Culled—Proshare

June 13, 2017/FBNQuest Research

In March the NNPC reduced its operating deficit from N14.1bn the previous month to N5.6bn (US$18m), its best performance since the token profit of N0.3bn in May 2016.

The driver was the Nigerian Petroleum Development Company (NPDC), the corporation’s most profitable unit, which pushed its revenue up by 86% to N41.3bn and its operating profit by 196% to N25.9bn.

The company is particularly vulnerable to sabotage in the Niger Delta. It produced just 40,000 b/d in February although it has a target of 250,000 b/d. The peace dividend is substantial.

A lesser bright spot in the corporation’s Financial and Operations Report for March is the operating profit of N3.4bn posted for March by the refineries (or by 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 listing.

Between March 2016 and March 2017 the NNPC’s export proceeds totaled US$2.50bn, of which US$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 US$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.

The report notes that power plants generated 3,056 megawatts in March from gas supplied by the corporation, equivalent to 75% of total generation.