The Nigerian National Petroleum Company Limited (NNPCL) has announced its intention to engage reputable and credible Operations and Maintenance (O&M) companies to oversee the operations of the Warri Refining and Petrochemical Company (WRPC), and the Kaduna Refining and Petrochemical Company (KRPC).
This development is part of NNPCL’s ongoing efforts to revitalize the country’s refinery sector, which has been plagued by inefficiency and underperformance for years. NNPC has reportedly spent about $20 billion on maintenance for state refineries, the same cost as Dangote Refinery. In 2020, Kaduna Refinery earned zero revenue but reportedly spent N26 billion in employee costs.
In a statement released on Friday through its official X handle, NNPCL detailed the process and requirements for interested O&M firms.
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“The O&M tender for WRPC and KRPC will be treated as a single tender through a three-stage tender process (expression of interest, EOI, technical and commercial), leveraging on all the possible opportunity costs associated with procurement of consumables, personnel/manpower management, utilization of computerized maintenance management software (CMMS), warehousing management system (WMS), etc.,” the statement read.
The scope of work for the O&M contract is extensive, covering various aspects of refinery operations and maintenance. These include long-term and short-term production and operations planning, execution, monitoring, reporting, and optimization of operations.
Maintenance planning and execution, reliability and inspection, process and controls engineering, quality control, and health, safety, and environmental management are also part of the responsibilities outlined by NNPCL.
Additionally, the contract will cover turnaround maintenance planning and execution, minor projects, subcontractor management, and inventory and warehouse management.
Eligibility and Financial Requirements
NNPCL has set stringent financial requirements for bidders. Interested companies are required to submit audited accounts for the past four years (2020 to 2023), including balance sheets, income statements, and cash flow statements. Furthermore, bidders must provide evidence of their latest credit ratings and demonstrate a minimum average annual turnover of at least USD 2 billion for the specified financial years.
All submissions must be made online through the NIPEX tender portal http://forms.office.com/r/kjSyVwz3Eg, with a submission deadline of 12 noon on September 26, 2024. The EOIs will be opened virtually on October 10, 2024, with bidders and external observers invited to attend the live-streamed session.
The Refineries Back Story
The Warri refinery located at Warri in Delta State was commissioned in 1978. Warri is a complex conversion refinery with a nameplate distillation capacity of 6,250,000 MTA (125,000 bpd). The refinery complex includes a petrochemical plant commissioned in 1988 with production capacities of 13,000 MTA of polypropylene and 18,000 MTA of carbon black. The refinery is meant to supply markets in the south and southwest regions of Nigeria.
On its part, the Kaduna refinery was commissioned in 1980 to supply petroleum products to Northern Nigeria with a capacity of 50,000 B/D. In 1983, the capacity was expanded to 100,000 B/D by adding a second 50,000 B/D crude train dedicated to the production of lubricating oils (lubes). In 1986, the capacity of the first crude train was expanded to 60,000 B/D. The expansions have increased the current nameplate capacity of the refinery to 110,000 B/D.
The decision to seek external O&M expertise comes after years of failed attempts by NNPCL to manage and rehabilitate these facilities effectively. Public frustration has been growing, particularly as the NNPCL has repeatedly missed deadlines for bringing the refineries back online. For instance, in July 2023, NNPCL’s Group Chief Executive Officer, Mele Kyari, assured Nigerians that the Port Harcourt Refinery would begin operations in early August.
Kyari had also made similar promises in the past, stating in 2019 that NNPCL would deliver all four of the country’s refineries before the end of former President Muhammadu Buhari’s administration. In a more recent appearance before the Senate in July, Kyari confidently declared, “I can confirm to you, Mr. Chairman, that by the end of the year, this country will be a net exporter of petroleum products.
“Specific to NNPC refineries, we have spoken to a number of your committees, and it is impossible to have the Kaduna refinery come into operation before December, it will get to December, both Warri and Kaduna, but that of Port Harcourt will commence production early August this year.”
However, as August draws to a close, the refinery, which has already consumed $1.5 billion in rehabilitation costs, remains non-operational.
This backdrop has led to skepticism among industry experts and the public. Some analysts argue that instead of seeking O&M partners, the federal government should consider privatizing the refineries entirely to bring in more experienced operators and reduce the burden on public resources.