Connect with us

Business

Nigeria: A crude swap contract in disarray

Published

on

Nigeria: A crude swap contract in disarray

The cumulative production of Nigeria’s refineries again fell to zero at a time daily fuel consumption rose to 55 million litres, putting the Direct Sale and Direct Purchase (DSDP) contracts between Nigerian National Petroleum Corporation (NNPC) and refiners abroad under pressure. Adeola Yusuf reports

 

 

The consumption of premium motor spirit (PMS) also known as petrol has risen from 35 million to a record 55 million litres daily, subjecting the DSDP also known as crude swap contracts, into 20 million litres deficit.
The data obtained from NNPC by New Telegraph showed that the consumption surge, which the nation began to experience from December 1, 2017, has over-stretched the DSDP, which the Corporation has with refiners abroad.
The DSDP contracts were originally based on 35 million per day petrol consumption pattern, the document showed, adding that the nation now stretches the contracts with additional 20 million litres.
“The sudden and unnatural shock in fuel consumption to record levels has over-stretched the Direct-Sale-Direct-Supply (DSDP) crude for product supply arrangement, which was originally based on 35 million per day petrol consumption pattern,” the document quoted the Group Managing Director of NNPC, Dr, Maikanti Baru to have said.
Consequently, Nigeria now depends on 100 per cent importation to meet its fuel need as the refineries are now down to zero production.

Complaints from the top
Baru lamented that with the current unprecedented average daily fuel evacuation of 55 million litres since 1st December 2017 to date, it was imperative for the security agencies to close-in on the smuggling syndicates who were cashing in on the obvious petrol price differentials between Nigeria and neighboring countries to make illicit profit.
He explained that apart from straining the ability of NNPC to sustain the prevailing 100 percent PMS importation in the face of increasing cost, the current situation was impacting negatively on NNPC’s resources for servicing Joint Venture Cash-Call and other obligations.

Clamour for more funding
He said to sustain adequate supply of petroleum products and national energy security, there was the need for the Federal Government to provide flush volumes in January & March, 2018 as well as create enabling environment for other oil marketing companies to participate in the importation of petroleum products.
He also noted the need to double supply in order to raise the fuel sufficiency template back to the 30 days threshold from the current 15 days by bringing in at least two vessels per day for 20 days.
The NNPC GMD, however, explained that the Corporation would require additional funding outside the DSDP regime to achieve this.
He listed the measures put in place to tackle the prevailing challenges to include: Engagement of the Nigerian Navy, Federal Road Safety Corps and Civil Defence to improve truck movement; engagement of the Nigerian Army Engineers to remove failed trucks on the Jebbba/Mokwa Road, which had hitherto slowed down truck movement to the northern part of the country; repairs of about 10km stretch of bad roads and sustained assistance to tankers among others.

Financier for refineries
Owing up to gross inefficiency of refineries in Nigeria, the NNPC in another development, said that it was inching closer to arriving at the choice of financiers for the three refineries for which 445,000 barrels crude are allocated daily.
The refineries are Port Harcourt Refining Company Limited (PHRC), Warri Refining and Petrochemical Company Limited (WRPC) and the Kaduna Refining and Petrochemical Company Limited.
The development, the NNPC boss said, holds the promise to boosting petroleum products supply and distribution in the Country
Dr. Baru maintained that the agreements on the potential financiers for the refineries were being fine-tuned, following, which the endorsement of the NNPC Board would done this month.
“We are pushing towards the final selection of our financiers and we expect that when that is done, we’ll get the agreements and present them to our board, meeting this month to secure their endorsement and once we have the funding, we would start the rehabilitation of the refineries towards a 90 per cent capacity utilization per stream day before the end of 2019,” Dr. Baru affirmed.
He described the procedure for electing the financiers as painstaking, noting, however, that it was necessary to enable a desired closure on the subject.
Dr. Baru said the corporation was also encouraging new refining capacities to come on board, adding that there were two consortia that have indicated interest to co-locate refineries in Warri and Port Harcourt.
He said NNPC would provide whatever utility services the companies might require, such as power, processed steam, water and land, stressing that the corporation has agreed in broad terms on areas of collaboration to fast track the development.
“Am happy to inform you that progress has been made, up to the level of an acceptable detailed engineering design and we are in the process of mobilizing some of the refineries already identified for installation in Nigeria,” the GMD informed.

N4.95tr subsidy claims to NNPC
Inefficient refineries, checks by this newspaper showed, usually lead to a surge in subsidy claims by NNPC and marketers.
NNPC, for instance, confirmed, last Monday, the receipt of N4.950.80trillion subsidy payment from the Federal Government for petrol imported between January 2006 and December 2015.
The Corporation also declared that the Nigerian federation was indebted to it to the tune of N170.6 billion outstanding subsidy payments during the period.
Leading a team of top management of NNPC to the on-going Investigative hearing on N5 trillion subsidy payments from 2006 to 2016, the Group Managing Director of the Corporation, Dr. Maikanti Baru, said that the figure was arrived at after deduction of N4.950.80 trillion received as payments from the N5.121.40 trillion approved subsidy claims of the corporation from January 2006 to December 2015.
Providing details of the accruals, Chief Financial Officer of the corporation, Mr. Isiaka AbdulRazaq, according to a statement, traced the advent of the subsidy regime to October, 2003 when NNPC was directed by the government to commence the purchase of domestic crude oil at international market price without a corresponding liberalization of the regulated price of petroleum products.
“He explained that under the subsidy regime, NNPC and other suppliers of refined petroleum products were entitled to file subsidy claims to the Petroleum Products Pricing Regulatory Agency (PPPRA),” the statement issued by Group General Manager, Group Public Affairs Division of NNPC, Ndu Ughamadu, stated.

Varieties of subsidy collection
Mr. AbdulRasaq, however, noted that unlike other Oil Marketers, NNPC did not receive cash payment for subsidy claims as its subsidy claims were deducted out of cost payment to the Federation Account after due certification by PPPRA.
‘’In summary, NNPC submits that the amount of over N5.1 trillion was duly approved by PPPRA as subsidy claims for NNPC. Out of this sum NNPC is still being owedN170.6 billion,’’ the NNPC CFO said.
The Corporation called on the Senate Downstream Committee to assist in ensuring that the outstanding debt was settled to enable NNPC effectively achieve its obligation as the supplier of last resort to the downstream sector.
Chairman of the Senate Committee, Senator Kabiru Marafa, commended NNPC for the elaborate presentation while pledging his support to all stakeholders in the sector to ensure uninterrupted supply and distribution of petroleum products

Last line
The Federal Government has taken the “jokes” on inefficient refineries too far while this seeming unserious posture to resolving this issue lingers. The National Assembly keeps engaging in many probes of subsidy payment whereas, it should, once and for all, probe the refineries and come up with sincere recommendation on how to make them work again. Only this will guarantee the country’s liberty from the embarrassment of fuel scarcity, subsidy and unnecessary crude for product swap.

Advertisements
Continue Reading
Advertisement
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Categories

Facebook

Trending

Take advantage of our impressive online traffic; advertise your brands and products on this site. Call For Advert Placement and Enquiries, Call: Mobile Phone:+234 803 304 2915 Online Editor: Michael Abimboye Mobile Phone: 0813 699 6757 Email: mmakesense@gmail.com Copyright © 2018 NewTelegraph Newspaper.

%d bloggers like this: