Nigeria’s Long Road to Petrol Scarcity

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Segun James

How can the leadership of a country whose economy is dependent on oil deliberately decided to sabotage the economy by awarding a contract for the turn-around-maintenance (TAM) of a Nigerian refinery to an Indian fishing company, which has no knowledge of oil and gas operations?

This was the key question that agitated the minds of the oil and gas industry stakeholders when in 1996 a probe was opened on the TAM that took place on the Warri refinery.

The then management of the Nigerian National Petroleum Corporation (NNPC) had awarded the TAM to Primlaks Nigeria Limited, a company whose sole activities was fishing in the Nigerian waters.

A lot of companies including major oil producing companies in the country and the company that built the refinery had submitted bids for the TAM contract which was worth several million dollars, but surprisingly, the contract was awarded to Primlaks, a company that was never part of the biding process in the first place.

Politics has always been lousy with business and management especially in Nigeria; worse still; there has never been rules and tradition too. So, for this, every new government brings in a new manager for every government business even if the manger is not competent and the job he is expected to do is highly specialised and required experience.

This is made worse if the business concerned is the mainstay of the nation’s economy. In Nigeria’s case, the petroleum industry accounts for about 70 per cent of government revenue and over 90 percent of the nation’s foreign exchange earnings.

As Nigerians grapple with fuel scarcity that has virtually shut down the country for weeks, not a few people knew that this perfidy began in 1994, precisely during the regime of the late maximum leader, General Sani Abacha.
Prior to that time, professionalism had always been the order in the petroleum industry with the NNPC shielded from politics.

But when Gen. Ibrahim Babangida took over as the head of state, things started on a new course. This was the time politics came into the oil industry. Every decision and activity was taken from the political turf than from the professional, which had hitherto been the norm.
In the oil refining industry, comprehensive maintenance and upgrade of equipment called the TAM takes place every two years. During this period, the entire refining process is shut down for 45 days for the maintenance period.

All the four refineries in the country – the old Port Harcourt Refining Company (PHRC), Eleme Refining and Petrochemical Company (ERPC), Warri Refining and Petrochemical Company (WRPC) and the Kaduna Refining and Petrochemical Company (KRPC) – needed TAM urgently.

But unfortunately, the TAM for WRPC and the KRPC were somewhat complicated.
The Kaduna refinery, which was commissioned in 1980 was designed to use imported “heavy crude oil” from Venezuela instead of the “Light Sweet Crude,” Bonny Light produced by Nigeria. Because of the vandalism of the pipelines that transport the crude from Escravos in Delta state to Kaduna which necessitated a number of shut downs in the past, the TAM on the refinery became very complicated.

The Warri refinery which came on stream in 1978 experience a lot of setbacks from the beginning. Of the three plants commissioned to operate in the refinery, only two was working. While the petrol and the Diesel were working optimally since it came on stream, the kerosene plant was never functional; and all efforts to put it on stream had proved abortive.

Even though the petrochemical side’s polypropylene and carbon black plants were working, all the plants within the refinery had broken down due to lack of maintenance. Thus they were in dire need of TAM badly.
The same problem besets all other refineries in the country as the NNPC, under the government of Babangida never carried out TAM on any of the refineries for about six years.

Every time a TAM was planned, somehow, the process was abandoned and or postponed for another year. This was the situation until 1994 when the TAM was eventually carried out on the Warri refinery while the others refineries were on standby operation.

The TAM process was supposed to last for 60 days, but it was extended to about 100 days as the rot in the system was not anticipated. The equipment on the refinery was obsolete. At the end of the TAM, the refinery maintenance department was forced to fabricate most of the obsolete parts from its workshops for the refinery to come back on stream.

At the end of the TAM, the petrochemical plants could not resume operation. The refinery was stopped from producing kerosene. But the fuel plants however came on stream even if though it was not at optimal capacity as its produced at less than 60 percent of its 125,000 barrel installed capacity.

The same problem besotted the other refineries in Kaduna and Port Harcourt. This was the beginning of the nation’s decent into the abyss of perennial fuel scarcity.
However, if this was scandalous enough, the worst was not unraveled until in 1996 when the truth began to unfold as to why the TAM failed.

The Abacha government in a surprise move instituted a panel to probe the management of the Warri Refinery and in particular the operation of the TAM following the total breakdown of the refinery plants a few weeks after the supposed total overhaul of the refinery.
During the probe, cans of worms were exposed as materials purchased by the NNPC for millions of dollars were found to cost a few hundred dollars.

So alarmed was the government that the managing director of the refinery Dr. Owolaku was placed on indefinite suspension and was later relieved of his job.
The TAM done by Primlaks was said to be shoddy that it in actual fact did more damage to the plants than remedy the situation. Since then, the plant has never performed optimally. Today the refinery can only produce at 30 percent of its installed capacity.

Today, the refinery is 38 years old and most of the equipment used in constructing it are well over 40 years, hence they can no longer meet the need of the times. Even the manufacturers have stopped make them many years ago.

Most refineries the world over today are now digitalised, yet the NNPC claims to do TAM on obsolete equipment, which are no longer in production.
In 2015, before the present administration took over, there were reports that the corporation spent over N152billion on TAM of the four refineries. This was however refuted by the corporation.
The then Group General Manager, Group Public Affairs Department of the corporation, Mr. Ohi Alegbe had said the corporation was a public entity responsible for the government and people of Nigeria.

Specifically, he dismissed the report credited to some civil society organisations, alleging that the NNPC had committed N152 billion for the TAM of the four refineries between 2011 and 2013. Alegbe however explained that a decision was taken in 2011 to rehabilitate all the refineries, using the Original Refinery Builder (ORB) of each of the refineries.

Alegbe said NNPC was focused on its mandate and would not be distracted by the spate of politically inspired polemics against its operations.

According to him, the NNPC made recourse to a new strategy after the ORBs declined participation and nominated some partners in their stead who came up with outrageously unfavourable terms.

“The nominated partners, as sole bidders, came up with humongous price offers after two years of thorough and exhaustive scope of work definition and price negotiations. “The proxies were also unwilling to provide post rehabilitation performance guarantees,’’ he said.

He said the new arrangement, which kicked off in October 2014, entailed phased and simultaneous rehabilitation of all the refineries, using in-house and locally available resources. Alegbe said that the strategy also embraced the direct use of Original Equipment Manufacturer representatives to effect major equipment overhaul and rehabilitation.

He said it was projected that the new strategy would reduce the cost of the operation by 70 per cent. This money, he said, would help in mitigating the financing challenges of NNPC visa-a-vis refinery rehabilitation.

“The phased rehabilitation programme started in October 2014 after the required funding stream was established and will last for 18 months,’’ adding that over 60 per cent of materials needed for the TAM at Port Harcourt refinery had been delivered and that their installation was in progress.”

Alegbe also disclosed that material orders and deliveries to Kaduna and Warri refineries remained substantial.
Despite the accusation and counter-accusation, Nigerians today are groaning under petrol scarcity, the fall out of the political decisions taken over 20 years ago. Finding a lasting solution to the perennial fuel crisis by revitalising the refineries remains elusive even as the oil marketers are smiling to their banks at the expense of Nigerians.