New Telegraph

Test for transparency

Deregulation, planned rehabilitation of Port Harcourt Refinery, PPPRA pricing template and high crude oil prices are some of the highlights for the energy sector in the first quarter of 2021. ADEOLA YUSUF reports

 

The Executive Secretary, Nigeria Extractive Industry Transparency Initiative (NEITI), Dr. Orji Ogbonaya Orji, was at the headquarters of the Nigerian National Petroleum Corporation (NNPC), last week.

 

Orji, who led the management team of the transparency group during the visit, got a renewed commitment from NNPC to deepen transparency in the sector. NNPC had earlier taken the tough route of transparency and when it was the turn of the Group Managing Director of the Corporation, Mallam Mele Kyari, to address his guests, he used the opportunity to highlight benefits his Corporation had gained from taking the unprecedented road to transparency and accountability in its operations.

 

The first quarter of 2021, for instance, witnessed many issues in the sector that seemed to have been solved with transparency and the surge in the trust by investors for NNPC.

 

PPPRA’s template

 

NNPC ruled out higher petrol prices in the three months that made up the first quarter. In one instance, it made an official announcement to this effect, less than a day after the fuel regulator, the Petroleum Products Pricing Regulatory Agency (PPPRA), signaled the first increase since November.

 

The reversal means that government- owned NNPC, the nation’s sole importer of gasoline, will continue to bear the cost of subsidising fuel in Africa’s biggest economy. PPPRA published an announcement in March, saying gasoline should retail for N209.6 to N212.6 ($0.51) a liter, almost 30 per cent higher than current rates.

 

A day after, NNPC insisted there would be no increase in March, reiterating a statement published at the start of the month. Based on the PPPRA data, NNPC is making a loss of at least N47 a liter on the current retail price of N165.

 

Deregulation as tough task

 

Nigeria’s government has been trying since March 2020 to remove energy subsidies that cost about N744 billion ($1.8 bil-lion) a year over the past 15 years, according to the information ministry.

 

After prices were allowed to rise several times in the second half of 2020, they have remained steady since early December in the face of threatened labourunion protests, even though oil is trading about 40 per cent higher at $69 per barrel. Minister of State for Petroleum Resources,

 

Timipre Sylva, apologised for “any distress and inconvenience” caused by the PPPRA’s publication.

 

“Government wouldn’t unilaterally abandon on-going discussions with the unions on a reasonable price regime.” NNPC fixes the price at which it sells the product to depot owners, while PPPRA sets the margins that wholesalers and filling stations can make.

 

The announcement setting out the higher prices was removed from PPPRA’s website Friday morning and replaced with a message saying the published prices were only indicative of current market trends.

 

Afreximbank’s $1bn

 

The NNPC boss also declared that the corporation secured financing agreement for the rehabilitation of the Port Harcourt refinery from African Export Import Bank (Afreximbank) as a fruit it reaped from its transparency and accountability. Though the rehabilitation is to gulp $1.5 billion, the financing deals secured from the Afreximbank, New Telegraph gathered, was $1 billion.

 

The Corporation has, according to Kyari, begun to reap more benefit of its management’s commitment to transparency and accountability with bountiful opportunities of private sector financing for its projects.

 

The publication of the Corporation’s Audited Financial  Statements has significantly improved investors’ confidence in the Corporation and was instrumental to the speedy facilitation of the financing agreement for the rehabilitation of the Port Harcourt Refinery by the African Export Import Bank (Afreximbank).

 

“Since we opted to disclose our financial statements, the speed with which we close financial transactions has been monumental. We now close deals at a quarter of the time we used to them and that is very critical,” the GMD noted.

 

He restated his commitment to work with NEITI and urged the executive secretary and members of his management team to avail themselves of details of the corporation’s operations, especially the monthly engagement with the Federation Accounts Allocation Committee (FAAC) on the NNPC website. Speaking earlier, Orji described NNPC as a key partner of the agency, whose role in the industry stands clearly on the orbit.

 

He commended the GMD for the regular engagements and effective communication between the two organisations, adding that such engagements were necessary to create value.

 

The NEITI boss said there was need to build on the existing relationship with a view to deepening the culture of transparency in the oil and gas industry, stressing that there was no need for confrontation on issues that can be resolved amicably.

 

“When we see an agency like NNPC listening and being able to make themselves available for discussion, we will explore that option, it’s more useful to us than fighting on the pages of newspapers,” he stated. Orji also expressed support for the on-going engagements on the Petroleum Industry Bill

 

 

(PIB), which he said would help close all possible gaps in the proposed legislation.

 

Oil touches the highest point

 

The prices of crude oil surged past $70 per barrel mark during the quarter under review.

 

This, caused by high hope in coronavirus vaccine, highlighted the first three months of 2021 and it has formed the direction in which the next quarter is taking.

 

Organisation of Petroleum Exporting Countries (OPEC) and allied countries said that they have decided to add gradually add back some two million barrels per barrel per day of oil production from May to July, moving cautiously in pace with the recovery of the global economy from the COVID-19.

 

The group is gingerly adding back production that was slashed last year to support prices as demand sagged during the worst of the pandemic recession, which sapped demand for fuel.

 

The group will add back 350,000 barrels per day in May, 350,000 in June, and 400,000 in July. Meanwhile, Saudi Arabia will restore an additional one million barrels per day in cuts that it made on its own.

 

OPEC members, led by Saudi Arabia, and non-members, led by Russia, have been meeting monthly to determine production levels as they face a recovery in demand whose pace has been uncertain. They face conflicting pressures. Raising production before the demand is there risks sending prices lower.

 

But lower production levels deprive national budgets of money at a difficult time. Oil prices traded higher despite the decision to increase production, suggesting markets see more than adequate demand for the added oil.

 

Crude oil traded 4.0 per cent higher at USD 61.56 per barrel in trading on the New York Mercantile Exchange while Brent crude rose 3.5 per cent per barrel to USD 64.96. Saudi Arabia’s Energy Minister, Abdulaziz bin Salman, who has urged careful approach with the recovery still uncertain, said that the cautiousness is still there in the group’s approach.

 

Ahead of the meeting, he had warned that until the evidence of recovery is undeniable, “we should retain this cautious stance … the waves are still tall and the seas remain rough.

 

One reason is the new wave of infections in Europe, which is holding back the economy amid a slow vaccine rollout.” He noted that the reductions would only take effect from May, meaning that the Saudi voluntary cut still had a month to run. He also said that under the agreement, the group could tweak, or adjust production as needed in coming months.

 

Like oil, like electricity

 

On February 17, 2021, the country was thrown into darkness as the national electricity grid collapsed around 1.58pm P. This was confirmed by separate statements issued by elec-

 

tricity distribution companies (DisCos) in the country. Ikeja, Eko, Kaduna, and Yola electricity distribution companies informed their customers of the power outage on their social media handles on Wednesday.

 

The Head, Corporate Communication at Kaduna Electric, Abdulazeez Abdullahi, said the grid collapse affected power supply to Kaduna, Sokoto, Kebbi and Zamfara states.

 

He said: “We regret to inform you that the loss of power supply in our franchise – Kaduna, Sokoto, Kebbi and Zamfara states – is as a result of the collapse of the national grid. Supply shall be restored as soon as the grid is back up.

 

We regret all inconveniences.” Yola Electricity Distribution Company also apologised to its customers as the grid collapse affected residents in Bulumkutu, Kanem and Yerwa areas of Maiduguri. Also, Ikeja DisCo informed its customers of power outage, but was able to restore supply to Alimosho, Ogba and Alausa transmission stations an hour later. It also assured its customers of gradual restoration of power supply.

 

“This is to inform you that we experienced a system collapse at 13:58hrs today and this affected all customers on the IE network,” Ikeja Electric said. “However, we are pleased to confirm that supply has been restored to Alimosho, Ogba and Alausa transmission stations at 14.47hrs.”

 

Eko DisCo said: “There has been a partial system collapse on the national grid interrupting supply to most areas within our network. “We are gathering updates on the situation and will provide them as available.

 

For now, please be assured that all stakeholders are working hard to make sure this is resolved.” The grid, which is being managed by the Transmission Company of Nigeria (TCN), has continuously suffered system collapse over the years due to a lack of spinning reserve that is meant to prevent such occurrences.

 

Last line

 

As tough as events made the first quarter to look, the transparency and accountability, particularly at NNPC, helped shaped the energy sector for good.

 

Through transparency and accountability, the Mele Kyari-led Corporation was able to check growing apprehension and crisis, then caused in the downstream market by the PPPPRA template.

 

It was, in equal measure, able to secure financing for rehabilitation of Port Harcourt refinery from Afreximbank as a fruit of its transparency. Going forward, the Corporation is expected to do even more in the second quarter of the year.

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