Chief Executive Officer (CEO) of the Nigerian National Petroleum Company (NNPC) Limited, Bayo Ojulari, has said state-owned refineries have not worked in Nigeria due to the focus on financing and contracting Exploration, Production, and Construction (EPC) companies.
Speaking during the just-concluded Nigerian International Energy Summit (NIES), Ojulari said the refineries failed to focus on running the facilities.
“The reason our refineries have not worked is that we are focused on the first two: EPC and financing. Anybody who wants to do the financing will get value for it,” he said.
“The person financing is not financing you for free, right? They are financing you for margins and profitability. The EPC contractors do their work, get paid, and move on.
“You, as NNPC, are left for the next 20 to 40 years to run those refineries. And we’ve never really focused on that.”
Ojulari said there had been extensive discussions around Operations and Maintenance (O&M).
However, he noted that globally, effective O&M requires a strong operational excellence team to oversee the function; without that, resources are often wasted.
“Then again, O&M is another contract. So you end up with financing EPC, O&M, all of them taking money from the system without any skin in the game,” Ojulari said.
“There’s no way you can sustain any business like that. It’s very clear. The system was designed for taking, not to put anything in.”
He added that the current NNPC leadership team decided to focus on “that part that has not been there”.
“For those of us who spend years building big, multi-billion dollar facilities for the IOCs, we know these principles. The day you start a project, you appoint an ‘operational assurance person’, who will be part of that project from the get-go and ensure that whatever you deliver can be operated,” Ojulari said.
“One of the privileges I had working in Shell was that I was on the commissioning team for the Qatargas. From the beginning, during the project phase, I was in the operations readiness team.
“Far ahead of when the gas plants were to be constructed, I was there twice. We went to audit operational readiness for things that were about to be constructed. The second audit was when the construction was about 90 percent completed.”
He said the issues identified by his team highlighted why operability would be a challenge and needed to be addressed.
“Then you put in the capability, the training, the resources to be able to operate. Remember, for most mega-projects, you spend maybe two to three years thinking about the project, framing it, if you are very efficient,” Ojulari said.
“You spend maybe three to five years constructing it. You run it for about 25 to 50 years. So where should your focus be?”
However, he added that NNPC had previously handled these critical issues with kid gloves.
Ojulari had said the company is discussing a potential partnership with a Chinese firm over one of the state-owned refineries.
