ONE of the take home messages from the Group Managing Director, the
Nigerian National Petroleum Corporation, NNPC, Dr. Emmanuel Ibe Kachikwu, after
scaling his ministerial screening was that finally, the nation’s four
refineries will be made to work.
If this happens by December as being planned, then not only will
Nigerians kiss goodbye to the perennial fuel shortages that bite harder during
this period, but also significantly reduce the cycle of petroleum products
importation and the attendant huge capital flight and subsidy claims.
Heads were up at the National Assembly, as millions of Nigerians watched
the live telecast of the ministerial screening, when Kachikwu gave the
assurance that all the local refineries would have been re-streamed by the year
end.
According to him, this will displace massive fuel imports, cut huge
import bills, reduce pressure on the nation’s lean foreign exchange earnings
occasioned by the free fall in crude oil prices at the international market as
well as create multiplier effects in the domestic economy.
He expressed confidence in the technical skills of the refineries
workforce, saying that over 80 percent of the NNPC technical staff are
competent. He cited the achievements of the Port Harcourt Refining Company,
PHRC, at rehabilitating the plants as part of the potential available in the
industry.
New business model
While responding to legislators’ questions, Kachikwu gave a rundown of
the Nigeria petroleum industry, and promised to drive an operations model that
will place the Corporation on a performance platform that will guarantee
commercial viability.
For the over one hour he was put to task, he gave a detailed explanation
of a reform package that has been activated to re-inject vibrancy in the
petroleum industry. He also disclosed of plans to enhance efficiency and
transparency in the sector as well as restructure the national oil firm to be
competitive across the full value chain of the industry.
He equally promised to build local capacity across all the business
units of the Corporation to enable it live up to the roles as the industry
leader, government’s revenue earner, custodian of the nation’s petroleum assets
and lead domestic fuel market supplier.
He, however, noted that target objectives will remain only a dream
except the operations of all the business arms of the Corporation are
commercialised and profitable.
Using the refineries as an example, he said their new role is to operate
as profit centres, reliable fuel sources as well as feedstock sources for
ancillary businesses, particularly for the petrochemicals and industrial.
At the Port Harcourt Refinery, for instance, he said the complex has
become the reference for domestic technical ingenuity, internal innovation and
revival model for sister refineries in Warri and Kaduna respectively.
Nigerian refineries: Nigeria’s four refineries have
combined capacity for 445,000 barrels crude oil processing per day, which
produce about 18 million litres of the premium motor spirit, PMS or petrol.
This product is highly prized in the country as one of the main fuel for
transportation and light machines used by homes and small businesses.
However, the refineries have remained largely moribund for decades due
to poor maintenance and wrong business models. The refineries are over 30 years
and have not had a proper turn around maintenance, TAM, for over 15 years, as
they relied on the NNPC for administrative and funding control, a system that
slowed processes and denied them of financial independence.
But Kachikwu, who is tipped to become the junior but powerful Minister
of Petroleum Resources, has reiterated that the new business model he activated
in the system will dismantle all administrative and funding constraints in all
the Corporation’s business units, especially the refineries. He added that this
will enable them to leverage internal energies and competencies in optimising
uptime at the plants.
He told journalists in Lagos that the refineries are of strategic
national economic and security importance, and restated his commitment to not
only recover their capacity but also explore opportunities of building new
plants with a view to leveraging the economies of scale in the existing
industry hubs.
Operational efficiency: Kachikwu maintained that all
the nation’s refineries must be revamped and attain 60 percent process capacity
by December, when government will decide the best management model to adopt in
making them efficient.
He noted that none of the refineries can operate profitably below 60
percent capacity, adding that if this were the case, such a refinery will not
be supplied crude feedstock through traditional allocation processes.
Under this circumstance, he said the Corporation will have no choice
than to explore private sector management for any underperforming refinery.
He said: “If after we finish (facility maintenance) and we think that
the issue is management then we see if there is somebody willing to buy a
majority share that have the skills set and the market reach internationally to
do the work.
“Obviously if we did that and by then we have expressions of interest
from people who are building refineries in this political environment they will
be given the first right of refusal, because they will be able to help manage
what is there, help to share skills.”
He specified that the acceptable 60 percent performance benchmark must
not be a flash in the pan, adding that it would require sustainable uptime at
the refineries fluid catalytic cracking units, FCCUs, which is the optimum
process unit.
To scale the 60 percent performance hurdle the refineries must add value
to crude oil at all the process units in order to cut waste, enhance
commerciality of operations and optimise resources.
He had told journalists: “The greatest immediate challenge is how do you
limit the debt loss factor and then on the medium term basis address the issues
and make the refineries to work for example? The reality is that the refineries
are not working now, because if you give me a 60percent this week and next week
I am down to zero performance, when you take an average, you are down to
20percent and the average performance of the refineries right now is below
30percent, that is on a continuity basis. That is the fact.”
Scaling the hurdle: Interestingly, out of the
three refineries, only the 210, 000 barrels per day Port Harcourt Refinery has
all its three key process units including the Crude Distillation Unit, CDU;
Vapour Distillation Unit, VDU; and Fluid Catalytic Cracking Unit, FCCU,
on-stream after an internal rehabilitation programme.
The company which initiated and successfully evolved the downstream
petroleum industry local content model for in-country refinery refurbishment
and upgrade is already working to ramp up its production performance level to
80 percent installed capacity in order to enter a sustainable commercial
comfort zone.
Kachikwu, pointed out that only PHRC appears to have crossed the
performance hurdle and stressed that government will no longer run unprofitable
businesses when better options exist in private sector partnership.
After revamping the refineries, he said, their business models will be
examined to determine the best management approach to take. The model, he said,
will protect and preserve the public interest in the refineries without
compromising efficient commercial and technical operations standards.
Business Vanguard: By Clara Nwachukwu
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