NNPC Records $1.2bn Shortfall in Priority Projects Funding

The Nigerian National Petroleum Corporation (NNPC) recorded a total shortfall of $1.2 billion in the financing of its priority projects between January and May 2021, latest data from the national oil company has shown.

This is coming as the Senate’s decision to award three per cent to oil-bearing communities may not be the only controversial clause in the Petroleum Industry Bill (PIB).

The Senate in the recently passed PIB, has also restricted the importation of all petroleum products into the country to only players that have local refining capacity.

The NNPC document showed that the entire appropriation for ‘calendarised’ cost recovery and funding for priority projects was $6.43 billion, which was further segmented into $536 million monthly.

According to the corporation, of the $2.680 billion that was supposed to be released for the projects as of May this year, only $1.468 billion financing had been made available, leaving a deficit of $1.211 billion.

In terms of actual functional dollar funding level, a breakdown of the releases showed that in January, $276.4 million was spent on cost recovery and ongoing projects, in February it was $252.9 million, while it was $307.65 million in March.

In the same vein, for April, out of the monthly appropriation of $536 million, $239.2 million was spent, while in May, it increased to $392 million, the highest in the period under consideration.

The corporation listed the federally funded upstream projects as gas infrastructure development, Brass LNG, crude oil pre-export inspection agency expenses, frontier exploration services as well as the Excravos Gas-to-Liquid (EGTL) operating expenses.

However, it noted that the funding excluded pipelines security and maintenance, which gulped N2.263 billion in May alone.

THISDAY had earlier exclusively reported that the corporation had resumed the monthly funding for its frontier exploration services which did not receive any budget in April, but gulped N3.216 billion in May, having received N1.964 billion in January, N1.920 billion in February, and N2.255 billion in March.

Added to that, in May, the gas infrastructure development was funded to the tune of N3.919 billion and the crude oil pre-export inspection agency expenses was N659 million.

In the month under review, funding for renewables was N196 million, while the Nigeria-Morocco pipeline which was not funded in April, received attention to the tune of N8.33 million in May.

Meanwhile, the Senate in the PIB has restricted petroleum products importation to only operators who own and run local refineries.

The joint PIB harmonisation committee of the National Assembly is expected to meet from today to address some of the controversies generated by the bill, chief among them are the three per cent of the operating expenditure of oil companies that should go to the host communities and the 30 per cent NNPC’s profit designated for exploration in frontier basins.

THISDAY gathered that while the PIB expectedly removed price controls on petroleum products in section 205, the Senate version of the bill has a clause that constrains market competition by restricting the importation of products to only players with local refining capacity.

The controversial provision in the Senate’s version contained in Section 317(8) of the PIB, clearly counters the provision of 205(1) of the bill, which states thus: “Subject to the provisions of this section, from the effective date, wholesale and retail prices of petroleum products shall be based on an unrestricted free market pricing conditions.”

The inserted section 317(8) in the Senate bill stated that the authority, that is, the new agency to oversee the activities of downstream and midstream sectors of the oil and gas industry shall apply the Backward Integration Policy in the downstream petroleum sector to encourage investment in local refining.

The Senate’s version also stated that, to support the provision above, licence to import any product shortfalls shall be assigned only to companies with active local refining licences.

The upper legislative chamber also stated that import volume to be allocated between participants based on their respective production in the preceding quarter, and that such import to be done under the Nigerian National Petroleum Company (NNPC) Limited Direct Sale/Direct Purchase (DSDP) scheme.

The Senate further in its own version of the PIB, equally stipulated that, to safeguard the health of Nigerians, imported petroleum products shall conform to the Afri-5 specification (50ppm sulphur) as per the Economic Community of West African States (ECOWAS) declaration of February 2020 on the adoption of the Afri-Fuels Roadmap.

Reacting to the controversial provision, an industry source, who pleaded anonymity, said such a provision in the Senate’s version of the PIB, which restricted the importation of refined products to only players with local refining capacity would create a monopoly in a price deregulated environment and destroy the Nigerian downstream petroleum industry.

“The provisions above will create a monopoly in a deregulated price environment thereby destroying the Nigerian downstream industry as we know it today. It restricts the importation of all petroleum products, including petrol, diesel, aviation fuel, lubricants, base oil – products that are already deregulated, to only players with local refining capacity,” the source said.

He added that only the NNPC currently has domestic refining capacity for petrol and will be the only importer.

He maintained that such provision takes the industry back and could not have been the intention of the bill.

According to the source, “Moving from a state-owned monopoly in a price regulated market to a duopoly in a price deregulated market is not what Nigeria needs now as it takes the industry backward and exposes Nigerians to exploitation and further hardship. This, in my humble view, is not reformatory.

“Rather than seek to protect refiners, we should rather seek to protect the consumers by liberalising and expanding petroleum product supply sources. That is the only way prices will be “market-determined” and consumers made to pay fair value for the products they buy.”

Emmanuel Addeh in Abuja and Peter Uzoho in Lagos

Follow us on: