NNPC shuts out Nigerian shipowners, says coastal movement of crude oil not sustainable

Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr. Ibe Kachikwu has declared that using vessels to move crude oil coastwise is too expensive when compared to using pipelines.

This is even as the corporation records an annual loss of N287.4 billion from the operations of its subsidiaries across the country despite the fact that it is meant to be a profitable business venture.

Kachikwu said pipelines must be made to work because there was no model that would make economic sense in the absence of working pipelines for the petroleum business.

He said it was unsustainable to leverage alternative models other than pipelines as far as the movement of crude and refined products were concerned, stressing that alternative models would only shoot up cost for the corporation.

The NNPC boss said, “Militancy, difficulties and what have you are not enough reasons to make our pipelines not to work. We are engaging relevant security agencies in this respect.

“Coastal movement of crude or finished products is not profitable. It is not sustainable and it is not a solution. We need to get the pipelines working, and that is why we are unbundling the PPMC to have a pipeline company with a managing director that focuses on just the pipelines.”

NNPC is reportedly losing about N250 billion yearly as a result of the inefficiencies of the Pipelines and Product Marketing Company (PPMC) alone, which is one of its subsidiaries, according to figures made available by the national oil company.

The PPMC’s N250 billion loss accounts for about 87 per cent of the corporation’s aggregate loss by implication.

Reports had it that sside the huge losses coming from the PPMC, the refineries and contractual arrangements, among other problem areas, were responsible for the remaining 13 per cent of the losses made by the corporation.

Some of the contracts were recently cancelled by Kachikwu. According to him, an average of $150m is being saved monthly due to the cancellation.

The country is also said to be losing about N10bn as a result of the near-comatose state of the refineries.

Kachikwu said in an interview that when 40,000 barrels of crude oil were transferred to the refineries for processing, only 15,000 barrels came out.

To this end, he said, “The truth is that the refineries are not working profitably now. This, no doubt, could be for the reason of pipeline issues, or for aging facilities in the refineries. If the refineries do 60 per cent capacity today and tomorrow zero per cent, we could possibly end up with a 20 per cent capacity when the average is done. This is, of course, a huge loss.

“We will not continue to commit crude and other resources to the refineries only to get far less.

“It would be better to shut the refineries for turnaround maintenance, while the crude hitherto pumped into them is sold and the proceeds used to import petroleum products,” he said.

There are also indications that the planned unbundling of the PPMC, with the aim of creating a new subsidiary that will oversee purely pipelines issues, is part of the loss-reduction move by the leadership of the NNPC.

The unbundling exercise is also going to affect some other subsidiaries of the corporation due to their unprofitable and inefficient states. 

Copyright 2017 Ships & Ports Ltd. Permission to use quotations from this article is granted subject to appropriate credit given to www.shipsandports.com.ng as the source.