NNPC Group Managing Director Engr. Andrew Yakubu speaks about alleged US10.8 Billon unremitted oil revenue
Abuja - Nigeria – WEBWIRE – Thursday, February 13, 2014
Today, the Nigerian National Petroleum Corporation is pleased to present further clarification on all outstanding issues relating to the non-remittance of US$10.87billion. For the benefit of this Committee and all Nigerians let me quickly state here that long before the allegation of US49.8 billion, NNPC, FAAC, CBN and the Federal Ministry of Finance are clearly aware of the outstanding US$10.87 billion and the issues relating to its non-realization.
For the avoidance of doubt let me restate that the items included in the $10.87 billion are:
- Unpaid petroleum products subsidy totaling the sum of US$8.76 billion
- Crude oil and products losses amounting to US$0.76 billion
- National strategic reserve holding cost amounting to US$0.46 billion
- Pipeline maintenance and management cost amounting to US$0.91 billion.
Item I have been fully reconciled and signed off The above items have been fully reconciled with all relevant stakeholders and supporting documents submitted to this distinguished Committee.
Mr. Chairman, distinguished Members, kindly permit me to elaborate on the above issues for the benefit of all who do not understand the current operational challenges of the NNPC as follows:
- PETROLEUM PRODUCTS SUBSIDY
This Distinguished Committee is invited to note that since January 2012 NNPC has not received any subsidy payments for petroleum products supplied to the domestic market. You may also recall that N888.101 billion and N971.138 billion appropriated for subsidy for years 2012 and 2013 respectively (See Appendix IIIA & IIIB) were grossly inadequate to meet the required subsidy payments to both NNPC and other Marketers.
In spite of the nonpayment of subsidy, NNPC continued to sustain petroleum products supply, even when other marketers refused to participate. This development led to the accumulation of $8.76 billion as unpaid subsidy due to NNPC for petroleum product supplied during the period under review. This amount is comprised of US$5.25 billion for PMS and US$3.51billion for DPK and has been reconciled and signed-off by statutory agencies (PPPRA, DPR and NNPC) as outlined in Appendix III, Schedule 3.
Even when the marketers resumed supply of petroleum products, they still refused to participate in the importation/supply of Kerosene following the lack of clarity over the removal of subsidy on Kerosene.
- CRUDE OIL AND PETROLEUM PRODUCTS LOSSES
NNPC is operating in an increasingly hostile business environment both in the Upstream and Downstream sectors of the industry. As you are aware pipeline vandalism is today of great concern to both the industry and Government.
On the Downstream sector, NNPC is suffering from crude oil losses along Escravos-Warri, Bonny-Port-Harcourt and Warri-Kaduna crude oil pipeline systems in its effort to supply crude oil to its refineries. In the period under review, the Corporation lost a total of 4,658,096 barrels amounting to US$465,809,647.05.
Pipeline vandalism along our petroleum products distribution networks is even more extensive, affecting nearly all regions of the country. In the period under review, NNPC lost 463,185,000 litres of PMS, 2,392,000 litres of DPK and 47,643,000 litres of AGO amounting to US$296,047,770.15.
The total Crude Oil and Petroleum Products losses during the period under review amounted to US$0.76billion as outlined in the following appendices:
- Appendix III Schedule 5A: Summary of Crude Oil Losses by Pipeline Segments
- Appendix III Schedule 5B: Summary of Petroleum Products Losses by Pipeline Segments
- STRATEGIC RESERVES HOLDING COST
For National energy security and to guarantee seamless supply of Petroleum Products, NNPC is mandated to maintain strategic petroleum products stocks on behalf of Government and currently maintains a 30 day stock level as against the international practice of 90 days. The non-availability of inland storage facilities as a result of continuous vandalism of NNPC’s supply and distribution assets has led to increased costs as NNPC is compelled to resort to offshore storage to maintain this strategic petroleum product stocks.
For the period under review, the sum of $0.46billion was incurred in discharging this responsibility (See Appendix III, Schedule 4). This cost is not covered under the PPPRA pricing template (See Appendix IIIH).
- PIPELINE AND DEPOT MAINTENANCE AND MANAGEMENT COST
NNPC operates over 5000km of pipeline and 22 Depots across the country. In view of the fact that the pipeline network across the country remains critical for the supply and distribution of petroleum products, NNPC in the discharge of its statutory duties as provided for in Section 5 of the Nigerian National Petroleum Corporation Act CAP. N123 (Appendix IIIH) has to carry out the management of these assets. Closely tied to the escalating vandalism of pipelines across the country, is the rising cost of maintenance, management and repairs including the provision of additional security at huge costs.
During the period under review, the sum of $0.91billion was incurred on pipeline and depot management and repairs (See Appendix IV).
It is important to also note that the cost of Crude oil/Petroleum product losses, pipeline management and repair cost are not covered in the PPPRA pricing template and have not been redeemed by NNPC.
- OTHER SUPPORTING DOCUMENTS
Mr. Chairman, further to the above submissions, we have also presented to this distinguished Committee, all relevant documents regarding petroleum products cargoes deliveries and discharges by NNPC into the Nigerian market covering the following:
- Bill of Lading
- Survey Report
- Cargo manifest
- Certificate of quality
- Certificate of quantity
- Certificate of origin
- Tanker timesheet
- Navy clearances
- Custom clearances
- Discharge certificate
- OBSERVATIONS
Mr. Chairman and distinguished members, while the above submissions and documentations have been presented to effectively address the issue of $10.8Billion brought before this committee, it is our understanding that at our last sitting before the Committee, the CBN raised fresh issues which require response from NNPC.
Accordingly Mr. Chairman, even without this Committee requesting for it, NNPC has proceeded to also address the supplementary submission of the CBN in the as in the attached Appendix A.
- CONCLUDING REMARKS
In conclusion Mr. Chairman, let me invite this Committee and indeed Nigerians, to note that NNPC has been incurring huge costs in ensuring adequate and steady supply of petroleum products in Nigeria resulting from:
- The Purchase of crude oil at international prices while selling petroleum products at regulated rates.
- Crude oil and petroleum products losses due to syndicated theft and vandalism, the cost of which the Corporation is compelled to bear.
- Cost of providing security to pipelines and oil installations across the nation
- Holding of strategic stock at huge costs to ensure National energy security.
- Non-payment of subsidy claims for petroleum products supplied to Nigerian domestic market.
- RECOMMENDATIONS/WAY FORWARD
- Payment of outstanding subsidy due to NNPC.
- Formal approval for reimbursement of cost of holding Strategic Petroleum Product stock.
- Re-imbursement of crude oil and petroleum products losses.
- Sustenance of the recent momentum to end pipeline vandalism, crude oil and products theft.
Please be assured that NNPC remains available at all times to provide clarifications on our submissions or any other matter relating to our responsibility to the Federation and the Nigerian people.
Engr. Andrew L. Yakubu
NNPC Group Managing Director
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Nigerian Petroleum- Contact Information
- Dr. Omar Farouk Ibrahim
- General Manager - Media Relations Dept.
- NNPC Abuja
- contactus@nnpcgroup.com
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