NNPC Weekly: How NASS, others intervened in aviation fuel price reduction

“In the next three days, representatives of MOMAN, DAPMAN and Airline Operators of Nigeria would sit down and adopt transparent bases of pricing.

Kyari in a meeting with House or Reps and airline operators on high cost of aviation fuel

 

The House of Representatives and the Nigerian National Petroleum Company Limited (NNPC Ltd) last week facilitated a deal between petroleum products marketers and airline operators to keep the price of Aviation Turbine Kerosene (ATK), at N500 per litre.

 

The ATK is popularly known as aviation fuel.

 

The agreement was reached on Monday at the second day of the investigative hearing of the House of Representatives Adhoc Committee on High Cost of Aviation Fuel which held at the National Assembly Complex, Abuja.

 

Presenting the highlights of the agreement, the Group Managing Director/Chief Executive Officer GMD/CEO of NNPC, Malam Mele Kyari, stated that both parties were represented.

 

The petroleum product marketers were represented by the Major Oil Marketers Association of Nigeria (MOMAN) and the Depots and Petroleum Products Marketers Association (DAPPMA).

 

At the other end, the aviation industry stakeholders were represented by the Airline Operators of Nigeria (AON) and the Nigerian Civil Aviation Authority (NCAA) as both groups agreed to have the pump price of aviation fuel pegged at N500 per litre for the next three days.

 

“In the next three days, representatives of MOMAN, DAPMAN and Airline Operators of Nigeria would sit down and adopt transparent bases of pricing.

 

“That as requested by the Association of Airline Operators of Nigeria, they will be granted license by their authority to also import ATK so as to have a way of benchmarking prices.

 

“They will also have a reference exchange rate for the naira,” Kyari said.

 

Stakeholders also resolved to engage and agree on a premium which would also be different from client-to-client depending on the volumes they want to buy and the credit limit that each marketer can permit.

 

This is expected to help establish a transparent basis for pricing, eliminate price discrepancies and would throw up the real market value of the product.

 

Earlier, the Executive Director Systems, Storage and Retailing Infrastructure of the Nigerian Midstream and Downstream Regulatory Authority (NMDPRA), Mr Ogbogu Ukoha, highlighted some of the factors that sent the price of ATK over the roof.

 

“One of the major factors influencing the high cost of ATK remains the issue of availability of forex that is, the source from which marketers acquire their Dollars either from the Central Bank of Nigeria (CBN) or the parallel market.

 

“When that is added to the fact that ATK is deregulated, it becomes a commercial dilemma whereby marketers can’t sell below certain price due to forex barriers and challenges of landing cost.

 

“However, airline operators insist that they can’t buy products above a particular amount if air fares will remain affordable,” Ukoha said.

 

Speaking in similar vein, the Secretary of DAPPMA, Mr Olufemi Adebayo, explained that the scarcity of forex was a major issue in rising price ATK.

 

“If we can buy dollars at N410 or N420, the price will be different. Unfortunately, we cannot.

 

“What you buy from the street is different from what you get from the banks; and for dollar, the more you want it, the cheaper it’s not.”

 

On his part, the Chairman of MOMAN, Mr Olumide Adeosun, stated that part of the challenge with the pricing of ATK was the fact that it is the most difficult to handle of all the middle distillates because it required extra licensing to produce.

 

“There are refineries in Nigeria today that produce ATK but can’t sell the product because it has to be licensed.

 

“Some of the modular refineries that produce diesel in the country can produce ATK, but these refineries are not certified for such production,” he said.

 

Adeosun also disclosed that the look-back method of determining the price of ATK in the aviation sector lends itself to abuse by airlines which often want to take advantage of price variations in the market.

 

“Aviation fuel price index is determined by the previous month’s average.

 

“Habitually, product buyers want to take advantage of price variations at the market, which sometimes trigger loss.

 

“You can buy products today when it is expensive and sell at a loss tomorrow, considering how the price index is determined on a look back”.

 

Speaking on behalf of the AON, Mr Allen Onyema, Vice Chairman and Chairman/CEO of Air Peace, expressed appreciation to the GMD NNPC and the leadership of the House of Representatives for their forthright approach to ATK price hike issue and pledged the commitment of the group to the welfare of Nigerians.

 

In his closing remarks, the Chairman of the Adhoc Committee and Deputy Speaker of the House of Representative, Rep. Idris Wase, commended the GMD NNPC, Malam Mele Kyari and all the stakeholders for their sacrifices that made the interim agreement possible.

 

He said the House would continue to provide the needed support to ensure the welfare and security of Nigerians.

 

Still in the week under review, the NNPC Ltd., confirmed that it remitted the total sum of ₦59.8 billion to the Federation Account from 2010 to 2018.

 

The Company made the disclosure at an interactive session with the House of Representative’s Committee on Public Accounts.

 

In a presentation to the lawmakers, NNPC’s Chief Financial Officer (CFO), Mr Umar Ajiya who represented the GMD/CEO Kyari, tendered documents to show that the sum of ₦59.8 billion was remitted after reconciliation with the office of the Accountant General of the Federation and the Revenue Mobilisation and Fiscal Commission.

 

He explained that prior to the passage of the Petroleum Industry Act (PIA), NNPC was mandated to remit certain streams of revenue to the Federation Account and the Consolidated Revenue Fund, stressing that under the PIA, the Company would only make remittances to the Federation Account.

 

On the remittances of revenue generated by the NNPC in 2019 and 2020, the CFO explained that payments were still being reconciled with the Accountant General’s Office and the Revenue Mobilisation and Fiscal Commission.

 

On his part, Chairman of the Committee, Rep. Oluwole Oke said that the lawmakers would study the documents presented by NNPC and get back to the Company on any matter that needed further clarification.

 

Present at the interactive session were representatives of the Office of the Accountant General of the Federation and the Office of the Auditor General of the Federation respectively.

 

Also in the week under review, the NNPC Limited has said that one of the key reasons why the Modular refineries are unable to produce Premium Motor Spirit is the regulation of the pump price of the product by government.

 

The statement was made by the Group Executive Director, Refining, NNPC Ltd, Mr Mustapha Yakubu during a plenary session at the recently concluded Nigeria International Energy Summit 2022 in Abuja.

 

A modular refinery is a simplified refinery requiring significantly less capital investment than traditional full-scale refineries. It is a crude oil processing facility with a capacity of up to 30,000 barrels per day.

 

Nigeria has a number of modular refineries in Edo, Delta, Imo and other states, while plans are on to increase the number through private sector investments.

 

The GED said that , “Some modular refineries should take up to 50,000 barrels per day, but because of financing you can start with 10,000 barrels and then scale up gradually to 50,000 barrels.

 

“What do you need to do to produce PMS? He asked, the answer according to him, is to ensure additional investment that will put in the cracker required to produce the PMS”.

 

Still talking about the scarcity of PMS, the petroleum products marketers have called for a full deregulation of the downstream sector, even as the NNPC Ltd. considered a fresh investment in refineries and gas infrastructure.

 

The Chairman, Major Oil Marketers Association of Nigeria (MOMAN) and Managing Director, 11 Plc, Tunji Oyebanji, decried the postponement of full deregulation of the downstream sector.

 

According to him, “the move is a major setback for the industry”.

 

He said liberalisation of the sector would enable investors across the value chain to have adequate returns on their investments.

 

Executive Director of Rainoil Ltd., Emmanuel Omuojine said removing subsidy on petrol would add significant value to Nigeria’s foreign exchange reserves especially on the macroeconomic level.

 

Chief Executive, OVH Energy Marketing Ltd., Huub Stokman, said the current challenge with scarcity of petrol was a clear indication that Nigeria needed a good emergency plan.

 

Also speaking at the recently concluded Nigerian International Energy Summit (NIES), Group Executive Director, Refining, NNPC, Mustapha Yakubu, said efforts at rehabilitating refineries are in top gear, noting that deregulation of the downstream sector would boost the country’s domestic refining capacity.

 

In another development, the Nigerian Gas Company Limited (NGC), a subsidiary of the NNPC emerged the overall best participant at the just concluded 43rd Kaduna International Trade Fair.

 

The company also bagged the “Best New Product Award” at the fair with the theme “Re-strategising Nigeria’s Economy for Global Competitiveness”.

 

Presenting the award at the closing ceremony, Minister of Trade and Investment, Otumba Niyi Adebayo, represented by the Permanent Secretary, Mrs Evelyn Ngige, commended NGC on its performance at the event.

 

Earlier at the NGC special day, the Managing Director (MD) of the Company, Mr Seyi Omotowa said that the Ajaokuta-Kaduna-Kano (AKK) gas pipeline project would deliver on its mandate to provide job opportunities and facilitate balanced economic growth.

 

The MD who was represented by Mr Emmanuel Igbokwuwe, General Manager, Commercial Division said Kaduna state would reap huge economic benefit because of its strategic location to the AKK gas pipeline.

 

The 43rd Kaduna International Trade Fair held from Feb. 25 to March 6.

 

Meanwhile, the Federal Government said it would deal decisively and sanction any Depot Owner caught selling petroleum products beyond the approved Ex-Depot price in the country.

 

Chief Timipre Sylva, Minister of State, Petroleum Resources, disclosed this in Abuja while briefing newsmen on its effort to resolve the issue of fuel scarcity in the country.

 

He urged the public to report any one who tried to take advantage of the situation for sanctioning as required by the law.

 

Consequently, the minister said the trucks that could move petroleum products that ran on diesel were impacted and could not really cope with the high diesel prices.

 

Though he said the products were available in the depots, the trucks could not move the product because of the high cost of transportation.

 

This, he said, brought in another dimension to the crisis.

 

He said that so far, the management of the NNPC Ltd. and Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), had been working very hard.

 

According to him, the situation is gradually being controlled while supply for Abuja was increased.

 

Also in the week, Nigeria and Equatorial Guinea signed a Memorandum of Understanding for the supply of gas from Nigerian offshore fields to Equatorial Guinea gas processing facility at Punta Europa.

 

At the signing ceremony, the Minister of State for Petroleum Resources, Chief Timipre Sylva, stated that the agreement had kicked off a strategic collaboration across the Gulf of Guinea.

 

He explained that Nigeria’s abundant natural gas reserves would complement Equatorial Guinea’s gas processing and liquefaction infrastructure.

 

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Sylva added that the recent passage of the Petroleum Industry Act coupled with Nigeria’s Decade of Gas initiative triggered the conception of the project, as it had facilitated major investment inflow from Equatorial Guinea into Nigeria.

 

He said that the project also signaled the joint effort of the two countries in working towards a greener energy world.

 

Sylva noted that the project has envisioned an offshore gas pipeline development and would also create huge in-country local content opportunities for pipeline and other infrastructure service providers.

 

On his part, the Minister of Mines and Hydrocarbons for Equatorial Guinea, Gabriel Lima, said that the execution of the MoU was indicative of a great example of the South-South cooperation between Nigeria and Equatorial Guinea.

 

Sylva, signed the agreement on behalf of the Federal Government, while the Minister of Mines and Hydrocarbons for Equatorial Guinea, Gabriel Lima, signed on behalf of his country.

 

Visit us on www.nannews.ng for more details.

 

 

(NAN)

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