The Port Harcourt Refining Company (PHRC) is a Nigeria-based oil and gas company primarily specializing in the refining of crude oil into petroleum products. It is headquartered in the Port Harcourt metropolitan area of Rivers State, southeastern Nigeria.
Port Harcourt, named for the then-colonial secretary Lewis Harcourt, is a coastal city in southern Nigeria home to the Port Harcourt Refinery.
The Port Harcourt Refinery, Nigeria’s first oil refinery located at Alesa Eleme, is divided into two units: the old and new refineries.
Located in Alesa Eleme just to the southeast of Port Harcourt, the company operates two oil refineries, including an old plant commissioned in 1965 that can process 60,000 barrels (9,500 m3) per stream day, as well as the new plant commissioned in 1989, which has a capacity of 150,000 barrels (24,000 m3) per stream day.
The new refinery began operations in 1989, boosting the total daily capacity for crude processing to 210,000 barrels.
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By the mid-1970s, forecasts from Nigeria’s economic intelligence units suggested that demand for petroleum products would surpass supply at the pace the economy was developing.
The refinery in Port Harcourt, along with other state-owned refineries in the country, has only utilized a fraction of its capacity in recent decades due to inefficient processes and a lack of maintenance.
In March 2021, the Nigerian government approved expenditure of GBP 1.08 billion (USD 1.5 billion) for the refurbishment and modernization of the refinery complex in Port Harcourt.
NNPC announced the shut down the Port Harcourt refinery for planned maintenance, merely six months after it claimed to have resumed operations.
Pipeline Vandalization and its Impact
As is evident from the two maps above, the refineries were designed to receive crude oil feedstock by pipeline. In like fashion, they were designed to have products evacuated mainly also by pipeline. Lifting of products from depots immediately contiguous to the refineries was intended mainly to supply the towns and cities nearby.
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Vandalization of crude and product pipelines commenced in the late 1990s. Some scholarly works have sought to elucidate the reasons for this development. It could be argued that both are linked.
Several publications have given comprehensive treatment of these matters. In summary, the Niger Delta area of Nigeria where oil is principally produced has been a hotbed of agitation for resource control. This has arisen from the perceived injustice felt by the people on the assertion that the region has not significantly benefited from the oil wealth, while it has borne the brunt of resultant environmental degradation and pollution.
Suffice it to say that the attacks on the pipelines made it difficult to consistently supply crude oil to the refineries. The poor state of maintenance of the refineries worsened the situation.
The frequency of insertions of valves, outright stealing of crude and refined products, bombing of the pipeline by aggrieved and criminal elements have contributed significantly to worsening the on-stream time efficiency of the refineries. These activities have resulted in huge losses to the country as well as degraded the Crude Oil supply and product facilities.
Unplanned shut down of any of the crude oil pipelines to these terminals has an immediate impact on the refineries overall performance for that period. A McKinsey report in 2009 provided a correlation between the impact of lack of feedstock and the poor state of reliable operation of the refineries. Supply Chain Issues accounted for 53% of the unplanned shut downs while equipment failure made up 47%. Matters have been worsened by sabotage of the crude oil pipelines which feed the refineries, and the product evacuation pipelines.
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In December 2009, the then Group Managing Director of NNPC, in a two-day series of presentations made separately to the Inspector General of Police, and the Chief of Defence Staff in Abuja elucidated that the advent of illegal bunkering, pipeline vandalism and product theft has massively impacted on the capacity of Nigeria’s oil and gas assets to function optimally. He stated that a total of 16,083 pipeline breaks were recorded within the previous 10 years. While 398 pipeline breaks representing 2.4% were due to ruptures, the remaining 15,685 breaks which translate to about 97.5% of the total number of cases resulted from the activities of vandals.
Within the same period of 2009, 8105 breaks were recorded along the system 2E representing about 50.3% of the total number of petroleum products pipeline breaks in the country. The attacks left the NNPC with a cost of N78.15 billion in product loses and pipeline repairs. (The Port Harcourt to Aba segment only came back in service in 2012 after being out for 7 years due to vandalism).
System 2A product pipeline which conveys products from Warri-Benin-Suleja/Ore depots ranked second on the scale of pipeline break points with 3259 cases representing about 20.2% of the total. Here again NNPC lost over N20.39 billion in products and pipeline repairs. (The line also was brought back into service in 2012).
System 2B which carries products from the Atlas Cove facility to Mosimi-Satelite-Ibadan-Ilorin depots recorded 2440 breaks leading to a loss of over N73.6 billion in products and pipeline repairs. This zone was the most notorious. In the year 2012 alone, the activities of criminal syndicates caused massive fuel shortages within this axis by shutting off 11 million liters per day of PMS due to the fire outbreak at the Arepo vandalized point. Three NNPC pipeline maintenance staff were murdered while trying to plug the vandalized point. Over 774 line break points were identified and repaired before re-streaming of the line in December 01, 2012. Miscreants again repeatedly damaged the pipeline in January 2013 resulting in two (2) separate fire outbreaks.
On gas, the incessant attacks on the Trans-Forcados Pipeline rendered it out of service in May 2009, thus making it impossible to evacuate crude oil/condensate from some Shell operated facilities in 2010 with over 300,000 bpd and 140mscfd production shut-in. About 55 vandalized points were repaired at a cost of N11 billion. In the year 2011 alone, a total of N105 billion was lost due to crude and product theft from pipelines associated with the refineries, from PPMC records.
Due to repeated vandalism of the Escravos-Warri line, NNPC has had to resort to the alternative means of transporting crude oil to WRPC by vessel at an additional cost of $4.2 per barrel. Over each month, the cost of transporting the contract quantity of crude oil in this manner amounts to $7million; an added burden to the operating costs of the refinery.
While stealing products from pipelines at the Port Harcourt Refinery Jetty, a fire resulted and completely destroyed Jetty B. Jetty A was partially affected. Cost to NNPC for the reconstruction of the Jetty at Okrika is over $66 million.
The combined impact of these avoidable costs is that the economics of downstream operations is becoming increasingly unattractive and investors are being affected.
Pipeline Integrity and Financial Implications
The incessant attacks have greatly compromised the integrity of the crude and product pipelines because of the constant replacement and repair of the segment. This development is responsible for the non-attainment of the effective pumping rate of liquids in order to prevent pipeline rupture and consequent environment pollution.
The Energy Information Administration (EIA) Report on Nigeria updated on October 16, 2012, attributes oil theft, commonly referred to as “bunkering”, as being responsible for pipeline damage that is often severe, causing loss of production, pollution, and forcing companies to shut in production. Protests from local groups over environmental damages from oil spills and flaring undermined relations between local communities and international oil companies (IOCs). The industry has been unfairly blamed for pollution that has damaged air, soil, and water, leading to losses in arable land and decreasing fish stocks, whereas a significant percentage of the damage is due to activity of vandals.
The report estimates that the theft and trade in stolen oil has recently surged according to NNPC data, by 224% in 2011 over the previous year. The EIA report quotes Nigeria’s Ministry of Finance that about 400,000 bbl/day of oil was stolen in April 2012, which led to a fall of about 17% in official oil sales. The EIA reports quotes Royal Dutch Shell, Nigeria’s largest producer, recently estimated that 150,000-180,000 bbl/day, or 6% of the country’s total production, on average is lost to oil bunkering and spills.
Using Shell’s figure of approximately (150,000 bbl per day) translates to an average loss in the upstream of $5.475 billion per annum. Additionally, Nigeria also lost over N105 billion as theft in the downstream according to PPMC in year 2011 exclusive of pipeline repair cost.
It is, therefore, imperative, given the quantum of financial losses, loss of lives, destruction of property, and environmental degradation that the Country must evolve a strategy to commit about 25% of the $5.475 billion annually over a 10-year period as pipeline replacement, upgrade, and relocation from ROW, and installation of security surveillance in order to arrest this ugly trend. This should be funded via appropriation by the JVs, PSCs and NNPC under a National Energy Critical Infrastructure Protection and Restoration fund.
An extract from the PHRC Annual report for 2013 highlights the negative impact of pipeline vandalization on crude delivery to the refinery:
An average of 23.46 % and 37.58% capacity utilization and on-stream efficiency were attained, respectively, as at end of June 2013 for NPHR. Performance of the plant was impeded mainly by inadequate supply of bonny light crude oil.
In Q2 2012, the average capacity utilization and on-stream efficiency of New Port Harcourt Refinery (NPHR) were 3.92% and 6.12%, respectively. This low performance was largely due to low feedstock within the quarter under review. This improved to 12.48% and 20.43%, respectively, in Q2 2013 when crude oil supply improved slightly.
The average capacity utilization and on-stream efficiency of FCCU within the period under review were 12.84% and 16.73%. This low performance was as a result of insufficient feedstock from the upstream vacuum distillation unit, which itself was starved by poor supply to the Crude Unit. Table 3 and Fig. 3 confirm this impact.
Thus, the problem of pipeline vandalization warrants special treatment. The security and safety of the pipeline infrastructure are imperative for the viability of the Downstream Oil and Gas sector.
NNPC through its Pipelines and Products Marketing Company (PPMC) manages the facilities and infrastructure for the supply and distribution of crude oil and refined petroleum products (PMS/DPK/AGO). The crude lines are linked to the export terminals of the major Oil Producing Companies such as Shell Petroleum Development Company (SPDC) and Chevron Nigeria Limited (CNL) which provide the main feedstock for the Refineries totaling 445,000 bpsd capacity.
SPDC is estimated to have over 6000 km of pipelines and flow lines, 87 flow stations, eight gas plants, two export terminals and more than 1000 producing wells. Chevron on the other hand manages nine Oil mining Leases (OMLs) and one export terminal. The two operating companies provide a large percentage of the crude oil requirement for the Refineries.
Present state of the crude and product pipeline infrastructure:
Application of Technology to Enhance Pipeline Safety and Security
NNPC in collaboration with relevant stakeholders organized a security workshop in October 2012 to discuss and proffer strategies for improving the security of crude supply and evacuation of refined products to and from the Refineries.
The workshop aimed at complementing ongoing Joint Oil and Gas pipeline security committee efforts inaugurated by the Honorable Minister of Petroleum Resources (HMPR) and the Chief of Defense staff to minimize and eradicate crude theft in the oil pipeline. Various interventions, such as engaging communities, Police and Armed Forces for pipeline surveillance, had not stemmed the tide of vandalism. Far reaching solutions and combination of strategies were adopted and recommended to the Federal Government.
Unfortunately, there is evidence that several international syndicates are involved in this nefarious activity. Foreign flagged vessels have been arrested in the Nigerian coastal waters engaged in buying stolen crude oil and products. To do nothing means to mortgage the future of Nigeria to continued importation of petroleum products at huge cost and drain of scarce foreign exchange.
Regulatory Framework and Law Enforcement
A careful review of the Oil Pipelines Act, Cap 338 of 1990 [11] (and the Oil Pipelines Regulations which are made pursuant to the Act) does not establish sanctions for the violation of Pipelines or disruption of the distribution of crude oil or refined petroleum products.
However, the Miscellaneous Offences Act [12] Sect. 1(7) provides that any person who willfully or maliciously breaks, damages, disconnects, tampers with, obstructs, destroys pipelines or interferes with the free flow of crude oil or refined product through pipelines shall be guilty of an offence and liable upon conviction to imprisonment for life. However, the offences under this Act can only be prosecuted at the Federal High Court.
On the other hand, Petroleum Production & Distribution (Anti-Sabotage Act) [13] Sect. 1 provides that any person who willfully does anything with intent to obstruct or prevent the procurement of petroleum products in any part of Nigeria shall be guilty of an offence of sabotage.
Section 2 states that the persons shall be liable upon conviction to a maximum of 21 years of imprisonment or a Death sentence.
Section 3, however, vests exclusive jurisdiction in the Federal High Court.
The sanctions provided in the relevant laws are severe but the lack of diligent prosecution of offences has rendered the letters of the law ineffective and fueled the impunity with which vandals still operate.
There is a need for Government to enforce the existing sanctions to breeches in illegal act on Pipeline Vandalism and Economic Sabotage and for the National Assembly to harmonize the Oil Pipeline Act to conform to Miscellaneous Act as well as Petroleum Distribution act in order to engender growth in the downstream sector. Furthermore, the Federal Ministry of Justice must as a matter of urgency cooperate on the granting of Fiat to enable private prosecution of offenders.
Case Study: USA Approach to Pipeline Safety and Security
In the United States of America, The federal pipeline safety program is authorized under the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 [14] (PL 112-90), which was signed by President Obama on January 3, 2012. The act contains a broad range of provisions addressing pipeline safety and security. The federal pipeline security program began with the Department of Transportation (DOT) as well, immediately after the terror attacks of September 11, 2001, but pipeline security authority was subsequently transferred to the Department of Homeland Security (DHS) when the latter department was created. The DOT and DHS have distinct missions, but they cooperate to protect the nation’s pipelines.
In addition to their vulnerability to accidents, pipelines may also be intentionally damaged by vandals and terrorists. Pipelines may also be vulnerable to “cyber-attacks” on supervisory control and data acquisition (SCADA) systems or attacks on electricity grids and communications networks. Oil and gas pipelines, globally, have been a favored target of terrorists, militant groups, and organized crime.
On December 17, 2003 [15], President Bush issued Homeland Security Presidential Directive 7 (HSPD-7), clarifying executive agency responsibilities for identifying prioritizing, and protecting critical infrastructure. 53 HSPD-7 maintains DHS as the lead agency for pipeline security (par. 15) and instructs the DOT to “collaborate in regulating the transportation of hazardous materials by all modes (including pipelines)” (par. 22 h).
The order requires that DHS and other federal agencies collaborate.
Table 1: Impact of Pipeline Vandalization on Refinery Performance
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