NNPC Needs Restructuring To Become Profitable Like Peers

NNPC Needs Restructuring To Become Profitable Like Peers

By Nnamdi Odumody

With international benchmark of Brent Crude averaging $71.19 per barrel in 2018, 31.5 percent gain from 2017 when it averaged $54.15 per barrel, the state-owned Nigerian National Petroleum Corporation (NNPC) performed poorly when compared with its global peers.

According to its full year report for 2018, between January and December 2018 it spent 730.9 billion naira on under-recovery (subsidy) while 140.6 billion naira was spent on pipeline repairs and management cost. Its operations and financial report for 2018 showed gains of 393.5 billion naira from its upstream and gas processing subsidiaries: Nigerian Petroleum Development Company, Integrated Data Service, National Engineering and Technical Company, Nigerian Gas Company Limited and Nigerian Gas Marketing Company were wiped off largely by its downstream subsidiary operations which recorded losses of about 351 billion naira.

In 2018, NNPC recorded 24.9 billion naira on product losses while cash call payment for the development of oil and gas assets consumed Federal Government’s revenue as 1.829 trillion naira was paid to oil companies from revenue of 3.11 trillion naira, generated from sale of crude oil and gas in 2018. The combined value output by the nation’s three refineries at Warri, Port Harcourt and Kaduna at import parity price for the month of December 2018 was 10.86 billion naira while the associated crude plus freight costs and operational expenses were 8.89 billion naira and 19.29 billion naira resulting in an operating deficit of 17.32 billion naira by the refineries. The Group Operating Revenue for December 2018 was 731.88 billion naira while expenditure surged by 429.52 billion naira from the previous month.

Brazil’s state owned Petroleo De Brasiliero (Petrobras) had a net income of $6.84 billion, EBITDA(Earnings Before Taxes Depreciation and Amortization) of $30.44 billion, and for the fourth straight year a positive cash flow of $14.17 billion in 2018, generating $40.14 billion in municipal, state and federal taxes plus government take.

Sinopec (China’s state owned oil company) registered a 22 percent year over year growth to achieve $426 billion as operating revenue in 2018 with its downstream business accounting for about 60 percent of its revenue which increased by 2.31 percent to 244 million tonnes while total domestic sales volume of refined products increased by 1.4 percent to 180.24 metric tonnes.

Rosneft of Russia boosted revenue by 31.4 percent to $133.7 billion in 2018. It’s oil and liquids production increased by 2.1 percent to 4.7 million bpd while gas production averaged 1.12mboed per day.

Equinor of Norway earned $7.5 billion as profit – a 64 percent increase from its previous operating year result of $4.6 billion while total oil production hit 2,170mboe per day as at the last quarter of 2018.

Saudi Arabia’s Saudi Aramco earned the biggest profit of all the oil companies. Its net income was $111billion and it generated $224 billion as EBITDA. Currently it wants to raise funds from the global capital markets by offering a percentage of its shares which will value it as the world’s first trillion dollar oil corporation.

The failure of the President who is also Nigeria’s Minister Of Petroleum Resources to sign into law The Petroleum Industry Governance Bill aimed at making Nigeria’s oil and gas industry globally competitive like that of other oil producing countries, and reforming NNPC to operate as a successful business entity, is making the Nigerian state-owned corporation underperform below its potentials.

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