Nigeria’s NNPC cuts cost of refinery repairs to $550 million from $1.6 billion

February 12, 2015 | Management, Nigeria

Lagos, Nigeria | – Nigerian state-owned Nigerian National Petroleum Corporation, (NNPC)  said on Thursday it would spend $550 million on a phased rehabilitation of its four ailing refineries, compared to a bill of $1.6 billion submitted by foreign contractors previously contacted to overhaul the refineries.

NNPC also reiterated its position that the forensic report by leading audit firm PricewaterhouseCoopers on the missing $20 billion in oil export revenues cleared the NNPC of failing to remit the money.

“For the refineries, the estimates going with the nominees of the original builders of the refineries would have come up to $1.6 billion. But we can’t afford that because we are not going to get any funding from the government,” an NNPC statement quoted its director in-charge of the refineries, Ian Udoh, as saying.

“We did the pricing template, using local rates, and everything for the refineries combined came to around $550 million,” Udoh said.

NNPC announced in January that it had commenced a phased rehabilitation of the four refineries, using in-house engineers, after negotiations with foreign contractors previously broke down over cost disputes.

The program, slated to be completed over the next 18 months, will raise capacity utilization at the refineries to 90% of their combined nameplate capacity of 445,000 b/d, Udoh said.

The refineries are the two Port Harcourt refineries with a combined capacity of 210,000 b/d, which will be followed by the 110,000 b/d Kaduna refinery and the 125,000 b/d Warri refinery, according to the schedules released by the NNPC.

The poor performance of the refineries caused mainly by mismanagement and years of neglect, have forced Africa’s largest oil producer to depend on massive fuel imports for its domestic needs.

Meanwhile, NNPC chief executive Joseph Dawha said the company was absolved of any culpability in the forensic report by PWC on the missing $20 billion in crude oil export revenues.

Dahwa said the $1.48 billion the report recommended that NNPC should remit into the Federation account, was part of the $1.84 billion, which was the value of the assets divested by foreign oil firms and transferred to NNPC subsidiary the Nigerian Petroleum Development Company, NPDC.

“This does not constitute indictment; rather this value is still being reconciled with the Department of Petroleum Resources. What the DPR sent to NNPC as the estimated value of the assets was $1.847 billion out of which the Corporation paid over $300 million as a token to indicate its commitment to acquiring the assets pending resolution and reconciliation by NNPC and DPR,” the NNPC CEO said.