October 07, (THEWILL) – A major fallout from the recently concluded 6th international conference organised by the Centre for Gas, Refining and Petrochemicals (CGRP) of the University of Port Harcourt, based on the reports, was that the Nigerian Content Development and Monitoring Board (NCDMB) is grossly underutilised.
The participants arrived at this position against the backdrop of experts’ views on the embarrassing state of Nigeria’s resource-gulping but dormant refineries which have remained the Achilles heel of effective governance and widely acknowledged as the cesspool of corruption.
The participants noted that NCDMB has been made to play a subsidiary role in the development of Nigeria’s oil and gas industry, especially concerning the repair and maintenance of the refineries; and that the role of the agency should be upgraded.
Among the experts who harped on this lacuna was Babajide Soyode, a Petroleum Engineer and former staffer of the Nigerian National Petroleum Company (NNPC) Limited who was involved in the design and establishment of the refineries.
Engr Soyode who was keynote speaker, led the conference to demand for handover of the refineries to private hands and never to import modular refinery units but to rather develop capacity for local content by fabricating the components at home.
Speaking on the sidelines to newsmen, Engr Soyode, who now consults for Dangote Refinery in Lagos, insisted that the rehabilitation going on at the Port Harcourt refinery and gulping billions of dollars would not yield standard grade of petroleum as the facility’s workings have become obsolete. In his view, the refinery ought to have been upgraded and not subjected to rehabilitation.
He gave an example with modular refineries.
His words, “Let the Nigerian Content Development and Monitoring Board (NCDMB) not sponsor import of modular refineries except it is fabricated in Nigeria. If we can’t fabricate them, then we should forget them.
“We may not import it as they are but we can fabricate the major parts. They will produce petrol that meets specification. Right now, modular refineries cannot meet specification. Even the Port Harcourt Refinery cannot produce according to specification.”
He said Nigeria has a problem now. “The Port Harcourt specification and the Lagos (Dangote) specification exist. NCDMB can tell modular refineries to produce to specification. They can make them to fabricate the right modules. They are built in factories and shipped. Let us have a complete refining complex not just crude distillation. The different units can be mentioned and listed for fabrication.”
Engr. Soyode suggested that the NCDMB can sponsor local fabricating entities, emphasizing that the Centre for Gas, Refining and Petroleum (CGRP) can make those new modules.
“They can do the study, it’s a challenge. The NCDMB can sponsor them. The US and others cannot make modular because they are too small, but we can make it. Our young engineers can be grouped to make it. That is why I call it ‘Atrophy of industrial imagination’. Our imagination is dead.”
He recalled that “By the time we were doing Warri Refineries, we were studying the Port Harcourt Refinery. The British media insulted us because their people were exporting the by-products from us to abroad, but we designed the refinery that would use the by-product. We made our projections.”
The conference documents showed the organisers were in unison calling for urgent and strategic upgrade of NCDMB’s role beyond mere “monitoring”. They believe that the agency has monitored enough and should deploy their capacity towards research and production of refinery equipment.
The conference communiqué read in part, “Government must make deliberate policy to encourage the design and fabrication of oil and gas equipment in Nigeria. This is important because of its impact on the economy, job creation opportunities, as well as optimal and sustainable operation of the oil and gas industry,” it said.
The communiqué further stated that the Federal Government should initiate policies that would insist that at least 60 percent of equipment being used should be manufactured in Nigeria. Timelines to this also should be set.
Imperative of intervention
The Senate on July 5, 2023, rejected a motion seeking to investigate the moribund condition of the nation’s refineries despite spending trillions of naira on their maintenance.
This came barely two months after former president Muhammadu Buhari left on May 29, 2023 when he doubled as Minister of Petroleum Resources for eight years.
The motion was moved by Karimi Steve (APC, Kogi West) at the plenary.
In the motion, Mr Steve prayed the Senate to constitute an ad-hoc committee to investigate all contracts awarded for the rehabilitation of all federal government-owned refineries between 2010 and 2023. He stated that the Nigerian government had spent N11.35 trillion on the renovation of refineries from 2010 till date.
He also said the federal government had spent over N6 trillion between 2010 and 2020 on fuel subsidy due to Nigeria’s low refining capacity, and almost twice the amount have been spent on rehabilitating refineries in Port Harcourt, Kaduna and Warri between the same period under review.
The Kogi senator noted that despite the moribund condition, the operating cost of the federal government refineries between 2010 and 2020 was estimated at N4.8 trillion.
Mr Steve said he was disturbed that the Port Harcourt Refinery Company was still not functioning despite the rehabilitation projects in the facility for seven years between 2013 – 2019 at an estimated cost of over N12 billion.
Giving a breakdown, he said over N28 billion had been spent on revamping the Warri Refinery and Petrochemical Company Limited from 2014 to 2019.
He added that over N2 billion had also been spent on the rehabilitation of the Kaduna Refinery and Petrochemical Company in the past ten years, but it remains unproductive.
Pre-Local Content Environment
Nigeria was besieged by scavengers from Europe, America and Asia (India precisely) who posed as oil and gas experts before the emergence of the Local Content Policy which inculcated the desired sanity into the industry. It was common then for well-placed Nigerians, including military and top government officials, to pose as agents and representatives of overseas manufacturers whose products and services are used in the industry.
The so-called principals sometimes collaborated with corrupt insiders to inflate their prices in order to accommodate certain interests including commissions for the so-called agents who added no value to the system. At the time, only a few Nigerian companies were interested in capacity building and training of their employees to do what the Local Content Policy now advocates.
Technical areas like installation and servicing of the Metering system, construction of Loading Bay, LPG installation, Tank Farm construction, installation of Actuators, Colons, Mechanical Seals, Valves, Steam Trap and other process equipment served as conduit pipes for forex drainage. In some cases, the manufacturers signed agreements with Nigerian agents to supply equipment that were at the verge of being phased out, only to declare shortly that the spare parts had become obsolete.
Process equipment like metering were phased out so frequently that the manufacturers had to send their experts to install and service the new ones at a huge cost. Only a few focused EPICOM (Engineering, Procurement, Installation, Construction, Operation and Maintenance) Nigerian companies played the patriotic role of sending their technical employees abroad for training in the manufacturers’ facilities.
The Turn Around Maintenance (TAM) of the refineries was a bazaar season. At a time, persons from all walks of life — cattle rearers, furniture makers, mechanic workshop operators, teachers and traders became agents and representatives of oil and gas equipment manufacturers. All that mattered was the commission money.
Little transfer of technology or skill acquisition was achieved. In one case, the chief executive of a refinery was alleged to have ordered materials in excess of what was required to do the TAM. The excess warehoused equipment and materials remained unused as no TAM was held for years after.
Although some indigenous firms made endeavours to transcend beyond mere services, their efforts were hampered by Nigeria’s non-conducive operating environment. This was the case with Engr Soyode’s efforts at the heat exchanger servicing and local manufacturing of mechanical seals – critical facilities in running the refineries..
Enter Local Content
Nigeria’s 10-Year Strategic Road Map, anchored by the Nigerian Content Development and Monitoring Board is meant to completely change the old order and put the nation in proper place to take ownership of the management of the refineries, among others.
The Road Map is targeted at the retention of over $14 billion out of $20 billion estimated in-country spending, creation of over 300,000 direct and indirect jobs for Nigerians and growing Nigerian Content from 27 to 70 percent by 2027.
To achieve this, the NCDMB has created series of short-, medium- and long-term plans bordering on research, production and human capital development with well-articulated delivery and evaluation processes that are practically time-bound.
Among the schemes is the promotion of Science, Technology, Engineering, and Mathematics (STEM) education in Nigeria in partnership with stakeholders. ‘But all these have not led to where we should be in running our refineries”, the conference documents showed.
The outcome of the Uniport CGRP underscores the urgent need to revisit the mandate of the NCMDB towards functional support of the oil and gas development, especially in the management and upgrade of the local refineries.
But the government must create the enabling environment and provide the necessary infrastructure for this to happen.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
