Refurbishing Ailing Refineries As Solution to Perennial Fuel Price Increase, By Sola Olatunji

What is happening to us as a people? Are we jinxed or cursed for life? How can a country with huge hydrocarbon, which is amongst the top oil producing nations in the world have four moribund refineries and unable to refurbish any in the last 30 years?

Paradoxically, these moribund refineries have continued to serve as draining pipes to our resources in droves.

Why should refurbishing of refineries be difficult? Refurbishing refineries is like refurbishing a house or ship? Even countries that have built their refineries before ours are still operating theirs efficiently and effectively. In United States of America, for instance, the age of refineries are between 50 to 120 years.

In Europe, Romania was probably the hottest country that leads the refinery business which must have started around 1857 and the refineries are still functioning.

Nigeria built her first refinery in 1965 at Eleme Petrochemical plant in Port Harcourt with 38,000 b/day production capacity. Subsequently, additional refineries were built by government –.one more in Port Harcourt, one in Kaduna and another in Warri.

After the initial ones, most of these refineries were built in the 70’s and 80’s which makes our refineries relatively young. If we also deduct the number of years they have been idle, I doubt if any has functioned for 20 years non-stop since their inception.

So, why is it that we have not been able to refurbish our refineries in the last 30 years despite the huge salaries and allowances drawn by redundant workers of these moribund outfits? Why is it that we have not been able to fix any of our refineries despite pronouncements by government to turnaround the refineries?

Today, Nigerians are in pains as a result of the inefficiency of government over the year. which imports petrol from abroad when we have crude oil back home.

This is a clear case of contradictions.  It’s like a case of a farmer with large farmland and yet prefers to import food to feed his family when he can easily take advantage of cultivating land and plant crops

Nigerians are faced with the reality today that the petrol subsidy removal and foreign exchange markets liberalization will continue to have negative impacts on their lives, regardless of the interim measures, even including the remedial intervention of palliatives by national and sub-national governments.

In his nationwide address recently, President Bola Tinubu spoke about his policies and the negative impacts on the lives of the citizens and he must be commended for this because in the past, it was almost impossible to get the president to speak to Nigerians.

While Tinubu shouldn’t be blamed for all these problems, it has been anticipated that Nigerians are so impatient as all they want is quick fix of the myriad of problems confronting this country which is absolutely impossible. We may not blame Nigerians too because, the last eight years has been very difficult and unfriendly for them.

In my view, the recent strike by the NLC may not be justified because, Labour has become partisans.

At best, they can be described as opposition party, so coming out to say they are speaking on behalf of the workers of Nigeria may be propaganda from Labour Party.

We also know that the policies of government were meant to improve our social wellbeing but just that the accompanying pains are becoming overwhelming.  While we have excuses for everything, it’s now inevitable for us to fix one or two of our refineries at least to refine our petrol back home so that poor Nigerians will not be subjected to volatile foreign exchange markets.

We can’t sustain this trend because, more Nigerians will continue to slip into poverty, companies will lay off workers and whatever measures government might be struggling with, might amount to total failure.

Government must also relieve some of the refineries workers who are sabotaging the efforts of government to refurbish them without success.

A pattern has emerged in the arguments many of the partisans and ideological critics routinely make on television stations. There is this tendency to always muddle up facts and mislead the public, notably through willful ignorance.

One point that has been erroneously made is the view that the Federal Government is not doing anything about fixing the four refineries it owns. This view is incorrect.

The Federal Government, through the NNPC in 2021, signed a deal with an Italian company, Maire Tecnimont SpA, for a complete revamp of the two refineries in Port Harcourt at a cost exceeding $1billion. The contract that will be executed in three phases is expected to bring the two refineries to full production capacity. The first phase should have been delivered by April 2023, but the company recently announced a five- month extension. The second and third phases will be delivered in 32 and 44 months respectively. By the contact terms, we should have the two refineries in Port Harcourt fully working by 2025.

In February 2023, the NNPC also signed a  $741 million deal with Daewoo Engineering & Construction company to rehabilitate the Kaduna refinery. NNPCL, according to Bloomberg, signed the contract with the South Korean firm. Under the terms of the agreement, Daewoo will restore production at the moribund 110,000 barrels per day facility to at least 60% production capacity by the end of 2024.

It should be said that the facts on the ground decline to support the view that the government is not doing anything to fix the refineries.  Unfortunately, Nigeria cannot sustain the subsidy regime over the next two years when the rehabilitation of the refineries will be completed.

While it is good to have the refineries fully working alongside the Dangote Refinery, which will eventually make Nigeria a net exporter of refined petroleum products, local refining won’t translate to cheap pump price of petrol. From the pricing template of petrol import, over 90% of the price per litre is determined by price of crude oil in international market. Local refining will only help in reducing pressure on the demand for foreign exchange, eliminate the cost of shipping and port charges which may not translate to more than N10 per litre in savings. .

What we need to resolve this problem is to fix one or two of our Refineries.  When we refined our petrol at home, the cost will be cheaper and we shall not be subjected to the volatile foreign exchange markets that will eventually determine the price of petrol from time to time.

However, any reforms in the oil sector, without total overhauling of NNPC will amount to nothing.  It must also be noted that NNPC is fighting hard to scare away competitors so that it can remain as a monopoly.  It’s a well known fact that once NNPC is faced with competition, all her inefficiency will be exposed.

Tinubu’s  assurance to labour Unions that Port Harcourt Refinery will be ready in December is certainly a cheering news but he knows  that the trust between government and the citizens can best be described as very suspicious because of several unfulfilled promises.

For over 30 years, promises by government that one or two of our moribund refineries would be back to life remained  mere propaganda. Yet all hope is not lost for a new Nigeria. I can see it. I can smell it. And it must come pretty soon.

.Otunba Sola Olatunji, Chairman, Ikale Heritage Development Association, IHDA, writes from Lagos.