Exclusive: NNPC spends N17trn on refineries’ turnaround maintenance in 20 years

  • …..More than N800bn spent annually on maintenance

THE Nigerian National Petroleum Company Limited (NNPCL), formerly the Nigerian National Petroleum Corporation (NNPC), has spent N16.7 trillion (approximately N17 trillion) on the turnaround maintenance of the nation’s three refineries between 2002 and 2022, a competent source close to the national oil company told Economy Post.

The source, who has worked in two of the three refineries, said the national oil company spent over N800 billion each year for 20 years on the maintenance of two facilities of the Port Harcourt Refining Company Limited as well as refining plants at the Warri Refining and Petrochemical Company Limited and the Kaduna Refining and Petrochemical Company.

The source explained that turnaround maintenance had become “an ATM machine of senior NNPC and refinery officials,” noting that “they know that the refineries cannot work but are enriching themselves with those contracts.”

The source pointed out that the money spent on the turnaround maintenance could have been able to build new refineries were past heads of the NNPC and refineries willing to set personal interests aside.

“Ask yourself, how much oil has been refined in the last 20 years? Warri produces little and most times nothing. This is the same as Kaduna. Port Harcourt, mostly nothing. Why then are we awarding contracts for the maintenance of refineries that are not working?” the source asked.

N11.35trn in 13 years

Earlier in May 2023, the House of Representatives Ad Hoc Committee on the State of Refineries in the Country had revealed that the Federal Government spent a total sum of N11.35 trillion on the rehabilitation of the three refineries from 2010 to 2023.

The committee stated that the total cost of refineries’ rehabilitation within the period was N11.349 trillion, with additional costs in other currencies including $592.976 million, €4.877 million and £3.456 million.Port Harcourt Refining Company Limited

The committee’s report noted that the NNPC, in 2016, obtained a presidential approval for the $2.1 billion maintenance of refineries to be funded over a three-year period, The Punch reported.

The report added that the National Assembly approved N100 billion in 2020, N100bn in 2021 and N109.326bn in 2022 fiscal framework for the refineries’ maintenance.

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Losses and more losses

The three refineries have wasted tax payers’ money without commensurate productivity. Between 2017 and 2021, the Port Harcourt Refining Company Limited lost N343.66 billion, while maintaining a staff strength of 506. The refinery engaged 487 new workers in 2020, paying them N3.93 billion annually, The ICIR reported.

By implication, each of the workers takes home an average of N8.072 million annually or N672,713 monthly.

On the other hand, Warri Refining and Petrochemical Company Limited incurred losses totalling N267.09 billion over the period, maintaining a staff strength of 331. Similarly, the 110,000-capacity Kaduna Refining and Petrochemical Company Limited incurred losses amounting to N320.19 billion, posting a staff strength of 525 within the same period.

Between 2017 and 2019, the Kaduna refinery generated revenue of N4.429 billion but incurred expenses of N144. 140 billion, according to Economy Post analysis of the company’s financial statements.

Who is benefitting from turnaround maintenance?

Several companies – local and foreign – have benefitted from the failed turnaround maintenance projects, which have plunged the refineries into bankruptcy.

One of the biggest beneficiaries of the turnaround maintenance is Mr Emeka Offor, whose Chrome Group handled most of the contracts for the turnaround maintenance of the Port Harcourt refinery under late General Sani Abacha.Emeka Offor

Premium Times quoted former President Olusegun Obasanjo as saying in 2015 that nothing came out of the turnaround maintenance work done by the businessman.

“I explained that what I met were refineries that were not working, refineries that were given to an amateur for repairs, for maintenance, what they call turn around maintenance to the company of Emeka Offor – Chrome Group,” the newspaper quoted Mr. Obasanjo as saying.

“Where has Emeka Offor maintained refineries before? Where has he? That’s what we met. So, the refineries were not working. What can you recover? A man ‎ (Mr. Offor) who was paid upfront. He had people…. after I left he became friends with every government that has come. Now he’s not only into refinery and oil and all that, he’s now also in energy,” it further quoted Mr Obasanjo as saying.

In 2014, Offor also got a contract for a turnaround maintenance work from former President Goodluck Jonathan.
In year 2000, an Italian company, Comerint SPA, won a $7.6 million contract for turnaround maintenance of Warri refinery.

In 2005 and 2013, Japan-based Chiyota, which is the original builder of Kaduna refinery, carried out turnaround maintenance services on the facility, according to Vanguard, but nothing changed.

In 2021, the Federal Government awarded a $1.5 billion controversial contract for the rehabilitation of Port Harcourt refinery to an Italian company, Tecnimont SPA.

About $1.484 billion contracts were awarded to Saipem SPA and Saipem Contracting Limited for the rehabilitation of Kaduna and Warri refineries, reported The Cable.

Interestingly, most of the companies that have ruined Nigeria’s refineries are foreign firms with the so-called technical know-how.

NNPC GMDs in charge

There have been several group managing directors of the NNPC under whose watch the wasteful turnaround maintenance services were rendered. Apart from the current GMD, Mr Mele Kyari, the immediate past NNPC helmsman, Mr Maikanti Baru, died in 2020 of COVID-19. Under him, the refineries incurred humongous losses without refining much crude.

He was appointed the 18th GMD of the NNPC on July 4, 2016, and left on July 7, 2019.

He was preceded by Mr Ibe Kachikwu, who was appointed on November 11, 2015, by former President Muhammadu Buhari. He was removed on July 4, 2016, to assume the post of Minister of State for Petroleum.Mr Andrew Yakubu

Mr Andrew Yakubu was appointed on June 26, 2012, by former President Jonathan. He was sacked before Jonathan left in 2015 owing to “infighting between him and the Minister of Petroleum Diezani Alison-Madueke over whom to appoint as the managing director of Nigerian Petroleum Development Company Limited (NPDC).”

On February 3, 2017, about 72,000 pounds and $9.8 million were found in his Kaduna house and were seized by the Economic and Financial Crimes Commission (EFCC). He was, however, later acquitted by a court and is currently demanding the money back.

Yakubu was preceded by Mr Austin Oniwon, who was appointed on May 16, 2010 and sacked on June 16, 2012. Others who preceded him were Mr Shenu Ladan, Mr Mohammed Sanusi Bakindo, Mr Abubakar Yar’Adua, Mr Funso Kupolokun,  Dr Jackson Gaius Obaseki and Mr Dalhatu Bayero, among others.

Sell the refineries, experts advise

Experts are not taking any of the excuses of the government to continue holding onto the refineries.

A financial expert, Mr Kalu Aja, told Economy Post that the NNPCL might need to consider selling the refineries.

“Those refineries seem to be a bit old and have not been well managed over the years. I think it is a good opportunity to call folks and ask, what can we do? Can we sell them? I think those refineries have been so mismanaged that even if they run for one or two years, they will run into problems down the road that will cost of more to maintain them than just build brand new modular refineries across the nation.  That is going to be a decision point for the experts,” he said.

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An oil and gas expert at Lagos-based Chapel Hill Denham, Mr Mustapha Wahab, said the Federal Government must exit the refineries and hand over their management to the private sector.

“It does not make sense for the government to continue to hold onto refineries that are only making losses, They must quickly sell them,” he noted.

NNPC defends spending

The NNPCL said it was no longer doing turnaround maintenance but rehabilitation., noting that the refineries would improve after the ongoing work.

Group Managing Director of the NNPC, Mr Mele Kyari said, “We are not doing turnaround maintenance, we are doing rehabilitation of the refinery, and this is very different. It means that we are replacing certain major components.

“In rehabilitation, we normally don’t shut down the plant completely. We repair a segment of it, and then it starts working, and then, you move to the next segment. You continue to scale up and that is why, within the four-year period, the contractor would have completely left your premises.

“This process started 10 years ago and a number of mistakes happened leading to the enormous delay we have seen in this process because there were a lot of interferences in the past but these are gone. Initially, we thought that the best way to go was to go to the original builder but it wasn’t the right strategy.”

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