Editorial

Another season of promises to rehabilitate Nigeria’s refineries, in partial coma for the past 15 years, is upon the nation. This time, the Minister of State for Petroleum, Timipre Sylva, has announced progress already made on revamping Nigeria’s principal refinery in Port Harcourt in a memo that confirmed approval of the plan by the Federal Executive Council (FEC).

The minister tried to allay fears of citizens about increasing the debt burden: “Let me tell you how this rehabilitation is going to be funded; it is not going to be all debts, we are not going to borrow all the monies that are going into the rehabilitation (project). Some of the money will come from NNPC’s internally generated revenue, from NPDC, some of it will come from the federal appropriation, and just a little fraction will come from the African Export-Import Bank (Afreximbank).” One omission in the minister’s explanations is why at this point in the history of developments in refinery technology, the government seems bent on spending $1.5 billion on rehabilitating the Port Harcourt refinery that has become moribund.

Refinery maintenance in the country has had a chequered history as a business venture. The Port Harcourt refinery complex, completed in 1989, has had two seasons—a short one of success and a long one of failure thereafter. Until 1997, the 210,000bspd utilisation capacity was, in combination with the other two refineries in Kaduna and Warri, adequate to meet Nigeria’s needs without spending foreign exchange to import petrol. But the history of oil refining turned sour since 1997.

There have been many explanations for the decline—poor maintenance culture fuelled by over-bureaucratisation of management of refinery at the instance of avoidable red tapes erected by leaders of military rule which continued until the restoration of democratic rule in 1999. The Port Harcourt refinery performed at 20-25 per cent utilisation capacity till it was recently put to sleep.  For example, in 2019, the refineries lost some N167 billion ($439.47 million), and only Warri processed any oil. In April 2020, they were all shut, pending rehabilitation. The underperforming plants have for years left the country at the mercy of imported petrol supported by subsidy of about N120 billion per month today, according to the NNPC boss, Mele Kyari. All of these have been attributable to governance under both military and elected governments.

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The argument for deregulation and privatisation in the country in the last 20 years has been that it is irrational for government to hold on to businesses that it has not been able to make a success of. This argument was used for selling off telecommunications, electricity generation and distribution, and many other ventures. For close to 20 years, both the People’s Democratic Party (PDP) and the All Progressives Congress (APC) governments had been promising to make the refineries work, without any of them being able to meet such promises until the current FEC approved the plan to spend $1.5 billion to rehabilitate Port Harcourt refinery, after decades of unproductive performance. In Brazil and California, refineries that have not failed were recently sold. RLAM Martinez, with a capacity of 323,000bbl/d was sold to Abu Dhabi for $1.65 billion while Martinez Refinery with 157,000-b/d was sold to PBF Holding Co. LLC for $1.2 billion.

Now that the project of refining petroleum in the country is about one year away from completion, it is illogical for the government to borrow any money to revamp refineries that have become money losers for years. Similarly, a time that refinery technology has changed radically to make resurrection of a failed system competitive with an ultramodern cutting-edge Dangote refinery is not the right time for the Federal Government to scrounge for $1.5 billion to revamp an old refinery.

It would have been economically logical for the Federal Government to get to fixing the Port Harcourt and other poor performing refineries within the last 20 years. Throwing, between 2021 and 2024, $1.50 billion—half from appropriation and half from borrowing— at a badly used refinery at a time that refinery technology is focused on what Freburger G of Schneider Electric calls “intelligizing” refinery may be tantamount to throwing good money after a bad project. The only logical thing to do now is not to borrow money to overhaul a refinery whose technology is rather obsolete, at the expense of other competing projects

The sensible thing to do is to sell off the Port Harcourt and other non-functioning refineries to private buyers and free the government from operating refineries. With the Dangote refinery and scores of modular refineries across the country, the country stands a good chance to meet domestic consumption of refined petrol as well as for export.