NNPC Posts N27bn Deficit One Month after Reporting Surplus

The Nigerian National Petroleum Corporation (NNPC) has reported a deficit of N26.51 billion from its operations in June, just one month after posting a record trading surplus of N274 million in May.

The June 2016 monthly operations and financial report of the corporation which it released last Sunday indicated that it had failed to continue on the positive operational trend it reported in May because of a 13.30 per cent decline in the sales of its subsidiary downstream company – the Pipeline and Products Marketing Company (PPMC) among other issues.

Other operational issues which NNPC said influenced its deficit record in the month of Juneincluded reported huge incidents of vandalism at up to 261 points of its pipeline. It said in the report which THISDAY obtained in Abuja that this compounded its operational deficits.

It also stated that a substantial portion of crude oil sales of its exploration and production subsidiary – the Nigerian Petroleum Development Company (NPDC), for the month estimated to be in excess of the reported deficit could also not be realised due to ‘force majeure’ declared by Shell Petroleum Development Company (SPDC) following the break on 48-inch Forcados export line.

According to it, local refining capacity remained below commercial threshold within the month due to prolonged Turn Around Maintenance (TAM) issues, pipeline vandalism, and resultant losses, adding that the three refineries in Port Harcourt; Kaduna; and Warri had a combined operational deficit of N4.69 billion.

“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.

“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 in excess of the deficit could not be realised due to force majeure declared by SPDC as a result of vandalised 48-inch Forcados export line,” said the report.

According to it: “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. This deficit for the month was primarily due to irregular crude oil supply and impact of pipeline vandalism.”

It further explained: “In May 2016, crude oil production in Nigeria plummeted to 1.69mb/d following uptick in pipeline vandalism in the volatile Niger-Delta region. Subsisting force majeure at Forcados Terminal means that about 380,000bpd remains shut-in.

“Cargoes were deferred until repairs are completed. Also, the nation has lost over 1,500 megawatts to the damage at Forcados which accounted for 40 to 50 per cent of gas production. Furthermore, force majeure was declared on May 10, 2016, for repair works on Nembe Creek Trunk Line (NCTL) and the resultant shut-in of about 275,000bpd. Other far-reaching incidents include production shut-in at Usan, Que Iboe and Brass Terminals.”

It noted that: “In the downstream sector, introduction of new price regime, especially for Petrol has continued to incentivise the market players to import petrol and relieve NNPC the responsibility of supplying more than 90 per cent of the petroleum products.

“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.”