*Shows why govt should hands-off refineries
The sharp contrast in operational performance of two oil and gas based companies, located close to each other in Eleme council area near Port Harcourt - the Port Harcourt Refining Company (PHRC) and the Eleme Petrochemical Company Limited (EPCL) under the management of Indorama, helps to clarify the deepest flaws in government involvement in enterprise management.
It illuminates a broader challenge facing the Federal Government, if it hopes that Turn Around Maintenance (TMN) will immediately cure all the ills associated with the downstream sector of the economy.
That is because the PHRC, unlike the EPCL, is a government driven company, with manifest management inefficiencies as shown by BusinessDay investigation.
While the PHRC, built in 1965 with initial refining capacity of 35,000 barrels per day, and later expanded to 60,000b/d in 1972, continues to record losses, the EPCL, privatised only in 2006 provides a clear case study on why the Federal Government should hands off the management of the nation’s refineries.
A number of management indices were identified by BusinessDay investigations to have caused the two companies’ different result postings. For instance, clear management vision – knowing what to do and at the right time.
Our investigation reveals that while the management and staff of EPCL are evidently aware of clear goals and targets set by the company, the same can certainly not be said of the PHRC.
This much was anchored by Jossy Nkwocha, EPCL’s head of corporate communications and special adviser to the managing director, who told BusinessDay in an interview, that Indorama-EPCL has five major critical success factors which include: “Clear management vision, prudent application of resources, maintenance culture, good public-private participation (PPP) model and customer focus.
“From the onset, Indorama had a clear vision of what to do; and it sets clear goals and targets to achieve that vision,” Nkwocha said, adding that, “both management and staff of the EPCL are daily driven by a commitment to a vision of building the petrochemical plant into Africa’s petrochemicals hub in Nigeria.”
On maintenance culture, a virtue that is even sorely lacking in Nigeria ’s macro-economy, while EPCL undertakes routine maintenance of its machines, including turn-around maintenance (TAM) every two years, this is evidently absent in PHRC. The last TAM was done scrappily in 2000, which led to fire incident at the refinery less than a year later. “Our plant requires turn-around maintenance (TAM) every two years. We have done three TAMs since Indorama took over EPCL in 2006,” said Nkwocha.
The next TAM is said to be due sometime this year. Sadly enough, the reverse is the case with the PHRC. The refining company has never seen any TAM in the last 12 years, despite unconfirmed reports that funds for this exercise have been constantly set aside in the company’s operations. Whether they were released for the desired purpose is a different kettle of fish.
Over N37.1 billion ($231.7 million) has so been spent on TAM by the Preesident Goodluck Jonathan administration. Another N64 billion ($400 million) was spent by the Yar’Adua administration. All of these are regarded as a fruitless effort by analysts BusinessDay spoke to.
The current managing director of the PHRC, Tony Ogbuigwe, while conducting a team of Maire Tecnimont, the Italian original constructors of the refinery, gave assurances that the nation’s premier refining company would bounce back to about 90 per cent capacity utilisation by the year end, after the completion of its first turn-around maintenance (TAM) in more than 12 years.
Philip Chukwu, PHRC’s group executive director, in charge of refining and petrochemicals, admitted that “the refineries have not been properly maintained over the years; we have had to manage things.”
Ogbuigwe’s immediate predecessor, Abdullahi Bashir, before his replacement, earlier in 2009, adduced the refining company’s years of abysmal performance to “difficulty in getting quality personnel due to insecurity in the Niger Delta, high attrition rate due to age-related disengagement and shortage of critical technical staff.”
While submitting a $174.26 million three-year (2009 – 2012) restoration plan for the refining complex, which has a combined capacity of 210,000b/d with the addition of the 150,000b/d new refinery in 1989, the then Bashir-led management said the process would be broken down into short, medium and long term. However, there is a caveat – the process would have to be sanctioned by the Nigerian National Petroleum Corporation (NNPC), a clumsy oil company that reeks of mind boggling controversy. But, on the other hand, EPCL, which was acquired by Singapore based Indorama Group, has been posting rising levels of success since 2006.
On customer focus, PHRC appears not to really care about what it sends out to its consumers – the Nigerian populace, especially those in the South-South and South East. Otherwise, the company, with 210,000b/d refining capacity, ought to have refrained from using obsolete equipments and poor quality key technical personnel.
But Indorama-EPCL says it insists on high product quality. “Our product quality is such that, today, it competes with foreign products.” Today, about six years in private hands, the petrochemical plant has grown to become a net exporter of polypropylene to Europe, America , Asia and other parts of Africa.
