Cost controls but production shortfalls

The NNPC’s accounts for August show a group operating deficit of N11bn (US$37m), compared with N24bn the previous month. Revenue from the Nigerian Petroleum Development Company picked up from N15bn to N33bn in August, which the corporation’s commentary attributes to the resumption of production on OML 119. It pushed up its operating surplus from N2bn to N12bn. Another positive was a boost to coastal sales by the Pipeline and Products Marketing Company (PPMC), which raised its revenue from white products from N104bn in July to N130bn.
These are creditable results in the adverse circumstances, the worst of which is the shut-in of about 300,000 b/d since February due to sabotage of the Forcados terminal export line. The corporation puts average crude production at just 1.65 mbpd in July.

The corporation will continue to report trend deficits without a lasting settlement in the Niger Delta. The commentary notes 221 PPMC pipeline breaks in August, the lowest since April.

The January-August operating deficit of N128bn compares with N183bn in the same period of 2015. Given the production constraints, the improvement has been achieved through cost control at head office and the renegotiation of contracts with local and external parties. These accounts are presented on an operating level and so exclude below-the-line items.

Over the 12 months to August, export receipts from crude oil and gas sales totaled US$3.17bn. Other than token payments of US$73m to the federation account, the amount was paid in full towards joint-venture (jv) cash calls. These payments are falling well behind budget, and the NNPC puts its arrears under the jv arrangements at US$6bn. The industry has higher figures.

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