BusinessDay... the voice of business: Yar’ Adua: Scaling the acid test of moribund refineries?

Yar’ Adua: Scaling the acid test of moribund refineries?
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EJIOFOR ALIKE on 07 January, 2008 05:57:00
 
The group managing director gave this assurance during a visit to the scene of
the fuel pipeline fire that claimed about 60 lives at Adagbo village in Iru
Local Council Area of Lagos State.
Speaking on the issue of the inability of successive administrations to carry
out turn around maintenance (TAM), which left the refineries comatose over the
years, the NNPC boss disclosed that TAM would be carried out on Kaduna refinery
within the next three months, while that of Port Harcourt would be done during
the first quarter of 2009.
According to him, a $23million (N2.8-billion) material needed for the operation
at Kaduna is already in site, adding that the operation at Warri would be
carried out during the second quarter of 2009.
Yar’Adua also disclosed that unmanned aircraft that would provide
surveillance on oil installations were already stationed in Port Harcourt.
In a move to stop pipeline vandalism which has often been a major source of
disruption in crude oil supply to the refineries, Yar’ Adua stated that NNPC
was awarding contract for the protection of these petroleum pipelines to
communities hosting the pipelines to give them the sense of ownership of these
pipelines.
He hinted that already, the communities hosting the Chanomi creek pipelines
have been awarded the contract to guard the pipelines, which suffered series of
vandalism by the militants.
The group managing director stated that the award of the contract to the
communities was responsible for the repair of the pipelines, which supply crude
to Warri and Kaduna refineries.
He remarked that it was the repair of the pipelines that raised hope for the
resumption of the Warri refinery.
The group managing director also made reference to media reports that attacked
him for his apparent inability to fix the refineries within the period he
promised the nation.
Yar’Adua was until his appointment, the group executive director in charge of
Refining and Petrochemicals in the NNPC.
By his position, he was in charge of the nation’s refineries.
It was therefore not surprising that many analysts had expressed doubt over his
ability to turn around the fortunes of NNPC, having presided over the moribund
refineries for a couple of years.
However, not a few Nigerians have come to his rescue and argued that as NNPC
boss, he has the requisite credentials and expertise to turn around the fortunes
of the refineries, if given a free hand.
According to experts, Yar’Adua ran the refineries well until the Niger Delta
militants cut off crude oil supply to them.
They argued that the Niger Delta crisis, corruption and ageing infrastructure
were some of the factors to be blamed for the poor state of these refineries.
It would be recalled that militants had in February 2006 damaged the Chanomi
Creek Channel pipeline that feeds both Warri and Kaduna refineries.
Both refineries had operated at 70 percent and 75 percent capacity,
respectively before the militants attack.
Most industry observers also concluded that the new NNPC helmsman should not be
held responsible for the abysmal failure of a nation, endowed with enormous
petroleum resources to meet the refining needs of her citizens.
It was the contention of analysts that the entire oil and gas sector was
bedeviled with a lot of hydra-headed problems that transcend the managerial
ingenuity of one man.
There was a challenge of replacing ageing assets, which have been in place for
the last 40 years.
The old Port Harcourt Refining Company (PHRC) with a capacity of 60,000 barrels
per stream a day (bpsd) was primarily set up in 1965 to provide efficient
petroleum refining services to the nation at a minimum cost and the
international market at competitive prices.
It was also envisaged that the refinery would spearhead the development and
production of specialised petroleum products.
The second refinery was commissioned in 1989 with an installed capacity of
150,000 bpsd, thereby bringing the combined crude processing capacity of the
Port Harcourt Refinery to 210,000 bpsd.
The Warri Refining and Petrochemical Company Limited which was one of the
eleven NNPC subsidiary companies created in March 1988 was earlier commissioned
in September 1978 with an initial capacity of 10,000 barrels per stream day of
crude oil.
The refinery was however increased in capacity to 125,000 barrels per stream
day in 1987 with petrochemical plants (polypropylene and Carbon Black), being
built to optimise the refinery in March 1988.
Kaduna Refinery was built and commissioned in 1988 with a processing capacity
of 150,000 barrels a day. It also has a petrochemical plant, which produces oils
used in the manufacture of lubricants used in vehicles.
From the foregoing, it is evident that the four refineries were built over a
period of almost 25 years, 1965 to 1989 with a combined capacity for processing
445,000 barrels of oil per day.
This daily capacity which translates into about 13 million litres was a far cry
from the 30 million litres needed by the country daily.
Even at this, the facilities worked below capacity for most of the time, and
were shut down on several occasions because of poor maintenance.
The refineries were allowed to rot during 30 years of military regime as the
mandatory turn around maintenance (TAM) which was supposed to be done every two
years were abandoned.
Sola Alabi, managing director of the Port Harcourt refinery had told Odein
Ajumogobia (SAN), minister of state for energy (Petroleum), who was on a
schedule tour of the establishment that the refinery had a turn around
maintenance for only three times since it was built as against eight times such
maintenance was supposed to have been carried out.
Olusegun Obasanjo’s administration also spent $730 million on the refineries
but the impact on their efficiency was not felt much.
Faced with myriad of problems due to lack of TAM, the refineries could not
produce up to 20 percent of domestic fuel demand and the government resorted to
importation of more than 90 percent for domestic fuel demand.
Today, the domestic requirement for petroleum products is wholly imported and
this situation gave rise to frequent review of prices of petroleum product as
the government was determined to deregulate the down stream sector of the
industry.
Alabi also identified epileptic power supply as the greatest problem facing the
Port Harcourt refinery.
Interestingly, the refinery was designed to be self sufficient in power and
utilities generated from the Power Plant and Utilities section.
There are four turbo-generators each with a capacity of 14 megawatts of
electricity per hour and four Boilers, capable of generating 120 tons of steam
per hour each.
The Warri Refinery and Petrochemical Company was also built to be
self-sufficient in power and utilities production
It has a power plant made up of three steam turbo generators of 15 mw each,
three gas turbines of 30,30 and 20 mw respectively and steam boilers producing a
total of 220 tons an hour at 82 kilogrammes per centimetre squared, among other
components.
However, analysts believe that corruption has infested pools of maintenance
personnel that take care of routine, programmed and emergency repairs of
equipment at the refineries.
The situation was so bad that Transparency International, a Berlin based
international watchdog on corruption and good governance had to issue an adverse
report on the four refineries a couple of years ago.
But with the cheering news from Yar’Adua, the group managing director has
demonstrated that as the boss of the NNPC, he can fix the refineries better than
when he was in charge of only the refineries.