Kachikwu, re­finer­ies and un­end­ing re­ha­bil­i­ta­tion as­sur­ances

Daily Trust - - BUSINESS - From Mo­hammed Shosanya, Lagos

The Group Man­ag­ing Di­rec­tor of the Nige­rian Na­tional Petroleum Cor­po­ra­tion (NNPC), Dr. Ibe Kachikwu, who went through screen­ing at the cham­bers of the Na­tional As­sem­bly for pos­si­ble min­is­te­rial con­sid­er­a­tion left Nige­ri­ans with op­ti­mism that the na­tion’s ‘dead’ re­finer­ies would ‘res­ur­rect’ soon.

He as­sured that all the lo­cal re­finer­ies would start work­ing by the end of the year to stop huge fuel im­ports, cut huge im­port bills, re­duce pres­sure on the na­tion’s mea­gre for­eign ex­change rev­enue and cre­ate mul­ti­plier ef­fects in the do­mes­tic econ­omy.

He re­it­er­ated his con­fi­dence and trust in the tech­ni­cal work­force of the re­finer­ies, say­ing that over 80 per­cent of the na­tion’s tech­ni­cal skills’ pool for op­er­a­tions of the NNPC are com­pe­tent and pointed at the achieve­ments of the Port Har­court Re­fin­ing Com­pany (PHRC) at re­ha­bil­i­tat­ing its plants as part of the po­ten­tials avail­able in the industry.

Dr. Kachikwu whose re­sponse to leg­is­la­tors’ ques­tions pre­sented a busi­ness plan of the Nige­ria petroleum industry, promised to drive op­er­a­tions model that would place the cor­po­ra­tion on a per­for­mance plat­form that would guar­an­tee com­mer­cial vi­a­bil­ity.

He re­vealed plans to en­hance ef­fi­ciency and trans­parency in the sec­tor, as well as re­struc­ture the na­tional oil firm to be com­pet­i­tive across the full value chain of the industry.

He promised to build lo­cal ca­pac­ity across the en­tire busi­ness units of the cor­po­ra­tion to en­able it live up to its billing as do­mes­tic industry leader, gov­ern­ment’s rev­enue earner, cus­to­dian of na­tional petroleum as­sets and lead do­mes­tic fuel mar­ket sup­plier.

He said all the pro­gramme tar­gets would only be a dream un­less op­er­a­tions of all the busi­ness arms of the cor­po­ra­tion are prof­itable. He sin­gled out the re­finer­ies for em­pha­sis, point­ing at their new role as profit cen­ters, re­li­able fuel sources and feed­stock sources for an­cil­lary busi­nesses.

He gave ex­am­ples with the new busi­ness model at the Port Har­court Re­fin­ing Com­pany Lim­ited (PHRC) which he said has be­come the sign post of do­mes­tic tech­ni­cal in­ge­nu­ity, in­ter­nal in­no­va­tion and re­vival model for sis­ter re­finer­ies in Warri and Kaduna re­spec­tively.

The re­finer­ies col­lec­tively hold ca­pac­ity for 445,000 bar­rels of crude oil pro­cess­ing per day, pro­duc­ing some 18 mil­lion litres of the premium mo­tor spirit which is highly prized in the coun­try as the main fuel for trans­porta­tion and light ma­chines used by homes and small busi­nesses.

But they have re­mained largely in­ac­tive for years as a re­sult of poor main­te­nance and wrong busi­ness mod­els as they re­lied on par­ent NNPC for ad­min­is­tra­tive and fund­ing con­trol, a sys­tem that slowed pro­cesses and starved them of fund­ing.

Dr. Kachikwu de­clared that the new busi­ness model, which he said has been ac­ti­vated in the sys­tem, would dis­man­tle all ad­min­is­tra­tive and fund­ing con­straints at all the cor­po­ra­tion’s busi­ness units, es­pe­cially the re­finer­ies and lever­age in­ter­nal en­er­gies and com­pe­ten­cies in op­ti­mis­ing up­time at the plants.

He had ear­lier de­clared in Lagos that the re­finer­ies are of strate­gic na­tional eco­nomic and se­cu­rity im­por­tance and re­stated the com­mit­ment of his ad­min­is­tra­tion to not only re­cover their ca­pac­ity but also ex­plore op­por­tu­ni­ties of build­ing new plants in a plan that would lever­age economies of scale at ex­ist­ing industry hubs.

Dr. Kachikwu, stated that all the na­tion’s re­finer­ies must re­vamp and at­tain 60 per­cent process ca­pac­ity by De­cem­ber when gov­ern­ment would con­sider the best man­age­ment model to adopt in mak­ing them ef­fi­cient.

He said be­low 60 per­cent ca­pac­ity, any of the re­finer­ies would no longer op­er­ate prof­itably and would not be sup­plied crude oil feed­stock through tra­di­tional al­lo­ca­tion pro­cesses. He said the sit­u­a­tion would leave the cor­po­ra­tion with the op­tion of ex­plor­ing pri­vate sec­tor man­age­ment for any un­der­per­form­ing re­fin­ery.

Ac­cord­ing to him, the ac­cept­able 60 per­cent per­for­mance bench­mark must not be a flash in the pan, adding that it would re­quire sus­tain­able up­time at the re­fin­ery’s fluid cat­alytic crack­ing unit (FCCU) which, ac­cord­ing to ex­perts, is the op­ti­mum process unit.

He sug­gested that in or­der to scale the 60 per­cent per­for­mance hur­dle, the re­finer­ies must add value to crude oil at all the process units in or­der to cut waste, en­hance com­mer­cial­ity of op­er­a­tions and op­ti­mize resources.

He stated that the new gov­ern­ment met the na­tion’s 445,000 bar­rels per day in­stalled re­fin­ing ca­pac­ity at an av­er­age per­for­mance level of about 30 per­cent.

In­ter­est­ingly, out

of the three re­finer­ies, only the 210,000 bar­rels per day Port Har­court Re­fin­ing Com­pany (PHRC) Lim­ited cur­rently has all its three key process units in­clud­ing the Crude Dis­til­la­tion Unit (CDU), Vapour Dis­til­la­tion Unit (VDU) and Fluid Cat­alytic Crack­ing Unit (FCCU) on­stream af­ter an in­ter­nal re­ha­bil­i­ta­tion pro­gramme.

The com­pany which ini­ti­ated and suc­cess­fully evolved the down­stream petroleum industry lo­cal con­tent model for in-coun­try re­fin­ery re­fur­bish­ment and up­grade is al­ready work­ing to ramp up its pro­duc­tion per­for­mance level to 80 per­cent in­stalled ca­pac­ity in or­der to en­ter a sus­tain­able com­mer­cial com­fort zone.

Dr. Kachikwu pointed out that only PHRC ap­pears to have crossed the per­for­mance hur­dle and stressed that gov­ern­ment would no longer run un­prof­itable busi­nesses when bet­ter op­tions ex­ist in pri­vate sec­tor part­ner­ship.

He said af­ter re­vamp­ing the re­finer­ies, their busi­ness mod­els would be ex­am­ined to de­ter­mine the man­age­ment ap­proach to take.

He also said the model would pro­tect and pre­serve the pub­lic in­ter­est in the re­finer­ies with­out com­pro­mis­ing ef­fi­cient com­mer­cial and tech­ni­cal op­er­a­tions stan­dards.

He said plans were on to ex­pand ex­ist­ing re­finer­ies to broaden the coun­try’s rev­enue win­dows un­der the pre­vail­ing crude oil price down­fall, adding that gov­ern­ment would also ex­plore lo­cal­iza­tion of the re­fin­ery industry around ex­ist­ing fa­cil­i­ties in or­der to max­i­mize economies of scale, op­ti­mize industry skill set and beat down cost driv­ers in the busi­ness.

Op­er­a­tors in the oil and gas are of the opin­ion that only the re­ju­ve­na­tion of the na­tion’s re­finer­ies would strengthen the oil and gas and value to the econ­omy.

Only time would tell how Kachikwu would ac­tu­al­ize his prom­ises to Nige­ri­ans.

Warri Re­fin­ing and Petro­chem­i­cal Com­pany plant

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