30 August 2015, Abuja – The Nigerian National Petroleum Corporation has recommended the sale of the nation’s three refineries in Port Harcourt, Warri and Kaduna due to some challenges the corporation described as critical elements, which may continually hinder their effective operation in the hands of the Federal Government.
NNPC has equally finalised its position on the protracted pipeline surveillance, with a verdict that the protection of the pipelines be entrusted to the military, which it believes can effectively protect the critical facilities.
A source in the corporation, who spoke to one of our correspondents on Saturday in Abuja, said the corporation’s stance was informed by the position of the NNPC Stock Reconciliation Committee, which met last week in Abuja to assess the performance of the refineries and associated logistics.
The source, who is very close to the committee, explained that the committee concluded that the operation of the refineries could not be profitable under the current arrangements, which the panel described as unfavourable.
The source, who spoke on condition of anonymity, explained that the Ship-to-Ship transfer, which the corporation has employed to get crude oil to the refineries, cost between $6m and $7m per vessel and load one million metric tonnes of crude oil.
“MC COSMIC and MC JEWEL, which are engaged to transfer crude to Warri refinery because of their carrying capacities of about one million metric tonnes, collects between $12 and $14m per operation(trip). These are heavy vessels that load crude and transfer to smaller vessels. They then transport the crude to where the product can be transferred to the refineries.
“The same scenario is replayed to get the crude to the Port Harcourt refineries. If you add the amount to the already huge cost, you will realise that the nation cannot sustain the refineries on the prevailing conditions,” the source added.
The committee, it was learnt, also recommended the stoppage of the SWAP and the Offshore Processing Agreement (which had been carried out), in order to increase local availability of crude to the refineries.
“Crude business is done three months ahead. It was already concluded during the immediate past administration that the three refineries would be sold, even though the government had stocked all the materials for the turnaround maintenance of the refineries.
“So, there wouldn’t have been any crude for the local refineries if the SWAP deal and the OPA had not been cancelled; so, the quota that would have been exported was rescheduled to the three refineries,” our source said.
Disclosing that the Kaduna refinery started production from its Fractional Cracking Catalytic Unit at 11.50am on Saturday, the source, however, said the threat posed by pipeline vandalism remained the greatest challenge to the local refining of petroleum products.
“Kaduna refinery has the capacity to crack any type of crude from any part of the world, be it light or heavy. The FCCU, which produces all components of petroleum products from the crude supplied, started production at about 11.50 this morning. During the week, it was undergoing processing,” the source added.
“The fear of the committee, however, is that the number of leakages along the Warri-Kaduna pipeline will not allow the transfer of petroleum products to continue. In July, when the Kaduna refinery was about to start production, the pipeline had been breached in 78 points between Warri and Lokoja. The vandals have been able to identify the difference between the pipelines carrying crude, gas and refined petroleum product. And once there is a breach in one of the pipelines, other pipeline will be shut down.”
The source equally explained that the menace of vandals would also not allow fuel tankers to leave the nation’s highways soon, especially Lagos.
He said the NNPC had recommended to the Federal Government that the military should be directed to take over pipeline surveillance, as the agency would no longer be able to carry out the protection of the pipelines across the country.
“With about 250 points being attacked on a monthly basis, and the huge cost of putting them back in shape, there is no way the government can sustain such losses, which it had intended to stop,” he stated.
The source said owing to the challenges outlined by the committee, the panel believed the best operation for the government was to sell the refineries in their current state while holding on to a “minimal stake” in the facilities.
“The recommendation is that the government should sell the refineries as they are. The same principle applies to our cars; it gets to a point that we believe that they are no longer serving the purpose for acquiring them. The refineries have become a burden. It has been recommended that if the government will not embark on outright sale of the refineries, it should go into partnership but hold a minimal stake in the venture, especially with those who built the refineries initially,” the source added.
It was also gathered that the government had been advised to facilitate the setting up of modular refineries, which are smaller but runs on modern technology, to replace the existing facilities, which are even obsolete.
However, President Muhammadu Buhari is said to have disagreed with selling the refineries for now on the ground of what the source explained was based on “social and political” factors.
“You know the connection between the President and how he facilitated the setting up of the refineries in Port Harcourt. He is highly concerned about what the people will say. He is also said to be considering what the cost of petroleum products will be after the sales; considering what the government pays silently at the moment to make sure petroleum products are readily available,” the source said, while explaining that Buhari’s reaction had been made known to the top management of the NNPC.
Meanwhile, the NNPC has denied any plans to sell the country’s refineries at present.
According to the corporation, reforms by its new management have not suggested the sale of the three refineries located in Warri, Port Harcourt and Kaduna.
The corporation’s Group General Manager, Group Public Affairs Division, Mr. Ohi Alegbe, told our correspondent on Saturday that although the firm had undertaken series of reforms since its new management came onboard, it had not recommended the sale of the national refineries.
Alegbe said, “There is nothing like that.”
When told that there are concerns that the NNPC might not be able to protect the pipelines and that the Federal Government should take over the surveillance of the facilities, the corporation’s spokesperson replied, “It is also not true.”
On the level of vandalism and how it affects the respective capacities and outputs of the refineries, Alegbe stated that the corporation had adopted various measures to check the menace of crude oil pipelines destruction.
Explaining how the corporation had been protecting the pipelines in the interim since the cancellation of various pipelines’ protection contracts, he said the NNPC had engaged security agents of different communities where the facilities run through.
Alegbe said, “Firstly, there was no contract with the OPC (Oodua Peoples Congress) please. We have the police, the military and we also engage with community-based groups. And it is not as if the pipelines were left unprotected. We have the military, the civil defense and the police, and some leaders of communities that are bordering some of these pipelines have been involved in the protection process.”
One of the latest reforms of the NNPC’s new management, which was carried out last week, was the trimming down of the off-takers for the lifting of Nigeria’s crude oil from 43 to 16.
*Ademola Oni & Okechukwu nnodim – Punch