Govt’s JV funding gulps N833.8b
The Federal Government’s Joint Venture cash calls funding between March 2015 to February 2016 gulped about $4.156 billion (about N833.8 billion) for the period.
The Nigerian National Petroleum Corporation (NNPC) said in its current monthly financial report that JV funding, which is a first line charge to Federation Account, has gulped more than 95.74 per cent of the proceeds from oil and gas exports.
It said that the 2015 approved budget requires monthly funding of about $615.8 million, adding that NNPC was therefore mandated to sweep all the export receipt to JV cash call funding, implying a zero remittance to federation account.
NNPC said that in order to introduce and entrench transparency into the ‘‘crude oil for product transaction by the corporation and in line with global best practices, it has switched to Direct-Sale-Direct-Purchase arrangement to replace offshore processing and crude swap arrangement, which hitherto resulted into huge losses (about 30 per cent loss per cargo), as crude oil was exchanged for petroleum products through third party traders at a pre-determined yield pattern.
“It noted that the new arrangement, which commenced last month, will ensure elimination of all the cost elements of middlemen and give NNPC the latitude to take control of sale and purchase of the crude oil transaction with its partners.
The arrangement is estimated to generate saving of approximately $80 million per month and guarantee products security supply.
To end the country’s over dependence on fuel importation, the corporation said that there is need to carry out a holistic reform of the refineries in order to put the assets back on track of profitability.
It stated: “A 90-day programme is currently ongoing to reassess/resuscitate the refineries. Refinery capacity is below commercial threshold due to prolonged Turn-Around-Maintenance (TAM) issues and pipeline vandalism and products losses has continued to cost NNPC and the nation huge amount of money.
“The recurrent fuel scarcity has been a big challenge to NNPC. The scarcity is the resultant effect of recent increase in pipelines vandalism and inadequate foreign exchange for importation. This hostile business environment forces oil majors to completely pull out from the importation business which means NNPC, despite its logistic challenges, must bridge the supply gap created by their sudden exit”.
It noted that the incessant vandalism and products theft have continued to destroy value and put NNPC at disadvantaged competitive position.
Reduction in vandalism, it noted will indeed unlock several industry upsides which include improved upstream oil production due to reduced pipeline disruptions, improved refinery utilization due to increased crude oil feed from restored pipelines, and reduction of crude/product losses.