There are strong indications that the Federal Government would start paying N163m daily as fuel subsidy to oil marketers because of the slight increase in crude prices. A survey of markets around the world showed that oil prices, including Nigeria’s Bonny Light 1have increased from about $29 to $40 per barrel, meaning additional cost to refining companies, which pass the high cost to traders.
Consequently, Petroleum Product Pricing Regulatory Agency, PPPRA, which had discouraged government from paying subsidies because of prolonged era of very low crude prices, has advised it to start payment. The agency believed it has become necessary for the President Muhammadu Buhari-led administration to commence subsidy payment from this month. In its April, 2016 template posted over the weekend, the agency put the subsidy at N4.09 per liter.
This amounted to N163m daily as the nation’s estimated daily demand for fuel hovered at 40 million liters. PPPRA puts the nation’s landing cost for fuel, including cost and freight, traders margin, lightering expenses, NPA, NIMASA, jetty/depot thru charge and storage charge at N75.79 per liter. The agency put total sub margins, including administrative charge, marine transport average, bridging fund and margins at N14.30 per liter. It puts total cost, including highway maintenance, government tax, import tax, fuel tax and subtotal taxes at N90.09 per liter. PPPRA also puts the official ex-depot, ex-depot and ex-coastal prices at N71.70, N76.00 and N71.19 and arrived at an under recovery of N4.09 per liter.
Executive Secretary, Major Marketers Association of Nigeria, Mr. Femi Olawore said in a telephone interview yesterday that the subsidy is justified because of the slight increase in oil prices. He said the subsidy would enable marketers to recover cost involved in the process of importing fuel into the country.
It was learnt that government would need to pay more as subsidy, should crude oil prices continue to surge in the global market. However, there was improvement in fuel supply because of the involvement of many stakeholders over the weekend. A visit to Apapa in Lagos showed that many marketers were involved in lifting of fuel to many destinations. The involvement followed an agreement signed with tank seven farm owners for the storage and lifting of imported fuel few days ago.
The tank farm owners include Capital Oil, NIPCO, MRS, Folawiyo and Hen Petroleum among others. The tank farm owners were chosen because they have the capacities to store and facilitate lifting to filling stations.
In a related development, the Federal Government has commenced the release of Premium Motor Spirit, PMS, to Independent Petroleum Marketers Association of Nigeria, IPMAN. Information on the release was contained in a statement issued by the Secretary, IPMAN Reconciliation Committee, Mr Lawson Ngoa, yesterday in Abuja. It would be recalled that Minister of State for Petroleum Resources, Dr Ibe kachikwu, constituted a 14-man committee to resolve IPMAN crisis and to ensure end to fuel scarcity in the country.
The statement quoted the committee secretary as saying the release of the product was part of efforts to settle the 7,000 pending loading tickets of IPMAN. He stated that some marketers had confirmed that they started loading the products from some depots in Lagos as a result of the efforts of the committee. He noted that IPMAN controlled over 80 per cent of the petroleum products’ retail outlets in the country and that members were not getting products from the Nigerian National Petroleum Corporation, NNPC, due to internal leadership crisis since the last two years.
Ngoa said the committee had taken steps to ensure that products were available all over the country. He thanked Nigerians for the patience and understanding during the difficult period and assured that with the support of the minister of petroleum resources and his team, the scarcity would soon be over. He further called on stakeholders to shun unnecessary rancor and join hands with the committee to restore peace and normalcy in petroleum distribution.
Meanwhile, the consolidated revenue of Nigeria’s three refineries decreased by N14.17bn, down from N22.41bn generated in January to N8.24bn in February, the latest financial and operations report of NNPC indicated. It also showed the amount of crude oil processed by the refineries slumped by 224,342 metric tonnes between January and February 2016, just as the combined operating profit of the three refineries decreased by N4.83bn during the period under review. Nigeria’s refineries include Warri Refining and Petrochemical Company; WRPC, Kaduna Refining and Petrochemical Company, KRPC, and Port Harcourt Refining Company, PHRC. A study of the individual performance of the refineries showed that the revenue of WRPC fell drastically from about N5.3bn recorded in January to as low as N2.43m in February this year.
WRPC posted an operating loss of N967.28m at the close of business in February, after recording an operating profit of N4.39bn in the preceding month. For KRPC, the facility’s revenue also decreased from N4.24bn in January to N1.03bn in February, as it recorded operating losses of N2.12bn and N1.51bn in January and February, respectively. Although the third refinery, PHRC, did not record any operating loss at the close of business in the review period, it posted a decrease in revenue and net cash flow in February. Specifically, PHRC recorded a drop in revenue from N12.86bn generated in January, down to N7.21bn in February, while its net cash flow dropped from N3.4bn to N3.32bn.
Their combined operating profit also dropped to N839.75m in February, as against the N5.67bn profit posted in the first month of 2016. It was also reported that the processing of crude oil by Nigeria’s refineries fell by 87.4 per cent in February when compared to the volume of crude refined by the three facilities in the preceding month. In January this year, the total crude processed by the refineries was 256,676 metric tonnes, but this dropped by 224,342MT or 87.4 per cent to 32,352MT in February 2016. NNPC attributed the poor performance of the refineries to crude pipeline vandalism.
It had repeatedly complained about the menace perpetuated by pipelines vandals. Similarly, operators in the oil and gas industry, as well as those in the power sector, on several occasions, had blamed the abysmal performances of power plants and refineries on vandalism of both gas and crude oil installations by miscreants.
Executive Director, Association of National Electricity Distributors, the umbrella body for power distribution companies in the country, Sunday Oduntan, said recently that part of the reasons Nigerians experienced poor power supply and petrol scarcity was the vandalism of pipelines. Although Nigerian refineries produce less than half of the about 40 million litres of petrol consumed daily across the country, their meagre production is often used to meet the needs in a few cities. Despite the poor performance of the refineries, Group Executive Director/Chief Operations Officer, NNPC (Downstream), Mr. Henry Ikem-Obih, said the facilities would commence production this April.
He said: “Most of the work being done at the refineries is on site, that is, just getting them ready to start cracking crude so that they too can start contributing to the amount of fuel we have to distribute across Nigeria. We have to ensure that within the month of April, we have some local refineries contributing to the amount of fuel we have to distribute across the country.
“The work will be across the three locations and they are all at various stages of start-up. And in terms of moving them to their optimal yield, there is a lot of work going on and we are hoping that within this month (April), we will also have locally produced fuel as part of what people are buying at the pumps.”