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Fuel subsidy returns, as NNPC records N50bn shortage

NNPC discovers crude oil, gas in Northern Nigeria
Written by Maritime First
  • Canadian oil hike puts Trudeau climate action in doubt

Fuel subsidy appears to have returned, as the Nigerian National Petroleum Corporation, NNPC, said it recorded ‘under recovery’ of N49.86 billion between January and March 2017.

Under-recovery in downstream petroleum marketing parlance, is when the expected open market price of PMS, which includes the cost of importation and distribution of the commodity, such as marketers’ margins, landing cost and freight cost, is below the approved official retail price at the pump.

Giving a breakdown of the figures, the NNPC in its latest financials, the March 2017 Monthly Financial and Operations Report, stated that it recorded under-recoveries of N37.26 billion, N6.3 billion and N6.3 billion for January, February and March 2017 respectively.

Though the NNPC did not state the amount per litre, the total amount was charged from proceeds of its domestic crude oil and gas sales. Today, with the retail price of Premium Motor Spirit, PMS, at N145 per litre, the NNPC is absorbing the extra cost and is paying the subsidy to itself.

In an analysis of its total receipt for the months, the report disclosed that the NNPC recorded domestic crude oil and gas receipt of N132.202 billion in January 2017, rising to N171.786 billion in February, while in March, it recorded N134.96 billion.

Of the total receipts, the NNPC, after appropriating for the under recovery, crude oil and product losses, and pipeline repairs and management cost, transferred N49.17 billion, N61.29 billion and N46.46 billion for January, February and March 2017 respectively, to Joint Venture Cash Calls, JVCC.

The NNPC, the report also revealed, transferred a total of N89.36 billion, N116.83 billion and N94.83 billion to the Federation Account in January, February and March 2017 respectively, for onward distribution to the three tiers of government. In its financials over the last couple of months, the NNPC stopped appropriating for fuel subsidy in January 2016 up until December 2016.

However, in January 2017, it returned, under a new heading — ‘Under Recovery.’ This might not be unconnected with the increase in the price of crude oil in the international market, from about $20 per barrel in 2015 to about $50 per barrel for most part of 2017.

It can also be attributed to the declining value of the naira and scarcity of foreign exchange, especially the dollar. The increase in the price of crude oil, low value of the naira and difficulties in accessing foreign exchange, had forced many oil marketers to discontinue fuel importation.

In the meantime, oil companies said Tuesday they planned to ramp up their output in Canada, throwing a wrench in Prime Minister Justin Trudeau’s efforts to slash greenhouse gas emissions.

Currently the world’s sixth largest oil producer, Canada expects to hike production by 32 percent to 5.1 million barrels per day by 2030, according to the Canadian Association of Petroleum Producers.

The additional output will come entirely from the Alberta oil sands.

Trudeau was criticized by the energy sector this year for suggesting a need to “phase out” oil sands production, which is Canada’s top single source of CO2 and its fasting growing.

“We need to manage the transition off of our dependence on fossil fuels,” he said in January, two months after approving two new pipelines to the United States and to Pacific tidewater.

Environmental activists have been unrelenting in their dislike of the oil sands and calls to shut down extraction of heavy crude and bitumen, which is harder, more polluting and more expensive to extract than typical light crude.

But Trudeau instead gave a boost to the sector by approving the refurbishment of two existing Canadian pipelines to increase capacity.

US President Donald Trump’s approval of the Keystone XL pipeline connecting the oil sands to Gulf Coast refineries was also welcomed by the industry.

Vanguard with additional report from MSN

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Maritime First