‘Why FG should scrap Kaduna refinery’
Egbogah
• Egboga says facility obsolete
• NNPC ‘to repair or modernise’
AS hopes rise that Nigeria’s refineries may come on stream by December, details are emerging that the Kaduna Refining and Petrochemical Company (KRPC) may not be among them, and may even need to be ‘scrapped.’
Chief among the reasons, The Guardian learnt, is because the refinery would not meet expected parameters of operation should it depend on feedstock from the Nigerian National Petroleum Corporation (NNPC).
It was also learnt that the KRPC runs on ‘obsolete analogue technology and is not fit to refine Nigeria’s light crude,’ as against what obtains at Warri and Port Harcourt refineries, both of which operate advanced refining technologies.
Former Presidential Adviser on Petroleum Matters, Dr. Emmanuel Egbogah, in an interview with The Guardian, said the Kaduna refinery has bad features, which are never discussed, especially the fact that Nigeria would have to import heavy crude from Venezuela to refine at the facility, because the country’s light crude is incompatible with the refinery’s technology.
Egbogah, who has varied experience and earned a reputation in the global oil and gas industry for his pioneering work in Venezuela, Brazil and Canada, was co-opted by former President Olusegun Obasanjo to draft the first version of the Petroleum Industry Bill (PIB) together with late Dr. Rilwan Lukman as oil minister.
In the same vein, Kachikwu, told The Guardian in an exclusive chat that the ‘complexities’ of the Kaduna refinery could compel a shutdown “to repair and modernise.”
Confirming Egboga’s position in a text message exchange, Kachikwu, however, said: “All refineries are on the 90-day fix-or-shut-to-fully-fix programme. I do not want to prejudge, although I was expecting Kaduna to stream into production as its Fuel Catalytic Cracking (FCC) unit was presumed to be in better state than others’ despite its ageing state.
Built in 1975 by the NNPC, the Kaduna refinery was constructed as a 60,000bpd-capacity plant but was upgraded to 100,000bpd, when the Federal Government mandated that the latter was the benchmark capacity of its refineries.
The refinery which was intended to be a hydro scheming type , was upgraded to an integrated facility, to produce a wide variety of petroleum products, and some lubricating base oils. It thereafter started importation of suitable paraffinic-based crude oil from Venezuela, Kuwait or Saudi Arabia.
In Egboga’s capacity as the deputy chairman of the Oil and Gas Implementation Committee (OGIC) and adviser to President Obasanjo and later Yar’Adua, he visited Nigeria’s refineries to assess their operational capacity and made case for the setting up of new ones to shore up the deficit of petroleum needs in the country.
According to him: “Government should scrap the Kaduna refinery and build a new one. There are many bad features of the Kaduna refinery, which are never talked about. The refinery is not very good for refining Nigerian crude oil. We have to import oil from Venezuela. It is built to refine heavier type of oil. We have very little heavy crude, but nobody ever talks about it and it amazes me.”
If people, who craft off-shore oil refining allocation don’t benefit from it, they will let the oil industry grow. When I was adviser, I went to assess it and my conclusion was that there is no point putting money there. At the time, I was pioneering the building of a new refinery in Nigeria. I went to India and took with me two ministers, that for gas, and the other for oil; I think Ajumogobia and another guy. We visited the best functioning refinery in the world in Jamnagar, India. It produces at 1.2 million barrels per day. It is like a university campus and I wanted to bring the people here to build us one.
I made my case to Yar’Adua. I told him the subsidy we are paying was more than enough to construct this refinery that will produce 600,000 barrels per day. I said the Kaduna refinery out; count it out because it is so obsolete, so bad that there is no way it will ever refine oil. Even today, I don’t care what they tell you, it can never function properly; it is impossible,” he added.
A recent NNPC report showed that, in the last eight months, the refinery, with a total loss of N26.183 billion, fared worst of Nigeria’s three refineries, with its Warri and Port Harcourt counterparts posting N8.496 billion and N8.057 billion losses, respectively.
The Kaduna refinery, the report revealed, operated at a loss of N5.111 billion in January; N2.673 billion in February; N2.260 billion in March; N3.045 billion in April; N2.595 billion in May; N2.662 billion in June; N3.847 billion in July and N3.990 billion in August.
Kachikwu, represented by the Managing Director, Nigerian Petroleum Development Company (NPDC) at the NPDC’s headquarters , Abubakar Mai-Borno , said safety in work place is vital for productivity in the sector. “It is with great optimism that we are foreseeing our refineries soon coming back on-stream. PHRC, for instance, has demonstrated great drive in meeting the federal government’s desire on our refineries; whence our crude will be processed in order to meet our immediate domestic demands.
While a lot of efforts are still on-going towards attaining this desire, appropriate safety practice and safety observance must be entrenched.
“Through the recent programmes and initiatives that promote and drive HSE awareness, observance and operational safety conformance corporate wide. NNPC will transform and modernise its health, safety and environment management standards and performance records.”
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56 Comments
The truth is yet to be told on and about the refinery with the Nigeria evoking politics.
The real problem is bad planning, not regionalism. All the refineries are losing money, KRPC only loses more because of the peculiar “feature” that it was not built to refine Nigerian crude. Meanings can be read into that, i guess, but the sooner government gets out of the business of refining crude the better.
If government should investigate the causes of losses in the balance sheets of the refineries,you would be suprised that inflated contracts is mainly responsible for the financial hemorrhage of the refineries.
This shows us how the criminal practice of regionalism continues to drain our economy. Will Buhari plug this huge hole in the nation’s purse by doing the right thing? Or will he continue with the parasitic practice? We shall see.
…criminal practice of regionalism?… [eg what issue!]
Kaduna refinery was only built to satisfy the north. It is now being maintained for that same purpose. It was NEVER going to be profitable. Read the history.
AA, your points are interesting; your disqusion and presentation are not properly informative. Me think, the issues of transportation of fuel to the north nooks and corner was one of the points in consideration of making the refinery. Now what is your take {…Criminal Practice of Regionalism…?]
Let me make myself clearer. Firstly, when I say ‘north’, I actually mean the ‘northern oligarchy’. I don’t mean everyone in the north, but the ruling class. Now, if u go into the history a little, u will understand that the citing of a refinery in Kaduna was a fall out of regional rivalries. It was clear from the beginning that putting a refinery in the north was a foolish economic decision – even when transportation (as u say) is considered. In a way, it is like an aspect of the federal character principle which sometime says u have to appoint people from a certain region or state whether they are the best people to do the job. In terms of Kaduna, the chickens have come home to roost. We are now reaping the negative fruits of decisions best on politics and not on reason and economic wisdom. I hope I have made myself clear.
Good, you are now speaking and from all indication ‘it seem’ you are focusing in the wrong direction. Please, see @ajuwa:disqus submission me think it will be helpful. Thanking you for responding to my enquiring.
Thanks and see my response to Ajuwa too. My question is simple: at what cost? Why shd I keep an old car that can’t take me around and that I keep servicing? What wd be the point? For fancy?
Well happy disguising with you AA. Can we all face realities. People are busy assessing the use of water, sunlight and wind to put in check climate change: Some are cabbaging on oil reserve and refinery’s- very soon must of the technological improvement and design will dismiss the use of Hydro-carbon. Let reverse our set minds on these refineries and oil well!
I think you are very right!
That is the problem with government ownership of business.
They make business decision for political exigency ETC. No private investor would site a refinery in Kaduna, when it is cheaper to pump refined petrol to Kaduna.
We have the power to stop government from making wrong decision in a democracy. We were in a military regime from 1976 – 1979, when Kaduna Refinery was conceptualised, designed & being built by Buhari.
What is the basis for saying pumping crude once by pipeline for refining is cheaper than pumping, petrol, then clean the pipe, pump AGO, clean pipe, pump kerozene, clean pipe, aviation fuel, clean and then back to petrol. Did you really think this through?
I am surprised this Eboga claims to be a petroleum expert and all he can say is scrap the refinery. Every knowledable person in the oil industry undertands that Kaduna refinery was designed to refine heavy crude which is not produced in Nigeria. The refinery in addition to fuels was also designed to produce lube oil base inputs, and detergent LAB for soap production. The wisdom of siting such a refinery so far away from the coast is questionable in my opinion, but gleefully suggesting scrapping the whole plant doesn’t sound brilliant in any way to me.
There is no rocket science in importing heavy crude of processing as far less endowed countries even in ECOWAS who produce no crude oil are already doing that. I don’t see the problem with that. If there is little market for the by-products we can talk of relocating the main production units to a coastal city rather than simply tossing the whole investment into the waste bin. Used refineries over 30 years old for sale are ready to be relocated to any location of your choice are all over the world.
We can research the possibility of blending local crude with the imported heavy crude to achieve a grade usable by the refinery to reduce the import component,
Re-engineering can be done to replace the main production facilities that may be specific for heavy crude usually the main heaters, FCCU and the entire control system can be replaced and upgraded to latest versions so they can handle Nigerian crude. You don’t need to replace all the storage tanks, pipe racks. piping, most pumps and buildings to achieve this. These easily form 50% of the cost of a new refinery.
That is how i expect a so-called expert to talk rather than a wasteful, it’s not my money advice. If the facility was the experts personal investment will he walk away or find ways to salvage the investment? The quality of people who run our affairs as experts is really appalling
Of course Ajuwa, “the quality [mediocrity} of ‘damage brain’ ~call experts# people who run our ‘Nigeria’ affairs is really [dam] appalling…” and wasteful to the country destruction. People are busy assessing the use of water, sunlight and wind to put in check climate change: Some are cabbaging on refinery and oil reserve – very soon must of the technological improvement and design will dismiss the use of Hydro-carbon. Let reverse our set minds on these refineries and oil well!
“Re-engineering can be done”. At what cost pls? Why shd we spend a fortune “re-engineering” a refinery if there is not going to be a commensurate return on investment and profit? Why shd we import crude oil to refine in Kaduna such that the final product becomes more expensive than if the final product is itself imported? What would be the sense in it? Pls enlighten us.
Engineering is hardly up to 6% of the total cost of the refinery hardware and it makes sense if the refinery is already existing to re-engineer and replace only part of the existing hardware. Most storage tanks, foundations, piping, pumps, utilities, water supply, power units, roads etc. will not need to be replaced in a re-engineered plant. Mainly the critical process units will be upgraded or replaced. It makes perfect economic sense if a study shows most of these support units are serviceable and still have useful life. I am currently part of a team upgrading a petrochemical plant over 30 years old located in a country in worse condition than Nigeria. The history of this plant is similar to our own refinery, abandonment and poor maintenance. And the overall cost is about 20% of a new plant.
There us nothing wrong in importing raw material you don’t have, Nigeria doesn’t produce heavy crude to feed the Kaduna refinery, afterall we export our light crude to other countries who lack crude oil or only produce heavy crude.
We should study and find answers to the reason cost of production is generally higher in Nigeria for the manufacturing of all products not just oil and go about solving it. If we agree we want to domesticate production as a way of providing jobs for a youth instead of keeping foreign youths employed because it is ‘cheaper’ then it is our duty to take measures to reduce the cost of production. Giving up and walking away from a problem does not teach you the solution.
you have to weight the cost of doing that, along with the cost of just investing in a newer one. Nigeria have shown they can’t do maintenance or even upgrade, and frankly, it might not be worth it to do that. They best situation would be this. keep the two modern ones and deregulate the sector, that would bring in investors that would build this refineries. all they need is a guarantee supply of oil at domestic price, and for the fuel sector to be deregulated. This would cost the nation less than what it cost to repair the refineries.
You haven’t quite explained the core reason or reasons for building the Kaduna refinery, since it wasn’t built to refine Nigeria’s crude.
uncle, this is a country where everything is politicised. Common wisdom should dictate that we should first build refineries that can handle what we produce before going to import. The situation now is that we neither can refine what we produce nor can we handle what is imported. Let us forget anything that has to do with importation.
THIS IS HOW THE RULING ELITE UNDERDEVELOPED NIGERIA UNDER MILITARY REGIME.AFTER ALL THE MONEY SPENT IN KADUNA REFINERY, NOW THEY TELL US IT IS ABSOLATE.NIGERIA WHAT A COUNTRY.
With all due respect to all those who have devoted time to comment on this article and expressed their views from different perspectives (informed and less-informed), I feel very disappointed that the language used in some of the comments reflected utter disrespect to the personality of Dr. Emmanuel Egbogah, PhD, DIC,D.Sc.,OON. Here is a highly educated Nigerian with acclaimed (not claimed) international experience who has a track record of exemplary achievements in the global Oil and Gas Industry in various Countries including Canada, Libya, Brazil, Malaysia, Venezuela etc. Here is a world-acclaimed (not claimed); listed in the world’s Who’s Who in Science and Engineering and the first person in the World to obtain the coveted Ph.D Degree in Petroleum Reservoir Engineering, Imperial College of Science & Technology, University of London and was honoured then by the Queen of England. Here is a man of conscience and integrity and a visionary who has served Nigeria with utmost devotion and integrity in both the academic and Industrial fields and had served as Special Adviser to the President on Petroleum Matters to two successive Federal Governments of Nigeria as well as served as the deputy chairman of the Oil and Gas Implementation Committee (OGIC). He is a Member of the 15 person African Oil Policy Initiative Group, (AOPIG) and was also a co-opted member of the Committee that drafted the original Version of the Petroleum Industry Bill(PIB) which was acknowledged asa master piece at that time.
For details of his accomplishments go to: https://www.dregbogah.com/documents/curriculum_vitae.html
There is, therefore, no reason or cause whatsoever to use derogatory or insulting language, which is very unprofessional, to respond to his suggestion since he has the right to his opinion just like everyone
else.
Now, I’ll go back to the subject matter. From a layman’s point of view, my understanding on why Dr. Egbogah recommended that the FG should scrap the Kaduna Refinery is based essentially from cost/ benefit perspectives backed by well informed verifiableevidence of the inherent ‘bad feature’ and ‘complexities’ of the KRPC such as: the refinery’s inability to meet expected parameters of operation should it depend on feedstock from the NNPC; the KRPC runs on ‘obsolete analogue technology and is not fit to refine Nigeria’s light crude unlike the Warri and Port Harcourt’s refineries which operate on advanced refining technologies; its reliance on import of suitable paraffinic-based crude oil from Venezuela, Kuwait or Saudi Arabia to refine at the facility due to insufficient heavy crude inNigeria; incompatibility of the country’s light crude with the Kaduna refinery’s technology; a surprising total loss of N26.183 billion in the last eight months based NNPC recent Report and lack of maintenance culture in Nigeria.
Therefore, the seemingly ‘pessimism’ expressed by Dr. Egbogah about the functional inefficiency and bleak prospects of the Kaduna Refinery, in my opinion, was his frank and expert opinion based on socio-economic and political realities as well as his expert and professional judgement. It also reflected, in my opinion, a sort of his ‘cry’ for help and to be heard concerning the deplorablecondition into which the ‘obsolete’ Kaduna Refinery was sinking with all the attendant wastage of resources. In other words, his thoughtful advice was borne out of patriotism and should not be dismissed merely as “..a wasteful, it’s not my money advice” as someone insinuated.
Nevertheless, Dr. Egbogah’s views, in my opinion, are without prejudice to the Federal Government’s current and proactive decision that “All refineries are on the 90-day fix-or-shut-to-fully-fix programme” and possibly to ‘shut down’; and “to repair and modernize’. His views, in my candid opinion, are also without prejudice to Dr. Kachikwu’s “..great optimism that we are foreseeing our refineries soon coming back on-stream” including his initiative to accord due attention to safety in work places which is vital for productivity.
In response to this Article, various opinions, and insinuations have been expressed as motive or rationale for establishment of the Kaduna Refinery such as: ‘hidden agenda’; ‘criminal practice of regionalism’; built only on
‘political exigency’ to satisfy “the north” or ‘northern oligarchy’; ‘wrong decision’; ‘bad planning; ‘regional rivalries’; or a ‘foolish economic decision’; and ‘no commensurate return on investment and profit’..
Notwithstanding all these these, the critical challenge now is not whether Dr.Egbogah is right or wrong but rather how we could confront the challenges facing the Refineries to ensure that we take desirable and proactive measures to achieve positive outcomes for a workable solution to the Refinery problems for the benefits of local and international Stakeholders and to maximize benefits from our abundant natural resources by exploiting all the available opportunities at our disposal to maintain Nigeria’s Integrity as an exemplary Oil and
Gas hub.
In this regard I strongly believe that with strong political will; genuine commitment; collective responsibility; perseverance; honesty; patience ; and God’s help we will succeed. Some of the measures we could take, as also suggested in response to this Article include, but not limited to, the following:
1. A thorough review of Dr. Egbogah’s earlier Assessment Report on the Kaduna and other Refineries and the recent assessment of the Country’s three Refineries by Dr. Kachikwu and his Team should be carried out with a view to determining the economic feasibility and other justifiable reasons and then decide on either to keep and
maintain/rebuild the Kaduna Refinery or to scrap it. As suggested in one of the comments, it will be prudent to use sound professional advice devoid of emotions or prejudices as a basis for making an informed decision on this controversial and sensitive issue.
Such decision should, of course, be without prejudice to the possibility of siting refineries in any part of the Country in future but should be with due justification and merit as expediency and circumstances demand. Alternatively, I also agree that it should be considered whether it is cheaper to build a new pipeline for refined Petrol to the Northern States of the Country than to continue, at a great loss, to maintain existing obsolete Crude Oil pipelines to the North and the Kaduna Refinery.
Should the problems of the Kaduna Refinery be confirmed or reconfirmed to be because of the problems and challenges inherent in its present Technology, the Refinery could then be considered for total upgrading to latest version by refurbishing it, if expedient, to be able to utilize Nigeria’s abundant Sweet Crude and respond to desired
modern needs including those unique Products or ‘Deliverables’ that this Refinery was originally equipped for that are not available in the Warri and Port-Harcourt Refineries.
2. In the event of decisions to build new Refineries, we need to consider a shift to Modular Refineries which have proven to be more economical and faster to install; and such refineries, I agree, should desirably be closer to crude oil sources, to the extent possible, keeping in mind the great potentials of discovery and exploitation of Crude in the Northern part of Nigeria within the lake Chad Basin as recent investigation Reports by the NNPC confirm.
Thank
you.
Enoch
Okoli (LedbyPatriotism)
I discussed this matter with my brother few months ago during one of our perennial shortages about how we could refurbish our existing refineries ourselves to suit modern needs without scrapping or building expensive ones. It will be wrong to scrap any of them. We have the technology to learn from, use from and upgrade ourselves. We should not wear a new coat when we can parch up the old one. We already know how to wear the old one. We need the Kaduna refinery for the products it can make others can’t. Egbogah is wrong..
We need it whether it is economically viable or not????? What exactly are u saying???
We have wasted far more than that say in the senate. What we need to think about are: can it be improved for security reasons; can it be used to reduce foriegn exchange bleed; how many Nigerians are employed in this particular sector with heavy oil refining? We may not like it, but the social security aspect of heavy oil refining should also be considered here. This, though a dark economy, can be regarded as a form of social security. We do not have a national social security system like some of our western counterparts. Some of our universities would have a fact to a means; not guesswork. Upgrade the refinery, I say and more would have jobs to feed their families and the countrry would build on this tech knowhow.
Mine is primarily, making Nigeria a “self-reliant finished products consumer” by domestically adding value to our own Sweet Crude, from extraction to refining down the value chain, in the Downstream sector of Oil & Gas . In this light, Kachikwu needs to be focused in that direction and restructure/correct past bad planning policy & operations in that light (eg as Dr. Egbogah pointed out two major flaws/things on KRPC; * the ANALOGUE facility on ground & * Importation of its Heavy Crude raw material from a place like Venezuela while it cannot utilise ours now). KRPC needs total upgrade technologically and also to suit utilization of our Sweet Crude. At this time of very unattractive Upstream operations with respect to very poor Oil Prices at the International Oil Market, let Nigeria think visionary and heed the counsel of the likes of Dr. Egbogah, for the nation to optimize from our abundant natural resources (BLACK GOLD reserves) by exploiting all the available opportunities at our disposal in making the nation now, “A FOREMOST PETROCHEMICAL PRODUCING HUB” among the comity of nations through OIl & Gas. Yes, we can! We have all it takes to do it. We have the best brains in that field to activate & execute it (at least arguing from my line of thought, as a trained professional in Petrochemistry, some 34 years ago at the University of Ibadan, CHEMISTRY DEPT.). Sunny Chuba Nwachukwu, Onitsha
I don’t understand the sin in importing crude oil if necessary, USA produces 9 million barrels per day and still imports much more. I will be happy if Nigeria is able to process all its 2 million BOPD crude and still import more to satisfy refineires all over the country up to Maiduguri and Nguru if necessary. Dr Ebogahs recommendation is a poor solution to the problem. If the problem of Kaduan is analogue control it can easily be upgraded to latest version. I am currently involved in the upgrade of a 33 year old petrochemical plant which involves replacing the compressor PLC from Mark 2 to the latest Mark 6. I am shocked that a so-called professional will recommend throwing the investment away by scrapping it whatever that means
A refinery that does not produce is like a factory that does produce. I wonder how it then incurs huge losses every month. A total loss of N26.18BN in 8 months? Where did this money go – in overhead or lost crude? Why should the nation’s treasury continue to bleed simply because we want to maintain a non productive refinery?
AJUWA, why are you talking this way. The expert has told you and there was a better reason why the Refinery was established in the first instance which you have not grasped. The Refinery was established by the Northern Oligarchy for their interest, which you have not seen. Look at it this way, in the event of Nigeria braking-up the Refinery will be used to refine crude imported from outside the country or near-by country like Niger Republic. Otherwise, why building a Refinery in the country where you cannot use your local crude to be refined in the factory. Let be told that any-day there is a discovery of crude in a large quantity in the Northern part of this country, the Northern Oligarchy will ask you to go and be on your won within twenty-four hours.
still mixing too many things together, clear the fog in your mind
Infrastructures serving Kaduna Refinery are over 35yrs Old. It will be a waste of public money to continue to maintain or try to rebuild it.
That money would be better used to subsidize commercial petroleum products refineries in areas nearer to Oil Wells & Sea Ports for Export.
We can not continue to demand millions of dollars as Licencing fee from credible investors, subject them to corruption ridden crude Oil allocation process, price control policy, while maintaining uneconomic plants in the wrong places.
It is cheaper to build a new pipeline for refined Petrol to the North than maintaining obsolete Crude Oil pipelines & Kaduna refineries.
All government Refineries should be sold off, either as a going concerns or as scraps.
These huge losses by Kaduna Refinery is enough to build, Cotton Mills, Textile Mills, Vegetable Oil Refineries & Tomatoes factories in all of 19 States in the North. There is no pride in stupidity.
The writer of this article has shown a total ignorance of the structure of Kaduna refinery with it operational system. I am surprise with this kind of false information he is passing to the general public, a person who called himself an oill expert. When did this man visited Kaduna refinery last since after Obasanjo’s regime? Thanks to my former boss engineer Ian Udoh who has given him food for thought.
Some people let their emotion becloud professional judgement, they are yet to get over siting a refinery in Kaduna and not their own village. They complain about siting a refinery about 1000 Km from oil fields but have no issues with shipping same crude to refineries 5000 – 10,000 Km in other countries.
If we remove emotions from professional advice then we can reach a workable solution to the refinery problems, that is not to say i have no issues with locating a refinery that needs imported oil so far away. But that is different from insisting there should be no refinery there at all.
He is right, especially with Nigeria situation. In most other country, they would successfully and wisely update this refinery. However in Nigeria, that means another means of looting and waste of money. I think the government should focus on the two that are more modern, use the money from the repairs of Kaduna and invest in modular refineries. why modular? because they are cheaper and quicker to install. for the money for the repairs, we can install two of those. and until we get our pipeline transportation right, refineries need to be closer to crude oil sources . but I am sure that the politic of Nigeria would fight thing and also the relocation of refineries closer to crude oil sources.
We cannot throw our hands up because of looting and say government should no longer spend money on projects. Or else we can say they should also hands off roads, housing, rural development, airport/seaport construction because it is only an opportunity to loot. The only way to survive is to ensure that corruption does not thrive, and i guess that’s one of the reasons the last government was kicked out.
But why do we ship 2 million barrels of crude oil thousands of kilometers away if refineries should only be located close to oil well?
Situating a refinery up North can only be for politics in the first place. However, there has been rumor of oil discovery up North. I subscribe to the school of thoughts that behind every rumor there is a pinch of true. Develop wells not too far from the Kaduna refinery to come into feeder pipe-line on a small scale until the whole complex can be configured for our light crude oil from down South. More so, it is an opportunity for our Universities and other higher institutions to brainstorm on for research projects without crazy and stupid politicians breathing down their necks for cheap publicity.
For your general information
I make bold to further add to this discussion concerning KRPC, as a stakeholder (a Nigerian citizen and a professional). From the economic view point, Emmanuel Kalu made very striking/interesting points (* Deregulation that will attract Investors & * Guarantee of Crude Supply @ DOMESTIC PRICE). Ajuwa, in his own comments, hit an Issue of National economic concern/advantage (that will always benefit all & sundry, when he talked/thought about * “Domesticating Production” as a way to create EMPLOYMENT/JOBS; & * Utilizing our own Light Crude, which in mind, MAKES MORE ECONOMIC SENSE, IN ANY BUSINESS OPERATION; and finally thought in line of * “REDUCING THE IMPORT COMPONENT”, in addition to * Re-Engineering/Configure TO REPLACE the MAIN HEATERS, FCCU, and ENTIRE CONTROL SYSTEM COULD BE UPGRADED TO LATEST VERSIONS to enable the Plant UTILIZE OUR CRUDE). We see, by the Principle of “Law of Comparative Advantage” in Economics, it makes no sense or shows no WISDOM in IMPORTING SAME RAW MATERIAL INTO THE ECONOMY WHERE WE HAVE IT IN ABUNDANCE, though of different grade & ours even of better stock. By all of these contributions and comments, I think we all are on the same page with the Oil Expert, Dr. Emma Egbogah who said two things; * Facility Obsolete (because of its Analogue Technology) & * “NNPC to REPAIR or MODERNIZE” (as reported on the Guardian Newspaper in his interview with them). If you read in between lines to get the main substance (from the 1st to 3rd paragraphs of the Guardian properly/critically), he never said/meant “SCRAP” but, was a “suggestive information” being reported by the news reporter as a ‘sensational Caption’ it carries or ‘News Headline’ featured to make the paper sell; not that Dr. Egbogah “RULED OUTRIGHTLY” or “ADVISED THE FED. GOVT. TO SCRAP KRPC”, as being interpreted. This is my own take/personal understanding of the material/topic in question. What we all need to do now, as a nation is, THE WAY FORWARD FOR OUR ECONOMY, CONSIDERING THE DOWN TURN OF THE PRICE OF CRUDE IN THE INTERNATIONAL OIL & GAS MARKET, vis-a-viz OUR “NON OIL EXPORTS” & “DOMESTIC PRODUCTION” IN tHE LIGHT OF OUR ABUNDANT BLACK GOLD, as our natural endowment!
you cant upgrade the system without replacing a lot of key systems. remember they are no longer in production and modern equipment are automated, requiring little human intervention.
what you are talking about can only be done when the technology improves by little increments.
KRPC to modern refinery is a major leap and upgrade is as good as building a new refinery
Refinery items are hardly like automobile or laptops that have yearly model change, most of the key hardware still remains the same in design and are still very much in production. The instrument and control systems can easily be upgraded at vastly reduced cost to a completely new plant. The technology for concrete foundation, piping, piperacks, storage tanks, which constitute a huge part of the total cost has not changed fundamentally. There are 60 year old refineries still in operation that has seen upgrades at different times, i am not convinced our refineries have exhausted their useful life, where it so no private investor will bid for it.
Succinctly put, i agree with your submissions
Mr. Chuba N. all these academic suggestion wont help the Nigeria young citizens because, Technology is busy assessing the use of water, sunlight and wind to put in check climate change: Some of us are cabbaging on oil reserve and refinery’s- very soon must of the technological improvement and design will dismiss the use of Hydro-carbon. Let reverse our set minds on these refineries and oil well! and focus on the use of Solar, Wind and Water
funny comments, first and foremost;
1, The refinery is dilapidated, like an old broken car. even if you change the engine you can never go on a long journey without experiencing breakdowns
2, A key rule of locating industries and factories was not met;factories need to be close to source of their major raw material. In this case crude oil. In most countries that import crude oil, their refineries are located close the sea. ie. point of off-load.
3. Peradventure the kaduna refinery works at 100% capacity and the losses was minimal, the cost of transporting the crude will cut deep into the profit of the facility; even when the cost of piping is minimal cost of maintenance will be higher for both pipe and plant.
world wide it is renown that major cities and dense population centers are located by the sea or major rivers. by building the refinery this far inland defies business sense, implying that the location of the refinery was more political than what common sense would afford.
At the moment the refinery is not functioning, yet trucks are being used to bridge the demands of these far flung areas in the hinterland. common sense should prevail.
Nigeria cannot afford such a monumental loss making venture. smaller and more efficient refineries can be built around Benue, Kogi, and Niger that can supply the immediate and foreseeable need in these parts and far North pending discovery of commercial quantity of crude up North.
Rather than focus on oil in the far north, Agriculture and extractive industries can help change the fortunes of this region. which are indeed worth their penny in their contribution to building a sustainable Nigeria.
Do you really think it is cheaper to transport a single product crude oil, by pipeline than build different pipelines for petrol, Diesel, Kerosene, Aviation fuel, or alternatively clog up the roads with trucks from Lagos or PH to the northern parts of the country. Does it not make economic sense to distribute from a central location to depots in adjoining states? Are you saying if the northern region is a country it makes no economic sense to refine crude oil within it’s territory?
Really? are all US refineries located along the coastal areas? what of UK? And Switzerland with no seaport? Chad, Uganda, Ethiopia, Zimbabwe, Botswana should never refineries going by this logic of siting factories?
Let us restrict the discussion to the wisdom of siting a refinery which needs imported crude so far away from the port and what can be done to salvage the investment. Nigerians from all over the country work there and by-products can create new industries if the plant operates properly.
Yes the region needs to focus on agriculture but there is nothing wrong in locating a functioning refinery there as also buy fuel
if you have read more carefully, you will notice i said instead of trying to patch the nu-patchable it is better to consider and focus on building new ones around central areas in nigeria.
“Nigeria cannot afford such a monumental loss making venture. smaller and
more efficient refineries can be built around Benue, Kogi, and Niger
that can supply the immediate and foreseeable need in these parts and
far North pending discovery of commercial quantity of crude up North.”
if you were to consider the cost of salvaging kaduna refinery you will be amazed.
1, a lot of units are not functioning right and remember the refinery is nearly 40 years old.
2, the failing parts are no longer in production and modern ones will not work well with the old system so you are dealing with a ongoing concern that will continue to bleed the nation.
3. the pipeline used to pump the crude has many pumping stations along the route which were built about the same time as the refinery. now you will realize that bring the refinery up is not the only problem but keeping it and the aging pipeline up.
if new refineries were to be built around central parts of the country logistical challenges will be halved and every part of the country will be within easy reach.
one of the reason the refinery was situated in kaduna was because refined products can be easily pumped to depots in northern states. if you checked the statistics it has been a long time since products have been pumped to most of the far flung depots.
reason:
pipe vandalization, poorly maintained pump stations, infrastructural decal from natural forces such as erosion.
The solution to refinery problem in Nigeria is simple, SELL ALL OF THEM TO PRIVATE INVESTORS in a public bid process!
The government should sell the majority of the shares to private investors that has the capability to run the business. We don’t need a president that has expertise in oil and gas, power generation, telecommunication, transportation etc! All we need is to create enabling environment for private investors to do business and make money. If the government owns only 20% of the shares in each refinery, the investors will ensures that the refineries function at utmost capacity, they will make money, employ the best hands and pay taxes to the government. The government will not need to pay any subsidy either!
See what is happening in telecom industry for example …. for many years NITEL was an abyss of waste and corruption, but today the telecommunication problem in Nigeria is solved. Could anyone imagine what would be the situation if the government had put in billions of naira into NITEL to startup GSM business? We will all be having to climb on top of our roofs to get telephone signal!
You have made good points, just that it’s a great indictment on our abilities as a people. There are many workable models if enterprises are public owned but it seems our peculiarities makes nonsense of the whole concept.
Thanks. The situation is not peculiar to Nigeria alone. Our pple say: A slave that is jointly owned dies of poverty. Even in the United States, government is not involved in commercial ventures, it is left to private investors. It can only work in places like China where a person can be executed for any offense!
KRPC HAVE THE FOLLOWING FACILITES
1) FUELS REFINERY PROCESSING NIGERIAN CRUDE AT 60,000BD MAINLY FOR WHITE PRODUCTS
2. LUBES REFINERY PROCESSING FOREIGN CRUDE AT 50,000BD MAINLY FOR BASE OIL PRODUCTS.
3) PETROCHEMICAL FOR PRODUCING LAB, HAB, TOLUENE, KERO SOLVENT ETC.
4) MANUFACTURING PLANT FOR PRODUCING 220LT DRUMS AND 18LT TIN
.IT IS AMAZING TO HEAR THAT KRPC RUN ONLY ON FOREIGN CRUDE. THE OPINION OF MR. ADVISER IS TO KILL NIGERIA ECONOMY. THERE IS A REFINERY BUILT IN 1948 STILL OPERATING TODAY IN JAPAN.
IF YOU UPGRADE PHRC AND WRPC WHY NOT KRPC WITH UNIQUE PRODUCTS TO BOOST NIGEIRIA ECONOMY.
PLEASE GO BACK TO THE DRAWING BOARD. YOU MAY NOT NEED 25% OF FUND TO BUILD A NEW PLANT TO REVAMP KRPC. IT IS ONLY WISE FOR GOVT. TO CONTINUE THE ONGOING REHAB. PROJECT TO LOGICAL CONCLUSION. THE REHAB OF PHRC CONTRIBUTED TO THE SUCCESS STORY OF TODAY.
Your items 1-3 are helpful and educative. These have open some eyes who EBOGA is and what he is ready to use KRPC facilities for his personal gains. Thanks voa.
Very intelligent submission Ajuwa; but you have to understand that we all do not think or venture alike. Some are born too lazy to hull out their car from a dish, even if it is new, while some can go as far refurbishing used one to send to us in Africa to buy. To whom that care to know, a refinery of 35 years is a brand new refinery; else, send Kaduna refinery to China and they will prove it to you. The only thing I see wrong in Kaduna refinery is putting square pegs in round holes and corruption- kind of let us cut our own part of an elephant meet. Analogue and obsolete? no way!, simply employ a good technology management company to run the refinery on contract and you will not believe what you will see. And that includes, not making any return to any member of the ruling class but strictly to the employer (that is the government). To be realistic, Nigeria can only succeed when certain government businesses are out-sourced to true experts (not the scrap-it-all type) and of course there are many of them from Nigeria. I would have proposed to NNPC for such but cannot risk Boko Haram. But, I believe that so many other Nigerians or even foreign corporations will. The best I can do is to participate in re-engineering (pre and detailed engineering design) but some other person has to do the field work. As for the question of siting a refinery in Kaduna, I totally believe that it is not wrong comparing the cost and risk of sending about four finished products pipeline up north to the cost of sending one. As to why designing it for heavy crude instead of Bonny light which is available in Nigeria, it is really a point to ponder.
What do you do with an old car that is costing you a fortune in time and money to keep going? You sell it (if it has any value). Why can’t the same principle be applied to our refineries? They are a source of waste of the scarce money available to develop this country. OBJ sold them. Yaradua reversed the sale: You know, they are national assets! Assets, my foot. They are BIG LIABILITIES AN A DRAIN TO OUR FRAGILE ECONOMY.
All well and good, i very much appreciate all inputs made so far. Every one seems to be making inputs & contributions from divergent angles with varied view points but, the bottom line of all is this BIG QUESTION; “how do they improve our national economy (Financially), when factored in” (do they realistically add up in terms of National Economic Growth & Development)? I am of the opinion that certain matters (Political/Ethnic/Religion) that appear controversial be played down or jettisoned at this point in time, while we brainstorm (with very healthy arguments) for a way forward for the national economic growth!The angle that will benefit all Nigerians economically ought to & should be our watchword in this discussion. With one-voice (as a nation), “how do we make exploits with our natural resources (our Black Gold) at this auspicious time, to leap high geometrically among comity of nations; when issues of economic growth are presented”?
Sincerely, am not here just to theorize but, to realistically proffer practicable solutions that shall move the economy to an enviable level, globally (all things being equal). Very sincerely, i appreciate Zonkwa’s take on fears of FOSSIL FUEL not being relevant in the near future, if the presently Technological Researches on how to combat Global Warming/Climate Change (Carbon Emissions) for GREEN ENVIRONMENT through Alternative Sources of Clean Energy (Solar, Hydro-power, Wind & etc) take the center stage but, “HOW ABOUT RE-POSITIONING OUR ECONOMIC RELEVANCE THROUGH RECREATING GOODS & SERVICES ALONG THE “VALUE CHAIN” OF OUR EXISTING NATURAL ENDOWMENT” (from the extractive operations carried out at the Downstream)? ARE WE THINKING FAR IN THAT LINE (BEING VISIONARY)? I believe that ‘TRUE SUCCESS’ is measured by the justified “means” at the end of a matter. We must do something now (with all the challenges facing that sector), that will enable us take a vantage position in the future International Commercial activities, by planning how to INDUSTRIALIZE NIGERIA PETROCHEMICALLY, since we have the “TOOL” (our BLACK GOLD), if corruption will permit us to work it out patriotically! Nigeria spends (from our Balance Sheet) multiple Billions of Foreign Currency annually in importations of both Intermediate & Finished Raw Materials for our diverse Industrial activities in the Real Sector/Manufacturing. These items in question are classified as “Non-Oil Products” but, in the real sense they all originate from Crude Oil. Think about this. It is good that KRPC was producing Base Oil in the ’80s and as a young University graduate, i was lifting it from Kaduna to Onitsha. For the benefit of those asking why Kaduna was importing Heavy Crude from Venezuela, this is one of the Answers because, everything isn’t “political” as we wrongly point accusing fingers (at times). One other GREAT AIM of setting up KRPC was its “Toluene” manufacturing (among other Petrochemicals). Do we know that “TDI” (Toluene Di-Isocyanate) alone, a major polyurithane component used for making FOAMS/Mattresses sell as costly as 300, 000/Drum of 220 Kilograms? My heart bleeds, i don’t want to talk further because, we are here chasing shadows while we have the real “tool” in our hands (our Crude Oil). We have not explored nor have we exhausted all the opportunities, we need to be producing a thousand & one different kinds of SOLVENTS for the Real Sector (while PMS, AGO, DPK will just be part of the action)! Yes, in the country we have the likes of INDORAMA, PRPC (for all kinds of Polyethylene) & Bonny LNG Plants but, the real things will start happening with the basics; the likes of the Methanol plants and stuff springing up in the country. Remember Albert Einstin’s Law of Relativity; E=MC! We have the “tool”! We must keep creating/evolving new ideas as time keeps changing because, our Fossil Fuel for energy production could be redirected economically & commercially too (through Petrochemical transformation), and all these could be achieved through a systematic approach in developing the said project, by systemically looking inwards in developing our “Non-Oil Export business” (in this time of dwindling price of Crude Oil at the International Oil market). Just to assure Zonkwa not to fear. Through this singular tool, against all odds, we can collectively enrich our national economy.
I suggest that the Federal Government should create an enabling environment that will make investors flood the land (with all assurances/incentives) to start setting up cottage Petrochemicals plants (in clusters) all over the country! I know what i am talking about because, i read it, mastered it and putting it into practicals 24/7 @ the marketplace (globally) all my life since after graduation 33 years ago (*Chemistry Dept. Unibadan, *MBA Management University of Nig. Enugu Campus & * Onitsha-based International Merchant/Industrialist). We are available to make our little contributions/add our own quota to our national growth, (if need be). Nigeria owns us as our only nation and we are here to give back because, we cannot fold our hands to be a wasted generation! We must think fast because, there are feasible Templates to these ideas.
Please, re -read my position and let’s face realities for the future of our citizens. Stop, thinking [on these face out economy which] is base on Hydro-Carbon.
We will review and take appropriate action.