Dr Godswill Ihetu, a former Managing Director/Chief Executive Officer, Nigeria LNG Limited. retired from the Nigerian National Petroleum Corporation after attaining the position of Group Executive Director, Engineering and Technology. He speaks to ’FEMI ASU on the country’s refining sub-sector
For over a year now, all the government-owned refineries have been shut down for repairs, and Nigeria has been relying wholly on imports to meet its fuel needs. How did the country get to this point after over 60 years of crude oil and gas production?
I will say that the refineries were functioning up to about 1996. The refineries had operated for over 10 years without any dislocation. Why was it that there were no issues during that period? The reason was simple: There was a system put in place by corporate management that each refinery had to undergo turnaround maintenance every 18 months. So, that was a policy – there was no debate about it. The turnaround maintenance normally required bringing in manpower from outside because we didn’t have enough staff members. What we had were workers who were operating the refineries; so, if we needed to do a major overhaul as quickly as possible, we would bring in technicians from India and Italy to come and mobilise and do the job.
Usually, it would last for not more than six months. And six months or so before the turnaround maintenance starts, the refineries would build up stocks that would last for that period of shutdown. That was the policy for more than 10 years. The company would go to tender to ask for certain services for that period; everything was within the authority of corporate management. It didn’t go to the minister or the President. It didn’t even go to the board; it was corporate management level. It was regarded as routine maintenance. That was how we started.
Then in 1995/1996, the Presidency got involved and, in getting involved, slowed down the process. The process was delayed and then we got on to the point where there was no turnaround maintenance for two or three years. I think it was up to 1999, after one or two refineries had actually come down, that there was an arrangement with Total to refurbish and do turnaround maintenance. The important thing is that the government at the Presidency level got involved and there were delays in providing funding for the refineries. That was the genesis of what we now have. It appears that we have not been able to get this thing out of the government and back into the NNPC.
There have been reported turnaround maintenance and rehabilitation works done on the refineries in the past few years, but the plants still remain in a state of disrepair. What could have been responsible for this?
I am an engineer and I want to be sure of what I am saying. I cannot comment much on what happened after 1999, when I retired from NNPC, because those in the field will know how much maintenance was done or whether they had a problem with funding and abandoned it halfway. Unless you are an insider, you won’t know what is going on there. It is such a technical thing. You don’t know whether they had enough money to do only three quarters and the next time, they had to look for the funding for the remaining quarter.
Even the Port Harcourt refinery that they say they are refurbishing, you can see the phases they have outlined. They said phase one after 18 months will take the refinery to 90 per cent capacity. But the job is not finished; they still have to do the second and third phases; the job will be completed after 44 months.
Last month, the Federal Government announced the approval of $1.5bn for the rehabilitation of the Port Harcourt refinery. When you heard that news, what was your reaction?
I was surprised. Based on what one was reading in the public domain over the last two or three years, it looked as if the government was considering a number of options, one of which was to sell; another option was concession and another was to repair and sell. So, I was surprised that the government took this option of repairing before selling, because of the fact that the country’s revenues have been badly affected by events that we all know about.
Dr Godswill Ihetu
There is the subsidy regime that has taken a lot of money. There is also the oil price collapse of last year. So, one would have thought that the government would have looked for other ways of getting the plants running other than having to repair them. With little revenue coming in, somebody else should have been the one investing the capital – whether it is privatisation or part purchase. Money would have come and the investors would have been the ones to repair the refineries. We did that in Eleme Petrochemicals, and now Indorama Eleme Petrochemicals is a world-class company and is very successful. They have gone beyond what they met there. That is the kind of advantage one would get in privatisation. I think the government should privatise the refineries.
But again, the bottom line is that the government knows best, because it has all the information. We must assume that its decision is in the interest of the country, having explored all the other options. I don’t know what they took into consideration in coming to this decision.
Before the end of the administration of President Olusegun Obasanjo in 2007, he sold 51 per cent stake in the Port Harcourt and Kaduna refineries. But the sale was cancelled by his successor, the late President Umaru Yar’Adua, following public outcry, especially opposition from labour unions over the deal. What is your take on this considering what has happened since then?
The fact that the Obasanjo administration tried to sell the refineries showed that there was already a problem with the maintenance and operations. And I think the Obasanjo administration did the right thing. The labour unions will always protest, but unions cannot be running the country. Unions opposed the power sector privatisation. But that was the right thing to do. The issue of to whom the assets were sold or whether they are competent or not is another matter entirely. But the strategic decision was taken, and Obasanjo took the right decision. To reverse it under Yar’Adua, in my view, was not the right thing to do. But I don’t think it was only the unions that opposed it.
There may have been other forces or reasons why the government did what it did. But again, one doesn’t know the details of their reasoning. The only thing I can tell you is that I think Obasanjo took the right decision. In our country, whatever you do, people will always find faults; people will even say it was undersold or there was no negotiation. But at the end of the day, the improvement that would have happened with that sale would overshadow all of these shortcomings, if you may call them that.
The unions don’t realise that when these refineries go into private hands, the facilities are expanded; companies become larger and more employees will be required like we saw in Eleme Petrochemicals. Maybe the NLNG is an extreme example because from day one, the structure was different, but it shows you what private companies can do. It doesn’t have a majority of government in it, and it is expanding, starting from two trains to six and now the seventh train is underway.
What are your thoughts on the establishment of modular refineries in some parts of the country?
The Niger Delta Petroleum Resources Limited was the first to build a mini refinery with a capacity of 1,000 barrels per day; they didn’t call it modular then. But they have since expanded the capacity. The Waltersmith modular refinery in Imo State, which was inaugurated last year, is also operational. The only other refinery that I know has been completed is the one in Edo, but I don’t know whether it is running or not. I remember that about three or four years ago, the government in negotiating with the Pan Niger Delta Forum, said part of what they would do was allow them to do modular refineries, particularly because of all those people doing what I call bush refineries. But modular refineries are not cheap. The one that Waltersmith has just built, they borrowed substantially from the Africa Finance Corporation.
So, when you say people are building modular refineries, who will fund them, who will manage them and who will supply crude to them? The NPDR is producing its own and refining its own crude. You have to have access to crude oil. Waltersmith is using its own crude oil. But as they expand, they are entering into agreements with some other oil companies producing in that area to supply them crude oil.
In the case of the one in Edo, I understand that the site of the refinery is next door to the Nigerian Petroleum Development Company’s crude oil facility; I think they will buy crude oil from the NPDC. So, when we talk about modular refineries as if they are panacea for curing anything, I think I have demonstrated to you the complexity of it.
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