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DMEA CommentaRy DMEA
NNPC hopes rehab
programme reinstates
refining capacity
NNPC’s Mele Kyari is banking on a rehabilitation programme at Nigeria’s state refineries and a one-off private development to reinvigorate the struggling sector.
afRiCa
What:
NNPC is planning
to overhaul its four refineries, which
have chronically underperformed for many years.
Why:
A lack of investment and failure to maintain the facilities have resulted in utilisation rates dropping below 5%.
What next:
The plans are ambitious and government support provides some confidence, but many schemestoreinvigorate the sector have been announced with little in the way of results.
NIgerIAN National Petroleum Corp. (NNPC) has announced plans to overhaul and repair all of its oil refineries in less than three years. Mele Kyari, the group managing director of the national oil company (NOC), unveiled plans for the rehabilitation programme on September 22 during a tour of Port Harcourt refining and Pet- rochemical Co. (PHrC).
In his remarks, Kyari said the programme would allow NNPC’s four refineries in Kaduna, Port Harcourt (two) and Warri to operate at full capacity for the first time in many years. Collec- tively, the plants have a throughput capacity of 445,000 barrels per day (bpd), but this has not been achieved for many years.
According to NNPC accounts, the refineries operated at a loss of 17.42bn naira ($48mn) in June.
NNPC will begin rehabilitation work in Jan- uary 2020 and wrap up the project by the end of 2022, the group managing director said. “We will do everything possible between October and December [of 2019] to close out all neces- saryconditionsforustodeliveronthatproject,” he added. He also stated that the company was committed to finishing the overhaul and repair of the refineries on schedule.
“We will stick to [the] time. We will deliver this project by 2022 ... I believe that with the sup- port that we have from the shareholders – [the] government of this country, the entire staff of this company and the contractors – I believe it is doableandwewilldelivertheproject.”
Rehabilitation required
The planned overhaul is sorely needed. Data released by the NNPC in May showed that the country’s four state-owned refineries were oper- ating at just 5.55% of their nameplate capacity.
The Kaduna facility can produce 110,000 bpd, Warri 125,000 bpd and the two Port Har- court units, built roughly 25 years apart, have a
joint total of 210,000 bpd.
However, the latest figures show that 5.55%
was a six-month high. “The lower operational performance recorded is attributed to the ongoing revamping of the refineries, which is expected to further enhance capacity utilisation when completed,” NNPC said.
After years of under-investment, the ageing facilities typically run at less than 10% of capacity and a general update on operations by NNPC in January this year disclosed that that full turna- round maintenance (TAM) at the plants had not been carried out for 42 years.
This has meant that imports are relied upon to meet more than 80% of demand and NNPC added that a refining capacity of 1.52mn bpd would be required to meet Nigerian demand by 2025.
Plans by the NNPC to repair the facilities have been regularly delayed and early in the year Abuja formally acknowledged the failure of more than two and a half years of efforts to per- suade private investors to fund the work.
InMarch,thefirstrealsignofprogresscame when Italy’s Maire Tecnimont confirmed an announcement by NNPC the previous day that the company had been awarded a con- tract to rehabilitate the refining facilities at Port Harcourt.
The confirmation by each party was impor- tant, since both the client and potential restor- ers have previously claimed separately to have reachedsuchagreements,whichweretheneither formally denied or simply never implemented.
The Italian company explained that the con- tract involved two phases. The roughly $50mn first stage would encompass a six-month ‘integ- rity check’ and equipment inspection at the site, as well as ‘relevant engineering and planning activities’.
Subject to completion of that work, the Italian company would then carry out the ePC contract
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w w w . N E W S B A S E . c o m Week 38 26•September•2019