POLICY STATEMENT O28 BY THE INDEPENDENT MEDIA AND POLICY INITIATIVE (IMPI)
Alleged Wasteful Turn Around Maintenance (TAM) of Refineries: Setting the records straight
We find it incredulous that the African Democratic Congress (ADC) will condition the sale of Nigeria’s sovereign-owned refineries on a forensic audit of the $18 billion allegedly spent on the four refineries.
We do not have any misgivings about this otherwise innocuous demand. However, we readily perceive that the ADC was merely playing to the gallery by limiting the scope of the demanded forensic audit to the years since the All Progressive Congress (APC) emerged as the nation’s ruling party.
We consider this a cheap and unserious effort at making an issue out of the protracted economic nuisance the government-owned and managed refineries had long turned into.
We believe politicians, especially those supposed to provide the country with alternatives, should canvass issues based on credible, logical, evidence-based propositions.
In this particular instance, we find it rather awkward that anyone claiming to be a true champion of probity and transparency in government affairs will insist that only successive administrations under the APC have collectively spent over $18 billion on the refineries, even as it added that the current federal administration has reportedly committed an additional $2.8 billion for such.
The party further raised alarm over potential favouritism in the mooted privatisation, cautioning that national assets might be undervalued and handed over to political allies. ADC further asserted, “If the intention was to privatise the refineries, then the years of huge public spending are at best a waste, and at worst a scam.”
We find all these cacophonous and a deliberate attempt to confuse ordinary Nigerians. This is why we believe this issue is deserving of our intervention. In doing this, we foreground this intervention with the declaration by the recently appointed Group Chief Executive Officer of the Nigeria National Petroleum Company Limited (NNPCL), Bashir Ojulari indicating that the company is conducting a “deep dive, life-cycle review” of the projects (refineries) which are expected to be completed by the end of the year. This is not only to make sure that the company utilises whatever is helpful in the structures, but also to be free to bring in additional elements that can make things work, adding that the NNPCL must review the projects without falling victim to “sunk cost syndrome.”
We find it strange that despite underscoring his submission with the NNPCL’s commitment not to fall victim to “sunk cost syndrome,” it appears most commentators simply refused to imbibe the literal imputations of the syndrome as the guidepost for whatever will be the eventual fate of the refineries.
To avoid doubt, we think we should put this into perspective. The sunk cost syndrome, also known as the sunk cost fallacy, is a cognitive bias that leads individuals to continue investing in a decision based on prior investments (money, time, or effort) rather than on future benefits.
This fallacy often results in poor decision-making, as it prioritises past investments over better future options. It can affect various areas of life, including relationships, investments, and career paths, leading to suboptimal outcomes. Understanding this bias can help individuals or businesses make more rational decisions by focusing on current and future costs rather than past expenditures.
By adopting this philosophical outlook, we are confident that the NNPCL is well equipped to reach a beneficial conclusion regarding the fate of the refineries. Nonetheless, we also think it is appropriate to lay out the intricate tapestry of mismanagement, corruption, and acts of official sabotage that gutted the refineries long before the APC came to power.
The second Port Harcourt refinery, with a 150,000 bpd capacity, was built in 1985 for $850 million. The 125,000 bpd Warri refinery was built in 1978 for $478 million, and the 110,000 bpd Kaduna refinery was built in 1976 for $525 million. The refineries, including the 60,000-barrel-per-day Port Harcourt refinery, were collectively built to refine 445,000 barrels of crude daily. Over the years, they have suffered total disrepair and comprehensive paralysis.
However, it had not always been a sad tale of disrepair concerning the refineries. In the early 1990s, the refineries produced enough petroleum products to satisfy national demand and export. But after that period, a lot of things went wrong. The refineries under the management of the then Nigeria National Petroleum Corporation soon veered off the path of refinery management and production best practices.
Best practice is that a refinery is designed and built to produce defined quantities and product specifications, operating continuously without interruption for 24–36 months based on proper maintenance culture, before it is systematically shut down for a period to carry out Turn-Around Maintenance (TAM).
When TAM is unduly delayed, the performance of the refinery declines. Besides, machines and other service facilities are subject to deterioration due to their use and exposure to process and environmental conditions.
This deterioration must be duly taken care of by various maintenance interventions and techniques at certain pre-determined intervals so that the required use of facilities can be continued and service life extended until maintenance costs become prohibitive and replacement action becomes inevitable.
The American Petroleum Institute (API) defines Turnaround as a periodic shutdown (total or partial) of a refinery process unit or plant to perform maintenance, overhaul, and repair operations and inspect, test, and replace process materials and equipment.
As things turned out, the critical periodic TAM, which was supposed to be undertaken every two to three years at most, was not done between 1986 and 1993.
Because no TAM was conducted on any of the refineries in those six years, the output efficiency template of the refineries fell from 90 per cent to 60 per cent.
In 1993, it became apparent that TAM had become desirable and compelling. However, rather than being attended to with the transparency it deserved, it became a source of slush funds and a side hustle for government and NNPC officials. For instance, a little-known Indigenous oil service company, Anchoff Strongholds, was contracted to conduct a TAM on the 125,000 barrels per day Warri Refinery and Petrochemical Company.
Several media reports indicated that the TAM had little impact and, therefore, no consequence on the refinery’s technical standing. To address the issue, a probe panel chaired by the late Mr Aret Adams, one-time GMD of the NNPC, was instituted to investigate the WRPC TAM. The panel report recommended dismissing the WRPC managing director for his role in the scandal.
The report also recommended the blacklisting of Anchoff Strongholds and their promoters and a ban on them from ever doing business with the NNPC. Despite the sanctions, the harm had already been done; the output and production capacity of the Warri Refinery tumbled from 60 per cent to 30 per cent.
Curiously, in the same 1994, the primary promoter of the banned Anchoff Strongholds resurrected with Chrome Oil Services Limited and, in an inexplicable circumstance, secured the TAM of the second Port Harcourt 150,000bpd refinery. Again, the TAM was received with a lot of public dissatisfaction after it was reported that, rather than boost output, it declined to less than 40 per cent.
Overall, the TAM gobbled $216 million. Translated, in fiscal terms, $216 million went down the drain. Mr Chamberlain Oyibo was GMD of the NNPC at this time (1993 – 1995)
NNPC, under the leadership of Mallam Dalhatu Bayero (1995-1999), spent $92 million on the same Port Harcourt Refinery TAM in 1998.
However, the whole narrative relating to unexplained monies expended on TAM took another shape from 2000 during the Olusegun Obasanjo/Atiku Abubakar Presidency.
Mr Gaius Obaseki, NNPC’s GMD between 1999 and 2003, provided the background to this scenario in an interview in November 2000, in which he gave details of the state of the country’s four refineries.
Noting that he was satisfied with the state of things, he explained that the 150,000 bpd capacity Port Harcourt Refinery was running at 75 per cent, though it could run at 100 per cent. But he noted that professionally, he will be doing himself damage because the cracker—the fluid catalytic cracking units—will not be in place until the middle of 2001.
By Obaseki’s estimation, the 150,000 bpd Port Harcourt refinery would be running at 100 per cent by mid-2001, subject to the availability of crude oil. He also said the Kaduna refinery was running at 60 per cent after a lot of maintenance work. This performance, he promised, would be tremendously increased, such that by 2001, the Kaduna refinery would operate at the same level as PH Refinery.
However, there was a caveat: These growth projections will be realised “if we are left to do our work.”
Under the Obaseki leadership of NNPC, the administration spent $1.67 billion on the refineries within four years, 1999 to 2003, and a further $39.7 million under Mr Funsho Kupolokun’s leadership between 2003 and 2007. However, by the middle of 2003, all the refineries were in different states of dysfunction.
To show the level of disrepair of the refineries despite the $1.6 billion expended on them between 2001 and 2003, the Bureau of Public Enterprises (BPE) lamented that all the refineries needed a complete overhaul due to bad management and poor maintenance culture, which considerably reduced refining output.
A more serious consequence is that the country was forced to import petroleum products, resulting in a massive waste of scarce foreign exchange. Following the operational failure of the refineries, the then federal government resorted to wholesale fuel importation, which had serious consequences for the economy.
We note the outcome of the Nigeria Extractive Industry Transparency Initiative’s audit of the refineries between 1999 and 2004, which affirmed that: “The importation process, including the tendering, contracting and procurement practices, falls short of current good practice standards, and it is questionable whether they fully protect interests in many areas of the process. There was a lack of written procedures.”
When he returned for a second term in May 2003, President Obasanjo signed off on privatising the four refineries. The process was to be carried out under the auspices of the National Council on Privatisation (NCP). However, it became a reference narrative for process compromises and official manipulation.
The transaction formally commenced in October 2003. By December 2 of the same year, four firms, Essa Infrastructure of India, Oando Plc, Refinee Petrobus, and Transcorp Plc, had submitted their technical and financial bids after obtaining and submitting their respective Expression of Interest (EoI) documents. However, BPE disqualified all four bidders because they did not meet the minimum qualification benchmark after evaluation.
There was suspicion over the mass disqualification because the BPE did not give specific reasons for the failure of the bid test. The bidders were asked to resubmit their respective bids by 24 April 2006. Again, the bids were disqualified because a technical partner was a member of more than one consortium.
The President, acting on this excuse, ordered the process to be halted and the transaction to be reopened to other bidders. Without formal public explanation, the President directed the refineries to be returned to NNPC. With no improvement, he again ordered another bid round. Four firms, Mittal Investments Limited, Indorama International Finance Ltd, Global Oil and Energy, and Link Global International Ltd, joined the earlier four to submit bids.
Then coming from the flanks, it was announced that Oando Plc, Refinee Petroplus and Bluestar Consortium (incorporating Transcorp Plc) had submitted their technical and financial proposals for the Port Harcourt Refinery. Though all three were prequalified, the Blue Consortium emerged as the winner with a bid of $561 million for a 52 per cent stake in the plant.
The same Blue Star Oil Service Consortium won the bid for the Kaduna Refinery, outbidding China National Petroleum Corporation’s $102 million bid with its $160 million offer.
However, questions were raised concerning how the Blue Star Consortium suddenly appeared on the scene without committing to the initial bid process by submitting an expression of interest form required by law and complying with initial processes.
When asked about the scrap value at which the winners of the bids secured the purchase of both the Port Harcourt and Kaduna Refineries, Mrs Irene Chigbue, Director-General of the BPE famously declared that the Bureau’s mandate had never been to sell government’s enterprises to generate money for government: “Our greater mandate is to allow the private sector drive the nation’s economy. It is not how much we get from these sales that matters, but the overriding desire to see our refineries meet the local need for fuel, thereby saving the country from huge foreign reserves arising from fuel importation.”
We consider this curious averment the orchestration of the private aspiration of the President at that time. And an outright romanticisation of irresponsible profligacy. We do not want to imagine an accountable government which had expended a princely sum of $1.6bn on two refineries that were functional within two years, would, thereafter, sell them off at a scrap value of less than 40 per cent of the TAM expenditure.
The succeeding presidency of Umar Musa Yar’Adua cancelled the sale of the refineries by Obasanjo. Soon after the stoppage of the sale in 2007, the NNPC reportedly announced that it had awarded a contract to a Nigerian firm to carry out a comprehensive turnaround maintenance on all the refineries. The contract sum was said to be $57m.
In 2009, the then Group Managing Director (GMD) of the NNPC, Alhaji Mohammed Sanusi Barkindo, also announced that the corporation spent $200m on maintaining the Kaduna refinery. It soon became apparent that the trend, starting from Obasanjo, was to evolve into a saga of wastefulness of funds meant for TAM by the successor to Yar’Adua, President Goodluck Jonathan.
President Jonathan made TAM a state policy. As part of his four-year term agenda towards growing the economy through the oil sector, he directed the NNPC to, as a matter of national priority, carry out a comprehensive rehabilitation of the four refineries within the next 24 months.
The project was scheduled to commence in August 2011 and was expected to be completed by the first quarter of 2012. Between 2010 and 2012, with Mr Austen Oniwon as GMD of the NNPC, the sum of $900 million was expended on the TAM.
However, in an about-face, President Jonathan, despite the $900 million expenditure, approved the privatisation of the four refineries in December 2013. A steering committee, headed by then-Minister of Petroleum Diezani Alison-Madueke, was formed to oversee the process and make recommendations to the National Council on Privatisation.
Yet as a tug-of-war raged between the President Jonathan administration and labour unions in the country that had traditionally resisted privatisation of the refineries, the government approved $1.92 billion in TAM spending between 2012 and 2014. Mr Andrew Yakubu was GMD of the NNPC during this period.
In January 2014, in response to the union’s threats, the President announced that the government had no plans to privatise the refineries.
Between 2013 and 2015, $396.33 million was said to have been used to finance turnaround maintenance for the refineries.
This expenditure has a unique story. At that time, it was reported that the government contacted the Original Equipment Manufacturer (OEM) and Original Refinery Builder (ORB) of the Port Harcourt refinery (Nigeria’s largest), Japan Gas Company (JGC), which declined but instead gave the design materials to Tecnimont of Italy, which designed the Warri Refinery.
The company revealed that the original TAM proposal for Port Harcourt was initially submitted to NNPC in 2013 for $297 million by Tecnimont. Still, some of its (NNPC) officials opted to inflate the cost to almost $600 million. Meanwhile, the NNPC had at this time continued to decline payment of the $2.5 million balance owed to Tecnimont for a study it conducted on the Port Harcourt Refinery.
Meanwhile, domestic engineers working with the NNPC volunteered to salvage the situation by offering their skills and knowledge of the refineries to carry out the TAM of all four refineries at a far cheaper rate than the approved sum of $1.6 billion for 2015. This domestic intervention reduced TAM for the four refineries to about $22 million, saving taxpayers $1.57 billion from the $1.6 billion earlier voted for the projects.
A document from the NNPC showed that $10 million, about 48 per cent of the total expenditure, was spent on the two refineries in Port Harcourt. The $22 million expenditure was a 982 per cent reduction from the $216 million the General Sani Abacha regime spent for the same purpose.
According to the document, the Managing Director of the PHRC, Dr. Bafred Audu Enjugu, authenticated the $10 million investment in the facility. “The ongoing phased rehabilitation of the company cost a little less than $10 million. Indigenous engineers holistically carried out the job without foreign support,” Enjugu said.
Between 2000 and 2015, three different administrations of the People’s Democratic Party spent $4.66 billion on the nation’s four refineries. This does not include operational and other associated costs.
Yet by mid-2015, an NNPC report provided a summary of the state of the refineries: “The refineries recorded heavy losses in their operations in 2015 due to low refining capacity, prolonged maintenance issues and pipeline vandalism. The last time there was a routine intervention on the facility was in 2000. The components of the refineries have reached the point where they have to be replaced, as opposed to what we call turnaround maintenance, which is servicing.
“It is such an old plant, and we are having difficulties getting some components. We can’t find some of the old manufacturing companies again. Whenever the refineries managed to resume production after lengthy repair work, they hardly worked for up to 90 days before they were shut down, and the purported maintenance cycle continued.”
This narration should be sobering to any forward-looking Nigerian. We were bewildered because the ADC statement called for an investigation of TAM expenditures under the APC administrations.
We consider the call offensive, mischievous and fraudulent. We know no new TAM exercise has been commissioned under the current federal administration. As it were, President Bola Tinubu’s predecessor, former President Muhammadu Buhari, now late, inherited the state of the four national refineries as described above.
Expectedly, no frugal-minded and nominally committed Nigerian will be compelled to redress the untoward state of those national assets with the record of wasted expenditures. However, the late President may have fallen into the benign trap of sunk cost syndrome.
In this regard, former President Buhari has our sympathy. In addition to the funds sunk into the refineries, his administration was also burdened with the fiscal load of subsidy payments on the nation’s imported fuel consumption, eroding foreign exchange savings.
Of course, the powerful labour unions in the NNPC were insistent on the possibility of resuscitating the refineries to justify continued salary payments and the sustenance of the refineries’ workers, and the NNPC management was also very forceful in this regard.
It was, apparently, easy for the late President to capitulate. Beginning in 2021, the Federal Government awarded an Italian company, Tecnimont SPA, a $1.5 billion contract to rehabilitate the Port Harcourt refineries, while about $1.484 billion contracts were awarded to Saipem SPA and Saipem Contracting Limited to rehab the Kaduna and Warri refineries, respectively.
While one of the Port Harcourt facilities momentarily resumed crude processing in late 2023, it shut down again in May 2025 for maintenance. The Warri and Kaduna refineries, aged 46 and 44 years respectively, remain under rehabilitation.
Meanwhile, we must clarify the scope and scale of work done from the spending on refineries under the Buhari administration. This is well captured in the words of the immediate past GCEO of the NNPC, Mr Mele Kyari, who commented, “We are not doing turnaround maintenance; we are doing rehabilitation of the refineries, and this is very different. It means that we are replacing certain major components. 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, which is why, within the four years, the contractor would have completely left your premises.”
We do not object to conducting a forensic audit on all four refineries, but we believe it should cover the period 2000 to 2023. This will capture the active disbursement period and help the nation understand what happened in those years, which will inform policy positions in the midstream sector of the oil and gas industry going forward.
Omoniyi M Akinsiju, PhD
Chairman,
Independent Media and Policy Initiative (IMPI)
*July 24, 2025*
