Refineries Crippled as Crises Take Toll
•FG asks OPEC to stem oil price crash
By Chika Amanze-Nwachuku and Ejiofor Alike with agency reports, 10.09.2008
The twin problem of pipeline breaks and epileptic power supply are taking their toll on the nation’s refining capacity, as activities at all the nation’s refineries have been completely crippled.
The Warri and Kaduna Refineries had been shut down for about two years, after militants in the Niger Delta blew up their feeder pipeline, Chanomi Creek Pipeline.
Barely eight months after skeletal activities resumed at the refineries, following a repair work on the damaged pipeline, the refining activities have again been brought to a halt, owing to the last week’s rupture of the feeder Pipeline.
THISDAY investigation last week revealed that the nation’s refining capacity had gone down to below 30 per cent because all the refineries were performing far below their installed capacities. At optimum capacity, all the refineries refine 445,000 barrels per day.
Authorities of the Nigerian National Petroleum Corpo-ration (NNPC) confirmed yesterday that crude supply to the Warri Refinery has been disrupted following the pipeline rupture last week.
They also disclosed that the Kaduna Refinery would be shut down on November 5 for the mandatory routine Turn Around Maintenance (TAM) scheduled for November 15, 2008, while activities at the PortHarcourt Refinery have been affected by the long-running power problem.
The implications are that in the event that the repair of the Chanomi pipeline was not completed, and the TAM on Kaduna Refinery was not completed before the yuletide season, and enough products are not imported, the country may experience yet another round of scarcity of petroleum products.
The nation’s daily petrol need is put at about 30 million litres per day and has been projected to hit 40 million in the next couple of years.
Prior to the vandalism of the feeder pipeline in February 2006, the Warri and Kaduna refineriues were said to have operated at about 75 per cent of their installed capacities. But the nation, it was learnt, expend between $3 and $ million daily on importation of petroleum products because the refineries were shut down. With the latest development, it is feared that Nigeria may be spending more on importation of products until the refineries resume operation again.
Industry sources hinted that the development has further reduced the country’s refining capacity to below 20 per cent.
Although the cause of the latest incident at Warri is yet to be ascertained, the NNPC has assured Nigerians that efforts were in progress to restore operations with a view to ensuring normal supply.
A statement last night by the NNPC spokesman, Dr. Levi Ajuonuma, on the state of the refineries read: “Having received numerous enquiries on the state of the nation’s refineries, the Management of the Nigerian National Petroleum Corporation wishes to inform the public on the current state of affairs in each of the refineries.
“The recent Pipeline breaks at the Egwa and Bantan axis have affected crude oil supply to the Warri Refinery. However serious efforts are being made to fix the lines and operations will resume as soon as possible.
“The Kaduna Refinery will be shut down on November 5, 2008 and handed over to Contractors in preparation for the mandatory routine Turn Around Maintenance (TAM) scheduled for November 15, 2008. It is expected that the contractors will conclude TAM and hand back the refinery to NNPC Management on January 15 2009.
“The operations of the Port Harcourt Refinery have been affected by power problems. All hands are on deck to sort out these problems and restore operations as soon as possible.
“Meanwhile, NNPC wishes to assure the nation that arrangements have been put in place to ensure normal supply of products to the public throughout this period.
“We count on the cooperation of all well meaning Nigerians as we seek to resolve these challenges.”
About $52 million was expended on the repair of the Chanomi Creek Pipeline
The contract for the repair of the pipeline was awarded to a company owned by an indigene of Niger Delta as part of the strategies put in place by Government to resolve the protracted crisis in the oil-rich region.
The initial value of the contract during the administration of former President Olusegun Obasanjo was estimated at about $100 million, but after a renegotiation with the firm by the present administration, the amount was brought down to $52 million.
The inability of the refineries to work last year cost the country an estimated $4 billion in importation of about 5 million tonnes of petroleum products.
Meanwhile, as the price of crude oil fell by more than $4 to a 10-month low at $89 per barrel yesterday, the Federal Government has said the Organisation of Petroleum Exporting Countries (OPEC) may need to intervene to balance the oil market if the price of crude continues to slide.
Minister of State for Energy (Petroleum), Mr Odein Ajumogobia, stated this yesterday at the Africa Upstream 2008 Oil Conference in South Africa.
Ajumogobia’s statement, which was the latest concern voiced by an OPEC member about the impact of the global financial crisis, came amidst mounting expectations on the impact of the financial crisis on demand for energy.
“There may be a need to intervene to balance the market if the price slide seemingly predicted on (lower) demand and over-supply continues,” he said.
Iraq’s oil minister also said at the conference that OPEC might need to consider cutting oil output if the price of crude remained below $90.
Libya and Iran had earlier expressed concerns this week about the impact of the worsening global crisis on the oil market.
OPEC had decided at a meeting in Vienna on September 9-10 to comply strictly with its formal output target, a move officials said would result in the group trimming supply by about 500,000 barrels per day.
The oil cartel’s next scheduled conference is on December 17 in Algeria.
Meanwhile, Ajumogobia also said the National Assembly will pass the oil sector reforms bill, which is already before it.
This bill restructures the oil and gas sector and breaks up the Nigerian National Petroleum Corporation (NNPC).
“We believe the National Assembly is on board to pass the new petroleum reform bill,” he said.
According to him, government is optimistic that the falling world oil price will stabilise and it expects to lift its production to 4 million barrels per day by 2010.
“We in Nigeria remain optimistic that the oil price will stabilise. Our ambition is to reach 4 million barrels per day by 2010,” he added.
Crude oil prices had last Monday fell to its lowest in eight months, trading below $90 a barrel on speculation that the financial crisis would exacerbate a global economic slowdown and cut demand for crude oil.
For most of 2008, oil had been well over $100 a barrel.
