Refineries idle for 12 months, incur N142bn expenses

’Femi Asu

 The nation’s refineries did not refine a barrel of crude oil in the 12 months to June this year but incurred a combined operating expense of N142.07bn, the latest data from the Nigerian National Petroleum Corporation have shown.

The NNPC attributed the declining operational performance of the refineries to ongoing revamp aimed at further enhancing their capacity utilisation once completed.

The refineries, which are located in Port Harcourt, Kaduna and Warri, have a combined installed capacity of 445,000 barrels per day but have continued to operate far below the installed capacity.

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.

“No white product (Premium Motor Spirit and Dual Purpose Kerosene) was produced in June 2020 and apparently for the past 12 consecutive months. The lack of production is due to ongoing rehabilitation works at the refineries,” the NNPC said in its monthly report for June.

The corporation said the combined value of output by the refineries (at import parity price) for the month of June amounted to about N40m.

“No associated crude plus freight cost for the three refineries since there was no production but operational expenses amounted to N10.27bn. This resulted in an operating deficit of N10.23bn by the refineries,” it added.

The Kaduna refinery incurred an operating expense of N60.20bn from July 2019 to June 2020, according to the NNPC data.

Port Harcourt refinery’s operating expense in the period under review was N43.37bn while that of Port Harcourt refinery was N38.49bn.

The Chairman, SPE Nigeria Council, Joseph Nwakwue, said the refineries should have been sold some years ago to private investors.

He said, “Our position is that the refineries are key national assets and it is in our interest that they are optimally run from a commercial perspective. And we think that the private sector will do a better job of running it.

“I think it is important that we recognise that it serves no purpose that we have refineries that are sitting idle. They don’t just sit idle; we spend money to keep them idle. That is a huge drain. So, it is not in our national interest to continue to pump money into things that are not adding value.

“From that perspective, it is only reasonable that one would say we should have sold these things a long time ago to those who can run them.

“Maybe if we did, we won’t be importing the quantity of fuel we are importing today. So, I think that we should have sold them 10 years ago.”

The Group Managing Director, NNPC, Mallam Mele Kyari, said on July 30 that the refineries were all idle, adding that the country was importing practically every petroleum product being consumed in the country.

In June, 767.42 million litres of PMS were supplied into the country through the Direct Sale Direct Purchase arrangement as against the 495.10 million litres of PMS supplied in May.

Under the DSDP scheme, selected overseas refiners, trading companies and indigenous companies are allocated crude supplies in exchange for the delivery of an equal value of petrol and other refined products to the NNPC.

In the first term of the President, Major General Muhammadu Buhari (retd), the NNPC had planned to rehabilitate the refineries to attain a minimum of 90 per cent capacity utilisation.

The plan was to use third-party financiers and the original refinery builders to provide the requisite funding and technical support.

However, after over one and a half years, negotiations with financiers were stalled in December 2018 due to varying positions on key commercial terms.

Kyari, who took over the NNPC leadership in July 2019, had reiterated his plan to revamp the refineries and end fuel importation by 2023.

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