FG lost N84bn to ailing refineries in 11 months
Written by Henry on February 1, 2018
The nation’s refineries made a total loss of N84bn from January to November last year, as they continued to operate far below their installed capacity.
The refineries are the Warri Refining and Petrochemical Company, Port Harcourt Refining Company, and the Kaduna Refinery and Petrochemical Company, with a total installed capacity of 445,000 barrels per day.
Port Harcourt refinery recorded the biggest deficit of N35.58bn, followed by Kaduna (N28.21bn) and Warri (N20.4bn), according to the latest data obtained from the Nigerian National Petroleum Corporation.
The KRPC did not process any crude oil from June to November last year; the WRPC was shut down in March, May, June and September, and the PHRC was idle in August and November.
The three government-owned refineries lost a total of N16.67bn in the third quarter of this year, the NNPC data showed.
The NNPC recorded a trading deficit of N6.79bn in November, which is higher than October’s deficit of N410m.
The corporation said the drop in the performance was attributable to the increased cost in upstream activities as well as the reduced revenue in the downstream value chain occasioned by high crude oil inventory in refineries due to unplanned operational shutdown of the KRPC and the PHRC, which led to increased loss from the refineries in November.
It said it had been adopting a Merchant Plant Refineries Business Model since January 2017.
According to the NNPC, the model takes cognisance of the products’ worth and crude costs.
It said, “The combined value of output by the three refineries (at import parity price) for the month of November 2017 amounted to N13.08bn while the associated crude plus freight costs and operational expenses were N15.21bn and N9.02bn, respectively.
“This resulted in an operating deficit of N11.15bn by the refineries. Also, during the period under review, refineries’ combined capacity utilisation was 5.92 per cent.”
The NNPC, in its quarterly publication for the fourth quarter of 2017, obtained by our correspondent, said it was working in tandem with the Ministry of Petroleum Resources and other stakeholders to implant a novel refining model and other strategies that would restore the refineries and expand existing capacities to record levels.
The Chief Operating Officer in charge of the refineries and petrochemicals autonomous business unit, NNPC, Mr. Anibor Kragha, was quoted as saying that the original builders had actually started conducting studies to determine the cost of fixing the plants and returning them to minimum capacity utilisation of 90 per cent.
According to him, the Kaduna refinery is linked with Warri in more ways than one because they share a pipeline and get their crude primarily from Escravos.
He said Warri was the best performing refinery at the beginning of last year but it had some significant power issues.
Kragha said, “They have gas turbine because of access to gas; so, they generate a lot of power. But the gas turbine has not been overhauled overtime; it started failing this year.
“As a way out, we decided to shut it and engage with the General Electric, which is the original equipment manufacturer, to actually come up with a holistic plan and the management approved the full amount for the overhaul and the materials are coming to site.”
He also said, “In the first half of this year, Kaduna had exceptional performance compared to what we were expecting it to have. In fact, they did so well that we were able to even pump diesel all the way to Kano and start loading out of Kano for the first time in almost a decade.
“But later in the year, they had an issue with their Fluid Catalytic Cracking Unit, which is what produces the PMS (petrol). Because Kaduna’s location is inland, it is very different when you have a situation where all your units are not running. If you are producing some intermediate products like naphtha in Warri or Port Harcourt, where you have export facilities, you can export those products and still make some money.
“If you produce them in Kaduna and you are land-locked, you are in trouble; so, the decision was taken to shut the plant down for the rest of the year to try and at least address the issue holistically. We are currently working on it and once we have that downstream value adding unit back, the Kaduna refinery would be back on stream.”
He said Warri refinery came back on stream after some remedial work, adding that the Port Harcourt refinery was running well after some remedial work was done on its FCCU.