Page 4 - Downstream Monitor - MEA Week 27

DMEA Commentary DMEA
Refining remains in focus in Nigeria
NNPC’s new managing director has announced ambitious plans to reinvigorate Nigeria’s re ning sector, but while it all sounds good, results need to come quickly.
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What:
In his opening remarks, Malam Mele Kyari took swipes at the decades without the rehabilitation of state re neries, a lack of transparency and trumpeted ambitious goals.
Why:
10% re nery utilisation at the state-owned facilities is common and numerous plans to create new facilities have come to nought.
What next:
hopes are high, though, that the growing modular re ning industry can pick up some of the slack.
The newly appointed group managing director of Nigeria’s National Petroleum Corp. (NNPC) has come out swinging, promising to tackle the country’s chronically sub-par re ning sector.
Upon assuming o ce in place of the retiring Maikanti Baru this week, Malam Mele Kyari pledged to revive the downstream, targeting the rehabilitation of the country’s four state-owned re neries before 2023 when President Muham- madu Buhari’s term in o ce ends.
his ambition does not stop there; noting in his speech that the country “must be a net exporter of petroleum products” during the same timeframe, he announced lo y goals for ending corruption and improving transparency as well as increasing oil reserves by 40bn barrels by 2020.
Downstream dilemma
Nigeria’s four state-run re neries have a com- bined nameplate capacity of 445,000 barrels per day; 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, a er 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 full turnaround maintenance (TAM) at the plants had not been carried out for 42 years.
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 e orts to per- suade private investors to fund the work.
In March, the rst real sign of progress came 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 re ning facilities at Port harcourt.
e con rmation by each party was impor- tant, since both the client and potential restor- ers have previously claimed separately to have reached such agreements, which were then either formally denied or simply never implemented.
e Italian company explained that the con- tract involved two phases.
e roughly $50mn rst stage would encom- pass a six-month “integrity check” and equip- ment 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 on the required rehabilitation, which was said to be designed to restore output to at least 90% of nameplate capacity.
e second phase will be ful lled in collab- oration with an unnamed “partner”, which was later revealed to be Japan’s JGC, which with Ita- ly’s Saipem was the original builder of the larger of the two Port harcourt re neries.
NNPC characteristically muddied the waters, noting that capacity would be restored to 60% during the rst phase; highly improbable, since output is currently running at less than half of that and since the notice acknowledged that TAM had not been performed for 19 years.
Kyari’s announcement of ambitious targets is nothing new for Nigeria.
Petroleum Minister Ibe Kachikwu said in November 2018 that all four plants would be restored to full capacity by the end of 2020, a year later than in his earlier promises. A long history of such statements from government and
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w w w . N E W S B A S E . c o m Week 27 10•July•2019