Why NNPC Can’t Meet House Demand

Fri, Jul 12, 2013

By publisher

5 MIN READ

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THE House of Representatives has rejected the operational loss of N384.9 billion by the Nigerian National Petroleum Corporation, NNPC, between 2009 and 2011. The lawmakers expressed disbelief when the corporation asked to be exempted from remitting a certain part of its operating surplus to the Consolidated Revenue Fund, CRF, on the basis that it has never made any profit.

The NNPC made N6 trillion between 2009 and 2012 as internally generated revenue IGR, but refused to remit N142 billion to the CRF as demanded by the Fiscal Responsibility Act, FRA, 2007. The NNPC had informed the House of Representatives committee on finance probing federal government agencies’ remittances of surplus to the CRF, that the three years under review have been financially negative for the corporation.

The breakdown, as contained in the corporation’s presentation to the committee showed that crude oil loss to vandalism was 2.316 million barrels in 2010, while 6.391million barrels were stolen in 2011. In 2012, the loss to vandalism was 3.045million barrels. The total loss recorded was 11.753million barrels between 2010 and 2012.

Financially, losses recorded in the NNPC’s upstream, midstream and downstream operations, amounted to N298 billion in 2009, N110.9 billion in 2010 and N37.6 billion in 2011. Benard Otti, group executive director, finance and accounts, NNPC, said that there were indications in the presentation that the NNPC was not in the position to remit any surplus to the CRF. “Quantum of losses is indicative of crude and pipeline vandalism and unrecovered subsidy claims. It seems as if we are only working for thieves and vandals. Our business model defies description,” he said.

What Nigeria Loses to Gas Flaring

THE Department of Petroleum Resources, DPR, has said that Nigeria is losing more than N735 million daily to gas flaring. George Osahon, director, DPR, said that in spite of the country’s massive hydrocarbon endowment, Nigeria was yet to fully benefit from the resources.

According to him, Nigeria’s gas reserves endowment is up to 600 trillion cubic feet, TCF, hence the country is often described as a large gas haven with little oil. “Oil production stands at 2.5 million barrels per day, while gas flared stood at 1.4 billion cubic feet per day. This means that an average of 4.9 million dollars worth of gas is being flared on a daily basis  which translates to about 1.4 billion cubic feet of gas flared daily by the international oil companies,” he said.

Osahon, who was represented by Oliver Okparaojiako, deputy director, DPR, during press briefing in Lagos, said that gas flaring would be curtailed when the Petroleum Industry Bill, PIB, is passed into law. “It will help in the creation of a modern petroleum legal frame work, align with the Nigerian Gas Standard to meet international best practices and enhance transparency,” Osahon said.

He further said that the objective of the PIB was to increase exploration activities and expand reserves and formulate a National Oil and Gas Policy. He said that whenever the PIB is eventually passed into law, it would ensure that gas would be widely used for domestic purposes.

PIB Will Change Nothing If…

THE possibility of passing the Petroleum Industry Bill, PIB into law is being threatened. Benjamin Dikki, director-general, Bureau of Public Enterprises, BPE, said that the bill may not attract investors as expected. Dikki expressed the fears when the Senate committee on privatisation visited his office on its oversight function. He explained that if the bill does not separate policy formulation from operation and regulation, it would run into problems, adding that if the bill does not delineate the powers of the regulator from those of the agencies, no investor will come. Dikki told the lawmakers that this accounted for why investors had not established refineries in Nigeria, despite the profitable nature of the business.

He said that in the present bill “you have regulatory power domiciled in the ministry, domiciled with the regulator and domiciled with other agencies. That is confusion. One, it is more or less not changing the status quo because that is what exists now.”

He noted that as the petroleum industry is being operated presently, it has regulatory powers in the hands of different agencies and the change has not been effected in the bill before the legislature, arguing that it is confusing since it has not changed the present status quo. He, however, advised that if the reforms in the petroleum industry are to commence effectively, government must delineate the roles of the agencies.

“It is more or less not changing the status quo because that is what exists now. Now the DPR has a regulatory power. The NNPC has some regulatory powers and the ministry has some regulatory powers. If these reforms are to take effect, you must separate policy formulation from regulation and operation. Now if you don’t clearly delineate those roles, whatever bill you pass, will run into problems. Now if you look at the PIB, you have regulatory powers domiciled in the ministry, domiciled in the regulator and domiciled in other agencies. That is confusion. One, it is more or less not changing the status quo because that is what exists now,” he said.

Compiled by Anayo Ezugwu 

— Jul. 22, 2013 @ 01:00 GMT