A Review of the Nigerian Energy Industry

Nigerian task force gets 60 days to revive local refineries

*Says 3 new refineries to come on-stream by 2017

Oscarline Onwuemenyi

06 March 2012, Sweetcrude, ABUJA –
The Federal Government on Tuesday gave the National Refineries Special Task Force 60 working days to revive the four comatose refineries in the country, even as it has disclosed that three proposed Greenfield refineries would be functional by the year 2017.

The Ministry of Petroleum Resources, Mrs. Diezani AlisonMadueke, who stated this while inaugurating the Special Task Force in Abuja, noted that government was determined to revamp the existing refineries for maximum output towards meeting local demand for products.

According to the Chairman of the National Refineries Special Task Force, Dr. Idika Kalu Idika, “I am of the firm opinion that based on our proven and potential reserves in the medium term, Nigerians will like to see at least ten medium to large scale refineries, and smaller modular refineries that could be spread to all the zones of the Federations.

“We are fully aware of the nation’s expectations from this process. Our assurance to Nigerians is that we will put in our best in unraveling the issues that have bedeviled the functionality of the existing refineries. We shall also to the best of our abilities proffer ideas and solutions in line with our terms of reference to ensure that our country goes back to self-sufficiency in the supply of locally refined petroleum products.”

According to Idika, “We would, in line with our terms of reference, conduct a thorough technical, financial and manpower review of all the refineries, audit the finances and determine the operating capacities as a basis for recommending the financial and technical framework that raise the existing capacities to an acceptable rate, which by global standards is usually between 80 and 90 percent of installed capacity.

Idika noted that beyond this, the task force is also “committed to the development of a framework that would not only turn around Nigeria’s dependence on importation, but would go further to present a platform for the export of products to the regional market and beyond.

“We will review existing licenses granted for establishment of private refineries in a bid to assess the readiness of the operators to utilize the licenses. We are also fully aware of the contribution of the petrochemicals subs-sector to the development of a robust production driven economy as well as provide jobs for our teeming youth population, and would work hard to resuscitate existing petrochemical industries to utilize the by-products of the refineries.”

Inaugurating the National Refineries Task Force, Mrs. Alison-Madueke noted that, “The state of the nation’s refineries, the shortfall in local production and the gradual increase in importation of petroleum products over the years has been well publicized. Even if the importation of petroleum products appears to be a solution to cover the gap between local production and consumption, it should be a temporary one.

“The best solution for the long term is to attain adequate local refining capacity to fully meet the requirements of domestic consumption. The present administration is determined to reverse the continued negative trend in the refineries’ performance.

“It is for this reason that we are reaching out to patriotic Nigerians with undisputed credibility from inside as well as outside the industry to brainstorm on and seek holistic solutions to re-align our refineries to global standards.”

To that extent, she said, the National Refineries Special Task Force will “review the current state of the refineries vis-à-vis the domestic requirements and refine further a road map to grow the nation’s refining capacity, both new and existing, to meet its domestic demand.”

The Minister further noted that, “It will be a very happy day for all Nigerians when we can at last feel like our refineries are working to name-plate capacity, or at least to 90 percent capacity utilization, but beyond that, that we are meeting the greater percentage of our country’s refining needs.”

Among the terms of reference of the Special Task Force include conducting a high level assessment of the Port Harcourt, Warri and Kaduna refineries, and reviewing all past reports and assessments and produce a Diagnostic report complete with a Change Journey Map.

The task force is also expected to review the operations of the three refineries with a view to improving their efficiency and commercial viability, as well as work with a world-class firm to audit the finances of the three refineries, and produce audited accounts over the past two years ending December 31, 2011.

Other functions include the design of a template for key Production/Management-Critical Performance Indicators to be tracked on a periodic basis for ministerial review, as well as to design an automated information work bench to monitor the performance of Port Harcourt, Warri and Kaduna refineries on an online basis.

The special task force will also review all license issued for new refineries in Nigeria and assess their operational, technical, and financial readiness; seek new ideas and design financial models across the value chain for the building of adequate capacity for meeting local demand for petroleum products.

Also, it is expected to design a blueprint for public and private partnerships (PPP) to build small, medium to large-scale Greenfield refineries across Nigeria, as well as design investment models and a road map to self-sufficiency in local production or petroleum products in Nigeria; and to produce a report complete with timelines and milestones within the next 60 working days.

The Minister noted that task Force’s mandate was without prejudice to government’s on-going programme of rehabilitation and turn-around maintenance of the Port Harcourt, Warri and Kaduna Refineries, and the building of about three Greenfield refineries.

She added that already the government has commenced the engagement of the original equipment manufacturers and competent consultants to provide a thorough technical audit of all existing refineries and provide a blueprint to refurbish the refineries to name-plate capacities, adding that the Special Task Force will be expected to review the technical audit in line with government’s targets and make recommendations.

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