By Akanimo Sampson
With refineries being run by Nigerian National Petroleum Corporation (NNPC) reporting a total loss of N778.71billion from 2015 to 2019, former Vice President Atiku Abubakar, says the decision of the Buhari administration to spend $1.5 billion on the rehabilitation of Port Harcourt Refinery is suspicious and unwise use of scarce funds.
Earlier, Governor Nyesom Wike of Rivers State said the approval by Abuja smacks of politics.
Wike is claiming that there is really nothing to jubilate about the approval because similar promises had been made in the past, particularly during election transition period that never materialised.
He spoke during an interview on Channels Television, pointing out that people ought to bear in mind that there is a different between mere approval and actual release of the $1.5 billon for the rehabilitation.
“I am not going to jubilate because the Federal Government said they have approved $1.5billion for the rehabilitation of Port Harcourt refinery. Thank God they said so, but let us wait and see the outcome of it at the end of the day.”
Wike described as unacceptable, a situation where all the refineries in the Niger Delta region, which is the hub of the oil and gas industry are not functioning.
“We have had these promises and nothing has happened. And so, I don’t want to start to sing hallelujah. Let us wait and see based on the approval and the statement made by the Minister of State for petroleum. We will hold him accountable to it.”
Governor Wike said before the APC led government assumed office in 2015, the party promised to fix the refineries. He wondered how the government which now has barely two years to the end of its tenure can fix the refineries it neglected since 2015.
“They said, Nigerians if you give us (APC) the opportunity to remove this (PDP) government that told you it (refinery)will work, we are going to make it (refinery) work. And since 2015 it has not worked. Now we are going to the next transition, you are now coming to tell Nigerians you have made this approval. It’s the same thing with the Ogoni clean-up. It has always come up when we are going for election.”
The governor stressed that ahead of 2023 politics, so many promises and approvals will be made by the APC led government to hoodwink gullible Nigerians that the country is being taken to Eldorado.
But, the Executive arm of the Federal Government under President Muhammadu Buhari’s watch has approved $1.5 billion for the rehabilitation of the 32 year-old refinery at its virtual meeting held Wednesday.
However, in a statement he personally signed on Thursday, Atiku notes that with the current state of the Nigerian economy, the rate of unemployment in the country and the state of the refinery, the decision of the Buhari administration amounted to an unwise use of public funds.
The former presidential candidate of the opposition Peoples Democratic Party (PDP) also noted that the funds that will be borrowed for the rehabilitation will add to the already high national debt, pointing out that the cost of rehabilitation of the loss-making refinery was prohibitive, and wondered if due diligence was done before the contract was awarded.
While also pointing out that the Anglo-Dutch oil and gas major, Shell, last year sold its Martinez Refinery in California, USA, which is of a similar size as the Port Harcourt refinery, for $1.2 billion, Atiku noted that the Shell Martinez Refinery is more profitable than the Port Harcourt Refinery.
“We cannot as a nation, expect to make economic progress if we continue to fund inefficiency, and we are going too deep into the debt trap for unnecessarily overpriced projects”, Atiku said in his statement that reads:
‘’That Nigeria’s economy is in dire straits is a fact well known both to the nation and to our international partners. Unemployment has just reached an all-time high of 33%, while inflation has hit another record high of 17%.
‘’At this critical period, we must as a nation be prudent with the use of whatever revenue we can generate, and even if we must borrow, we must do so with the utmost responsibility and discipline.
‘’To therefore budget the sum of $1.5 billion to renovate or turn around the Port Harcourt Refinery would appear to be an unwise use of scarce funds at this critical juncture for an assortment of reasons.
‘’First of all, our refineries have been loss-making for multiple years, and indeed, it is questionable wisdom to throw good money after bad. At other times, I have counselled that the best course of action would be to privatise our refineries to be run more effectively and efficiently.
Moreover, the cost appears prohibitive. Too prohibitive, especially as Shell Petroleum Development Company last year sold its Martinez Refinery in California, USA, which is of a similar size as the Port Harcourt refinery, for $1.2 billion. We must bear in mind that the Shell Martinez Refinery is more profitable than the Port Harcourt Refinery.
‘’Given this discrepancy, might we ask if there was a public tender before this cost was announced? Was due diligence performed? Because we are certainly not getting value for money. Not by a long stretch.
‘’We cannot as a nation expect to make economic progress if we continue to fund inefficiency, and we are going too deep into the debt trap for unnecessarily overpriced projects.
‘’Our national debt has grown from ₦12 trillion in 2015 to ₦32.9 trillion today. Indeed that is shocking enough to cause us to be more prudent in the way we commit future generations into the bondage of bonds and debt.’’
In the mean time, government-owned refineries generated total revenue of N21.12billion in the five-year period (2015-2019) as they operated at below their full capacities. The refineries located in Port Harcourt, Kaduna and Warri, have a combined installed capacity of 445,000 barrels per day.
The country relies largely on importation of refined petroleum products as its refineries have remained in a state of disrepair for many years despite several reported repairs.
Port Harcourt Refining Company generated a total revenue of N10.33billion from 2015 to 2019, but posted a loss of N229.14billion.
The refinery generated zero revenue in 2019; N1.46billion in 2018; N4.82billion in 2017; N3.37billion in 2016, and N683.52million in 2015. It lost N50.53billion in 2019; N45.59billion in 2018; N53.77billion in 2017; N43.44billion in 2016, and N35.81billion in 2015.
Kaduna Refining and Petrochemical Company reported revenue of N4.17billion and a loss of N307.27billion in the five-year period. While it generated revenue of N37.17million in 2019, compared to zero revenue reported in 2018. Its revenue had risen to N2.24billion in 2017 from N1.47billion in 2016 and N418.76million in 2015, it posted a loss of N65.99billion in 2019, N63.64billion in 2018, N111.89billion in 2017, N30.19billion in 2016 and N35.56billion in 2015.
Warri Refining and Petrochemical Company posted a revenue of N6.62billion and a loss of N242.30billion in the period under review. Its revenue dropped to N921.82million in 2019 from N1.99billion in 2018 and N1.25billion in 2019. It had risen from N884.39million in 2015 to N1.58billion in 2016.
The refinery recorded a loss of N51.66billion in 2019, compared to N52.18billion in 2018, N84.60billion in 2017, N24.50billion in 2016 and N29.36billion in 2015.
Kaduna refinery, in its 2019 annual report, said its losses had arisen principally from its inability to operate profitably under its current processing contract with its parent company, NNPC.
The report said, “KRPC’s primary source of revenue is from the processing of crude oil for NNPC. The processing fees are determined solely by NNPC, without consideration for related costs and are significantly lower than the costs incurred to produce.
“The high cost is also due to the current structure of the organisation whereby the company bears the total cost of personnel expenses.”
It said the NNPC had undertaken not to reduce its shareholding in the company and to continue to support it by funding its operations ‘until such time the company is in a position to adequately finance its operations’.
NNPC’s latest monthly report showed that Port Harcourt refinery stopped processing crude oil in April 2019, while Warri and Kaduna refineries have been idle since May and June 2019 respectively.
The corporation said the declining operational performance of the refineries ‘is attributable to ongoing revamping of the refineries, which is expected to further enhance capacity utilisation once completed’
