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Nigeria’s Refineries running at huge loss: NNPC should tell us another story



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By Ifeanyi Izeze

Just in one year (2018) as contained in its first-ever audited financial statement published on its website last week, the refining subsidiaries of the Nigerian National Petroleum Corporation (NNPC posted a combined operating loss of over N177 billion. This is just the operating loss not the accumulated losses!

Serially, it has been said that the three refineries located in Port Harcourt, River State; Warri, Delta State; and Kaduna, Kaduna State have been technically dormant for over 10 years now. So finally, NNPC can longer cover its lies with new ones as they know that this government that permitted all sorts of malfeasance in the subsector is rounding up and a new government would definitely ask questions on what has been happening with the refineries?

In the first instance, what the corporation described in its audit report as operational losses for the year under review was actually monies spent on overheads because there was nothing that could be called ‘technical operation’ in the organisations throughout the period except stealing and doling out huge salaries to idle workforce that only come to the plants to deceive Nigerians that the refineries were working.

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Let’s even look at the breakdown of the losses as reported.  As expected, all the refineries returned poor results, with Kaduna Refinery and Petrochemical Limited posting the worst performance, with an accumulated loss of over N423.43 billion compared to over N359.093 billion in 2017.

Apart from an operating loss of about N64.55 billion, Kaduna refinery reported administrative expenses of about N64.68 billion during the year, down from about N114.347 billion in 2017.

As presented, the bulk of the losses were attributed to direct operational costs, despite that none of the four refineries in the country has been functional for years.

Also, Port Harcourt Refining and Petrochemical Company Limited posted a loss of over N46.62 billion during the year, although better than over N57.8 billion loss reported in 2017.

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Although Port Harcourt earned about N1.455 billion as revenue during the year, about N22.6 billion was recorded as gross loss for the year, with about N24.04 billion incurred as processing expenses, even with the epileptic refining operations still closed since 2017. The bulk of the losses declared by the company were administrative expenses of about N24.03 billion, including salaries and other remunerations paid to its workers.

The Warri Refinery posted operating loss of about N45.399 billion against N85.136 billion the previous year, with the cost of sales during the year dropping from N14.54 billion in 2017 to N12.745 billion during the year and gross loss from N13.29 billion in 2017 to N10.757 billion. Operating expenses stood at about N34.642 billion, down from N71.847 billion in 2017.

Also at the Warri Plant, salaries, wages, and allowances took about N13.756 billion in 2018 against N12.9 billion spent for the same purpose in 2017, while directors remuneration gulped about N270.1 million compared to N353 million spent in 2017; travels and hotel expenses took N758.9 million against N471.8 million in 2017. About N10.354 million was written off as bad debt.

Even when the NNPC told us that its refineries were doing well, the functioning epileptic ones: Port Harcourt and Warri were operating at less than 15 per cent of installed capacities. Is that how refineries work: produce at 15 percent today and at zero percent the next day?

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As for Kaduna refinery, the plant was born dead or rather very disabled. You are building a plant in Nigeria that is known worldwide for its light crude grades and you designed it to process only heavy crude oil grades such as are found in Venezuela and the Middle East, what did you have in mind: to import the heavy crude from overseas to process in Kaduna? Until we get to the point in this country that we begin to tell ourselves the bitter of truth, Nigeria will never make the kind of progress that our citizens would be proud of.

Port Harcourt refinery had its last Turn Around Maintenance (TAM) in 2000, Warri in 2004 and Kaduna in 2008. To me, this is deliberate to ensure the Plants remain disabled.

Dangling the popular excuse by NNPC top management that the refineries have not been producing optimally because the plants had not been well maintained in the last 10 years is the most stupid explanation any manager can adduce. Whose responsibility is it to make cogent case for the servicing of the plants as at when due, is it the man on the street? Why didn’t they protest the negligence to their supervising minister who remarkable was also the President of the Federation?

Of course why would NNPC overseers bother about refineries working when it is more lucrative for them to take the 450, 000 or more barrels of crude oil set aside to carter for the nation’s daily domestic fuel need to process overseas?

Does anybody still doubt that corruption and greed are the reasons we can’t optimally process our crude at home? Both the people at NNPC and the Presidency are as guilty as the other and that’s why the rot in the nation’s oil sector is sustained.

Government’s lacklustre attitude towards full deregulation of the nation’s downstream has remained unexplainable at best and at worst callous. Every year we talk about huge losses in the NNPC’s downstream operations orchestrated mainly by carrying huge costs of redundant overheads. How long can we continue like this?

Despite its envious domestic market that gulps products like no man’s business, Nigeria has remained one of the few OPEC members if not the only one as at today without efficient refining operations. How do you explain that? Why has it become an impossible task to process our crude domestically?

Now the shameless NNPC overseers and their business partners at the Presidency are waiting on the 650, 000  barrels per stream day Dangote Refinery to come onstream as a life saver as if our government does not know that the Dangote plant is a private business that will produce and sell at international market prices even here at home except they get the crude oil for free to process,

As the plants are now, it would be foolhardy to believe any investor in his right mind will stake his money on any of them except as scrap. The government and the NNPC have dragged this issue of revamping the refineries to this point that even if government decides to concession or outrightly sell them off, we have to spend huge resources to put them in shape so financiers would be able  to come in to fund the revamping for them to operate optimally.

Anyone that speaks the language that President Buhari and the cartel at the NNPC understand should kindly help Nigeria and tell them that if nothing is done to the nation’s existing refineries including option of concessioning or outrightly selling them off between now and when Dangote’s new refinery in Lagos will come onstream, the nation’s three refineries would never function even at one percent installed capacity. Also, by then few people, except Dangote himself will be ready to buy them and the prices they would offer will be laughable because they will buy the plants as scraps. Mark my words!

(IFEANYI IZEZE writes from Abuja: [email protected]; 234-8033043009)