Home Economy NNPC records N287.4bn loss from operations

NNPC records N287.4bn loss from operations

Group Managing Director, NNPC, Dr. Emmanuel Kachikwu

Over N287.4bn loss is being recorded yearly by the Nigerian National Petroleum Corporation from the operations of its subsidiaries across the country despite the fact that it is meant to be a profitable business venture.

The corporation is losing about N250bn yearly as a result of the inefficiencies of the Pipelines and Product Marketing Company alone, which is one of its subsidiaries, according to figures made available by the national oil company.

The PPMC’s N250bn loss accounts for about 87 per cent of the corporation’s aggregate loss by implication.

Findings by our correspondent showed that aside the huge losses coming from the PPMC, the refineries and contractual arrangements, among other problem areas, were responsible for the remaining 13 per cent of the losses made by the corporation.

Some of the contracts were recently cancelled by the new Group Managing Director of the NNPC, Dr. Ibe Kachikwu, and according to him, an average of $150m is being saved monthly due to the cancellation.

The country is also losing about N10bn as a result of the near-comatose state of the refineries.

Kachikwu said in an interview that when 40,000 barrels of crude oil were transferred to the refineries for processing, only 15,000 barrels came out.

To this end, he said, “The truth is that the refineries are not working profitably now. This, no doubt, could be for the reason of pipeline issues, or for aging facilities in the refineries. If the refineries do 60 per cent capacity today and tomorrow zero per cent, we could possibly end up with a 20 per cent capacity when the average is done. This is, of course, a huge loss.

“We will not continue to commit crude and other resources to the refineries only to get far less. It would be better to shut the refineries for turnaround maintenance, while the crude hitherto pumped into them is sold and the proceeds used to import petroleum products.”

There are also indications that the planned unbundling of the PPMC, with the aim of creating a new subsidiary that will oversee purely pipelines issues, is part of the loss-reduction move by the leadership of the NNPC.

Kachikwu said the pipelines must be made to work because there was no model that would make economic sense in the absence of working pipelines for the petroleum business.

He said it was unsustainable to leverage alternative models other than pipelines as far as the movement of crude and refined products were concerned, stressing that alternative models would only shoot up cost for the corporation.

The NNPC boss added, “Militancy, difficulties and what have you are not enough reasons to make our pipelines not to work. We are engaging relevant security agencies in this respect.

“Coastal movement of crude or finished products is not profitable. It is not sustainable and it is not a solution. We need to get the pipelines working, and that is why we are unbundling the PPMC to have a pipeline company with a managing director that focuses on just the pipelines.”

The unbundling exercise is also going to affect some other subsidiaries of the corporation due to their unprofitable and inefficient states, our correspondent gathered.

Kachikwu was quoted as saying recently, “Now, we are committed to ensuring that the chief executive officers of these subsidiaries make their companies profitable,” while warning that the NNPC was likely to lose more employees going forward, as recent retirees from the corporation’s service were not being replaced.

For NNPC Retail, which oversees the corporation’s branded filling stations, the GMD said a lot of fraud was being perpetrated through it in which high volumes of products got missing in transit with no history of account.

He also stressed that the proliferation of NNPC-branded filling stations in the country did not follow an ideal model; hence, current plans to streamline their number and ensure that subsequent growth in the retail arm of the corporation was justifiable.

Kachikwu said for the upstream segment of the country’s petroleum industry, there was the need to cut costs considerably in the area of project valuation.

He added that the NNPC was faced with the major challenge of value chain in terms of implementing mega projects at the prices they should be done at, and ensuring that terms of contracts met international standards.

The account books of the NNPC were last submitted in 2010, but according to the new management, the corporation is looking at updating the books to 2015.

To this end, the NNPC GMD said, “I pay less emphasis on individuals and institutions. I rather pay more emphasis on processes and outcomes.

“Going forward, if a contract does not give me good financial yield, we are going to cancel it. The focus now is on contracts with the best value yields.”

Kachikwu reiterated his focus on transparency issues, saying that must be holistically addressed if the corporation must get back its credibility.

He said individuals who had contributed to aggravating the woes of the corporation would be shown the way out of the NNPC, stressing that “performance modelling is what we are strictly adhering to at the moment.”



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