Bayo Ojulari, chief executive officer (CEO), Nigerian National Petroleum Company (NNPC) Limited, says 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.
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