Why Early Production Date For PH Refinery Is Unrealistic

Nigerians yearning for pump fuel price reduction will have to still wait because the promise by the Nigerian National Petroleum Company Limited (NNPCL) that production of petroleum products at the Port Harcourt Refinery would begin in the second quarter of this year is not realistic.
National Point investigations reveal that a lot of work still needs to be done to get the old refinery, which has achieved mechanical completion, working again.
A reliable source in the project disclosed that the earliest the old refinery can roll out products will be in the third quarter of 2024 because of the nature of work left to be done.
Group Chief Executive Officer of the NNPCL, Mr. Mele Kyari, had in March told the Nigerian Senate Ad-hoc Committee on the rehabilitation of the refineries that the old Port Harcourt Refinery would begin production of petroleum products within two weeks.
He had vowed that the timelines given for the deliveries of Port Harcourt and other refineries, were sacrosanct.
“We will make sure that promises that we made about the rehabilitation of these refineries are kept. We did a mechanical completion of PHRC in December. Now, we have crude oil already stocked in it. It is currently undergoing regulatory compliance test before we re-stream it. I assure you that this refinery will start in next two weeks,” Kyari told the Ad-hoc Committee.
Nigerians have been eager to see the refineries resume production so that the prices of petroleum products in the country would drop and bring drag down in the prices of consumer goods.
Inflation rate in Nigeria has consistently risen above 35 percent since June 2023 after President Bola Tinubu withdrew subsidy from petrol. The economic crisis got worse when he also allowed a free float of the naira against foreign currencies. With an economy that is largely import-based, the general cost of goods rose making life difficult for the people, as unemployment is high and the national minimum wage is just N30,000 a month, an equivalent of US$20.
Nigeria had four refineries with an installed capacity of processing 450,000 barrels of crude oil a day. But the refineries over the years, were allowed to rot and break down as corrupt highly placed officials and petroleum marketers made illicit gains in billions of dollars from the importation of petroleum products.
Several attempts to rehabilitate the refineries located in Port Harcourt, Warri and Kaduna failed. Then in April, 2021 the Nigerian government signed an agreement with Tecnimont, an Italian firm, to rehabilitate the Port Harcourt Refinery at the cost of $1.5 billion.
The project, which was phased, was to get the entire refinery back on stream within 48 months, with the first phase involving re-streaming the old Port Harcourt Refinery within 24 months. That would have got the refinery back on stream in April 2023.
But that date could not be met because funding of the project slowed down as the former government of President Muhammadu Buhari wound up. In the intervening period, a private investor, Dangote Group started building a refinery at Lekki in Lagos with an installed capacity of 650,000 barrels of crude oil per day.
Dangote Refinery was officially “inaugurated” in May 2023, thus raising hopes that local production would bring down prices and make petroleum products available. But it was not to be because the mechanical completion of the plant was still farfetched.
After President Bola Tinubu cancelled subsidies on petrol to stop the corruption reported with the subsidy and save money for government to spend, the new prices of petroleum products instigated hyper inflation and a general outcry by the masses.
In response, the president directed that the rehabilitation of the Port Harcourt Refinery be hastened and gave an August 2023 deadline. Following improved funding of the project, there was a flurry of activities on the project and several workers earlier sent home were recalled.
But the August date could not be met. A new date of getting the plant working before the end of 2023 was promised by the Petroleum minister, Mr. Heineken Lokpobiri. When the year was almost ending, NNPCL and the Ministry of Petroleum proclaimed a mechanical completion of the old refinery and even threw a party to celebrate it.
But not one drop of a petroleum product rolled out of the plant. National Point then reported that electrical, instrumentation and other major aspects of the project were yet to be completed. The minister promised that the plant would be restarted for production in the first quarter of 2024.
Towards the end of the first quarter of 2024, NNPCL announced that it had supplied crude oil to the refinery awaiting injection into the plant. But the plant was not ready. National Point was told at the site that what was going on was the sandblasting of the interconnecting pipelines between the plant and the tank farm.
An engineer at the site told National Point that a variation on the execution of the contract was responsible for the long delays the project has suffered.
He said the interpretation of the project by the contractors was to replace all the pipeline system in the plant, but during execution, NNPCL did not go with that and rather, insisted that only pipes found to have failed tests be replaced.
“This procedure of testing and certifying the good pipes is taking a long time to accomplish. Were we to replace all, it would have taken a much shorter time,” the engineer said.
For now, it is the sandblasting of the pipes that is going on.
Meanwhile, Nigerians harassed by the daily increase in prices of commodities, are waiting with baited breath for the refinery to start production so that the prices of the products will reduce and force down the prices of goods and services.
Mrs. Lale Obari, a trader at Eleme Market, a few kilometres north of the refinery told National Point that they cannot wait for the refinery to start production again. “We have been suffering all these years. Let them do. The cost of living is killing us. Everything you do requires fuel. Is it transportation, pumping of water, generators at home or even some of these little grinding of foodstuffs here? Let them do, please” she said.
A former chairman of the Independent Petroleum Marketers Association of Nigeria in Rivers State, Dr Joseph Obele, urged that everything be done to resume production at the refinery.
He said, “Expectations of the citizens are very high for the commencement of production at the Port Harcourt refinery because it will boost the economy, it will have positive effect on the worrisome Nigeria inflation index, it will create thousands of direct and indirect job opportunities for youths and the price of locally produced Petroleum products will not be as expensive as the price of imported fuel because of Principles of Comparative advantage.”
Dr Obele however said his worry about who would run the plant after the contractors had completed the project.
“The issue of when to commence operations is not as important as the issue of who will manage the facility. NNPC is tailored with corruption, nepotism, favouritism and political influence.
“Under the watch of NNPC Nigeria’s four refineries were shutdown due to mismanagement and selfish desire to import from foreign refineries owned by their friends.
“Under the watch of NNPC an off spec PMS that damaged thousands of vehicles and machines was imported into Nigeria by same NNPC been the sole importer, until date no one sanctioned or discipline for that fraudulent transactions,” he said.
Obele said it would be good if foreign companies were awarded the offer to manage the refinery. He welcomed the announcement of NNPCL seeking to offer by bid the management of Port Harcourt to private firms.
He said, “The Port Harcourt refinery ongoing bidding process should not be awarded to a local firm or Asian company, but a foreign reputation Company, preferably England or American firm.”
He warned that the bidding process for the refinery should be completed before the end of the project so that the refinery does not go back to NNPCL.