Two Nigerian Refineries Produce Zero Crude Despite ₦85.9 Billion Investment

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Two Nigerian Refineries Produce Zero Crude Despite ₦85.9 Billion Investment
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Nwolu Obiajulu

A June report published by the Nigerian National Petroleum Corporation (NNPC) has revealed that three refineries in Nigeria gulped ₦148 billion in 13 months but produced below 40,000 metric tonnes of crude oil.

The low output according to NNPC is occasioned by ongoing rehabilitation of the oil refineries.

Statistics show that when put together, both refineries have a production capacity of 445,000 barrels per day (bpd). The Port Harcourt refinery has the capacity of 210,000 bpd, the Kaduna refinery, 10,000 bdp and Warri refinery has 125,000 bpd.

However, the refineries managed to produce 38,977 metric tonnes of crude from June this year. The Kaduna refinery produced the crude in July 2019 resulting to a ₦62 billion shortfall in 13 months, Premium Times reports.

The report shows that ₦42.1 billion and ₦43.8 billion respectively were spent on the Warri and Port Harcourt petrochemical companies without producing even a single tonne of crude.

Only 8.09 percent of Kaduna refinery’s capacity was utilized in July 2019 while its capacity is yet to be utilized since then along with the other refineries.

NNPC in its report said, “The declining operational performance is attributable to ongoing revamping of the refineries which is expected to further enhance capacity utilization once completed,” the NNPC wrote in its report.

Recall that despite zero oil production in June, the refineries cost the country ₦10.23 billion in expenses while only 2.07 per cent of the consolidated capacity of the three refineries was utilised in June, for the 13 months under review, they functioned only at 0.16 per cent of their optimal capacities.

Despite attributing the shortfall to rehabilitation of the refineries, NNPC’s audit report released in June which marked the first in 43 years, it revealed that the refineries incurred a combined loss of ₦1.64 trillion from 2014 to 2018.

The Port Harcourt and Kaduna refineries recorded a combined loss of ₦208.6 billion in 2014; ₦252.8 billion in 2015; ₦290.6 billion in 2016; ₦412 billion in 2017, and ₦475 billion in 2018.

According to the report, the country recorded about ₦412.8 billion loss from operations of its four refineries in 2017 and 2018. Some analysts have asked the government to privatise the refineries, opposing the continued investment without remarkable progress in output.

Despite the outcry, both the state petroleum minister, Timipre Sylva, and the NNPC boss, Mele Kyari, have at different times pledged the government’s commitment to rehabilitate the refineries before considering privatisation.

Government has at different points invested so much money in maintenance to scale up capacity but has proven futile despite the huge financial burden.

Nigeria imports over 80 percent of its crude consumption despite the enabling environment to be self-reliant.

Review shows most of the losses from the refineries was from the operating costs and administrative expenses accumulated by them despite that some have since been shut down or operating at grossly below installed capacities.

Also, all the refineries spent huge earnings on administrative expenses, which included head office overhead funding, public relations and publicity, staff training expenses, local/international travels and hotels, employee benefits, director’s remuneration, and consultancy fees.

According to NNPC, other factors responsible for the losses incurred include spillages, explosions, and theft.

NNPC wrote, “Products theft and vandalism have continued to destroy value and put NNPC at a disadvantaged competitive position. A total of 1,067 vandalised points have been recorded between June 2019 to June 2020.”

This post was written by Nwolu Obiajulu.

The views expressed here belong to the author and do not necessarily reflect our views and opinions.

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