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FG beats down refineries maintenance cost to $22m

refinery

The Turn Around Maintenance (TAM) for the Nigeria’s four refineries gulped about $22 million, saving taxpayers $1.57 billion from the $1.6 billion earlier voted for the projects.

A document from the Nigerian National Petroleum Corporation (NNPC) showed that $10 million, being about 48 per cent of the total expenditure, was spent on the two refineries in Port Harcourt. The $22 million expenditure was a 982 per cent reduction from $216 mil-lion, which the Sani Abacha regime spent for the same purpose.

The $1.6 billion was said to have earlier been voted for the repair of the four refineries nationwide by 2014. Managing Director of the PHRC, Dr. Bafred Audu Enjugu, according to the document, authenticated the $10 million investment in the facility.

“The ongoing phased rehabilitation of the company cost a little less than $10 million. The job was holistically carried out by indigenous engineers without any foreign support,” the document quoted Enjugu as saying.

The administration of former President Olusegun Obasanjo had set aside $369 million for the TAM of the nation’s four refineries, while the Abdulsalami Abubakar and Sani Abacha regimes spent $92 million and $216 million respectively for the same purpose. In 2007, the NNPC claimed it awarded the contract for a comprehensive TAM on all the refineries to a Nigerian firm.

The contract sum as revealed by the then Group Managing Director of the corporation, Abubakar Yar’Adua, was $57 million. In 2009, the then GMD of the NNPC, Alhaji Sanusi Barkindo, also said the corporation spent $20 million on the maintenance of the Kaduna refinery alone.

A whopping $1.6 billion was voted for TAM of the four refineries across the country by the end of 2014. The country, analysts have argued, has a poor maintenance corporate culture. The 150,000 bpd Port Harcourt refinery was built in 1989. TAM operations were carried out in 1991, 1994 and 2000.

The Kalu Idika Kalu Committee had, in May 2013 during a visit to the Port Harcourt Refinery, found its four boilers nonoperational. Two out of the four power plants were down.

Besides, there was evidence of poor maintenance with serious corrosion of major key units, just as morale of the workers was low and management was dysfunctional with little or no financial authority. “The last major TAM was in 2000. It will have to be modernised and upgraded. Ditto for the 110,000 bpd Kaduna refinery, this had its last TAM in 2008.

The one before that was in 1998 after a major fire. Production is at 25 per cent of installed capacity. The 125,000 bpd Warri refinery is also operating at 25 per cent installed capacity. TAM operations were carried out in 1994, 2000 and 2008.

“The administration of a former President, Chief Olusegun Obasanjo, set aside $369 million for the TAM of the nation’s four refineries, while the Abdulsalami Abubakar and Sani Abacha regimes spent $92million and $216 million respectively for the same purpose.

“In 2007, the NNPC claimed it awarded the contract for a comprehensive TAM on all the refineries to a Nigerian firm. The contract sum, as revealed by the then Group Managing Director of the corporation, Abubakar Yar’Adua, was $57 million.

“In 2009, the then GMD of the NNPC, Alhaji Sanusi Barkindo, also announced that the corporation spent $20 million on the maintenance of the Kaduna refinery alone,” the document stated. An industry source said the NNPC was already planning to run the installations through proxy.

The corporation, he said, had begun talks with Joint Venture partners for the running of the refineries. Group Managing Director of the NNPC, Dr. Ibe Kachikwu, confirmed this after his tour of the refinery in Port Harcourt.

He said the NNPC would invite partners to support the running of the refineries to ensure efficiency. The refineries, he said, would “not be sold, but joint venture partners with established track records of success in refining would be invited to support the running of the refineries in order to ensure efficiency.”

He commended the NNPC’s engineers for the successful execution of the ongoing phased rehabilitation of the refineries while urging them to prepare replacement programmes for obsolete spare parts of all the corporation’s installations in order to avoid intermittent shutdown of facilities.

The NNPC boss stated that efforts were being made to fix all the crude and petroleum products pipelines nationwide. He added that the Nigerian Air Force would be engaged to provide aerial surveillance for the pipelines, the Nigerian Army Engineering Corps to fix and police the pipelines and the Nigerian Navy to provide marine surveillance for the network of pipelines.

According to Kachikwu, the ongoing phased rehabilitation of all the refineries would be accelerated with the aim of reducing petroleum products importation. He added that at full capacity, all the refineries could supply only 20 million litres of petrol daily.

Meanwhile, the NNPC has submitted a report to President Muhammadu Buhari on its process for recovering about $7 billion owed Nigeria from over deducted Joint Venture taxes.

Senior Special Assistant to the President on Media and Publicity, Mallam Garba Shehu, said in a statement yesterday that in the first 100 days of the Buhari government, the NNPC has begun the process of recovering over $7 billion in over-deducted tax benefits from JV partners on major capital projects. The report detailed successes recorded so far.

Kachikwu had commenced Performance Measurement & Benchmarking as well as Value for Money Review of NNPC and the JV Companies covering the period 2008 – 2013. A report indicated that this process may lead to further cost recovery. According to Shehu, “In addition, the report said that a reputable international accounting firm has been engaged by the NNPC to ascertain the exact amount due government on the Strategic Alliance Contracts entered by NPDC, where up to $2.46 billion of government money is to be recovered.

“It also revealed that consequent upon an extensive investigation of the various toxic crude oil for refined products swap contracts, a total sum of $420 million has so far been reconciled in favour of NNPC and is now due for recovery from the legacy OPA/SWAP contracts.

Out of the reconciled amount, the sum of $277 million has been recovered in lieu of products and the recovery effort is still ongoing.” He said progress was being made towards bringing back the nation’s refineries to full production before the end of this year.

If this is completed, the report said, it would achieve an annual savings of about $1 billion worth of foreign exchange from fuel import substitution and additional total saving of over $500 million annually will be made from the petrochemical products of Kaduna Refinery and Petrochemical Company.

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