UN-STAR INCOMPETENCE: NNPC @ Warri Refinery Displays it!
Tuesday, June 1, 2004
By Joe Obende, Warri
THE planned resumption of operations at Warri Refinery and Petrochemical Company (WRPC) suffered a set back on Monday as the restarting of the plant shut down two years ago could not hold due to a fresh technical fault.
With a built-in capacity to refine about 120,000 barrels per day, the refinery’s Turn Around Maintenance (TAM) was awarded to a French company, Delatre Bezon Nigeria Limited, for $100 million in November 2002 by the Nigerian National Petroleum Corporation (NNPC).
The refinery, which was slated for restarting on Monday, after a 20-month closure, could not come to life because engineers test ran the plant with Forcados heavy crude oil instead of its built-in structure Escravos type of Bonny light.
This, it was learnt, knocked the processing fluid catalytic cracking unity (FCCU), a vital part of the plant.
But Manager Public Affairs of WRPC told pressmen Monday that the failure of the start-up was because of delay in carrying out the TAM when it was due. TAMs are mandatorily carried out at four years intervals but the last for the Warri plant was in 1994.
The DAILY TIMES gathered that the blend of crude required for plant’s production ordinarily would have come from Escravos but following the vandalisation, last year March of pipeline conveying crude from Escravos to WRPC the wake of hostilities in the Warri and which regains were believed completed, had not been forthcoming as repair works were said to still be on.
A French company, Delatre Bezoa which had carried out the TAM said the job was completed in January but the plant could not be started up for test runs because there was no crude from Escravos.
Hinged on the premise that a plant such as WRNPC should not be left idle for too long, engineers from the refinery decided to test run with heavy crude meant for Kaduna Refinery with, according to them,†modifications here and there†which resulted with it running aground.
A livid Managing Director of WRPC Benson Idahosa was said to be saddened at the development which forced the cancellation of NNPC’s MD, Funso Kupolokun’s visit to turn on the plant scheduled for Monday.
Also, the plant which was said would resume full capacity production may not go beyond 40 per cent of its installed capacity when it eventually starts up as disappointed Executive Director of NNPC (Refinery and Petrochemicals), Mr. Ahmed Yar’Adua led Kupolokun’s advance team to Warri on Sunday for the start-up learnt on Monday.
An elated Kupolokun, over the weekend in Abuja based on what information he was fed with had declared that NRPC with its Crude Distillation Unit (CDU) and fluid catalytic cracking unity (FCCU) rehabilitated was ready for full blast of 8 million litres per day of Premium Motor Spirit (PMS) take-off.
With WRPC’s 8 million litres per day he had added that about 30 million litres would now be produced locally by the nation’s refineries with improved production capacity with time.
Fresh fears are that a part TAM court may be forced to be awarded to DBN before the plant can begin production and that may take some time.
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What do we benefit from investment on refineries? |
According to a recent report, the Federal government has in the last five years spent N103 billion on the nation’s four refineries. That report taken in conjunction with other disclosures by the NNPC that two of the refineries now operate at 60% of capacity while the other two are below that level as well as the fact that the four refineries even when operating at full capacity, defined as 85% capacity utilization would mean that Nigerians can expect a maximum of 14,5 million litres of fuel per day while aggregate demand has been estimated at 30 million litres. But in reality, the 14.5 million litres is unlikely to be consistently achieved because even as late as 2000, the refineries were operating below 20%; the current level of 60% capacity has been possible as a result of great efforts which are unlikely to be sustained. There are two inescapable and obvious conclusions from all these. First, the nation will depend on imported fuel for years to come and as a consequence suffer from the volatility of crude oil prices which are not only uncontrollable by the Federal government but which from all indications will hover above $35.00 per barrel for years to come. Second, with the NNPC abandoning fuel importation, the nation will increasingly depend on the private sector which being profit oriented must earn a fair return in order for uninterrupted flow of fuel to be guaranteed. The current crisis over fuel prices can only in the short term be resolved by paying the marketers price which is N50.00 today but is programmed to go up to N58-60 per litre. Nigerians might find this difficult to accept, but Vanguard can see no way to escape this eventuality; strike or no strike. However, while that debate is on and the issue remains contentious, it is pertinent to ask the federal government and the NNPC to provide the details of this huge expenditure on refineries which for the most part have failed to deliver fuel to the citizenry. Principally, the public would like to have a breakdown of the contracts awarded, to whom, at what price and on what terms as well as the results achieved after the contract was completed. In the instances where contracts were either not executed at all or were unsatisfactorily completed, the nation would like to know what had been done to invoke the penalty clauses which are standard components of such agreements globally; that is assuming there were penalty clauses to protect the national interest against contractors well-known for abandoning projects after collecting mobilisation fees. Finally, given the sudden rise in official estimates of daily fuel consumption from 18 million litres per day in 2000 to 30 million litres today; a 66% jump which calls for another study to ascertain the accuracy, Nigerians would want to know why the government in five years has not been proactive enough to invest in another refinery given the strategic nature of fuel. As it is the nation which is an oil producing one has, for lack of vision, become hostage to imported fuel whether by NNPC or the private sector. The greatest puzzle is: what has government been doing while we got into this hole? |
ECONOMIC INTELLIGENCE COMMITTEE (NEIC)
1994-1999
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62. Intermediate products in the nation's refineries, especially Naphtah,
was being allocated to individuals for export. Even bitumen which was
produced by the Kaduna refinery was bought by individuals at a
ridiculously low price and sold to road construction companies at the
current higher world price. This practice persisted until the Government
revised the price upward at the instance of the NEIC. Aviation fuel was,
however, being sold to airline operators at a price which was higher than
the stipulated price of N9.0 per litre, while fuel oil which is the main
source of energy in the industrial sector was being exported, thus giving
rise to acute shortages at home and consequent black marketeering.
63. The NEIC also talked to the oil companies on the need to help reduce
the huge disparity in the standard of living of the staff of the oil
companies vis-a-vis those of the dwellers in the oil producing areas.
This they could do by providing more social and physical infrastructures
in the oil producing communities and by encouraging greater community
participation in these projects in order to ensure their sustainability.
64. Even though there is the belief in certain quarters that the NNPC
subsidiaries are inefficient, it is the view of the NEIC that they are no
less efficient than some private companies and therefore, should not be
excluded from the contract to import or export petroleum products.
65. The major marketers appear favoured over independent marketers. The
major marketers who are mainly expatriate companies buy petroleum products
from NNPC on credit while the independent marketers who are entirely
Nigerian companies pay cash in advance of purchase. NEIC did not support
this discriminatory policy of the NNPC but it has continued unabated.
66. One of the major problems of OMPADEC was that it awarded too many
contracts whose value far exceeeded its revenue. In consequence, quite a
number of contractors were not paid. Following NEIC reports, the OMPADEC
was not only reformed, but part of OMPADEC debts verified by NEIC were paid
beginning from March, 1999. The balance of N3.70 billion was to be made
available by the Federal Government in order to settly fully the debt to
the contractors. However, NEIC recommended that the sum of N1.60 billion
should be recovered from OMPADEC contractors who obtained mobilisation but
did not perform at all.
Crude Oil Allocation to Refineries
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67. On the increase in the allocation of crude oil to the refineries from
250,000 bpd to 300,000 bpd, the Commiteee noted that even when 250,000 bpd
were allocated for domestic refining, only 182,000 bpd could be processed
while the balance was swapped by the NNPC without Government's approval.
NNPC, DPR Disagree on Refinery Performance
By Patricia Ubaka, 06.29.2006
Fresh controversy over the state of nation's refineries may be brewing following conflicting performance level of the plants released by both the Nigerian National Petroleum Corporation (NNPC) and the Department of Petroleum Resources (DPR). Also, NNPC fuel distribution capacity is being stretched to the limit following a 20.6 per cent jump in the volume of premium motor spirit (PMS) or petrol consumed in the country in the last 12 months. Consumption of the fuel has now reached 36.2 million litres compared to 30 million a year ago.
While the NNPC claimed that the Port Harcourt refinery was operating at 90 per cent of its installed capacity, statistics released by the DPR showed that the plant, Nigeria's biggest, operated at 67.5 per cent of its 210,000 barrels per day (bpd) capacity.
The DPR is the nation's oil industry monitor while NNPC manages the refineries.
NNPC Group Managing Director, Engr. Funsho Kupolokun said last weekend that two Port Harcourt refineries were processing 180,000 bpd of crude. "The performance of the Port Harcourt refineries was the best ever since they were established. Because of the high production of the refineries, evacuation of products has become a challenge for the corporation," Kupolokun said at the commissioning of the Ore Depot.
A status report released Monday by the DPR on downstream activities in the last four weeks stated that the refinery processed on the average 141,790 barrels of crude daily. The plant's capacity utilisation according to the department, even showed a decline of 1.44 per cent over the level achieved in the last week of May, 2006.
While all units in the 125,000 bpd Warri refinery remained shut (following the vandalisation of the pipeline supply crude to the plant last February by Niger Delta militants), the 110,000 bpd Kaduna refinery did not process any crude during the period in review, state the DPR.
Industry officials said that by implication, the level of fuel import both by the NNPC and oil companies would need to be substantially increased to meet rising local demand for the products.
High oil prices in the international market, the officials argued, could further weighed down on domestic pump prices of fuel. Already, marketers last week jerked up the price of diesel to N90 a litre, citing high landing cost of the product.
NNPC sources however, blamed the development on the fallout of the crisis in the Niger Delta, where militia groups have laid siege on oil production facilities.
Meanwhile, both the NNPC and marketers would need to raise the level of supply following the continued rise in demand for petrol. The DPR statistics revealed that the supply of 22,259,408 litres of PMS per day during the period in review represents on the average, 68 per cent of the current daily demand of 36,158,117 litres of petrol.
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