Crude used for swap, proceeds remitted to Federation Account – NNPC

Out of a total of 162.425 million barrels of crude oil allocated to the Nigerian National Petroleum Corporation, NNPC, for the country’s four refineries in 2014, the refineries only received 25.84 million barrels of crude oil leaving 135.85 million barrels of crude oil, valued at about N2.62 trillion appropriated for other uses not disclosed by the NNPC.

The NNPC, in its Annual Statistics Bulletin for 2014, stated that the refineries were only able to refine 23.36 million barrels of crude oil, meaning that Nigeria’s refining capacity in 2014 dropped to 14.4 per cent from 22 per cent in 2013.

The amount of crude oil processed by the refineries, according to the NNPC, translates to an average daily production capacity of 64,001 barrels per day.
Using OPEC’s Reference Basket which puts the average price of crude oil for 2014 at $96.29 per barrel and current exchange rate realities, the unaccounted 135.85 million barrels of crude oil by the NNPC, amounts to N2.616 trillion.

The amount is about half of the Federal Government budget for 2015, and is almost four times the N556.9 billion earmarked for capital expenditure in the budget and is slightly higher than the N2.607 trillion budgeted for recurrent expenditure.

The NNPC disclosed that the refineries received a total of 25.84 million barrels (3.5 million metric tonnes) of (dry) crude oil, condensate and slops in the year under review. This translates to 70,793 barrels of crude oil, condensates and slops per day.

The amount of crude oil supplied to the refineries on a daily basis was 374,207 barrels less than the 445,000 barrels per day of crude oil allocated to the NNPC for the refineries in the country. With the amount allocated to the NNPC, the refineries were supposed to receive 162.425 million in 2014.

The daily supply to the refineries represents 15.91 per cent of the total crude oil allocation of 445,000 barrels per day. The balance of 135.85 million barrels was, however, not accounted for by the NNPC.

This means that 135.85 million barrels of crude oil might have been appropriated for other unexplained reasons, or used for the controversial Offshore Processing Agreement (OPA) or for the Crude oil for product SWAP arrangements entered into by the NNPC.

The closest explanation given on the crude swap and offshore arrangements by the NNPC in the report was the fact that products valued at N6.76 billion were received by the Pipelines and Products Marketing Company, PPMC.

Specifically, the NNPC said, “PPMC evacuated 3.208 million metric tonnes of petroleum products from the refineries and it also imported 7.038 million metric tonnes of Premium Motor Spirit (PMS) and Household kerosene (HHK) for distribution valued at N6.76 billion on Offshore Processing Agreement (OPA) and Crude oil for product SWAP arrangements.”

Crude paid for, swapped, proceeds remitted — NNPC

However, responding to queries for explanation on the unaccounted barrels of crude oil, Mr. Ohi Alegbe, ‎Group General Manager, ‎Group Public Affairs Division‎, NNPC, told Vanguard that crude oil that are not utilised by the refineries is sent abroad for the product-for-Crude exchange programme (crude swap) and the offshore processing agreement scheme, while refined products from the scheme are brought back into the country, sold and proceeds remitted into the Federation Account.

He further allayed fears of any missing money, as he stated that the NNPC pays for the 445,000 barrels per day of crude at the prevailing international market price.

He said, ‎”The term `allocation’ of crude to NNPC does not arise as the Corporation is required to pay for this crude at prevailing international market price. This practice has been in place since 2003.

“‎Thus NNPC receives 445, 000 bpd of crude for domestic refining, but because of the state of the refineries (which as you know are receiving massive attention) the refineries are unable to utilize the entire volume of crude.

“‎Consequently, the balance of what is left unutilized by the refineries is sent abroad for the product-for-Crude exchange programme (crude swap) and the offshore processing agreement scheme.

“T‎he refined products from the above arrangements are brought into the country and sold towards meeting Nigeria’s petroleum product domestic consumption requirement. Proceeds are then remitted into the Federation Accounts.”
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The NNPC has four refineries — two in Port Harcourt, one in Kaduna and another in Warri, with a combined installed capacity of 445,000 barrels per day. A network of pipelines and depots located throughout the country link these refineries.

Nigeria produces around two million barrels of crude oil a day, but has to export it due to a lack of working refineries. It then imports fuel back into the country at international market prices.

The NNPC had a couple of days ago, stated that the four refineries in Port Harcourt, Warri and Kaduna will resume production this July, after a successful turn-around-maintenance (overhaul) of their facilities. The turn-around-maintenance has been on for some time.

The NNPC had stated that the refineries will start production as soon as they have delivery of crude oil for refining.

Group Managing Director of the NNPC, Mr. Joseph Dawha, had few days ago, disclosed that the NNPC is carrying out a phased implementation of the rehabilitation of the refineries, stating that work at almost all the refineries would be completed soon, and they would soon start producing at between 80 and 100 per cent of their installed capacity.

He said: “We took a conscious decision that if the refineries are not in a good state to process crude for maximum gains, then there was no point in sending crude to the refineries. What we do is to try and fix it, so that by the time it starts processing the crude, then we get real value for the crude we have sent to the refineries.

“We are satisfied with the level of work carried out so far on the Port Harcourt refinery so that if we start processing crude now, we will get real value, and they will not be any value distortion that would have been the case if the refineries are not operating optimally.”

- See more at: vanguardngr.com