BY BANYO TEMITAYO
GROUP Managing Director of the Nigerian National Petroleum Corporation, Mele Kyari, has explained the rationale behind the $1.5 billion contract cost for the rehabilitation of the Port Harcourt Refinery, saying that even a Google search will reveal what it takes to build a refinery of such status today.
According to him, the country will spend between $7billion and $12billion to build a refinery of the status of the one in question.
The GMD said this was aside from an additional 25 per cent cost for construction battle-limits, adding that if a refinery could be built with $7billion or even $10billion, the 25 per cent additional cost must be factored in.
Kyari, who spoke in a statement by the Corporation on Tuesday, said the approved rehabilitation contract of the 210,000 barrels per day capacity refinery was a worthy project embarked upon after diligent consideration and with strict adherence to industry best standards.
In arriving at the decision to award the Engineering, Procurement, and Construction (EPC) contract to Tecnimont spA of Milan, Italy, after a competitive bidding process, he said, the Corporation observed an unprecedented level of transparency and due diligence, which consisted of a governance structure and tender process that included key independent external stakeholders.
“We have people saying why not build a new one; why will you repair an old refinery with 1.5 billion dollars? The fact is available even by Google search, what it takes to build a refinery of this status today. It will be difficult for the country to build a new refinery as it will take four years for it to commence production,” the GMD said.
“It is around seven billion dollars and 12 billion dollars to construct a refinery of this nature (Port Harcourt refinery). This is the estimate you see in public space and there are things you do outside the construction battle-limits like the utilities that are never accounted for when estimates of this nature are done,” he added.
According to him, with today’s estimate, it is not possible to build a refinery at any cost below the amounts he quoted.
“If we start a new refinery of this nature today, it can’t work in less than four years, therefore, it means we will continue to import petroleum products in the next four years or more,” he said.
Kyari added that, in terms of outlook and job scoping, the rehabilitation project was different from the routine Turn-Around Maintenance, which he said was last carried out on the Port Harcourt Refinery 21 years ago.
Unlike TAM which should normally be executed every two years but was neglected for many years, he said the rehabilitation project would involve comprehensive repairs of the plant with significant replacement of critical equipment and long lead items to ensure the integrity of the plant on the long term.
On finance, Kyari said the African Export-Import Bank (Afreximbank) had agreed to raise $1billion towards the rehabilitation project, noting that a credible and capable lender like Afreximbank would not agree to put such a huge amount of money where there would be no value.
He noted that, having learnt from the failure of previous models, the NNPC would adopt the Operate & Maintain (O&M) Model as a strategy in the execution of the rehabilitation project, which is also one of the key requirements by the lender.
