FBN Quest Dismisses NNPC’s  Attempt at Another TAM for Refineries

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By Chineme Okafor in Abuja

Analysts at FBN Quest Capital Limited, a subsidiary of FBN Holdings Plc, have expressed doubts that the latest attempts by the Nigerian National Petroleum Corporation (NNPC) to undertake a fresh Turnaround Maintenance (TAM) on its refineries in Port Harcourt, Warri and Kaduna, would eventually come good and help Nigeria address her challenges with protracted scarcity of petrol.

The analysts stated in a periodic report, Good Morning Nigeria, which THISDAY obtained yesterday in Abuja that the NNPC should consider allowing its refineries to “wither away” because new refineries like the 650,000 barrels per day (bpd) capacity Dangote refinery and others scheduled to come on stream soon would be the game changers.

They also pointed out that the NNPC refineries were old and past TAMs on them had not been successful to suggest that the latest effort would be.

“The fuel shortages highlight Nigeria’s failure to refine domestically the petroleum products it requires for its own consumption. The scarcity has been attributed variously to: flaws in distribution, upward movement in the international price necessitating subsidy payments under another name (absorbed by the NNPC), hoarding, and the fact that the set retail price of N145/litre for premium motor spirit (PMS, or gasoline/petrol) is far below that in the countries of the sub-region.

“The FGN’s response to the periodic shortages is to commit public monies to another programme of turn around maintenance (TAM) for the corporation’s refineries, costed at US$1.1bn and said to be achievable over 18 months. An earlier investment in TAM in 2013 made little, if any impact. In September 2017 the refineries achieved a combined capacity utilisation rate of 6.1 per cent compared with 9.5 per cent the previous month,” said the report.

It further explained: “We all know that the combined capacity amounts to 445,000b/d crude but very few of us can say when, if ever, the refineries produced at this level. Such low rates tend to result in losses. According to the NNPC’s financial and operations report for September, the refinery companies have reported operating losses for four of the past 12 months.

“We cannot say for sure that the latest programme of TAM will not be a success. However, the age of the refineries suggests not: Port Harcourt (commissioned in 1965), Warri (1978) and Kaduna (1980).”

According to it, “Our message is “Local refining, the obvious solution”. By local, we mean private sector. The corporation’s refineries should be allowed to wither away in our view. The game-changer is the Dangote refinery under construction in Lagos State, which over time is scheduled to process 650,000b/d crude.

“It is said that the Dangote plant will start processing some crude in 2019. There are other projects further down the line. To give a topical example, Petrolex plans to invest US$3.5 billion in a refinery with capacity of 250,000b/d in Ogun State and is talking of completion within five years. We would expect several more projects if the retail price of PMS was genuinely deregulated.”

It suggested that an ideological battle would have to be won, and the combination of the corporation, organised labour and some elements in the federal government defeated for a genuine deregulation to be achieved in the downstream petroleum sector.

“The gains from victory would include job creation, FX savings, the prospect of regular supply and, at some stage, exports to the sub-region even,” it added.

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  • Aisha

    This government is just ridiculous. The earliest they realise that Government cannot maintain and operate those refineries the better for them. TAM would just be another way for Baru to loot. They should hand over those assets to private companies. Maybe not by sale but by some sort of Maintenance and Operation lease or something.

  • tobias

    One correction,there are two refineries in Port Harcourt, one of 1965 and another commissioned in 1989 or there about. I believe the Port Harcourt and Warri refineries are still salvageable being located within crude production fields. All you need to do is to change-out the crude processing units if they are old. The other infrastructure (land, internal and access roads, buildings and utilities are still valuable assets). So what the Govt needs to do is to urgently call for bids for the refineries and sell them out for whatever price it can get, then let the successful bidder(s) do the rest. Similarly Kaduna may still be salvaged if it can be tied to Niger republic crude supply source. Unfortunately that may not happen, Buhari being the worst of the statist leaders we have always had. As time is gradually running out, we are fast approaching the state of things we found Nitel where valuable assets were allowed to reduce to zero as more and more private entities came on stream. So sad that we as a nation cannot come out of the grip of a failed ideology that even Russian and China have long jettisoned into the dustbin of history. What a tragedy.

  • Daniel Obior

    NNPC with its culture of corruption and inefficiency cannot make any improvement on the conditions of these mismanaged refineries. The refineries should have been sold a long time ago. They will continue to depreciate and lose value for every day NNPC still keeps them. Money spent on TAMs in the past was a waste. Any more TAMs proposed will be throwing good money after bad. NNPC and government should get away from the downstream petroleum sector and leave private organisations to run it. No more TAMs. Sell the refineries; sell, sell, sell.

    • James Edward

      This has nothing to do with NNPC but with Nigerians in particular and blacks in general. Blacks can’t work together to achieve anything. They haven’t throughout history. Which sector of public administration is would you say is at par with world standard in terms of performance? Education? Health? Power generation? Transportation? Security? Forget your so-called giant of Africa. It’s a country of people with loud mouths and empty brains.

      • algol2000

        This also has something to do with the climate. There is no winter here that drives people to prepare.

      • Yaddah Amanda

        My brother if you say blacks can’t work together to achieve anything i will disagree with you on that. It is not about pigmentation ,its about concepts and ideology born out of pure conscience that negates ethical notion (which breed on ethnicity, tribalism which has corroded our driving force). Africans have allowed themselves to be bamboozled and drown into oblivion by western hegemony. We see ourselves as strangers in Africa and therefore need not to think doing anything that will promote our culture and well-being. If not, how then will an African defraud his mother land by any means possible and will choose to go as far as Asia, Europe and America to spend it. African are still on transit waiting when God will fully create their continent that they will recognize and accept as their own.

      • Daniel Obior

        This has everything to do with NNPC, the organisation tasked with running the refineries. It will be nice to have organisations that are at par with world standards. However, an organisation needs not be at par with world standards to do well. We have several organisations in this country, run by Nigerians which are doing well. Lets not continue to make excuses for a failed organisation like NNPC.