Page 4 - DMEA Week 12 2021

DMEA COMMENTARY DMEA

Government announces over Port

Harcourt revamp, faces questions

Having done little to improve operations at the refinery for decades, the Nigerian government
has come under scrutiny for its recently announced plan to overhaul the Port Harcourt units.

AFRICA THE Nigerian government’s announced last adviser. The roughly $50mn first stage included
week that it would invest $1.5bn to rehabilitate a six-month ‘integrity check’ and equipment
the struggling Port Harcourt refining complex, inspection at the site, as well as ‘relevant engi-
WHAT: adding that Italy’s Maire Tecnimont would carry neering and planning activities’.
Nigeria has signed off out the work. Subject to completion of phase one, the
on a megaproject to However, given that state-owned Nigerian Italian company was due to carry out the engi-
revamp the Port Harcourt National Petroleum Corp. (NNPC) has previ- neering, procurement and construction (EPC)
refinery, with up to $1.5bn ously admitted to not having carried out turna- contract on the required rehabilitation. At the
of funds earmarked. round maintenance (TAM) at any of its units for time, the second phase was to be fulfilled in col-
42 years and the refinery being offline for more laboration with an unnamed ‘partner’, which was
WHY: than a year, the move has come under criticism later revealed to be Japan’s JGC, which with Ita-
The country’s state- from throughout the country’s political and ly’s Saipem was the original builder of the larger
owned refineries have banking community. of the two Port Harcourt units.
been running at 0% The deal was part of an envisaged 18-24-
utilisation because of Plans month, $1.2bn project across the four state
chronic underinvestment The Port Harcourt complex is comprised of two refineries designed to restore output to at least
and a lack of long- units, built roughly 25 years apart, with joint 90% of nameplate capacity, with work originally
overdue maintenance. total capacity of 210,000 barrels per day (bpd), anticipated to be completed by 2023.
making it Nigeria’s largest refinery. Alluding to NNPC’s difficulties in refining,
WHAT NEXT: After years of under-investment, the ageing Sylva said: “Operations and maintenance have
If the project is state-run facilities at Port Harcourt as well as been a big problem for [Nigeria’s] refineries,
completed on schedule, the smaller Kaduna (110,000 bpd) and Warri this has been exhaustively discussed in coun-
Nigeria could be home (125,000 bpd) units have typically run at less cil” and this was not overlooked by the project’s
to nearly 870,000 bpd of than 10% of capacity in recent years with NNPC financiers.
refining throughput within admitting in mid-2019 that the refineries were NNPC agreed a loan of around $1bn with
the next two years. operating at just 5.55% of their capacity, with that lenders led by Cairo-based African Export-Im-
figure being a six-month high. The units were all port Bank (Afreximbank) in February. Sylva
then taken offline entirely. noted that once the rehabilitation has been com-
“The lower operational performance pleted, a “professional operations and mainte-
recorded is attributed to the ongoing revamping nance company [will be hired] to maintain the
of the refineries, which is expected to further refinery … this is one of the conditions of the
enhance capacity utilisation when completed,” lenders”. He added: “That’s embedded in discus-
NNPC said. However, the rehabilitation work is sions with the lenders.”
yet to begin.
A breakthrough was announced last week Criticism
when Nigerian Minister of State for Petroleum Meanwhile, with NNPC still understood to be
Resources Timipre Sylva said: “We are happy to considering offloading the majority of its stakes
announce the rehabilitation of the Port Harcourt in the refineries, criticism has been levelled at the
refinery will commence forthwith,” adding that it government for paying for a refurb before priva-
was “good news for Nigerians”. tising the units.
The minister added that Maire Tecnimont Atedo Peterside, founder and CEO of Stanbic
would carry out the work in three phases, with IBTC Bank said the government “should halt”
the first phase to bring the unit back to 90% its plans and “subject this brazen & expensive
nameplate capacity within 18 months, the sec- adventure to an informed national debate”. He
ond to be completed within 24 months and the noted: “Many experts prefer that this refinery is
final stage within 44 months. sold ‘as is’ by [the Bureau of Public Enterprises]
The Italian firm was awarded a contract in to core-investors with proven capacity to repair
March 2019 for a two-phase programme with it with their own funds.”
fellow Italian firm ENI contracted as technical Meanwhile former vice president Atiku

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