When news broke that the federal government had issued approval to rehabilitate the Port Harcourt refinery for $1.5 billion (about N570 billion), many Nigerians wondered to what end, and rightly so.
Not only is Nigeria struggling financially, with debt of over 32 trillion naira, history suggests it could end in futility.
This is not the first time the federal government would be announcing plans to repair or rehabilitate a dying refinery.
But more worrisome for Nigerians is the books of Port Harcourt Company Limited(PHRC); could it be a sign of what is to come?
First, since it was built, Port Harcourt refinery has never operated to its capacity put at 200,000 barrels per day, and for almost three years running, never reported a single drop of refined oil.
Yet, the company’s 2018 and 2019 audited financial reports obtained from Nigerian National Petroleum Corporation (NNPC) website show the refinery, just like the others, incurred a loss of N45.59 billion in 2018 from normal operating activities, without a single drop of oil.
And in 2019, the figure increased to N46.94 billion from same operating activities, also without a drop of oil produced.
Comprehensively, Port Harcourt refinery’s retained losses incurred for 2018 and 2019 is N385.64 billion and N482.597 billion respectively.
From the losses recorded, it is understandable to see why Nigerians are rising against the government’s willingness to borrow to fund the $1.5 billion for what has been described as “dead” with a loan.
On a global scale, the questions are even more pronounced.
Not only are most refineries in the world privately owned, the list of countries with proven oil reserves has risen over the years; meaning the world’s dependence on Nigerian oil is becoming slimmer.
Just within the Organisation of Petroleum Exporting Countries (OPEC), during the period of 2009-2018, Member Countries added 186.2 billion barrels to their total proven crude oil reserves, while non-OPEC members also added 152.1 billion barrels to their oil reserves.
When compared to oil demand during the same period, data from International Energy Agency (IEA) shows the world is demanding lesser for oil. Meaning there is more crude oil in the market for sale.
As at 2010, demand for oil was at 2.9 million of Barrels per Day. In 2019, the figure dropped 72.4 percent to 0.8 millions of Barrels per Day.
In addition to this, the development of alternative fuels is bad news, especially in the light of climate change.
More worrisome is that the United States, one time Nigeria’s largest importer of crude oil, now relies on its alternative shale oil more and more.
The implications are simple— with lesser oil demand, price will continue to fall. Moreso, as the price falls, production will fall, raising the question: how will Nigeria pay back the loan collected form the planned rehabilitation and other obligated payments?
However, Nigerian government looks determined to go ahead with its plan.
In a Friday tweet, the Nigerian government explained that rehabilitation of Port Harcourt Refinery will take three phases with a projected production of 90% of its nameplate capacity in Phase 1. After rehabilitation, a professional Operations and Maintenance Company is to be put up for the management of the refinery.
Tecnimont SPA, an Italian company, is expected to complete the work in three phases of 18, 24 and 44 months.
Nigerians are now left with the choice of trusting and hoping this time the right decisions are made by the Federal Government for the public good or to banish any optimism because of the harsh verdict of history.