2015: The phenomenal tough year for oil, gas sector
Subsidy intrigues ground downstream operations
AS the clock ticks by the second towards the end of the year 2015, the nation’s oil and gas sector could not but recount the tough moments heralded by the plunging oil prices, even as the subsidy brouhaha has dotted the domestic fuel supply chain.
Just as the international oil companies (IOCs) are groaning under the intense pressure of cash crunch, the national oil company has continued to tangle with the challenges of poor refining capacity, making the outgoing year an unforgettable period for the operators in the sector.
To the petroleum product consumers, the intrigues that trailed the subsidy saga has continued to pose untold hardships as it becomes a herculean task to purchase Premium Motor Spirit (PMS) otherwise known as petrol at the filling stations, or even get it at the official pump price of N87 per litre.
The Nigerian National Petroleum Corporation, (NNPC), in its last report, stated that the four refineries were at zero capacity, assuring that all hands were on deck to revive the ailing facilities.
Despite producing at zero percent capacity, the refineries generated a loss of N1.45 billion in October, falling from N8.84 billion in September. “Total crude processed by the three refineries, in the month of October 2015 was zero. However, 92,332 metric tonnes of unfinished product was processed which translates to a combined yield efficiency of 78.93 per cent,” NNPC stated.
NNPC also blamed its losses on subsidy claims, while in September, it said its bad business profile stemmed from both refinery and subsidy claims.
Meanwhile, the Minister of State for Petroleum Emmanuel Ibe Kachikwu, had said the refineries would be shut down in December, for a whole year, if they fail to meet up with optimum performance by this December.
Kachikwu has promised to bring about fundamental change in Nigeria’s oil sector in three hundred and sixty days.
But the hurdles of passing the Petroleum Industry Bill into law has remained very tough to cross, the industry operators groan under low business profile due to inconsistence government policy and the price pressure from the international scene.
Workers in the petroleum industry have recently criticised the redrafted Petroleum Industry Bill (PIB) packaged by the Federal Government for presentation to the National Assembly for approval early next year.
The new draft titled “Petroleum Industry Governance & Institutional Framework Bill 2015”, is for an Act to provide the governance and institutional framework for the petroleum industry and other related matters.
Reports showed that workers in three regulatory agencies in the petroleum industry, namely Department of Petroleum Resources (DPR), Petroleum Products Pricing Regulatory Agency (PPPRA) and Petroleum Equalization Fund (PEF), have raised concerns about the redrafted Bill not providing adequate accommodation for their interests and other oil workers.
Meanwhile, the International Oil Companies and the host communities who have key interests in the bill are also on the go.
Meanwhile, the petrol scarcity in the country has continued to bite harder, with some marketers selling the product for between N120 and N150 depending on the location.
Infact, the petroleum products importers are now wary of investing their money on importation to guard against what they described as bad debt that may result from the planned subsidy removal.
Although the government has recently paid about N522 billion subsidy claims in the supplementary budget, the marketers are still wary of investing money on the third quarter import programmes due to the perceived policy inconsistency of the Federal Government.
The Federal Government had earlier disclosed plans to remove fuel subsidy next year, which is likely to shoot the pump price from N87 to N97 per litre.
It argued that having spent excess of N1 trillion on fuel subsidy in 2015 alone, the 2016 budget deficit would definitely increase, going by the uncontrollably decline in crude oil prices.
Nigeria is one of the worst hit countries by the plunging crude oil prices. The situation has drastically reduced national earning by N4.5 billion on monthly.
Meanwhile, Brent crude oil prices hit their lowest in more than 11 years on Monday, driven down by a relentless rise in global supply that looks set to outpace demand again next year.
Brent futures fell by as much as two per cent to a low of $36.05 a barrel on Monday, their weakest since July 2004, and were down 49 cents at $36.39.