In October the NNPC’s operating deficit fell sharply from N2.8bn the previous month to N407m (US$1.3m). Before central costs and ventures, a profit from production (N16.9bn) covered the losses from refineries (N7.8bn) and retail/marketing (N1.6bn). The corporation’s Financial and Operations Report for October notes a gentle decline in crude output (including condensates) in September to 1.93 mbpd from 1.99 mbpd. The commentary reports the various production shut-ins, adding that the worst was at the Qua Iboe terminal (of 195,000 bpd).
The refineries had a slightly better month in October. Port Harcourt processed 279,000 metric tonnes (mt) of crude and Warri 53,000 mt while Kaduna’s output was zero for the fifth month in succession. The refining companies produced a combined total of 115,000 mt in September.
The operating deficit has declined to N69bn in January-October 2017 from N162bn in the year-earlier period. It compares with the budget for the year ytd of an operating profit of N501bn. While central headquarters costs in the period were lower than budgeted, the three revenue areas all underperformed, production most of all.
Without a legal framework for the industry and an overhaul of the refineries, further upside is limited. In the period sizeable operating surpluses were reported by the Nigerian Petroleum Development Company (NPDC; N82bn) and the Nigerian Gas Processing and Transportation Company (N57bn).
The financial results are reported at an operational level so do not show below-the-line-items. The commentary does not shed any light on the accounting treatment of retail sales of petroleum products. We cannot therefore add anything to the discussion about the reported gap between the maximum retail price of gasoline/petrol and the said landing cost.