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Oil & Energy

PEF Bridges To Ensure Uniformity In Petroleum Prices (II)



This is the continuation of the story published last  Monday, August 27, 2012


The Executive Secretary of the Petroleum Equalisation Fund
(PEF), Mrs Adefunke Kasali in this interview
with our correspondent  gives an
insight into the operation of the PEF. Excerpts:


Once that is done, the information immediately and
automatically to the server in our head office and when they scan the entire
document into the server and attach it here, our processing department
processes it and from there it goes electronically to audit and all the
verifiers and approval levels and straight into our e-payment system. It is the
first fully end-to-end operations and payment solutions anywhere in the

Question:Is the equipment fool-proof and how do you deal
with the human factor?

Answer:The design is done to have little human interference.
Our depot representative at the loading facility may have to click on some
issues, which have been preset, so that he just picks.

Once a marketer is registered on our database and he comes
into our office to do some transactions, all the depot representatives have to
do is to just pick that information. The truck would have been registered and
that information is sitting on the server and all in all the devices. It’s not
subject to a lot of human manipulation and that is the beauty of it.

Question: What are you doing to ensure that all depots are
captured in the project?

Answer: Our plan is that it will be 100 per cent deployed.
Now we have achieved just 60 per cent of the depots that are Aquila-ready. We
are in the process of deploying to the other depots and it’s really proper that
we follow up on all the procurement processes that have sort of delayed us.

Yesterday, one of the MDs of the facilities called me and
asked when are you bringing Aquila because all his marketers are saying with
Aquila they can get their money more quickly because nobody wants to buy from a
facility where they are not PEF Aquila-ready.

We are working very hard to ensure that in the shortest
possible time, we have all the depots in the country that are doing petroleum
transaction on Aquila so that they can all enjoy the benefits of what
government is doing.

I can be specific that by end of November, we should have
all the depots ready because the last bit of the procurement processes is that
we should be having all the equipment in Abuja in for deployment by the end of

In the new Petroleum Industry Bill (PIB) what are the
assigned roles for PEF? The PIB as I have seen the PEF is still very much part
of the PIB that has been submitted by the executive to the legislative arm of
government. The roles will be clearer but basically, the mandate of the board
is still very much maintained by the PIB.

Question: The House of Representatives Committee on Public
Accounts ordered the management of PEF to refund N27 billion into the Federal
Government coffers within three months being 80 per cent of the operating
surpluses of the agency in the last five years. How far have you gone in this regard?

Answer: It is true that the House of Representatives Public
accounts invited the Board for a review of the 2009 accounts of the Board and
at that meeting, directed that the board should refund some money to the
federation account.

At that meeting, management tried to clarify the issues to
the members of the committee and I hope we still have an opportunity to discuss
the matter further.

PEF uses cash basis of accounting and so because the feeling
is that as a Fund, we should recognise what comes in and what goes out and that
is basically what cash basis accounting says.

Cash basis of accounting does not recognise receipts and
receivables that you are expecting and it basically does not recognise payables
that you haven’t been able to process and pay.

The starter of our payables as at the time these audited
accounts were submitted was not taken into recognition, so asking the board to
pay back money at that time doesn’t necessarily take into the account if the
money is still there. Because when you are looking back at an account, you do
not even know what that situation is a few years down the road. Needless to
say, the board has been given 90 days to do that.

Question: When an agency is asked to refund, the conclusion
is that some fraudulent practices must have taken place. Could you use the
occasion of this forum to set the records straight?

Answer: Certainly there was no untoward act, no corrupt act.
What the committee did was that if the board had receipts in the year at the
beginning or throughout the year and then the board then paid some monies out,
whatever was outstanding was considered surplus income. And that meant, for
instance, if one billion was outstanding that was not paid out, the committee
did not take into view that there could be 10 billion worth of claims waiting
to be paid at the end of the year.

Basically, they didn’t find very much that was wrong with
the account of the board except what they called surpluses and they then took
the position that those surpluses are supposed to be refunded to the federation
account and then supposed to be gotten out.

But the fund does not get money from the federation account
to pay its claims. So, if the money is returned into the federation account,
then the board will have an issue as to where the funding to pay the claims
when they are processed.

Question: Is this the same thing with the N20 million scam
on land? The committee also directed the board to refund another N20.22 million
within the same period for expenses incurred on a plot of land acquired in 2001
for its corporate head office but which was revoked by the Federal Capital
Development Authority, FCDA in 2006?

Answer:The other issue that was raised by the committee was
that in 2003 which predates my coming into the office, the FCT had allocated a
piece of land to the PEF for the purposes of developing its corporate

The files available to me actually indicate that the board
has prepared all the drawing and everything. It also forwarded all those things
to the appropriate department in the FCT for granting of a building plan

But before that could be done, the exercise that took place
around that time, the land was revoked and government took it back. I know that
when I came in 2007 as the executive secretary and I met that situation, I made
several attempts. In fact, I spoke to two past ministers of the FCTs and made
several vigorous attempts for us to get the land back and to develop the head

But the House Committee has now taken the decision that
since the board had expended some of that money [20 million naira]… [cuts in]
and to the best of my knowledge a large chunk of that money was spent on
payment of license fee to the FCT, engineering design and drawing… the board
paid back and the N20 million into government coffers.

Question:How can the nation eradicate the issue of fuel
scarcity especially with the recent strikes by NUPENG, DAPPMA and JEPFON over
nonpayment of subsidy claims?

Answer: The issue of fuel scarcity is an issue of supply and
I think the focus that government has to rehabilitate and get our refineries up
and running efficiently is really the long term solution.

I know that there is a lot of work being done on getting the
refineries back, and the Turnaround Maintenance (TAM). The Honourable Minister
of Petroleum Resources had mentioned that contract for the TAM had been awarded
to the original builders of the refineries so that we can get the expertise
that went into building them the first place.

That is the long term solution when we have our refineries
working to meet our local demand then, the issue of distribution is easier.

Question: How can we ensure that petroleum products are not
diverted to neighbouring countries as it is commonly practised?

Answer:The issue like I said, is that of supply which is
ensuring that as much as possible we are refining what we produce in crude.
Also one of the benefits of Aquila is a truck that is headed for a particular
location cannot deliver to another location.

For instance, several marketers have said we are moving this
product to Suleja and it never arrives. Then they take it to another location.
When it gets in there and once our depot representative can’t even find it on
the server even if they try to receive that product through another means, it
won’t go.

So those are the things we are doing now to curb diversion.
Therefore, Aquila will curb a lot of that. Phase one of Aquila is depot to
depot, phase two is to ensure that when it leaves the receiving depot it ends
up in the retail outlet that it’s meant to go.

With this project over time, cases of diversion will be
really severely cut if not totally eliminated.

Question: How will the PIB affect operations in the oil and
gas industry?

Answer: I believe that the review of the laws and the
transformation plans will just help Nigeria. I believe that it will be good for

As far as PEF is concerned as I said earlier, we have the
bill that has been presented to the National Assembly and our commitment to
Nigeria is that we will do whatever we need to do and work very hard to ensure
that the benefits that government had in mind in putting together PEF are
delivered to Nigerian public.

This is by way of our products being available in the retail
outlet s and also by way of cutting people who are exploiting the situation
that causes the products not being sold at the appropriate prices.

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Oil & Energy

Nigeria Earns N2.7trn From Domestic Crude Oil Sales In 2019



The latest report by the Nigeria Extractive Industries Transparency Initiative (NEITI) has put Nigeria’s earning from domestic crude oil sales in 2019 at N2.7 trillion.
According to NEITI’s 2019 Oil and Gas Industry Audit report, the country earned N2.72 trillion from just domestic crude oil sales.
It added that of this figure, N518.07bn was deducted for Petroleum Motor Spirit, PMS, under-recovery by the Nigerian National Petroleum Corporation, NNPC.
This figure is N213.07bn above the approved sum of N305bn for under-recovery in 2019.
Similarly, the sum of N126.66bn was incurred by the corporation as costs for pipeline repairs and maintenances, which showed a difference of N96.38bn from the approved sum of N30.29bn for the purpose.
The report also pointed out that N31.84bn was deducted for crude and product losses due to theft and sabotage in 2019.
The sum of $34.22bn was recorded as revenue from the oil and gas sector in 2019.
The $34.22bn revenue represented an increase of 4.88 percent over the $32.63bn garnered from the sector in 2018.
A breakdown of the earnings showed that payments by companies accounted for $18.90bn, while flows from federation sales of crude oil and gas accounted for $15.32bn.
The report showed that 10-year (2010-2019) aggregate financial flows from the oil and gas sector to government amounted to $418.54bn, with the highest revenue flow of $68.44bn recorded in 2011, while the lowest revenue flow of $17.06bn was recorded in 2016.
According to NEITI, the total crude oil production in 2019 was 735.24 million barrels, representing an increase of 4.87 per cent over the 701.101 million barrels recorded in 2018.
Production Sharing Contracts contributed the highest volumes of 312.042 million barrels followed by Joint Venture and Sole Risk, which recorded 310,284 million barrels and 89.82 million barrels respectively.
Others include Marginal Fields and Service Contracts which accounted for 21,762 million barrels and 1,330 million barrels respectively.
The report also showed that total crude oil lifted in 2019 was 735.66 million barrels, indicating a 4.93 per cent increase to the 701.09 million barrels recorded in 2018, with companies lifting 469.01 million barrels, while 266.65 million barrels was lifted by the Nigeria National Petroleum Corporation on behalf of the federation.

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Oil & Energy

Egbin Power Plant Plans 1,900MW Boost



A boost for electricity generation is on the horizon.
This indication comes on the heels of a planned additional 1,900 megawatt (MW) to the country’s power generation capacity by the Egbin Power Plant.
Its Chairman, Temitope Shonubi, made this known while unveiling expansion plans for the Egbin (Expansion) Phase 2 Investments, which is expected to add between 1,750MW  and 1900MW to power generation.
Shonubi, conducting a delegation of the NNPC led by its Chief Operating Officer (COO), Gas and Power, NNPC, Yusuf Usman, an engineer, through the plant’s post-privatisation, said the plant has gone through major overhauling, which he said has helped to increase its generation from the low capacity it had before 2013.
“Egbin has 1,320 MW capacity. As at the time we took over, the plant was generating 300MW which is an abysmal 22 per cent. As at today, our generation capacity has surged and we do 89 per cent. We have reached 970 MW, the peak generation for the year and we are working hard to ensure sustainability of this feat. The 970MW we hit is the highest for the year and based on our core value of sustainability, we are working round the clock to make sure that we sustain the gains we have made,” Shonubi explained.
Listing challenges being faced by the company to include, grid limitation, gas constraints, and liquidity, Sonubi added that stakeholders, including the NNPC, Central Bank of Nigeria (CBN), and the Transmission Company of Nigeria (TCN) have been trying to solve the problems.
He called on the NNPC to keep exerting efforts towards gas development and supply of the product to keep turbines at Egbin working productively at optimal capacity.
Responding to the call and obviously satisfied with efforts put in so far in the thermal plant, Usman assured of the corporation’s commitment towards gas optimisation and supply for gas to power.  He said NNPC will be joining the Egbin Power Plant to deepen gas supply for power generation.
He maintained that the NNPC was impressed with the turnaround at the thermal power station.

By: Tonye Nria-Dappa

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Oil & Energy

Rising Oil Prices’ll Create Problems For Nigeria – NNPC



Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, has warned that rather than being a positive development, the rising prices of crude oil in the international market could cause major challenges for resource-dependent nations like Nigeria.
He spoke just as the International Monetary Fund (IMF) expressed concern over the re-emergence of fuel subsidy in Nigeria in the face of the country’s low revenue mobilisation.
The Washington-based institution, however, welcomed recent moves by the Central Bank of Nigeria (CBN) to unify exchange rates, certifying Nigerian banks as being liquid and well-capitalised.
Kyari, at the virtual Citizens Energy Congress, tagged: “Securing a Sustainable Future Energy System through Strategy, Collaboration and Innovation,” yesterday described the rising price of crude oil as a “chicken and egg” situation.
He added that oil prices had started exiting the comfort zone set by the NNPC, and becoming a burden.
The forum was organised by DMG Events, a London-based Public Relations company, which said the occasion was to provide an opportunity for players to reset the energy agenda post- COVID-19 and connect the divergent and polarising perspectives.
Kyari put the comfort zone globally at $58-$60, saying that for the NNPC, anything above $70-$80 will create major distortions in the projections of the corporation and add more problems to the company.
Brent crude, Nigeria’s oil benchmark, is currently selling for over $74 and is likely to increase further in the coming days as the NNPC continues to battle the dilemma of shouldering the payment of petrol subsidy, which has made it unable to contribute to the Federal Account Allocation Committee (FAAC) on two occasions.
Kyari expressed the concern that as the commodity prices rise, buyers of Nigeria’s crude may be compelled to accelerate their investment in renewable sources of energy, thereby leaving the industry in a quagmire.
He said: “In a resource-dependent nation like Nigeria when it gets too high, it creates a big problem because your consumers shut down their demand. Demand will go down and obviously even as the prices go up, you will have less volume to sell.
“So, it’s a chicken and egg story and that’s why in the industry when people make estimates for the future, they always make it about $50 to $60. Nobody puts it beyond $60.
“But for us as a country, as prices go up, the burden of providing cheap fuel also increases and that’s a challenge for us but on a net basis, you know, the high prices, as long as it doesn’t exceed $70 to $80, it’s okay for us.”
According to him, Nigeria will have no problems supporting the restoration of about 5.8 million barrels a day that the Organisation of Petroleum Exporting Countries (OPEC) still has offline since the pandemic, due to the curbs in production quota imposed by the oil cartel.
He said adding that number to demand will stabilise and probably bring oil prices down to about $60 level or a little below $60, stressing that that’s a comfort zone for every producing company or country.
“I don’t see them (Nigeria) having any difficulty agreeing to add additional volume to cushion the effect of these high prices for this period,” he said.
He stated that Nigeria is already producing well below its capacity, because in early 2020, the country actually produced up to 2.4 million barrels of oil per day for both oil and condensates.
With declining investments in the oil sector, Kyari stated that in a short time, most likely the next five years, the world may experience an energy crisis if the current situation is not properly managed.

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