NNPC Admits Inefficiency in Management of Refineries

• Operators seek collaboration for surviving low oil price regime
Ejiofor Alike and Aliogo Ugochukwu
The Nigerian National Petroleum Corporation (NNPC) has admitted that it had displayed inefficiency over the years in the management of the country’s four refineries, attributing the poor performance of the refineries to obsolete technology.

This is coming as oil and gas industry operators who gathered yesterday in Lagos at the West African International Petroleum Exhibition and Conference (WAIPEC) have concluded that the only means of survival of service providers at this current regime of low oil price is collaboration, rather than being traditional competitors.

Speaking at a special panel session at WAIPEC, the Managing Director of National Engineering and Technical Company (NETCO), a subsidiary of NNPC, Mr. Siky Aliyu, stated that when he started his NNPC career in the refineries over 30 years ago, the then group managing director of the corporation used to query the refineries for performing at 93 per cent capacity utilisation.

He said the situation had changed for the worst with the plants currently struggling to achieve only 50 per cent, which is far below the 93 per cent that had attracted queries in the past.
“We are grossly inefficient in managing the refineries. We have been struggling to do 50 per cent. I started my career in the refineries and when we are doing 93, 95, 96 per cent, I remember the GMD calling us to ask what is happening? What is really going on? Why are you doing 93 per cent? And you see people running helter – skelter. ….Now, we are doing 12 per cent, 15 per cent,” he said.

Aliyu disclosed that Nigeria accounts for 73 per cent of the 607,000 barrels per day West Africa’s refining capacity, without much to show for it as a result of the poor performance of the country’s four refineries.
According to him, Nigeria with her huge population has only four refineries while Egypt has nine refineries and United States has 137 operating refineries.
“I agree with my sister (Mrs. Uju Ifejika) that the four refineries are technically obsolete. We are planning to build pipelines between Niger and Kaduna. We can’t have a refinery in Kaduna where we pay workers but can’t put the refinery into use,” he added.

On concern raised by the Chairman and Chief Executive Officer of Brittania-U Limited, Mrs. Ifejika that the NNPC is only interested in four out of the 15 derivatives from the refineries, Aliyu said the corporation blends the other derivatives to produce petrol.
Aliyu added that the present management of the NNPC is determined to turn the refineries around with 60 per cent capacity utilisation target by the end of this year or first quarter of 2018, stressing that there are huge opportunities for private investors in the refining business.

In his keynote address on “Collaboration and local capacity development as an enduring strategy in a low oil price environment,” the Group Managing Director of NNPC, Dr. Maikanti Baru, said effective collaboration would ensure the survival of the service providers in the present low oil price regime.
Baru, who was represented by Aliyu cited the success story of the Detailed Engineering Design (DED) of the Topside of Total’s Egina FPSO project as a case study of good result of collaboration.
According to him, the project was delivered safely, on time and within budget by a consortium of Nigerian Engineering companies led by NETCO.

“Hitherto, no engineering project of this magnitude has been handled locally because no single local company had the capacity to do so. The Management of NNPC in its wisdom approved for three local companies to collaborate and support the local execution of this project. This decision paidoff and has placed on record that over 80 per cent of the associated man-hours which was in excess of 1 million man-hours on a single project can be effectively executed in one project location in Nigeria,” Baru explained.

Also in his presentation on “Service company – operator collaboration models; drawing on experience from other providences,” the Managing Director of Shell Nigeria Exploration and Production Company (SNEPCo), Mr. Bayo Ojulari, urged the service companies to collaborate to be able to execute world-class projects.