21 August 2016, Abuja- After reporting a marginal profit of N273.74 million in May for the first time in about 15 years, the Nigerian National Petroleum Corporation may have returned to its old operational loss-making given its outing in June, reports Chineme Okafor
For the Nigerian National Petroleum Corporation (NNPC), making profit from its operations may have to take a while. NNPC in the month of May reported an operational profit of N273.74 million, indicating that it may have finally turned the corners and now on the profit making path, but it soon relapsed and reported a trade deficit of N26.51 billion from its operations in June, just a month after.
When in May it reported the N273.74 million operating profit as against its operating loss of N19.43 billion in April, the corporation attributed the feat to improved cost efficiency at its corporate headquarters and the operational performance of its subsidiary, the Petroleum Products Marketing Company (PPMC).
According to the state oil firm, “PPMC recorded a net gain of N17.69 billion as against the net loss of N6.91 billion in April, 2016 following complete stoppage of commercially unfavourable swaps and offshore processing agreements (OPAs).
It added that, “Direct-Sale and Direct-Purchase has now replaced the previous regime.”
But notwithstanding these improvements, the corporation explained that renewed and vigorous vandalism of pipelines in the Niger Delta means that crude oil productions were shut-in and cargoes deferred, thus denying revenues streams accruing to its other subsidiary, the Nigerian Petroleum Development Company (NPDC) and the federation.
However, in the corporation’s June 2016 financial report, some of the factors which propelled the May profit level appeared to have weakened – the PPMC posted a 13.30 per cent decline in its product sales, pipeline vandalism increased with about 261 breakage points, while its refineries still operated at deficit levels.
“This 11th publication of NNPC monthly financial and operations report indicate a deficit of N26.51 billion as against trading surplus of N274 million reported in May, 2016,” said the corporation in the June report.
It further explained: “This trading surplus does not represent net profit as there are other expenses that should ordinarily have been captured. The deficit in the month of June 2016 was majorly due to decrease in revenue generation as a result of decline in PPMC petroleum products sales by 13.30 per cent or N14.9 billion and increase in products distribution costs.
“Also June 2016 operations witnessed the major impact of incessant vandalism, during the month more than 261 vandalised points were recorded. In NPDC, a substantial portion of crude oil sales for the month estimated to be i(TAM) issues; pipeline vandalism; and resultant products losses.
The three refineries in Port Harcourt, Kaduna and Warri, it stated, had a combined operational deficit of N4.69 billion.
Further on their economics, the combined value of output by the three refineries (at import parity price) for the month of June 2016 amounted to N24.68 billion while the associated crude plus freight cost was N22.25 billion, giving a deficit of N4.69billion after considering their overhead of N7.12billion.
This clearly showed that the refineries do not operate on commercially viable terms as the report indicated that they have for a long time largely operated on that level.
“Local refining capacity has remained below commercial threshold due to prolonged Turn Around Maintenance (TAM) issues, pipeline vandalism and resultant losses. However, the ongoing refineries revamp is improving the situation.
“The combined value of output by the three refineries (at import parity price) for the month of June 2016 amounted to N24.68 billion while the associated crude plus freight cost was N22.25 billion, giving a deficit of N4.69 billion after considering overhead of N7.12billion,” stated the report.
Another loss-making point for the corporation in June was on its downstream operations where a total value of N101.96 billion was collected as sales revenue for white products sold by PPMC in the month of June 2016 compared with N115.66 billion collected in the prior month of May 2016.
The report however indicated that total revenues generated from the sales of white products for the period July 2015 to June 2016, about a year was N957.78 billion with Premium Motor Spirit (PMS) contributing about 89.19 per cent of the revenues collected with a value of N854.20 billion.
For the month under consideration, NNPC said 860.46 million litres of white product was distributed and sold by PPMC as against the 1,256.07 million litres it had in the month of May 2016. This, it noted, comprised of 761.04 million litres of PMS, 66.31 million litres of kerosene and 33.11 million litres of diesel.
In the upstream, the report explained that NPDC’s substantial portion of estimated crude oil sales for the month worth over N20 billion could not be realised due to force majeure declared by Shell Petroleum Development Company as a result of vandalised 48-inch Forcados export line. This development has lasted for a while, leaving the NPDC with such huge shortfall in revenue.
Similarly, gas supply to power plants by the corporation dropped to 327 million standard cubic feet per day (mmscfd) from 446mmscfd, and 1,483 megawatts (MW) as against 2,017MW respectively. This also represents a drop in revenue from gas supplies.
- This Day