TheCable

Mele Kyari, group managing director of Nigerian National Petroleum Corporation (NNPC), says the Port Harcourt refinery will begin production in 18 months.

He made this known in Abuja on Monday, while reacting to controversies around the recent approval for the project.

On Wednesday, the Federal Executive Council (FEC) approved the sum of $1.5 billion for the rehabilitation of Port Harcourt refinery in Rivers state.

The repair, which will executed by Tecnimont SPA, an Italian company, will be done in three phases of 18, 24 and 44 months.

Kyari said the exercise will include a complete rehabilitation and not turnaround maintenance of the refinery.

He said major components of the refinery will be replaced as the contractor executes the repair in phases.

The NNPC MD said the refinery will begin production of gas after 18 months of repair.

“We are not doing turnaround maintenance, we are doing rehabilitation of the refinery, and it is very different; it means that we are replacing certain major components,” he said.

“We are introducing some items that ordinarily we won’t need to do in turnaround maintenance and there are major shifts in the status of the plant that we have to do and it is not done during turnaround maintenance.

“During rehabilitation, by the 18th month, part of this plant will begin to produce particularly the gasoline plants. In rehabilitation, we normally don’t shut down the plant completely, we repair a segment of it, and then it starts working, and then, you move to the next segment.

“You continue to scale up and that is why, within the four-year period, the contractor would have completely left your premises. What it means in a technical sense is that in 18 months, we will see production coming from that plant; we will follow it plant by plant until we are completely done.”

Kyari said process of rehabilitation started about 10 years ago but was slowed down due to a number of mistakes.

He said the federal government resorted to partly fund the project through borrowings, in order to ensure compliance with required conditions.

“This process started 10 years ago and a number of mistakes happened leading to the enormous delay we have seen in this process because there were a lot of interferences in the past but these are gone,” he said.

“Initially, we thought that the best way to go was to go to the original builder but it wasn’t the right strategy.

“Another way of making this project work was the introduction of borrowing for the repair work because when you borrow, the lenders will put conditions and one of the conditions is that it should be maintained under ‘own and earn’.

“This means that the NNPC will not operate this plant as a basic requirement of the financing institution. The financing partner will ensure that the contractor will work efficiently.

“Importantly is that the contractor O&M gave a guarantee that the facility will operate for the duration of the loan and the fact the project will be done under a financing structure supported by Afreximbank.

“The bank has promised a 500 million dollars loan in the first instance and additional 500 million dollars making it one billion dollars and the condition is for the loans to be repaid from the operations and proceeds of this plant.”