How Top Oil Industry Officials Ruined Nigeria’s Refineries

. NNPC urged to disclose full details of TAM

By Chika Amanze-Nwachuku

Oil industry sources over the weekend made startling disclosures of how top industry officials ruined Nigeria’s four refineries by diverting huge funds earmarked for their routine comprehensive turnaround maintenance (TAM).

The four refineries located in Port Harcourt (two), Warri and Kaduna have a combined installed capacity to refine 445,000 barrels of crude per day, but have over the years performed abysmally owing to the obsolete state of the facilities.

THISDAY gathered that in 2014, the combined average refining capacity utilisation dropped to 14.4 per cent from 22 per cent in 2013. In 2015, the combined refining capacity utilisation declined further to 4.9 per cent against 14.4 per cent in the previous year. Three of the refineries could only produce at averaged combined capacity utilisation of between 12.73 per cent and 23.09 per cent.

Minister of State for Petroleum, Dr. Ibe Kachikwu disclosed in February that collectively, all the four refineries are producing at 14 per cent capacity utilisation.

Oil industry sources familiar with operations of the refineries, told THISDAY that contrary to repeated claims by the Nigerian National Petroleum Corporation (NNPC) that the refineries undergo routine TAM, the four refineries might not have undergone comprehensive repairs in the last 18 years or more as contracts awarded by successive governments were either abandoned halfway or not executed at all.

Whereas the NNPC disclosed last week that it spent $396.33million on TAM for the four refineries between 1998 and 2008, an oil industry source stated that the last two comprehensive TAMs of the refineries were in 1995 and 2000.

According to the source, despite the billions of dollars, which the NNPC claimed were expended on the Port Harcourt refinery upgrade, the power unit, said to be among its vital units were neglected, culminating in the massive damage to the fluid catalytic unit, which is responsible for conversion processes used in petroleum refining.

According to checks, failures by successive governments to carry out routine TAM of the refineries resulted in the colossal damage to their vital units.

For instance, the two TAMs slated for the four refineries in 1998 were not carried out despite that the firms engaged in the purported exercise were paid millions of dollars.

Also, between 1999 and 2013, billions of dollars were reportedly voted for the refineries upgrades and/or TAMs, but there was little or no repairs carried out on them.

A former Minister of Petroleum, Mrs. Diezani Alison –Madueke had after a tour of the refineries, shortly after she assumed office, confirmed that “all the vital units of the refineries were obsolete and could no longer produce owing to years of neglect.”

Describing the refineries as ‘ATMs’ for successive administrations, a highly placed industry source said attempts to privatise the refineries had been frustrated by those who feed fat from them.

“What has happened over the years was that the authorities set up shell firms that win contracts for the repairs that were never carried out at the end of the day. The huge funds are often used for election purposes”, said the source.

In 2014, it was gathered that about $1.8billion was voted for TAM of the four plants, but there was no indication that the money was utilised for that purpose as all the refineries have remained comatose.

A source added: “All the claims in the past that the refineries were producing were false. If you were following the trend, once the NNPC announces TAM on the refineries, it would be followed by announcement on when the repair would be concluded and what the refineries are producing. In fact at some point, the corporation will announce the production capacity, 60 or even 90 per cent. The next thing is to set the target when the country will end importation. All these were aimed to deceive Nigerians that the money earmarked for the repairs had been utilised for the purpose.

“After the TAM that never happened, the next announcement would be attack by vandals. They will claim that the refineries have stopped producing as a result of the attack. The next thing is to award another contract for TAM and billions of dollars would be released for upgrades and TAM that never happen”, added the source.

He noted that the NNPC often kept the identities of contractors secret because the deals were fraudulent.

“A recent case in point was how a Nigerian firm, a few years’ ago, inflated the contract for the repairs of the old and new Port-Harcourt refineries. At the end of the day, the country was ripped off to the tune of about $150 million being inflated payments on the contract”, another source recalled, even as he challenged the NNPC management to make open to Nigerians, the identities of the contractors that carried out the series of repairs, the amounts, dates of the repairs as well as schedule of the various maintenance carried out.

The NNPC in 2014 claimed it adopted phased rehabilitation of the plants after efforts in 2011 to get the original refinery builders (ORB) involved in their rehabilitation came up with unfavorable terms.

Kachikwu, had shortly after assuming office, declared that about $1.2 billion was required to repair and bring the three refineries in Port Harcourt, Warri, and Kaduna, up to 100 per cent production level.

He said the government was yet to get financiers to take this up and not concession the refineries as previously reported.

Kachikwu also revealed that the government had renewed plan to invite the original refineries builders (ORB) for the three refineries to undertake their repairs.

The minister also stated then that there was a consensus within the government that the refineries ORBs which are Saipem in Warri; JGC in Port Harcourt; and Chiyoda in Kaduna, would be invited to undertake the repairs considering that they have a better knowledge of the refineries.

Addressing the House of Representatives’ Ad-hoc Committee investigating the status of the nation’s four refineries, last week, Chief Operating Officer in charge of Refineries, at the NNPC, Anibor Kragha, disclosed that the corporation spent $396.33million on TAM for the four refineries between 1998 and 2008 alone.

According to a breakdown of the expenses by the NNPC, a total sum of $182.730 million were proposed for old and new Port Harcourt refineries, for which it claimed $157.641 million was spent, while $151.170 million was spent on Warri refinery. The NNPC further noted that of the $91.5 million proposed for the Kaduna Refinery, $87.517 million was spent.

In the TAM record provided, the corporation did not reveal the cost of the TAM carried out during the last administration and also failed to give details about the firms that carried out the said TAM.