NNPC Plans N126bn Deduction from June Remittance to FAAC

•Says negotiations ongoing to acquire 20% stake in Dangote Refinery

Obinna Chima in Lagos and Emmanuel Addeh in Abuja

The Nigerian National Petroleum Corporation (NNPC) has served notice to the Federation Account and Allocation Committee (FAAC) that it will deduct about N126 billion from its remittance to the Federation Account at the next meeting scheduled for June.

This is coming as the Group Managing Director of the corporation, Malam Mele Kyari, yesterday clarified that the plan by the corporation to purchase 20 per cent minority stake in Dangote Refinery has not been concluded.

In a report signed by NNPC’s Bello Abdullahi, on behalf of the Chief Financial Officer, a copy of which THISDAY obtained at the weekend, the corporation stated that subsequently, it will begin the subtraction of the balance of an additional N50 billion, being Joint Venture (JV) cost recovery to sustain crude oil production level.

In the document which detailed the status of the corporation’s finances during its monthly FAAC meeting, which took place between May 19 and 20, the NNPC also confirmed that it did not make any remittance to the Federation Account during the period.

The development may further throw the three tiers of government, federal, states and local governments, into harsher times next month as they may get less from the Federation Account, as a result of the huge payment the NNPC is paying for subsidy on petrol.

In April, the corporation had notified the Accountant-General of the Federation (AGF), Mr. Ahmed Idris, that it would not be able to remit any funds to the Federation Account in April for distribution in May.

NNPC said it posted a value shortfall of N111.966 billion in February 2021, which would ultimately impact on its ability to contribute to the joint account shared among the federal, state and local governments.

The corporation attributed the N111.966 billion shortfall to the rising average landing cost of petrol, which jumped to N184 per litre in March as opposed to the existing N128 ex-coastal price.
According to the corporation, the N111.966 billion incurred as landing cost would be deducted from April oil and gas proceeds due to the federation in May.

However, it was learnt that the impact on the federation was not as far-reaching as expected because the Department of Petroleum Resources (DPR), which collects royalties and bonuses on behalf of the federal government, came to the rescue with the remittance of about $500 million it received from the marginal fields it recently put up for bids.

Minister of State for Petroleum Resources, Chief Timipre Sylva, had confirmed the role played by DPR in augmenting the FAAC allocation for April, which was shared in May.

The minister, however, did not disclose how much was paid into the account.
But the NNPC had in a reaction to the dust raised by the letter to the accountant general, stated that the corporation wasn’t broke, adding that the zero revenue projection only had to do with the federation revenue stream, which it manages and not a general reflection of its overall financial performance.

In the fresh notice raised by the corporation to deduct N126 billion from its remittance in June, it said it was still shouldering the burden of the differentials from the sale of petrol, which it prefers to call “under-recovery”.

The FAAC document added: “No remittance to Federation Account in April, 2021 (May, 2021 FAAC) due to recorded value shortfall resulting from difference between landing cost and ex-coastal price of PMS (petrol) recorded in March, 2021.

“The sum of N61,966,456,903.74 was deducted out of the total March value shortfall of N111,966,456,903.74. This is to make funds available for JV cost recovery to sustain the existing production level. The balance $50,000,000,000.00 will be deducted in subsequent months.
“In addition, April value shortfall of N126,298,457,944.36 is to be deducted from May federation proceeds in June 2021 FAAC meeting.”

The figures further showed that while a net revenue of N90.8 billion was remitted to FAAC in January, N64.1 billion was remitted in February, N41.1 billion was presented in March and zero amount recorded for April.

Meanwhile, the corporation has said that it sold total oil and gas valued at $565.4 million or an equivalent of N214.5 billion in April, according to the document.
NNPC stated that its overall crude oil lifting for both export and domestic in March 2021, recorded 29 per cent decrease relative to the 10.79Mbbls lifted in February 2021.

The national oil company said Nigeria maintained 1.52 million bpd OPEC production cut in the first quarter of 2021, while export crude oil revenue received in April amounted to $1.89 million, equivalent to N723 million.
“This represents a 98 per cent decrease compared to March 2021. Domestic gas receipts in the month was N5.13bn,” it added.

It stated that feedstock valued at $54.6 million was sold to Nigeria LNG during the period out of which $52.4 million was received during the month, with the difference being Modified Carry Agreement (MCA) obligations, gas reconciliation and credit notes.
MCA is a financing agreement whereby the International Oil Companies (IOCs) advance loans to NNPC to invest in upstream projects.

For other receipts, the corporation stated that $1.25 million, being miscellaneous receipts, gas and ullage fees and interest income was received in April 2021.
The data also showed that the exchange rate the CBN sold foreign exchange to the NNPC moved from N379 to N383.47, while N15 billion was spent on government priority projects.

In the same month, the corporation lost 3.1 million barrels for various reasons, ranging from shut-ins due to repairs, industrial actions, flow line leaks and power failure.
On the analysis of receipts due in April, gross revenue from JV crude was N124.3 billion, JV gas was N26.1 billion, while N5.8 billion was received from miscellaneous sources, amounting to N156.3 billion.

After deduction of royalty, JV cost recovery, profit before tax and taxes, receipts from JV crude came down to N5.5 billion, while that of JV gas stood at N7.8 billion.
Of the March domestic crude oil payable in June by the NNPC, in line with the 90-day payment plan, Chevron Nigeria Limited has roughly 2.89 million barrels valued at N72.6 billion while Eroton’s share is 130,000 barrels valued at N3.1 billion.

Also, Mobil Producing has 2.84 million litres, valued at N68 billion, Seplat’s is N3.36 billion, SPDC’s share of the JV is N33.6 billion while the value of Total’s crude oil payable in June is N3.1 billion, totalling approximately N184.5 billion or equivalent of $487 million.

As of March 31, total pre-2016 JV cash call arrears repayment status indicated that JV negotiated debt remained at $4.68 billion, total payment till date is $3.1 billion, while outstanding balance is $1.54 billion, with the exception of Mobil which has been fully paid by the NNPC.
In April, N938.9 million was spent on security and maintenance, while strategic holdings of the NNPC gulped N740 million, amounting to N1.679 billion.

In all, 37 vessels imported petrol for the month under review, with landing cost ranging from between N169 and N199.90. Also, a total of N1.48 billion litres were imported for the month, 1.99 billion litres were sold, with depot price remaining at N128 and the recorded loss put at N111.9 billion.

NNPC: Negotiations Ongoing to Acquire Stake in Dangote Refinery,

The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Malam Mele Kyari, yesterday clarified that the plan by the corporation to purchase 20 per cent minority stake in Dangote has not been concluded.

Kyari, in a text message in response to enquiries by THISDAY on the matter, said the terms of the agreement were being finalised and could be subject of non-disclosure understandings.
He added that the NNPC is interested in acquiring a stake in any private refinery with a capacity in excess of 50,000 barrels per day and not just the Dangote Refinery alone.

He said: “On the Dangote Refinery acquisition, it’s actually an ongoing negotiations that was disclosed by one of our executives. We haven’t concluded; terms are being finalised and may be subject of non-disclosure understandings.

“It’s difficult to discuss the details at this point. However, the decision is for NNPC to expand her portfolio as is the common practice amongst national oil companies as matter of energy security considerations and risk management. We will take equity from any refinery that plans to process in excess of 50,000 barrels per day, not just the Dangote.”

The 650,000 barrels per day (bpd) integrated Dangote Refinery, expected to process a variety of light and medium grades of crude, including petrol and diesel as well as jet fuel and polypropylene, is owned by Nigeria’s Dangote Group and is worth about $15 billion.

It is designed to produce about 50 million litres of petrol and 15 million litres of diesel a day, roughly 10.4 million tonnes of the product, 4.6 million tonnes of diesel, and four million tonnes of jet fuel per year, in addition to having a fertiliser plant, which will utilise the refinery by-products as raw materials.