Page 5 - AfrOil Week 22 2021

AfrOil COMMENTARY AfrOil

As a result, its full 445,000 bpd capacity has been long-term production and operations plan-
offline since for 16 months pending overhaul. ning, production and operations execution,
With that in mind, bringing in external help monitoring, and reporting and optimisation of
to run state-owned refineries was stipulated in operations.
the contract the Nigerian government signed This will involve process and control engi-
with Cairo-based African Export-Import Bank neering, quality control, quality assurance and
(Afreximbank) for a $1bn loan to rehabilitate laboratory, environmental management and
the Port Harcourt refining complex. planning and execution for long-awaited TAM.
In February, Minister of State for Petroleum To take part in the bidding process, interested
Resources Timipre Sylva noted that once the parties are expected to have relevant mainte-
rehabilitation has been completed, a “profes- nance experience in Nigeria or elsewhere in
sional operations and maintenance company Africa and are required to provide examples of
[will be hired] to maintain the refinery.” O&M work carried out on at least three exam-
He added: “This is one of the conditions of ples of engineering, procurement and construc-
the lenders. That’s embedded in discussions with tion (EPC) work in refining, gas processing and
the lenders.” LNG.
Yakubu said that NNPC would no longer Prospective bidders will also be expected
operate the four state-owned refineries. He to produce audited accounts for the previous
noted that NNPC was ill-equipped to run the four years, demonstrating a minimum average
refineries, opting instead for an operation and annual turnover of $2bn.
maintenance (O&M) contracting model for the They must also be prepared to demonstrate
units. compliance with the local content act, the pro-
Speaking to AfrOil, Ian Simm, Principal visions of the Industrial Training Fund (ITF)
Advisor at consultancy IGM Energy, said: amendment act of 2011, the Nigeria Social
“Afreximbank’s insistence on NNPC bring- Insurance Trust Fund (NSITF) act and the PEN-
ing in outside help appears to be the straw that COM Reform Act 2004.
broke the camel’s back. With funding in place Yakubu said that expressions of interest
and NNPC now seemingly on board with a new (EoIs) had already been submitted, with many
mindset, there is growing optimism that Nigeria companies already having been evaluated, and
can realise a higher proportion of its ambitious expressed optimism that NNPC would choose
refining plans.” the best and most appropriate contractor for the
According to the Department of Petroleum role.
Resources (DPR), valid refinery construction In April, NNPC signed an EPC contract with
permits cover plans for 1.09mn bpd of new Italy’s Tecnimont for the overhaul of the Port Dangote accounts
capacity, with Dangote Refinery accounting for Harcourt complex.
around 60%. The $1.5bn contract was signed by NNPC’s for almost 60%
managing director of the Port Harcourt Refin-
Rehabilitation ery, Ahmed Dikko, and Davide Pellizola, of new refining
Amid such ambition, NNPC last week launched vice-president of Tecnimont for sub-Saharan
a tender for a contract for O&M services at the Africa. capacity slated
idled refineries. Tecnimont will carry out the work in three for construction
The company’s two facilities at Port Harcourt, phases, with the first phase to bring the unit back
Kaduna and Warri have not processed crude to 90% nameplate capacity within 18 months, under currently
since January 2019, following years of chronic the second to be completed within 24 months
underinvestment, with Yakubu noting that a and the final stage within 44 months. valid permits
more comprehensive overhaul was required The Italian firm was awarded a contract in
than regular TAM. March 2019 for a two-phase programme, with
He said that the units had been shut down fellow Italian firm Eni contracted as technical
to save money. “We believe the only way to do adviser. The roughly $50mn first stage included
that is to power them down to reduce some of a six-month ‘integrity check’ and equipment
the cost,” he said. “We have heard that we are inspection at the site, as well as ‘relevant engi-
spending so much money on the refineries, yet neering and planning activities’.
they are idle.” At the time, the second phase was to be
He continued: “Of course, there are costs fulfilled in collaboration with an unnamed
associated with idle refineries; we have staff ‘partner’, which was later revealed to be Japan’s
salaries and remuneration and then the power JGC, which with Italy’s Saipem was the original
plant utility operations. And also we need to builder of the larger of the two Port Harcourt
maintain the plants in terms of preservation and units.
lost investments because they are assets that we
believe can be brought to life.” Smaller units
The Port Harcourt complex is comprised of Yakubu also noted NNPC’s interest in partnering
two units, built roughly 25 years apart, with joint with developers of smaller refineries, including
total capacity of 210,000 bpd, making it Nige- African Refinery in Port Harcourt’s co-location
ria’s largest refinery, while Kaduna and Warri facility at Port Harcourt, China National Chem-
have capacities of 110,000 bpd and 125,000 bpd ical Engineering Group (CNCEC) and Walter-
respectively. smith Petroman in addition to Azikel, with the
The scope of work will include short and latter being modular units.

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