Oil analysts have expressed concerns that the recently signed 2017 budget projections may fall short of full implementation going by the vulnerability of major oil producers in the country’s rich Niger-Delta to attacks. These attacks could lead to production cuts, thereby limit earnings for the prosecution of the budget, they said.
In the Niger Delta region, which hosts the oil blocks, there is an uneasy calm following new agitations for secession and threat to oil installations.
The concerns stem from the fact that the Nigerian Petroleum Development Company (NPDC), the most profitable arm of the national oil company, the Nigerian National Petroleum Corporation (NNPC), is particularly vulnerable to attack and sabotage in the restive region.
NPDC specifically drove NNPC’s revenue up by 86% to N41.3bn and its operating profit by 196% to N25.9bn last year. But in
February 2017, NPDC produced just 40,000 b/d although it has a target of 250,000 b/d.
It would also be recalled that the Nigerian National Petroleum Corporation (NNPC) in March this year reduced its operating deficit from N14.1bn the previous month to N5.6bn, about $18 million as a result of peace initiatives in the region. But with the current threats, the agreed peace truce may be breached, analysts maintained.
Indications are rife that Nigeria may be confronted with a wider budget deficit gap if production cuts are prolonged thus putting into jeopardy the chances of realizing the projections in the budget.
The Federal Government had predicated this year’s budget on oil price benchmark of $42.5 per barrel at a daily production output of 2.2 million barrels and average exchange rate of N305 per dollar. Oil price currently trends below $48 per barrel with Nigeria’s production level comfortable at range.
The finances of the NNPC are indeed very paramount for the country to implement the provisions of the budget.
NNPC’s Financial and Operations Report for March indicates an operating profit of N3.4bn posted by the refineries; Kaduna and Port Harcourt, to be precise. Under their new business model of merchant plant, the refineries purchase the crude themselves and sell
products for their own account.
The refineries are to remain state-owned although private capital may be injected. They will be joined by the 650,000 b/d Dangote project in Lagos State, which is scheduled for its first production in 2019 and for stock marketing listing subsequently.
Between March 2016 and March 2017 the NNPC’s export proceeds totaled $2.50bn, of which $2.29bn was transferred to the joint ventures (JVs) for cash call payments. The amount due to the JVs over the period per the 2016 appropriation, however, was $8.64bn.
Under an agreement with the oil majors, a haircut has been applied to the corporation’s arrears, a first repayment has been made, and the ventures are to become incorporated and self-financing.