An analysis of the financials of the Nigerian National Petroleum Corporation has revealed that four strategic business units (SBUs) and the corporate headquarters of the corporation collectively recorded a trading shortfall totaling N270.386 billion between January and November last year, causing NNPC to record a huge loss in its operations in the 11-month period.
The SBUs, namely, Warri and Kaduna Refineries, Pipeline and Product Marketing Company (PPMC), and NNPC Ventures, had together with the corporate headquarters (CHQ) jacked up NNPC’s financial expenditures within the period to overwhelm its earnings of N194.7 billion from its other subsidiaries, and then left it with a year-to-date (YTD) trading deficit of N75.636 billion.
The figures were contained in the latest monthly financial and operations report of the NNPC for the month of November. THISDAY also cross-checked the figures with its collation and analysis of the data in NNPC’s past reports.
According to the November report, the likes of the Nigerian Petroleum Development Company (NPDC), Port Harcourt Refinery, Integrated Data Services Limited (IDSL), NNPC Retail, National Engineering and Technical Company (NETCO) and Nigerian Gas Pipeline Transport Company (NGPTC) made YTD trading surpluses of N88.4 billion, N25.6 billion, N7.4 billion, N2.5 billion, N5.16 billion, and N65.45 billion respectively.
But NNPC Ventures which is in charge of NNPC Medical Services Limited, Research and Development Division, Renewable Energy Division, NNPC Properties Limited, and NNPC Shipping (NIDAS and NIKORMA) amongst others recorded a YTD trading deficit of N13.48 billion. It also said that the others on NNPC’s losing points for the period were Warri Refinery – N19.99 billion, Kaduna Refinery – N27.36 billion, PPMC/Marine Logistics/Nigerian Petroleum Storage Company (NPSC) – N91.46 billion, and CHQ – N118.07 billion.
The reports revealed that in November, NNPC posted a trading deficit of N6.79 billion; in October, it posted N0.41 billion; in September, it posted N2.81 billion, and in August, N5.74 billion.
In July, NNPC had a deficit of N11.87 billion against its books, and N5.19 billion in June, as well as N3.55 billion in May. Just as it recorded a loss of N5.27 billion in April. Similarly, in March, the corporation had a loss figure of N5.62 billion, N14.12 billion in February, and then N14.26 billion, to bring the corporation’s trading deficits for the period to N75.636 billion.
On one of the bleeding spots – the refineries, THISDAY checks on the reports revealed that on the average, the refineries recorded a 17.36 per cent capacity utilisation, with Kaduna refinery being the most unprofitable refining entity of the NNPC.
According to the reports, in January, the refineries recorded their highest capacity utilisation capacity of 36.73 per cent, after which it began to drop to 29.06 per cent in February, 13.36 per cent in March, and then picked up to 24.59 per cent in April. They subsequently began to drop again to 23.09 per cent in May, 12.73 per cent in June, 11.94 per cent in July, 9.50 per cent in August, 6.34 per cent in September, and then picked up to 17.63 per cent in October before dropping to 5.92 per cent in November – its lowest within the period.
THISDAY checks also disclosed that between June and November 2017, no crude oil was processed in the Kaduna refinery.
To buttress this, the November report stated: “For the month of November 2017, the three refineries produced 55,187 metric tonnes (MT) of finished petroleum products and 39,562MT of intermediate products out of 107,748MT of crude processed at a combined capacity utilisation of 5.92 per cent compared to 17.63 per cent combined capacity utilisation achieved in the month of October 2017. The decrease in operational performance recorded was attributed to decline in crude processed by WRPC while PHRC and KRPC remain shut down during the month under review.”
“The corporation has been adopting a merchant plant refineries business model since January 2017. The model takes cognisance of the products’ worth and crude costs. The combined value of output by the three refineries (at import parity price) for the month of November 2017 amounted to N13.08 billion, while the associated crude plus freight costs and operational expenses were N15.21 billion and N9.02 billion respectively. This resulted to an operating deficit of N11.15 billion by the refineries,” it added.
The report further explained that because the three refineries were only able to provide the country 1.351 billion litres of locally refined petrol and 641 million litres of diesel, the corporation had to import 11.826 billion litres of petrol and 63.73 million litres of diesel through its Direct Sales Direct Purchase (DSDP) programme between January and November 2017.
“In November 2017, a total 90 pipeline points were vandalised, 41 pipeline points failed to be welded while 6 pipeline points were either ruptured or clamped. Thus, 136 pipeline points were destroyed for the month under review. PHC-Aba and Aba- Enugu pipeline segment accounted for almost 67 per cent of the affected pipeline points,” it stated on the losses made from downstream operations.
Recently, analysts at FBN Quest Capital Limited, a subsidiary of FBN Holdings Plc, expressed doubts that the latest attempts by the NNPC to undertake a fresh Turnaround Maintenance (TAM) on the refineries would eventually come good and help Nigeria address her challenges with protracted scarcity of petrol.
The analysts stated in a periodic report – Good Morning Nigeria, which THISDAY obtained, that the NNPC should consider allowing its refineries to ‘wither away’ because new refineries like the 650,000 barrels per day (bpd) capacity Dangote refinery and others scheduled to come on stream soon would be the game changers.
They also pointed out that the NNPC refineries were old and past TAMs on them had not been successful to suggest that the latest effort would be.
The analysts had in their submission said: “The fuel shortages highlight Nigeria’s failure to refine domestically the petroleum products it requires for its own consumption. The scarcity has been attributed variously to: flaws in distribution, upward movement in the international price necessitating subsidy payments under another name (absorbed by the NNPC), hoarding, and the fact that the set retail price of N145/litre for premium motor spirit (PMS, or gasoline/petrol) is far below that in the countries of the sub-region.
“The FGN’s response to the periodic shortages is to commit public monies to another programme of turnaround maintenance (TAM) for the corporation’s refineries, costed at US$1.1billion and said to be achievable over 18 months. An earlier investment in TAM in 2013 made little, if any impact. In September 2017 the refineries achieved a combined capacity utilisation rate of 6.1 per cent compared with 9.5 per cent the previous month.”
They further explained: “We all know that the combined capacity amounts to 445,000b/d crude but very few of us can say when, if ever, the refineries produced at this level. Such low rates tend to result in losses. According to the NNPC’s financial and operations report for September, the refinery companies have reported operating losses for four of the past 12 months.”
“We cannot say for sure that the latest programme of TAM will not be a success. However, the age of the refineries suggests not: Port Harcourt (commissioned in 1965), Warri (1978) and Kaduna (1980).
“Our message is “Local refining, the obvious solution”. By local, we mean private sector. The corporation’s refineries should be allowed to wither away in our view. The game-changer is the Dangote refinery under construction in Lagos State, which over time is scheduled to process 650,000b/d crude,” they posited.