The Nigerian National Petroleum Corporation (NNPC) spends an average of N92 billion yearly to run the three refineries in the country even though they are operating at half of their installed capacity.
This makes them in the league of refineries with the highest operating costs worldwide, according to official Refinery Financial Performance data analyzed by Daily Trust.
The data showed that in the last three years alone, N276.872 billion has been spent as operating expenditure or OPEX on all the refineries.
According to information sourced from leading refinery service advisory companies, OPEX or operating expenditures include expenses made on refinery personnel, maintenance, administrative, cost of chemicals and additives as well as catalysts, utilities (including electric power, water) among other general administrative expenses.
Operating costs of a refinery vary widely across countries and regions and such costs depend on multiple factors such as size and the complexity of the refinery, among others.
Guzzling funds for doing nothing
In 2015, N87.3 billion was expended as OPEX on the three plants located in Port Harcourt, Warri and Kaduna. The cost to run the refineries was N87.1 billion in 2016 but rose by 17.4 percent to N102.3 billion in 2017, according to the official data.
Despite suffering intermittent hiccups, months of low capacity utilization and zero crude refining at times, the data showed that the Kaduna refinery (KRPC) accounted for the highest operation costs within the last three years.
The Port Harcourt refinery (PHRC) adjudged as best performing among the three, gulped N96 billion while the Warri refinery famous for frequent process unit downtime soaked up N122.9 billion as operations cost.
Findings also showed that it is difficult to compare operating costs from different refiners/oil companies as they are not reported regularly and on a common basis.
However, world’s leading performance improvement company HSB Solomon Associates LLC, in one of its study of competitive refinery practices reported that for a refinery to be economically viable, its operating cost must be low.
According to one of HSB Solomon Associates’ report, the least-efficient refineries typically have high maintenance costs, low energy efficiency and high personnel usage.
Daily Trust analysis showed that based on the above indication, the country’s refineries can pass in the category of least-efficient and economically unviable among its global peers.
Culled from DailyTrust