Limited Upside for NNPC Finances for Now

Oil & Gas
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Tuesday, September 12, 2017/11:00 AM/ FBNQuest Research

In June the NNPC’s operating deficit picked up slightly from N3.5bn the previous month to N5.2bn (US$17m). Profits were generated by production (N8.6bn) and refineries (N3.3bn) before deductions for central costs and ventures. Products marketing and retail were again lossmaking.

The corporation’s monthly Financial and Operations Report for June notes a pick-up in crude output (including condensates) in May to 1.88 mbpd from 1.79 mbpd the previous month. OPEC data for end-August indicates output of about 2.0 mbpd on the same combined basis.

The corporation highlights the improvement in the availability of petroleum products, if not the profitability of their distribution. In June 860 million litres of premium motor spirit were imported, 141 million litres refined domestically, and 1.08 billion litres distributed and sold by the Pipelines and Products Marketing Company (PPMC).

PPMC sales have averaged 33,000 litres per day over the past year.

The report notes 77 pipeline breaks due to vandalism in June. These were mostly in the delta but include 13 along the Kaduna-Zaria line.

The corporation’s operating deficit has declined to N48bn in H1 2017 from N92bn in the year-earlier period. Without a legal framework for the industry and radical change at the refineries, further upside is limited. In the six-month period three Group units reported reasonable operating surpluses: the Nigerian Petroleum Development Company (N37bn), the Port Harcourt Refining Company (N31bn) and the Nigerian Gas Processing and Transportation Company (N28bn).

The report notes that power plants generated 2,969 megawatts in June from gas supplied by the corporation, equivalent to 84% of total generation.

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