ ALSO: Rivers courts decide on Indorama’s 7.50% host community equity dividends

“The $1.5bn earmarked for PH Refinery Rehabilitation by #NNPC could build 12 world-class hospitals costing $125m each — two in each geopolitical zone,” Peterside said in a tweet on Thursday.

He advised the Federal Government to sell the Port Harcourt refinery to qualified private sector investors who can carry out necessary repair works with their own money.

“We could then allow private sector core investors to purchase the refinery and rehabilitate it with their own funds,” Peterside said.

Several Nigerians have called on the Federal Government to privatise the refineries and avoid years of losses from them, but the management of the Nigeria National Petroleum Corporation (NNPC) has continued to insist it will rehabilitate them and continue to own them.

A report published by NNPC in 2020 shows that Nigeria’s three refineries still cost the country N10.23 billion in expenses.

The NNPC disclosed in the report that the three refineries, located in Warri, Port-Harcourt and Kaduna, processed no crude because of the rehabilitation works being carried out on them.

The Port-Harcourt Refining and Petrochemical Company Limited (PHRC) has the capacity of producing 210,000 barrels per day, Kaduna Refining and Petrochemical Company Limited (KRPC) can produce 110,000 barrels per day, while the Warri Refining Petrochemical Company Limited (WRPC) has 125,000 barrels per day production capacity.

Recall on March 17, the Federal Executive Council (FEC) approved the sum of $1.5 billion for the rehabilitation of the Port Harcourt refinery.

Timipre Sylva, minister of state for petroleum, said the rehabilitation would be done in three phases of 18, 24 and 44 months.

He added that the contract would be awarded to Tecnimont SPA, an Italian company.

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Refinery

Nigerians rise against $1.5bn Port Harcourt refinery repair bill

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Nigerians are enraged over government’s plan to spend $1.5 billion (about N570bn) on the repair of one of its derelict and unprofitable refinery.

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The government’s long history of wasteful spending on turnaround maintenance on its struggling refineries triggers a feeling of bitterness in the hearts of many whenever the government says it wants to pump more money into them.

READ ALSO: Atedo calls $1.5bn refinery bill brazen adventure

They question why the government is throwing money it does not have into a venture that is entrenched in a culture of waste and has gulped far too much public funds with nothing to show for it. Its inflated payrolls also contribute to the non-competitive cost of fuels produced.

Many are in awe of how a cash-strapped government that has been knocking at the door of the World Bank for a $1.5 billion loan since last year is able to turn around and spend a similar amount on merely repair works on one dying refinery, an effort history suggests will be futile.

To put the planned repair into context, the government wants to spend $1.5 billion on a refinery that has never operated above its 200,000bpd capacity, whereas Shell sold a more efficient and profitable refinery with a capacity of 157,000bpd in California for $1.2 billion last year.

The complex nature of running refineries is why experts have called on the government to privatise them rather than seek to hold control and continue splashing cash on them.

“Refineries are one of the most complex facilities to run, they are capital, technology and management intensive operations, yet low margin,” Olagoke Balogun, former processor operator at Chevron with 13 years experience in the refining business, tweeted on Thursday.

Balogun noted, “Aside from corruption, the Nigerian state is grossly incompetent to run such complex operations even if they wanted to.”

It is not the first time the government is carrying out rehabilitation works on its cash-guzzling yet unprofitable refineries.

Over the past 12 years, Nigeria tried and failed four times to crank up its aging crude-processing plants.

The West African country of about 200 million people still imports more than 90 percent of products like petrol, diesel and kerosene, swapping crude oil for refined petrol, kerosene and aviation fuel.

Despite the repeated failure to breathe life into the refineries, the state-run energy company, NNPC, is giving it another shot, ignoring global examples on how to run a successful refinery.

Globally, most refineries are privately owned and run on razor-thin low margins in order to realise the highest returns.

Refinery managers seek to pay the lowest price for crude oil, maximise the yield of the higher value products, control operating costs and receive the highest price for its refined products on a sustained basis.

Nigeria’s refineries, which have overtime struggled to operate at 10 percent capacity utilisation, are however unable to operate on these four basic principles.

They currently pay international prices for crude oil, are unable to control operating costs, and cannot maximise the yield on the high-value product (petrol) because they receive the lowest prices for it.

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FG Refineries

FG Refineries Earn N21bn, Lose N778bn

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FG Refineries Earn N21bn, Lose N778bn In Five Years

The government-owned refineries, being run by the Nigerian National Petroleum Corporation, reported a total loss of N778.71bn from 2015 to 2019, an analysis of data collated from their financial statements has shown.

READ ALSO: GTBank reports full year PBT of N238.1billion

The refineries generated total revenue of N21.12bn in the five-year period as they operated at below their full capacities.
The refineries, which are located in Port Harcourt, Kaduna and Warri, have a combined installed capacity of 445,000 barrels per day.
The country relies largely on importation of refined petroleum products as its refineries have remained in a state of disrepair for many years despite several reported repairs.

Port Harcourt Refining Company generated a total revenue of N10.33bn from 2015 to 2019, but posted a loss of N229.14bn.
The refinery generated zero revenue in 2019; N1.46bn in 2018; N4.82bn in 2017; N3.37bn in 2016, and N683.52m in 2015.

Kaduna Refining and Petrochemical Company reported revenue of N4.17bn and a loss of N307.27bn in the five-year period.
The refinery generated revenue of N37.17m in 2019, compared to zero revenue reported in 2018. Its revenue had risen to N2.24bn in 2017 from N1.47bn in 2016 and N418.76m in 2015.
It posted a loss of N65.99bn in 2019, N63.64bn in 2018, N111.89bn in 2017, N30.19bn in 2016 and N35.56bn in 2015.
https://insidebusiness.ng/161525/fg-refineries-earn-n21bn-lose-n778bn-in-five-years/

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