NNPC: Low Oil Price Cuts Dollar Payments into Federation Account in 5 Months

140512N.NNPC-Towers,-AbujaA monthly financial and operations report released at the weekend by the Nigerian National Petroleum Corporation (NNPC), detailing its activities in the oil and gas sector from January to August this year, has revealed that no single dollar remittance was been made into the Federation Account from Nigeria’s take-ins on its crude oil and gas that were exported in the last five months.

The report which THISDAY obtained from the corporation’s website, disclosed that due to the extended decline in prices of crude oil at the international market, the Federation Account last received dollarised transfer from sales of export crude oil, gas and Nigeria Liquefied Natural Gas (NLNG) feedstock in March 2015.

It explained that subsequent months of April, May, June, July, and August had zero dollar transferred to the Federation Account as all earnings from export crude oil were diverted to offset the monthly Joint Venture (JV) Cash Calls obligations of about $615.8 million as appropriated by the National Assembly.

According to the report, dollar payments of $74.64 million, $346.21 million (the highest earnings so far) and $184.98 million were last made into the Federation Account in the months of January, February and March respectively to bring FAAC’s total earning from export crude oil so far in 2015 to $607.83 million.

“The total export crude oil and gas receipt for the period of January-August 2015 is $3.420 billion. Of the total receipts, the sum of $0.61 billion was remitted to Federation Account while the balance of $2.815 billion was used to fund the JV Cash Calls for the period.
“The dwindling oil price has negatively affected the NNPC dollar contribution to the Federation Account. The receipts witnessed a sharp decline of more than 67 per cent from September 2014 when the receipt was at its peak, to July, 2015 with dire consequences to the Federation Account.

This continued decline in oil price led to insufficient cash available to meet monthly JV cash calls obligations of about $615.8 million as appropriated by the National Assembly. To mitigate this effect, NNPC was compelled to sweep all the export receipt to JV cash call funding implying a zero remittance to Federation Account since the month of April 2015,” said the report.

The NNPC Group Managing Director, Dr. Ibe Kachikwu, had shortly after his appointment in August, stated that the corporation will constantly open up its books for public scrutiny. The release of the report perhaps coincides with his promise to run an open, transparent corporation.

Nevertheless, the report also stated that the sum of N723.82 billion has been paid into the Federation Account from January to August 2015 as proceeds from the country’s domestic crude oil and gas sales.

Accordingly, Nigeria’s earnings from her crude oil and gas transactions are broadly sourced from liftings, which are broadly classified into equity export crude and domestic crude. Both categories are however lifted and marketed by NNPC and the proceeds remitted to the Federation Account.

The report therefore explained that the federation’s crude oil and gas monthly export receipts were paid directly into a JP Morgan account operated by the Central Bank of Nigeria (CBN), after adjusting for calendarised JV Cash Calls, being a first-line charge as provided in the Appropriation Bill and the balance then transferred to the Federation Account.

The report also stated that domestic crude oil of 445,000 barrels per day (bpd) is allocated for refining to meet the country’s domestic products supply. This volume, it explained is utilised through various arrangements such as domestic refining, offshore refining (Offshore Processing Arrangement: OPA), crude for product exchange and direct export.
It added that the net proceeds after adjusting for fuel subsidy, crude and product losses as well as pipeline repairs and management cost are remitted to the Federation Account.

With regards to this, it thus explained: “Total US dollar payment to the Federation from sales of export crude oil, gas and NLNG feedstock for the month of August 2015 was $225.7 million.

“Crude oil export sales contributed $108.9 million-48 per cent of the dollar payment compared with 76 per cent contribution in previous month of July 2015 while export gas sales and NLNG feedstock accounted for $99.65 million-44 per cent contribution compared with 23.7 per cent contribution in the prior month of July 2015. The remaining $16.8 million was attributable to other dollar denominated receipts.”
“A total of $607.8 million has been paid so far to FAAC in the year 2015 from sales of export oil and gas. The sum of N723.82 billion for domestic crude oil and gas sales proceeds has been paid to the Federation Account from January to August 2015,” it added.

It also highlighted the progress made so far by the corporation in executing critical gas pipeline infrastructure, which the country initiated to upgrade and sustain gas supplies to thermal electricity generation plants in the country. The projects are reportedly up to 85 in number and valued at $754 million and N71 billion.

“A total of 85 on-going projects valued at $754 million and N71 billion are being handled by NNPC. Out of these, the sum of $533 million and N57billion have been paid as at 31st August 2015. The FGN-funded projects relate to Engineering, Procurement and Construction (EPC) contracts in respect of gas pipeline for PHCN power plants at various locations,” the report said. -Thisday

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