Home Opinion A Bleeding Nation in the Emergency Ward: Petroleum Scam 1

A Bleeding Nation in the Emergency Ward: Petroleum Scam 1

by Isiyaku Ahmed
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A bleeding nation - Nigeria

By Emmanuel Gandu

Nigeria’s three refineries of Port Harcourt, Warri, and Kaduna have a combined refining capacity of 445,000 barrels per day but none of them is functional for decades despite a series of Turn Around Maintenance (TAM).

The Buhari APC government has since come to power and spent a whopping $26.5 billion on maintenance alone.

Oil experts and industry watchers have estimated that it would cost less ($ 24 billion) to build the same 3 refineries with the same refining capacity at Port Harcourt, Warri, and Kaduna today.

They wondered why this government is not prudent with scarce resources by going ahead to do turnaround maintenance with funds that could have built a new set of refineries.

In the beginning

The discovery of Oil (Black Gold) on January 1956 at Oloibiri in Ogbia LGA of Bayelsa state, and subsequently many others in several Communities in the Niger Delta of Nigeria.

Following the increase in oil wells Nigeria embarked on the construction of these refineries by the Yakubu Gowon-led administration:

1. Port Harcourt refinery was commissioned in 1965 with a refining capacity of 210, 000 barrels per day of oil and gas.

2. Warri refinery was commissioned in 1978, and the commissioning of Petro Chemical plant in 1987 with a total refining capacity of 125, 000 barrels per day.

3. Kaduna refinery was commissioned in 1988 with a total refining capacity of 110, 000 barrels per day for oil and gas. It was also built to produce lubricating oil blend stocks, waxes, bitumen, and Kero.

These refineries launched Nigeria into the elite club of world oil-producing nations, and the organization of Oil Producing and Exporting Countries (OPEC).

Oil Subsidy:  Facts of the Scam

Nigeria is the 7th highest oil producer in the world and Africa’s biggest.

Despite oil being the country’s economic mainstay since the 1970s, contemporary successive governments have failed to maintain the refining of crude oil in our refineries.

This seeming apathy had resulted in the abandoning of such critical assets leading to endless importation, and rising prices of premium spirits, diesel, gas, jet A (Aviation) fuel, bitumen, kero, etc.

Nigeria is a country that produces crude oil but imports refined products for domestic consumption. This no doubt has given rise to monumental corruption.

How many petroleum products are imported?

How many liters are consumed?

These are some of the questions NNPC and government are unable to provide an answer.

Funds are always released for turnaround maintenance (TAM) of the country’s three (3) refineries at Port Harcourt, Warri, and Kaduna but the more money is sunk, the less oil drop is seen by Nigerians.

These refineries have become more of cash cows for government officials than avenues for national development.

For a government of the APC that promises to build of 4 new refineries in 4 years to resort to spending a whopping $26.5 billion on endless maintenance of rusted-out infrastructure called refineries smacks of corruption.

Therefore, Petroleum products have continued to be subsidized.

Unfortunately, due to the rising price of crude oil in the international market, and the falling value of the naira, Petroleum subsidy payments grew from # 350 billion in 2019 to N450 billion in 2020, then got to N1.573 billion in 2022.

What baffle keen observers of the sharp rising trend of this subsidy regime is the figures spent for 2022.

Data from the Nigerian National Petroleum Corporation (NNPC) shows that for January and February 2022 alone, the cost of subsidy was N396.72 billion.

Furthermore, the federal legislatures approved another sum of N4 trillion to be spent on subsidies in 2022.

This N4 trillion approval to be spent for subsidy in 2022 means that the federal government has abandoned its enacted Petroleum Industry Act of 2021 which prescribed a free market for the downstream sector of the petroleum industry.

According to the minister of Finance, Budget & National Planning, Zainab Ahmed in July 2022, the country will be expected to pay as much as #6.72 trillion for subsidies in 2023.

This is the danger:

(1) This portends trouble economically if this subsidy regime is continuous.

(2) How will Nigeria with a total annual budget of N17 trillion naira use a whopping N4 trillion for subsidy alone?

(3) How will Nigeria cope with projected revenue of #10 trillion?

(4) Oil prices are surging upwards globally due to the Russian War in Ukraine. Nigeria is unable to take advantage of this global oil boom in price because we don’t refine it.

Surely the subsidy will have to get higher as Nigeria is at the mercy of rising market forces.

Will things not get much more difficult for Nigeria in the very near future?

Petroleum Corruption Scandals under APC / Buhari’s Watch

You would recall that APC under Buhari had promised Nigerians before the 2015 elections that they will build 4 new refineries in 4 years of their reign if elected to power. The APC was elected in 2015 and we are 8 years going without the APC government building any new refinery. They cannot even maintain the existing ones, thus subjecting Nigerians to the excruciating agony of high prices and shortages.

As we speak, Nigeria cannot even mine its crude for export to meet the approved 1.8 billion barrels per day OPEC quota.

Surprisingly, Major General Muhammadu Buhari was the Petroleum Minister during the military administration of General Olusegun Matthew Aremu Obasanjo.

Today, President Muhammadu Buhari doubles as the Minister of Petroleum.

Therefore, the alleged monumental corruption in the oil sector can rightly be placed at Buhari’s doorstep.

The APC government under Buhari’s watch reportedly spent N10.23 billion in June 2020 on three (3) refineries that ended up processing zero crude.

Again in 2021, this APC government approved and is spending $1.5 billion (about N600 billion) to repair the Port Harcourt refinery.

Despite the huge spending, the refineries have refused to function, while Nigerians keep groaning under the excruciating and persistent scarcity.

Interestingly, SERAP in a suit number FHC/L/CS/806/2022 filed in the Federal High Court, Lagos is seeking an order of Mandamus to compel Muhammadu Buhari to investigate the spending of N1.48 trillion reportedly spent on 4 refineries between 2015 and 2020 (NNPC Monthly Financial Statement).

One may ask, which is the 4th refinery referenced here?

More Scandalous Revelation

In another major revelation twist, petroleum industry watchers lament the whopping sum of $26.5 billion which the federal government has so far spent on the maintenance of the country’s loss-making 445,000 barrels per day capacity of three (3) refineries of Port Harcourt, Warri, and Kaduna.

Experts on energy and construction of refineries have opined openly to say that this $26.5 billion is capable of building three new refineries of the same sizes as each of the ones in Port Harcourt, Warri, and Kaduna.

This suggestion, according to these experts is arrived at based on the cost analysis of refinery projects currently going on across the world:

(1) The Ecuador refinery being constructed at Manto is a 500,000 barrels per day capacity for $12 billion.

(2) Dangote refinery in Lagos Nigeria, has 650,000 barrels per day capacity being constructed for about $15 billion.

(3) Kuwait is building the Al Zour Oil Refinery for $16 billion with a refining capacity for 615 barrels per day.

Now, with Nigeria’s three (3) refineries having a combined refining capacity of 445,000 barrels per day, the implication is that it would cost less than :

(a) $8 billion to build a new 210,000 barrels per day capacity refinery in Port Harcourt – the same size as the existing one.

(b) It will also cost less than $8 billion to build a new refinery in Warri, just like the existing one with same refining capacity of 125,000 barrels per day.

(c) The Kaduna refinery has a refining capacity of 110,000 barrels per day.

If an exact and similar refinery were to be built today in Kaduna, it will cost less than $8 billion.

By the above expert’s analysis, the three new refineries would therefore cost only about $24 billion.

The questions to ask the APC and Muhammadu Buhari government include the following:

(1) Why did the government of APC spend a whopping sum $26.5 billion on the maintenance of refineries without a single drop of oil?

(2) Did Buhari’s Petroleum Minister experience during the Obasanjo military rule and his present Petroleum Minister status went without managerial capabilities?

(3) Who will account for these monumental wastages to Nigerians?

(4) What will APC boast to have achieved in its 8 years of governance of a Nigeria with 200 million suffering people?

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