How Obasanjo dictated fuel prices, by NNPC boss

No Comments » March 26th, 2008 posted by // Categories: Energy Development Project




Wednesday, March 26, 2008              

How Obasanjo dictated fuel prices, by NNPC boss
From Alifa Daniel and John-Abba Ogbodo, Abuja

THE Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC), Alhaji Abubukar Lawal Yar’Adua, yesterday in Abuja painted the grim financial position of the corporation.

He told members of the House of Representatives Committee on Petroleum Resources, who visited him that the death kneel came from former President Olusegun Obasanjo, who stripped the NNPC of control over the nation’s oil blocks. Obasanjo, he added, dictated fuel prices to the NNPC.

The NNPC boss added that the poor financial status was partly caused by the Federal Government’s refusal to pay the N58 billion debt it incurred on fuel imports between 2003 and 2005.

At the Senate, Yar’Adua has been asked to explain the circumstances surrounding the award of oil exports to 28 firms.

The Senate particularly wants to know the level of investments the companies made in the country’s oil industry to qualify for the high profile contracts.

Responding to a speech delivered by the committee’s chairman, Tam Brisbe, on crude oil production quota of 45,000 barrels per day allocated to NNPC, Lawal explained that the corporation had its subsidy stopped by Obasanjo and was buying crude at international price.

He added that because of the policy, the cost of operations became prohibitive and the government then forced the corporation to sell refined products in the country at prices dictated to the NNPC.

He said the corporation, in the process, lost all the savings it had made just to keep operating and stressed that since then, NNPC had been operating on credit.

“Since August 2003, the Federal Government stopped subsidy to NNPC, we bought products at the international price. Government does not give us money for products. We lost all savings up to the extent of not being able to pay salaries. We have not recovered the $58 billion spent to make fuel available. They refused to pay us. If it were a private venture involved, it would not have happened. It is not a good development,” he said.

Lawal Yar’Adua expressed confidence that the NNPC would come out of the crisis due to the on-going repositioning of the establishment. He said NNPC could resort to its $2billion investment in the Bonny-based Liquefied Natural Gas (LNG) project. The NNPC boss also said that another window for the corporation was to intensify work on the Atlas Cove and Mosimi to reduce demurrage. He defended the use of foreign firms on fuel import, saying that the kind of credit facilities which they granted could not be sourced by local firms.

Further painting the grim picture of the situation in which NNPC has found itself, the GMD said: “NNPC is living on credit and if not for the credit facility we have up to 90 days within which to pay for the products, it would have been extremely difficult. That is what we live on.”

He traced the history of the present financial crunch in the corporation to the era of former military President, Gen. Ibrahim Babangida, saying that all government agencies were asked to transfer their funds to the Central Bank of Nigeria (CBN) and the huge sums of money which the NNPC had from all its investments went to the CBN.

He said it was during the regime of Gen. Abdulsalami Abubakar that the NNPC got some life-line but the operation of the Petroleum Trust Fund (PTF) did not help matters because only paltry sums came to the corporation. The NNPC boss pointed out that main problem of the corporation was the refusal of Federal Government to allow it capitalise.

He added that the situation was worsened by the seizure of oil blocks belonging to NNPC which were later given to Chinese firms by the last administration but remarked that the present administration had reversed the trend. As part of the plan to reposition the NNPC, he disclosed that the corporation had revisited the search for oil in the Chad Basin and assured that something positive would come out.

Yar’Adua said the 2008 target date for elimination of gas flaring would be a mirage because the enabling environment had not been created. He said for the policy to be realistic, government should encourage stakeholders to make funds available and concrete plan drawn.

Brisbe, who led the delegation, said they were at the NNPC headquarters to interact and see what could be done to move the oil industry forward. He said the panel had requested the corporation to provide information but was yet to receive any response.

Six weeks ago, the Senate had demanded from the NNPC boss how 28 firms without solid investments in the country were picked to lift the country’s crude. For preferring to go for meeting in the Defence headquarters rather than receive visiting members of the Senate Committee on Upstream Petroleum Sector, Yar’Adua was summoned to the Upper House.

An apologetic NNPC chief had come to the Senate with over 30 of his officers, but was issued a list of questions the lawmakers wanted answers to.

Yar’Adua has also put the domestic consumption by domestic refineries at 445, 000 barrels per day with Port Harcourt Refinery getting the highest volume of 210, 000 barrels daily; Warri, 125, 000; and Kaduna Refinery and Petro-Chemical Company receiving 110, 000 barrels.

In his explanation, Yar’Adua said the number of firms, which began lifting the crude on the first day of March to the December 31, 2008, was reduced from 47 to 28 because of shut-ins.

However, of the 28, he added, nine are indigenous outfits to enable them become versed in oil trading skills, pledging that in the future, local companies would be solely responsible for lifting of the country’s crude.

Yar’Adua explained that the refineries picked to lift the oil were chosen to get a vending point for the country’s crude.

The other companies that will lift the remaining 1,110, 000 barrels of oil per day include traders that will lift 60, 000 barrels per day. They are Addax, Arcadia, Glencore, Vitol, Trafigura, Gunvor, MRS, Petrodel, Sahara Energy Resources, J&S Investment Services (Lukoil), Oando, Taurus, and Camac.

Refineries outside the country that also won the contracts but will get 30, 000 bpd are PMI, Isla, Fujairah, Petroenergy, Lanxing, and Sun oil. Others lifting 30, 000 bpd for the NNPC are Dukeoil, Napoil, Calson, and Nigermed.

Under bilateral arrangements, Sinopec is to lift 60, 000 bpd while countries with bilateral agreements with Nigeria and are getting to lift the crude are Indian Oil Corporation, Tema Oil Refinery (Ghana), Senegal, and Cote d’Ivoire.

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