The hardship being faced by the masses over the removal of subsidy on Premium Motor Spirit (PMS) with galloping inflation and unsettling foreign exchange crisis may not stop anytime soon as the succour expected to come in December this year through the rehabilitation of Port – Harcourt may remain a forlorn hope.
Although President Bola Ahmed Tinubu had promised that Nigeria’s refineries being overhauled at the cost of $2.7 billion would start running in December this year, especially the Port-Harcourt refinery, which was started in 2019 with a completion deadline of 2021, there are indications that series of challenges that border on procurement failures and wrong integrity checks may further delay the project.
It was gathered that some of the sub-contractors who were already mobilised to site were as at early this week idle, as some of the materials being imported did not match specifications, while other materials, including motor pumps, which are reportedly designed to be replaced were being refurbished.
It was further learnt that the contractors, which had initially conducted the integrity check, appeared to have encountered more trouble indicating that their previous investigation was not detailed enough to reveal the depth of work needed on the facility.
There are also indications that some of the pipelines linking to the storage facilities constitute challenges, with insiders disclosing that some of lines with integrity issues may not be changed.
“For two weeks now, some sub-contractors have not been working. They were brought in to connect pipes but the pipes on ground did not match specifications. They have a valve or an elbow joint for, let’s say, 40 inches that ordinarily should be fitted by another 40 inches pipe, but they have 20 inches pipes. This is the situation as I speak with you but somebody will just address the media that the refinery will start in two months,” a source said.
The rehabilitation of the Eleme refinery started in 2019. As at April 2019, the Nigerian National Petroleum Company Limited (NNPCL) had awarded a $50 million contract to Tecnimont SPA and Tecnimont Nigeria Ltd (TNL) to carry out a complete integrity check and equipment inspections of the Port Harcourt complex. In September that year, in a presentation on the progress and milestones on Phase One of the projects, a Tecnimont Project Manager, Carmelo La Mattina, said the inspection aspect of the project had progressed to 91 per cent with the project’s final report and engineering, procurement, and construction proposal now reaching 75 per cent.
With a series of opposition, which was vehemently defended by the Group Chief Executive of NNPCL, Mele Kyari, the Federal Executive Council in 2021 approved a contract to Tecnimont for $1.5 billion to ‘raise the dead’.
However, assurance by Kyari to reclaim the battered image of NNPCL in the aspect of managing refinery assets has gone south amidst a series of allegations of breach of local content law, especially in the aspect of recruitment and community development plan.
In September 2019, Kyari had said: “We will deliver this project by 2022. We will commence actual rehabilitation work in January. We will do everything possible between October and December to close out all necessary conditions for us to deliver on that project. I believe that with the support that we have from the shareholders – government of this country, the entire staff of this company and the contractors – I believe it is doable and we will deliver the project.
“It’s no longer about business now, but a reputational issue. For the original builders of the refinery, Maire Tecnimont SPA, Eni SPA (a subsidiary of Nigerian Agip Oil Co.) and NNPC, let us be conscious of the fact that our reputation is at stake as far as this project is concerned. The NNPC leadership has promised this country that our refineries will work. Therefore, we must work not to disappoint over 200 million Nigerian stakeholders.”
Although the contract was not awarded until early 2021, the failure to deliver the project did not attract sanction. Rather there was silence and secrecy as the management and staff of the state oil firm and Tecnimont did not respond to inquiries by The Guardian on the issue.
Community leaders had also alleged that a sum of N250 million awarded as community development fund to Eleme community, where the project is situated, was being embezzled. They also alleged that while the national oil company and others linked to the contract were dodging invitations at the National Assembly, an influx management plan, which specified employment with local content stipulated quotas by the parent company, had been dumped.
“How can they run a project and we don’t have any managerial staff? The community relation staff is supposed to be from the community, the project personnel is supposed to be from the community. And others like the head of security. We have written a series of petitions about it but our voices have not been heard,” Secretary Alesa Stakeholders, Timothy Mgbere, said.
A youth leader, Johnson Ngei, had earlier told The Guardian that the community was being shortchanged as job slots were being sold from N200,000 to N2 million depending on the position.
Ngei disclosed that the community had already staged three protests but the company remained adamant, especially the contractors, Tecnimont, a subsidiary of Italy’s Maire Tecnimont.
Ngei said section five of the Community Guidelines of the Local Content Act, being implemented by the Nigerian Content Development and Monitoring Board (NCDMB), especially in the area of employment, has been grossly violated.
Last year, the House of Representatives Ad hoc Committee investigating the state of refineries in Nigeria resorted to calling a press conference, where they announced a seven-day ultimatum for NNPCL and other key players to appear before it over the issues.
“We are compelled to hold this press conference because of the continued refusal and flagrant disregard of the GMD of the NNPCL, the Minister of State for Petroleum Resources and the General Managers of Port Harcourt, Warri and Kaduna refineries to the invitations to appear before the committee,” the committee stated.
Chairman, International Energy Services Ltd, Dr. Diran Fawibe, said it remained surprising that the refinery project has dragged on for a long time without sanctions.
Fawibe, whose firm handles a series of contracts in the oil and gas sector across Africa, said unless in a situation where the client has been compromised, the oil industry places serious regard on project delivery.
He said clients would ordinarily do anything to apply sanctions for failure to meet deadlines unless for obvious circumstances. Fawibe, a former management staff at the NNPCL, insisted that it remained critical to bring the refineries on stream to cushion the challenges Nigeria is facing amidst the volatility in the price of crude oil.
Nigeria has remained the only major oil producer without a functional refinery. To import the over 51 million liters consumed daily in the country, billions of foreign currency, especially the US dollar is needed. Contributing significantly to the nation’s economic woes, the import of the product alongside the low crude oil production combine to lay siege on the economy and worsen poverty.
Nigeria’s inflation rate of about 24 per cent and foreign exchange crisis that saw the naira stand at about N920/$ as importers scramble for forex to import 100 per cent of petrol consumed in the country have been linked to the removal of fuel subsidy; and the completion of the Port Harcourt refining complex, which includes a 60,000-b/sd hydroskimming refinery also called area five and the new 150,000-b/sd full-conversion refinery is meant to provide succour.
Energy expert and scholar, Dr. Garuba Dauda, expressed worry about the losses coming from the refineries, stressing that paying salaries for no work done could only happen with the government.
“It doesn’t seem like we are ever going to learn from it. The refineries have not worked up to 20 per cent installed capacity for many years. Yet, we are paying salaries and workers are promoted as and when due. Why are we looking to understand where the losses are coming from?
“I’ve stopped having trust in what the government is doing to fix the refineries for many years. We shouldn’t have revoked their sale during the late president Umaru Yar’Adua’s administration. After revoking their sale, the government has lost more without light at the end of the tunnel. Government should sell off the refineries and move on,” Dauda said.
An economist, Prof. Segun Ajibola, however, said Turn Around Maintenance (TAM) takes time, with the cost competing at times with what it would take to build a new one entirely.
“The gap is that the TAM has been left unattended for years now. But if the refineries above could stick to the anticipated completion dates with refining activities commencing, it will lessen the pains of consumers.
“The challenge has been continued importation of refined products, which costs are annexed to the ruling foreign exchange rate. There is no short cut as solutions to the current disequilibrium in the local oil industry, which has compounded the inflationary pressure in the domestic economy.
“There is therefore need by all and sundry to exercise some patience amidst the ongoing struggle to put the four local refineries in good shape, and evaluate the possibility of extending support to modular refineries. A return to the age of fuel subsidy, which removal has been acknowledged as sensible by all and sundry is not an option,” he stated.
