Refineries: NNPC to re-engage original contractors
The Nigerian National Petroleum Corporation (NNPC) may have decided to go back to the drawing board in order to find a lasting solution to the nation's ailing refineries.
BusinessDay gathered that the Corporation is currently in talks to re-engage the original EPC contractors for the various refining entities.
Nigeria's four refineries, located in Port Harcourt, Kaduna and Warri with a reported refining capacity of 445,000 barrels per day (bpd) of crude, were set-up over 30 years ago, but poor management, sabotage and irregularity in carrying out set turn around maintenances (TAM) have kept these refineries in a consistent state of inefficiency.
Austen Oniwon, NNPC's group managing director (GMD), said in Abuja recently that plans were on to rehabilitate and restore the ailing refineries to their original design capacities.
Oniwon said: "We have taken this deliberate decision because all of us here are witnesses to the past four, five, six, turn around maintenances that have been done in our refineries, which returned the plant worse than before the contractors came. So, management took a decision to call the original contractors that built each of these refineries. I am confident that this approach will lead to the desirable result of improving on the refineries' contribution to the national petroleum products' demand.
"NNPC is still challenged as an organisation to ensure uninterrupted supply and distribution of petroleum products.
The refineries must therefore, work on a continuous basis, thus, reducing imports significantly."
Indeed, Africa's giant and largest crude exporter to the United States, Asia and Europe depends on imports for over 80 per- cent of its fuel requirements. Decrepit infrastructure, distribution systems and lack of investments into the nation's refining industry have, for many years worsened this situation, leading to huge subsidies to keep product prices at low levels in the local market.
Lamenting the issue of subsidies, Oniwon described it as a "challenge and a burden" which will remain as long as the downstream sector remains regulated.
He said: "NNPC carries a huge burden because of the distortion in the market that is regulated. Unfortunately for us, our input is deregulated, but our revenue base is regulated and that is why NNPC is finding it very difficult to have sufficient funds to finance all our growth aspirations. We are very confident that the administration of Goodluck Ebele Jonathan will bring the good luck that is required to NNPC by deregulating the downstream sector.
"In the interim, we must have better control of the cost drivers in our operations by sustaining ongoing efforts at reducing operating expenditure, particularly demurrage and pipeline/jetty losses."
While this move by NNPC's management may indeed bring back the refineries to its original state of productivity, the question remains on how to plug the holes of corruption and poor management that have little to do with contractors.
