The Pacesetter Frontier Magazine

Tag: petrol

  • Despite issues, Nigeria ends 2022 as Africa’s largest oil producer

    Despite issues, Nigeria ends 2022 as Africa’s largest oil producer

    The Organisation of Petroleum Exporting Countries (OPEC) has revealed that Nigeria ended 2022 as Africa’s largest oil producer.

    According to OPEC, Nigeria in the month of December recorded a four percent increase in oil production to 1.235 million barrels per day, from 1.186 mb/d in November 2022.

    While on Year-on-Year, YoY performance, the nation’s oil output also increased to 1.235 mb/d in December 2022, from 1.197 mb/d in the corresponding period of 2021.

    OPEC disclosed this in its January 2023 Monthly Oil Market Report, MOMR obtained by Ripples Nigeria from its website.

    In 2022, Nigeria’s oil production fell heavily amid reports of increased oil theft. In fact, NNPC reported that it lost 95 percent of oil production to thieves at Bonny Terminal, Rivers State.

    While this happened other oil producers in Africa and other parts of the world reported large windfall from oil sales.

    However, OPEC in its report noted that Nigeria succeeded in beating Angola, its close rival that produced 1.088 mb/d in December 2022, to become the leading African producer while Equatorial Guinea came last with 54,000 bp/d.

    “Nigeria did not meet its 1.8 mb/d OPEC quota during the period even though the nation has the capacity to produce an additional 300,000 – 400,000 bpd of condensate,” OPEC stated.

    (Ripples)

  • N4trn bill: How petrol subsidy grew by 349.42% in 3 years

    Petrol subsidy payments grew by 349.42 per cent from N350 billion in 2019 to N1.573 trillion in 2021, propelled by the rising price of crude oil in the international market and the falling value of the Naira.

    The cost of subsidizing the product in 2020 was N450 billion. In 2022 alone, the total cost of subsidy in January and February was N396.72 billion, the latest data from the Nigerian National Petroleum Corporation, NNPC, has shown.

    Federal legislators approved the sum of N4 trillion to be spent on petrol subsidies in 2022.

    The Federal Government had previously disclosed through the Minister of Information, Alhaji Lai Mohammed, that it spent N10.413 trillion on fuel subsidies between 2006 and 2019.

    With Nigeria importing all its petrol from refineries abroad, the low value of the Naira has had a significant impact on the pricing of the product in-country.

    None of the three government-owned refineries is currently operational, despite huge investments in their Turn Around Maintenance (TAM) by the government.

    The current administration has failed on its promise to make the refineries operational within a short period of assuming office.

    Deregulation on hold

    A plan by the government to deregulate the sector, following enactment of the Petroleum Industry Act (2021) that prescribes a free market for the downstream sector of the petroleum industry has been abandoned, with the government seeking and obtaining budgetary approval to spend N4 trillion on petrol subsidy.

    The annual expenditures on petrol subsidy under the current administration contrast very sharply when compared with fuel subsidy under the government of former President Goodluck Jonathan, which was accused of fuel subsidy fraud.

    According to data published by the defunct Petroleum Products Pricing Regulatory Agency, PPPRA, the Federal Government paid a total of N2,105.92 trillion in 2011, an increase of N1,437.84 trillion from the 2010 payment.

    It also noted that in 2012, N1.35 trillion was paid as a subsidy, the highest within the period under review.

    “A total of N 1, 316 trillion in 2013, N1,217 trillion in 2014 and N653.51 billion in 2015 was paid as subsidy claims,” it added.

    It noted that the NNPC since 2016, had been the sole importer of the product to the country.

    Determined to curb fiscal leakages associated with the fuel subsidy regime, President Jonathan had announced deregulation of the downstream sub-sector, with a view to eliminating fuel subsidy.

    However, incumbent President Mohammadu Buhari, and other opposition party leaders, under the Save Nigeria Group, organised nationwide protests to stop Jonathan from going ahead with the decision.

    Other notable Nigerians that led the mass protest included Pastor Tunde Bakare, who was Buhari’s running mate in Congress of Progressive Change (CPC) and Governor Nasir el-Rufai of Kaduna State.

    The protests forced Jonathan to rescind the policy. When Buhari took over power in 2015, his government initially refused to pay fuel importers for products imported into the country.

    It took a fuel crisis, characterised by long queues, to force the government to pay the debts, as the marketers insisted that they would not import more products unless their earlier bills were settled.

    The Buhari administration was to later come to terms with the realities of the rot in the industry.

    President Buhari made himself Minister of Petroleum and by so doing, has directly managed the petroleum industry. However, he has failed to make any policy changes.

    ‘Global price of crude determines petrol price here’

    Speaking in a telephone interview from Ibadan, Director, Centre for Petroleum, Energy Economics and Law, University of Ibadan, Professor Adeola Adenikinju said the price of petrol is determined by the international price of crude and cost of foreign exchange.

    Adenikinju noted that the government’s decision to continue subsidy payment was more political than economic, given the revenue challenges facing governments at all levels.

    He pointed out that by retaining the petrol subsidy, the government would find it difficult to meet other commitments.

    According to him, “It is a political decision, not an economic one. Economically, we know that subsidies have been very costly to the country and this is going to have serious implications on government revenue, particularly the state governments.

    “The states are going to feel it more because they depend heavily on revenue from the Federation Account and secondly, they do not have the leverage to borrow like the Federal Government.

    “If it goes ahead, the states are going to be hard-hit financially and it is going to be extremely difficult for them to meet all their commitments in terms of payment of salaries and keeping their obligations to pensioners”.

    He noted that he would not be surprised later in the year if the states and local governments are unable to meet their commitments.

    The university teacher also pointed out that the decision went beyond just revenue but would also have implications for the oil industry.

    “It is also at the heart of the deregulation of the downstream sector. It will have implications for the implementation of the Petroleum Industry Act 2021 significantly because the decision on pricing is about market forces being at play to allow investment decisions to be made.

    “This is going to hinder investment, so we can say that until the issue is resolved there is not going to be much private investment flow to the downstream sector.”

    He blamed the middle class and the elite, who he said are the main beneficiaries of the petrol subsidy regime for mounting pressure on the government to retain the policy.

    “Once you touch the middle class, the elite, they react. The argument is about the protection of the privileges of the middle class to which the labour unions belong. This is because kerosene was deregulated, nothing happened, diesel was deregulated, nothing also happened but once you touch something that affects the middle class, it becomes difficult to implement because they have access to the media”, he added.

    (Vanguard)

  • FG raises Petroleum Products freight rate by 25 percent.

     

    The Federal Government has approved a 25 percent increase in freight rate for petroleum products, raising it from N9.5 per litre to N11.87/litre, the National President of the Nigerian Association of Road Transport Owners (NARTO), Alhaji Yusuf Othman has disclosed.

    Alhaji Othman who disclosed this at NARTO’s 22 Annual General Meeting in Abuja, yesterday, however lamented that the benefit from the increase has been wiped out by the hike in the price of diesel to N635 per litre.

    He said with the rise in the cost of diesel due to the Russian invasion of Ukraine, the group may have to go back to the Federal Government for another review.

    He noted that the “price of diesel is impacting on our business, not only us but all activities in Nigeria. This is because as at today fuel is imported into Nigeria and it is usually at the international price and everybody in Nigeria knows that the international price is now affected by the current war between Ukraine and Russia”.

    While thanking the government for approving the increase, he pointed out that “the increase would not have been noticed due to the price of diesel but we know that this is temporary because of the war. So we are positive that in the nearest future, the increase will impact on our business. But if things continue to go up as it is now, we will have no option than to go back to the government”.

    He said NARTO was in discussion with tanker divers to raise their salaries and allowances in order to create a good working environment in the sector.

    He admitted that the NARTO members were operating under difficult business environment in the country.

    “We are aware of the difficult conditions our members are operating in. We are doing everything possible to ease these difficulties. To this end, I am pleased to inform you that 25 percent increase in freight rate has been approved by the government. Though this might not be adequate but it is the best we can get under the existing PMS (premium motor spirit) Pricing Template of N165 per litre.

    “Bad roads have continued to be a stumbling block towards the safe and efficient movement of goods, services, and passengers throughout the country. Many reports have been received of delays in meeting up critical delivery deadlines, vehicle breakdowns and accidents due to bad road conditions throughout the country”.

    Away from the transportation of petroleum products, Alhaji Othman disclosed that with the collaboration of the Central Bank of Nigeria (CBN), NARTO members in past one year successfully freighted 2,000 tons of fertilizers in 2020 from Lagos to different parts of the country, 14,000 tons of wheat seeds in 2021 from Lagos to different parts of the country and 41,431.60 tons of fertilizers in 2022 from Port Harcourt to different parts of the country.

    He expressed satisfaction at the level of N621 billion NNPC Limited road intervention fund implementation, stressing that work has progressed well on the designated roads.

    Earlier, the Minister of Works and Housing, Babatunde Fashola assured the road transport owners that the government was working hard to ensure that the roads were put in good condition before the onset of the raining season.

    On his part, the Chief Executive of Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Farouk Ahmed said: “The Authority is not unaware of the various challenges currently confronting the Petroleum Industry specifically with regards to Petroleum Products haulage and transportation, and we believe they are surmountable with dedication and selfless services from all key stakeholders”.

    Mr. Ahmed was represented by Executive Director, Distributions System, Storage and Retail Infrastructure, Ogbugo Ukoha.

     

    (Vanguard)

  • Petrol Subsidy Morass

     

    THE All Progressives Congress, APC, Federal Government must accept the blame for the fact that after six years in power, we are still deeply mired in our intractable petrol subsidy regime.

     

    As the leader of the then opposition party, Muhammadu Buhari had intensely argued that there was no fuel subsidy; that the subsidy which the then Peoples Democratic Party, PDP, government was paying was used to oil the wheel of corruption. He promised to stop the subsidy and even reduce the pump price of petrol if elected.

     

    Many Nigerians believed Buhari because as a former Oil Minister who oversaw the establishment of the Nigerian National Petroleum Corporation, NNPC, he was seen as an expert of sorts. He also assumed the portfolio of Petroleum Resources Minister, a post he still occupies.

     

    It will be recalled that the APC had led a massive protest which ended former President Goodluck Jonathan’s plan to remove petrol subsidy to save one trillion naira in 2012 alone.

    Shockingly, Buhari continued subsidy payments until May 2016 when it was announced that the Federal Government had withdrawn the policy, thus jerking petrol price to N145 per litre. Since then, it has been confusion galore, as the Federal Government keeps paying huge subsidies even after several announcements of “full deregulation”.

     

    The Country Director of the World Bank in Nigeria, Shubham Chaudhury, recently disclosed that Nigeria is on track to spend almost N3trn on subsidies this year. The Federal Government itself says it will continue to pay the subsidy till June next year.

     

    Spending over seven out of its maximum eight years in power nursing this massive drain on our resources amounts to failure. Unless the regime begins now to align policies towards minimising the social pains of complete and genuine deregulation, we will be back to January 1, 2012 when the APC led out Nigerians against subsidy removal.

     

    Measures that must be taken include helping the Dangote Refineries meet the December 2021 for full commencement of operations. As a critical shareholder, the Federal Government has a duty to do this.

     

    The Federal Government must extend the same gesture to all upcoming private refineries to ensure adequate servicing of their immediate vicinities. More importantly, the revival of all viable public refineries must be completed before June next year.

     

    We should also resuscitate the practice of supplying crude at subsidised price to all local refiners to enable them sell at affordable prices to the Nigerian market. Full downstream deregulation is the desired final destination for the Nigerian economy.

     

    But it must be done with the social safety net of subsidising local refining for the domestic market. If Buhari plans to withdraw subsidy in June 2022 without providing these palliatives just because he is on his way out, he risks getting his party  voted out of power.

     

     

     

     

    Source: www.vanguardngr.com­

  • Crude Oil : Price of Oil hits $56

     

    The sustained increase in global crude oil prices has pushed up the landing cost of imported petrol closer to the current pump prices of the product in Nigeria, and appears to have triggered a return to petrol subsidy era, ’FEMI ASU reports

    Since November 13, 2020 when the pump prices of Premium Motor Spirit (petrol) were last increased in the country, the price of the international oil benchmark, Brent crude, has been on an upward trajectory, rising from $41.51 per barrel to close at $51.22 per barrel on December 31.

    Fuel marketers had in December expected another upward adjustment of PMS prices to reflect the further rise in crude oil prices.

    However, a N5 reduction in petrol price, effective December 14, was announced by the Federal Government – a development that left them reeling in shock and questioning the deregulation of petrol price.

    Crude oil price accounts for a large chunk of the final cost of petrol, and the country has continued to spend so much on petrol imports for many years amid low domestic refining capacity.

    The Minister of State for Petroleum Resources, Timipre Sylva, had said in September last year that the Federal Government had stepped back in fixing the price of petrol, adding that market forces and crude oil price would determine the cost of the product.

    The Federal Government removed petrol subsidy in March 2020 after reducing the pump price of the product to N125 per litre from N145 on the back of the sharp drop in crude oil prices. The price reduction lasted till June.

    Nigerians saw increases in the pump prices of petrol in four months, rising from N121.50–N123.50 per litre in June to N140.80-N143.80 in July, N148-N150 in August, N158-N162 in September and N163-N170 in November.

    Brent, the international oil benchmark, has risen by about 35 per cent since November 13 when the pump price of petrol was last increased. It closed at $55.99 per barrel on Friday, its highest level in 11 months.

    Going by the petrol pricing template of the Petroleum Products Pricing Regulatory Agency, the landing cost of petrol rose from an average of N143.60 in December to N158.53 per litre on January 7, with the expected open market price (retail price) being N181.53 per litre.

    The product is currently being sold at between N160 and N165 per litre at many filling stations in Lagos.

    The cost of petrol quoted on Platts rose to $480.25 per metric tonne (N139.67 per litre, using N390/$1) last Thursday from an average of $430.107 per MT (N125.09 per litre) in December. The cost of petrol averaged $391.75 per MT (N113.24 per litre) in July, according to PPPRA’s template.

    Apart from the increase in global crude oil prices, the devaluation of the naira last year also led to a significant rise in the cost of imported petrol.

    The PPPRA used an exchange rate of N306.90/$1 on January 14, 2020 to calculate the cost of petrol, while N387.63/$1 was used on July 31.

    The naira closed at 393.50 against the dollar on Friday at the Investors’ and Exporters’ Foreign Exchange Window, and 472/$1 at the parallel market.

    As of January 7, the cost of petrol plus freight stood at $500.72 per MT, translating to N145.62 per litre.

    Other cost elements that make up the landing cost include lightering expenses (N4.57), insurance cost (N0.21), Nigerian Ports Authority charge (N2.38), Nigerian Maritime Administration and Safety Agency charge (N0.23), jetty throughput charge (N1.61), storage charge (N2.58), and financing (N1.33).

    The pump price is the sum of the landing cost, wholesale margin and the distribution margins. The wholesale margin is N4.03 while the distribution margins comprise transporters allowance (N3.89), retailer (N6.19), bridging fund (N7.51), marine transport average (N0.15), and admin charge (N1.23).

    The NNPC, which has been the sole importer of petrol into the country in recent years, is still being relied upon by marketers for the supply of the product despite the deregulation of the downstream petroleum sector.

    Private oil marketing companies have continued to lament that their inability to access foreign exchange at the official rates has hampered efforts to resume petrol importation.

    If the pump price of petrol is left unchanged amid the rise in oil prices, it means the NNPC would again bear the latest subsidy cost on behalf of the government as it did for several years before its removal last year.

    There is currently subsidy, but it is being absorbed by the government through the NNPC,” the National Operation Controller, Independent Petroleum Marketers Association of Nigeria, Mr Mike Osatuyi, told our correspondent.

     

    He recalled that he said in December that petrol pump price was moving closer to N180 per litre, adding that with the current price of crude oil, petrol subsidy would gulp about N800m daily with an average consumption level of 40 million litres.

    He said, “Because of the volatility of petrol in the Nigerian political landscape, government does not have the boldness to allow full deregulation of petrol because of the spiral effects on Nigerians, and bearing in mind that Nigerians are in very hard times.”

    Osatuyi said, “But the government is supposed to come out and present the subsidy to the National Assembly. They should tell Nigerians that we are going back to subsidy. But because of the loans from the IMF and World Bank that they got with the condition that petrol should be deregulated, I believe the government is trying to manage the problem.

    “If we are going to do genuine deregulation, there must be a level playing field for the players. We are not where we are supposed to be; there is still some dark, hidden elements in our ‘deregulation’.

    “We are practising monopolistic deregulation – where one player is on the field and it is the goalkeeper, the defender and the referee.”

    The President, Petroleum Products Retail Outlets Owners Association of Nigeria, Dr Billy Gillis-Harry, stressed the need for deregulation to be properly done.

    He said, “The concern I have is that we are not getting it right. We must think inwards and grow our local production capacity. I don’t know why our refineries should not work.

    “Deregulation is the way to go; we want the sector to be deregulated. But we need to do it rightly. There should be a level playing field for all operators; everybody should be able to access forex at the same rate.”

    While opposing the return to subsidy, he said, “We call on the government to fast-track the regulatory process to ensure that deregulation is in place.”

     

    The Source had reported on September 8, 2020 that the Federal Government’s removal of petrol subsidy and the increase in electricity tariff were in line with reforms being sought by the International Monetary Fund and the World Bank.

    “The recent introduction and implementation of an automatic fuel price formula will ensure fuel subsidies, which we have eliminated, do not reemerge,” the Federal Government told the IMF in the letter of intent dated April 21, 2020 with respect to its request for emergency financial assistance of $3.4bn.

    In July, Sylva said in a statement that the Federal Government had reached  a conclusion that it could no longer bear the burden of petrol subsidy.

     

    Source : www.punchng.com