NNPC, Nigeria’s Oil Behemoth Records N547bn Losses in Three Years
Oil hits $80/bl as Shell declares force majeure on Bonny Light exports
It’s meant to be a cash cow, but the state oil company of Africa’s biggest producer is bleeding money.
The Nigerian National Petroleum Corporation, the Abuja-based behemoth that dominates Nigeria’s energy industry, has recorded losses for at least last three years, culminating in a total loss of N546.63 billion, statements on its website show.
The corporation’s unaudited financial operations reports showed that NNPC reported losses of N267.14 billion, N197.49 billion and N82 billion in 2015, 2016 and 2017, respectively, in contrast to its budgets that showed operating
surpluses of N466.94 billion, N334.04 billion and N601.15 billion for the three years under review.
NNPC will probably register another loss in 2018, according to Ecobank Transnational Inc., as its refineries and fuel-retailing arm fail to generate profit.
The pain for NNPC, which produces oil and natural gas in partnership with Royal Dutch Shell Plc, Exxon Mobil Corp. and Chevron Corp., comes even as national energy firms from Norway to Saudi Arabia thrive with crude prices recovering from their crash in 2014.
It also lays bare President Muhammadu Buhari’s difficulty in fulfilling his election campaign pledge to modernise a company that’s been a byword for inefficiency and opacity since its creation in the 1970s.
With oil accounting for more than half of government revenue and 90 per cent of export income, the company is a primary target of those seeking access to state funds and is vulnerable to political interference.
Tensions erupted last year between Emmanuel Kachikwu, the chairman of NNPC, and Maikanti Baru, the managing director, over how more than $20 billion of contracts were agreed.
“The very public power tussle shows the difficulties in reforming the organisation,” Malte Liewerscheidt, an analyst at Teneo Intelligence, said in an email to Bloomberg from Abuja.
Until a pending but longdelayed Petroleum Industry Governance Bill (PIGB) designed to overhaul the petroleum sector and split up parts of NNPC comes into effect, “political considerations will continue to interfere with vital business needs,” he said.
Nigeria’s state oil company has lost money three years running, hugely missing its targets
The state oil company doesn’t publish full audited financial results, though it releases limited numbers on its operating performance. These include earnings for core units, but exclude items such as taxes and dividends from a 49 per cent shareholding in Nigeria LNG Ltd., one of the world’s biggest exporters of liquefied natural gas.
Those numbers show that NNPC made an N82 billion ($246 million) operating loss in 2017. That was an improvement from 2015 and 2016, but still far from the operating income it budgeted for at N601 billion.
In each of the past three years, NNPC forecast a profit and finished in the red.
Higher oil prices have boosted exploration and production, the most profitable part of NNPC and which earned almost N183 billion ($600 million) in 2017.
But its ill-maintained refineries, which operate at a fraction of their combined capacity of 445,000 barrels a day, lost about N30.5 billion ($100 million).
Even bigger shortfalls came in the fuel-retailing business, which has to contend with the government’s cap on petrol prices, and the corporate headquarters unit, which lost almost N122 billion ($400 million), more than any other part of the company.
While NNPC’s exploration and production business will probably improve this year, the refineries and retailing subsidiaries will continue to be a drag, especially if the government maintains the ceiling of N145 a litre for petrol, according to Ecobank.
The bank predicts that NNPC will make an operating loss of as much as N80 billion in 2018.
Ndu Ughamadu, spokesman for NNPC, said that while the refineries are struggling to make money, the company’s overall performance will probably be better this year. He declined to say if NNPC was forecasting a return to profit.
It made a loss of N1.6 billion in January, the latest month for which results have been released.
The problems at NNPC offset the benefits to Nigeria’s struggling economy of Brent crude’s more than 50 per cent rise in the past year to almost $80 a barrel.
Still, there have been improvements within the company and the country’s overall oil sector, according to Moody’s Investors Service.
NNPC’s reduction of debts owed to joint-venture partners may help increase Nigerian oil production to around 2.5 million barrels a day by 2020 from 2 million today, said Aurelien Mali, an analyst at Moody’s.
“The clearing of arrears is a huge step forward that will unleash extra investment from international oil companies,” Mali said in an interview in Lagos. “NNPC is key for the government. It’s going in the right direction.”
It has some catching up to do. Its financial position contrasts with those of state oil firms in other major producers. Saudi Aramco is gushing cash, making a net income of $34 billion in the first half of 2017 alone, according to numbers seen by Bloomberg.
Brazil’s Petrobras, Mexico’s Pemex and Norway’s Statoil all improved their results in 2017 and made operating profits. So did Angola’s Sonangol in 2016, when it last published data.
Meanwhile, crude oil prices climbed above $80 per barrel yesterday for the first time since November 2014, on concerns that Iranian exports could fall because of renewed United States sanctions, which will reduce supply in an already tightening market.
This is coming as Shell Petroleum Development Company (SPDC) yesterday suspended shipments of Nigerian Bonny Light crude to the international market after it declared force majeure.
The crude oil market has continued to push higher as geopolitical concerns drove trading, with the global benchmark, Brent crude futures reaching an intraday high of $80.33 per barrel yesterday before receding to $80.16 per barrel.
West Texas Intermediate (WTI) crude futures also hit their highest since November 2014, at $72.30 per barrel.
U.S. President, Donald Trump’s decision this month to withdraw from an international nuclear deal with Iran and revive sanctions that could limit crude exports from OPEC’s third-largest producer has boosted oil prices.
France’s Total had warned on Wednesday that it might
Omololu Ogunmade in Abuja, John Shiklam in Kaduna, Michael Olugbode in Maiduguri and George Okoh in Makurdi
The death toll continued to mount without let in parts of the country on Tuesday when 10 persons were brutally murdered in Birnin Gwari Local Government Area of Kaduna State, following an attack on five villages in the area.
The attack on Birnin Gwari preceded yet another invasion on villages in Logo Local Government Area of Benue State by suspected herdsmen on Wednesday morning, leading to the deaths of three persons.
The herdsmen attack on the Benue communities took place when Vice-President Yemi Osinbajo was on a two-day visit to the state to assess the damage caused by the farmers-herdsmen crisis.
In the case of Birnin Gwari, the attack occurred on the same day the Chief of Army State, Lt.-Gen. Tukur Buratai visited the area, which has recorded dozens of attacks in recent months.
During his visit, Buratai had ordered troops to be deployed in Birnin Gwari and had given them an ultimatum to flush out the bandits within three weeks.
The bandits were said to have invaded the communities again in Birnin Gwari on Tuesday at about 5:00 p.m.
A vigilante group in the area, Birnin Gwari Vanguard for Security, said in a statement that the attack lasted for over three hours.
“The armed bandits attacked the villages around 5:00 p.m. on Tuesday and it lasted for three and half hours.
“The villages are Mashigi, Dakwaro, Sabon Gida and another village adjacent to Dakwaro,” the statement said.
The statement quoted a member of the vigilante group, Mallam Umar, as saying 10 dead bodies were recovered, while many were unaccounted for.
The bandits were said to have burnt houses and foodstuff of the affected villages.
According to the vigilante group, volunteers from the southern axis of Birnin-Gwari and security personnel were mobilised to ascertain the number of casualties.
The group added that the affected villages were in need of aid after the raid.
The group, while commending the federal government and security personnel for the steps taken to address the security challenges in the area, called for additional deployment of troops and special forces from the police to contain the attacks.
Efforts to reach the spokesman of the Kaduna State police command Aliyu Mukhtar were unsuccessful as he did not respond to phone calls and a text message sent to him.
Following the latest attack, Buratai said yesterday in Abuja that the Nigerian Army was prepared to partner other security agencies in the country to flush out bandits operating in the Birnin Gwari axis along the Kaduna expressway.
Answering questions from journalists after a meeting with President Muhammadu Buhari in the State House, Buratai said an army battalion had been deployed in the area to address security concerns.
“We will continue to cooperate along with other security agencies that are charged with the responsibility of securing our country and the deployment of a unit there is quite strategic. It is in line with the Nigerian Army order of battle that was approved in 2016.
“We have to implement all of them to achieve the strategic objective of the government. This is essentially why we have to put the battalion there and to work with other security agencies,” Buratai said.
On the counter-terrorism operation in the North-east, the Army chief said the ongoing “Operation Last Hold” by troops would strengthen military operations in the area and equally pave the way for the return of internally displaced persons to their various communities.
“It has gone very successfully. It’s progressing very well and be rest assured that Operation Last Hold will further consolidate on our achievements so far but we hope the internally displaced persons will go back to their communities and pick up their lives again.
“I think that is the aim of this our Operation Last Hold. It is a consolidation of the overall successes that we have achieved in the North-east,” Buratai said.
In Benue, rampaging herdsmen on Wednesday morning attacked and killed three persons while several others were said to be missing in Logo Local Government Area.
The attack took place when the vice-president was at the internally displaced persons (IDP) camp in Anyiin to sympathise with the people over the invasion of herdsmen in the area.
A resident said the herdsmen stormed the affected communities which included Tse-Mue, Torkaa, Mgbakpa, Torjem and Ifer villages between 6:30 and 9:00 a.m., killing three persons whose names he gave as Bem Torjem, Apedzan Chia and Akpuku Koya,
He said the herdsmen launched the deadly attack when the people were heading to their farms, adding that there was palpable fear as many people had fled the area.
He said the death toll from the attack could be higher but this could only be ascertained when those who ran away had returned.
Benue State governor, Samuel Ortom, confirmed the latest killing during a courtesy visit made by Minister of State for Power, Works and Housing, Mr. Suleiman Hassan Zarma.
Ortom said the herdsmen attacked and killed some people in Logo.
All attempts to get confirmation from the police command in Benue were unsuccessful, as the police spokesman could not be reached. Suicide Bombing Kills Four in Borno Meanwhile, residents of Borno State were woken up to another terrorist attack by Boko Haram yesterday when a suicide bomber detonated his bomb at Dikwa during early morning Muslim prayers.
The attack targeted at Muslims on the first day of Ramadan, the Holy month set aside for fasting and prayer to God (Allah), led to the deaths of four persons while eight others sustained injuries.
A post on the Facebook page of the National Emergency Management Agency (NEMA), North East office by the agency’s information officer, AbdulKadir Ibrahim, said: “Incident of suicide bomb blast occurred at Dikwa town, Dikwa Local Government Area of Borno State during early morning prayers.
“Four persons were reported dead while eight others were injured.
“Security has been beefed up. The area is now calm with extra vigilance enjoined by residents.”