NNPC GMD confirms Bad Management responsible for collapse of refineries

… Attribute Public Holiday to scarcity of PMS in Abuja, other states

The Group Managing Director of the Nigeria National Petroleum Corporation (NNPC) Mele (Kyari said on Tuesday that bad management of the nation’s refineries for the past 25 years was responsible for the current state of the refineries.

Kyari who spoke when he appear before the Adhoc committee set up the House to investigate the state of the refineries in the country also disclosed that there was about 2.8 billion litres of Premium Motor Spirit (PMS) that should last the country for about 48 days.

He also said that the current fuel scarcity being experienced in the the Federal Capital Territory was as a result of glut in supply occasioned by the long holiday, adding that the situation will soon nomalise as about 300 trucks of PMS was expected in the FCT between Tuesday and Wednesday.

Kyari said it was obvious that none of the refineries in the country was function at the moment as a result of poor management while the routine Turn Around Maintenance carried out within the period to keep them afloat was also poorly carried out.

He said the NNPC discovered that proceeding with further turn around maintenance of the facilities would amount a waste of public resources and had to shut them down for complete rehabilitation which is what was needed to bring them back to shape.

He explained that “the situation the refineries were was such that when they take 100 dollar crude, they will produce 70 dollar and it did not make business to continue like that because of the rate of degredation they had gone through.

He said further that even after the currently rehabilitation of the refineries is completed, they may not be able to go into production without rehabilitating the network of pipelines across the country.

Giving an example, he said “the pipeline that carries crude from Escravos to Warri and from Warri to Kaduna can not carry crude at the moment. The pipeline network has to be replaced before the refineries can fully come on stream.”

The GMD said further that the rehabilitation of the Refineries is to be carried out purely as a business venture to be financed by the banks, adding that to get funds from the banks, an operation and management agreement has to be out in place to which will guarantee proper management of the facilities.

He disclosed that work is currently ongoing in the Port Harcourt Refinery, while Warri and Kaduna Refineries will follow later, assuring that at the end of the exercise, Nigerians will be assured of steady supply of PMS as the refineries will be able to operate at a minimum of 90 percent installed capacity.

He said “We have a responsible to the shareholders of this company; the all the 200 million Nigerians on whose behalf we execute the programmes of this company. We have the responsibility to be open, transparent and accountable to the shareholders ably represented by this National Assembly.

“We recognise that today, none of our refineries is operating for the very obvious reason. Through the work of this committee, you will find out why they are not operating. We will hide nothing from you. We will also tell you where we are as we speak today.

“Needless to say that the refineries were essentially not properly managed overtime. Not just today, but in the last 20 to 25 years. The turnaround maintenance processes were clearly mismanaged overtime. I have said this over and over.

“We clearly admitted that those turnaround maintenance were not properly done in the past, leading to where were are.

“When we took over, it was very obvious that what you are dealing with is not a turnaround maintenance. We were dealing with total rehabilitation.

“Let me put it in context. When you have a car and you continue to allow the brake pads to wear off, it will get to the brake disc and you continue to drive, there is a day when you replace the brake pad, it will go done after 3 or 4 days. This is just the simple relationship that happens leading to where we are.

“The panels were clearly in situation where ordinary maintenance will not solve the problem. We have degredation of momumental proportion that we met and of course, the only way you can do this is to conduct a full turnaround maintenance.

“We shutdown some of them for obvious technical reasons. First, the refineries even if they do operate, they take a hundred dollar crude and produce a seventy dollar product. There is no refinery any where that works this way.

“Refineries margins are very thin and the reasons are very simple because many of the plants and facilities and process in the units are not operating optimally and because of that you degrade value and at the end of the day, you are better of not operating those plants until you are able to put back into full functional work.

“That’s how we started the process of making sure that we have the best of class engineers. I cannot remember all th details but surely we started the process to select the best class of contractors that will help us so that at the end of the day, we have a full rehabilitation of these refineries. We did not abridge any process.

“We took through all the processes of governance to make sure that we have the right contractors in place and I am very happy that at the end of the day we have put in place, the federal execute council has approved the contract for the Port Harcourt refinery and Warri refinery.

“Needless to say that even when you have the refineries, you must have the pipelines. I can tell you that as we speak now, the pipeline from Escravos which will feed Warri and ultimately, Kaduna refineries cannot carry the two refineries. This is for many reasons, the act of vandals.

“Needless to say that the rehabilitation work must also be complemented by the replacement by the pipeline network.

“We have a very different concept of the rehabilitation process we have started. It be financed by banks. That’s the difference between what you had in the past where you do halfway work and never complete what you were trying to do and banks always will put conditions for lending not just about payment but ability to pay from your cash flow.

“Part of the requirements is also to include O and M (Operation and Management) component which means that maintenance contracts will be part of this deal otherwise they will not lend us money.

“It means we have to have continuous sustained operations of the refineries to establish O and M contractor. This is what obtained anywhere in the world and that process is also going on and we will have over these refineries at the end of the exercise with the optimization of our existing staff but also a third party to run it for us.

“We believe that at the end of this exercise, the refineries will come to their full capacity at the very least 90 percent of their installed capacity. Of course, no refinery runs at 100 percent. That is not technically practical but we will do minimum of 90 percent of their installed capacity.

“None of them is running today. Work is ongoing in Port Harcourt refinery. As you wish at the right moment, you can go and physically see the amount of work that is going on which is also it included in the submission that I made to you and we are also kick starting the Kaduna and Warri immediately.

“Our target is not just proceeding with this but to scale rehabilitation of the Kaduna and Warri. It is going to be a different framework with Kaduna and Warri. But technically you can actually work and part of the refinery will be working also, you can also be making rehabilitation.

“We planned to concurrently proceed with this so that at the end of the day, as Port Harcourt refinery comes up, some minutes of Kaduna and Warri will also come up until we will continue with the process until we are able to take full closure and total rehabilitation of the refineries.”

Responding to questions from newsmen on the current scarcity of fuel in Abuja, he said it was occasioned by the long holiday when transporters did not lift products.

He however said that supply of PMS has since commenced, pointing out that about 150 trucks of PMS will arrive Abuja on Tuesday and another 150 trucks on Wednesday.

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