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NNPC’s N1.27trn projected remittance hampered by low oil price — Kyari

…N7bn, $48m lost to PMS, crude oil theft in four months

The Nigerian National Petroleum Corporation (NNPC) has disclosed that the fall in crude oil prices in the international market has hampered its projected N1.27 trillion remittance to the Federation Account in the 2020 fiscal year, specifically, between April and December 2020.

The NNPC also revealed that the activities of vandals and crude oil thieves made the country to lose N7 billion between January and April 2020; and $48.42 million, between January and February 2020, to petroleum products theft and crude oil theft respectively.

In a presentation during his engagement with the Nigerian Guild of Editors (NGE), Group Managing Director of the NNPC, Mallam Mele Kyari, explained that low crude oil prices had negatively affected the NNPC’s liquidity position and had forced to adopt certain survival strategies.

He said, “Revenue flow has been greatly impacted by fall in the price of about 65 per cent, thus affecting the corporation’s liquidity position and the anticipated remittances to the Federation of N1.27 trillion (April-Dec 2020).

“Low demand and uncontrolled supply sent global storage to the tank top with about one billion barrels and refineries output cut due to demand fall. The netback value of crude for long-haul journeys to China has declined to $1.05 per barrel on the 1st of April 2020 due to low price and high freight cost. Oil price collapse below cost has led to production deferment across the world.”

However, he stated that to continue to remain afloat, the NNPC had maintained steady production in order not to lose its market share in the event of crude oil price recovery.

Instead, he disclosed that the NNPC had taken aggressive capital allocation to prioritize low-cost oil production and additional measures to ensure cost discipline across, including renegotiation of contracts and other business obligations, thus saving 40 percent of proposed budget and cost.

He stated that the NNPC had also rolled out strategies aimed at achieving sub-$10 per barrel unit operating cost (UOC), without jeopardizing growth, especially as it discovered that UOC for 2019 Full-Year Performance, for its Joint Venture (JV) partners exceeded the targeted $10 per barrel in all cases.

In addition, Kyari stated that it was observed that reported performance for the first quarter of 2020 highlighted the need for further cost optimization as UOC figures were above the target of $10 per barrel in all cases.

He identified the major cost centers among its JV partners to include: human resources; logistics; service management; direct handling/transportation; and production maintenance costs, which accounted for about 80 percent of JV operating expenses (OPEX) and 60 percent of Production Sharing Contract (PSC) OPEX.

Furthermore, providing updates on downstream infrastructure security, as it concerns vandalism, crude oil, and petroleum product theft, Kyari disclosed that Premium Motor Spirit (PMS) losses along the System 2B pipeline network stood at 56.8 million litres, valued at N7 billion, from January to April 2020.

This, he said, is compared to the loss of 291.2 million litres of PMS in the same pipeline network, valued at N38.18 billion, from January to December 2019.

He added that 74 crude oil pipeline breach was recorded from January to February 2020, stating that based on reconciled industry figures, about 2.9 million barrels of crude oil, worth US$48.42 million, was lost from illegal activities of pipeline vandals and oil thieves, compared to 11.5 million barrels of crude oil, valued at US$747.50 million lost between January and September 2019.

He said, “Systems 2B & 2E are critical to effective distribution of petroleum products to the South-West,  South-East and other parts of the country. From January-December, 2019, pipeline vandals and criminals gangs operating along system 2B axis have stolen about 291.2 million liters of PMS valued at N38.18 billion in addition to economic scale damage to pipeline infrastructure and the environment

“Fire incidences with fatalities in communities that petroleum products pipeline traverses were recorded within the same period. From January to September 2019, based on reconciled figures about 11.5 million barrels worth US$747.50 million, representing five percent of the total JV production, of crude oil was a loss due to illegal activities of pipeline vandals and oil thieves.

“In 2020, NNPC has scaled up efforts to secure a pipeline network against vandalism and theft. System 2B and the destination depots along the South-West distribution corridor are active. Persistent vandalism and product theft have forced the shutdown of the Aba-Enugu segment of system 2E.”

Giving updates on the state of the refineries, Kyari stated that Tecnimont SPA, Italy (TCM) – the representative of JGC; the Original Refinery Builders (ORB) has completed inspection and Integrity Studies (Phase 1) f the Port Harcourt refineries, while the NNPC appointed NETCO/KBR as Owners Engineer (OE) for the rehabilitation of the refineries, as well as the Warri refinery,

For Warri refinery, Kyari noted that SAIPEM submitted a revised Technical & Commercial Proposal for WRPC Phase 1 rehabilitation, while approval had been granted for the NETCO/KBR (PMC/OE) to conduct Technical Audit on WRPC and submit a report for consideration.

In the case of Kaduna refinery, he disclosed that activities for Phase 1 inspection are to commence in the third quarter of 2020, noting that the Committee on Refineries Operations & Maintenance (O&M) had submitted its report, while the contracting strategy for engaging the O&M is being developed with consideration for private investor funding.

SOURCE: Vanguard