The first audited financial statements of the Nigerian National Petroleum Corporation (NNPC) after 43 years of its operation to the effect that the Kaduna Refining and Petrochemical Company Limited (KRPC) generated no revenue in 2018, once again underscores the need for the deregulation of Nigeria’s oil and gas industry, particularly the downstream sector. There is, indeed, the dire need for the immediate passage of the Petroleum Industry Bill (PIB), which has been pending for over a decade. Details of the report, which was released last week, showed that the refinery, however, incurred an operating loss of N64.5 billion, throwing up concerns over the continued operation of refineries by the corporation.
The newly released annual reports and financial statements for the year ended December 31, 2018, were for 20 of the state-owned national oil company’s subsidiary companies operating within and outside the country. The companies covered in the reports published in the corporation’s website last week included the Nigerian Petroleum Development Company (NPDC), Warri Refining and Petrochemical Company Limited (WRPC), Port Harcourt Refining Company Limited (PHRC), Kaduna Refining and Petrochemical Company (KRPC), and Integrated Data Services Limited (IDSL), Nigerian Products and Marketing Company Limited (NPMC), Nigerian Pipelines and Storage Company (NPSC).
The others include the National Engineering and Technical Company Limited (NETCO), Nigerian Gas and Marketing Company Limited (NGMC), Duke Oil Services (UK) Limited, Duke Global Energy Investment Limited, Duke Oil Incorporated, NNPC Retail Limited, National Petroleum Investments Management Services (NAPIMS), The Wheel Insurance, NIDAS Shipping Services, NIDAS UK Agency, and NIDAS Marine. Details showed that Kaduna refinery spent N24 billion in direct costs to record zero revenue and an operating loss of N64 billion for 2018, as against N2 billion revenue and N112 billion losses in 2017.
A breakdown of the direct costs and administrative expenses showed that it incurred N447.7 million in training expenses, security expenses of N230 million, communication expenses of N37.3 million, and consultancy fees of N843 million. For the Warri Refining Company, the audited financial statement showed that the company earned N1.98 billion as revenue while it incurred N12.74 billion as cost of sales, resulting in a gross loss of N10.57 billion and an operating loss of N45.39 billion. The Port Harcourt Refining Company recorded total revenue of N1.45 billion in 2018 with expenses of N24.04 billion, resulting in a gross loss of N22.58 billion.
Meanwhile, a breakdown of the payments made to directors at the Kaduna Refinery showed that total employee cost was put at N23 billion in 2018, compared to N27 billion in 2017. Details of the NNPC financial statement have raised concerns yet again about the continued operation of refineries by the NNPC. None of Nigeria’s refineries worked up to 50 per cent of their capacity at any time during 2017, according to official figures from the NNPC. The NNPC has four major refineries: two in Port Harcourt, Rivers state, which combines to form the Port Harcourt Refining Company (PHRC) with a combined installed capacity of 210,000 barrels per stream day (bpsd); the Kaduna Refining and Petrochemical Company Limited (KRPC) with an installed capacity of 110,000 bpsd; and the Warri Refining and Petrochemical Company Limited (WRPC) with an installed capacity of 125,000 bpsd.
All the refineries have a combined installed capacity of 445,000 barrels per day. For 2017, the Warri refinery functioned highest in January, utilising 42.6 per cent of its capacity. The Port Harcourt refinery, for the year, functioned at its peak in December, utilising 41.7 per cent. The Kaduna refinery had the worst performance in terms of capacity utilisation in 2017. It functioned most in February utilising just 34.4 per cent of its capacity.
Last year, Atiku Abubakar, presidential candidate of the Peoples Democratic Party in the 2019 general elections, said that he would privatise the NNPC. He said that the NNPC had failed to serve the purpose for which it was established in 1977 and selling-off the corporation and all the refineries was the best option for the country. But the Group Managing Director of the corporation, Mele Kyari, made a case for change in management of the refineries. He said the refineries would no longer be managed by the NNPC after rehabilitation.
Speaking in April, he said a company would be engaged to manage the plants on an Operations and Maintenance (O&M) basis upon the completion of the rehabilitation exercise. The rehabilitation of the four refineries in the country have gulped billions of naira since 1999 but none of them is yet to operate at full capacity. Against the background of resources expended on Turn Around Maintenance over the years despite their moribund state, many Nigerians have called on the government to shut down the refineries and sell them to willing investors.
It is appalling and regrettable that while the nation imports much its petroleum products, the refineries are not only dormant but have also become a drain pipe on the depleting federation accounts, no thanks to the Covid-19 pandemic. This is as unacceptable as it is reprehensible. We, therefore, urge the executive and legislative arms of government to expedite action on the PIB as the requisite legal instrument to cure this aberration.