ADVERTISEMENT

Nigeria's oil company fights for oil cargoes as revenue squeeze bites

"NNPC needs every cent they can get for fuel," said a source close to the negotiations, adding that "NNPC had a different set of books" than oil majors.

Ibe-kachikwu- Minister of state for petroleum

Nigeria's state oil company is in a standoff with energy giants ExxonMobil and Royal Dutch Shell over ownership of physical crude cargoes as the West African nation seeks to shore up its creaking budget.

The dispute has delayed some of the country's monthly oil export programmes and added to confusion over just how much crude Nigeria has at its disposal to exchange for gasoline, sell to fund its record 2016 budget or use as debt collateral.

Discrepancies between NNPC and companies with production sharing contracts (PSCs) that entitle them to oil have always existed, but the crude price crash has increased the urgency to sort them out as both state and foreign firms feel the pinch.

The stakes are high for Nigeria, which is fighting its worst financial crises in years and is also swapping more oil for gasoline to end a nationwide fuel shortage.

ADVERTISEMENT

But oil majors have also been forced to foot a hefty bill to cover NNPC's portion of joint venture project costs, making them unlikely to give ground.

At issue is how much oil NNPC gets each month and how much it has to give to majors to cover costs under PSCs that help Nigeria export some 2 million barrels per day (bpd).

The lower the oil price, the more cargoes needed to pay companies under contracts. But sources told Reuters that NNPC was taking nearly as much crude for itself as when oil was above $100, eating into oil companies' allotments.

Exxon has confronted NNPC, sources said, by refusing to allocate barrels from the Erha stream – significantly delaying its loading programmes. Sources said NNPC had got some six cargoes in total more than its share.

"As a matter of practice, we do not comment on private discussions with government," Exxon said in a statement, adding "however, it is ExxonMobil's expectation that all parties recognise the need to meet their contractual obligations."

ADVERTISEMENT

An NNPC spokesman did not provide a response to detailed questions from Reuters, stating that the company was "anchored on transparency and honesty". The company recently began publishing detailed monthly accounts of its financial status and crude liftings.

Shell is in a similar battle over Bonga crude, though it has simmered under the surface and not caused significant loading programme delays. Still, a source close to the situation told Reuters that NNPC had taken roughly nine more cargoes than oil majors thought it should – oil worth some $357 million at current oil prices.

Shell declined to comment.

The problem is likely to persist. Nigeria, Africa's largest economy, relies on crude sales for the bulk of government revenues, but NNPC has reported losses since it began publishing its data from August last year.

As NNPC's liquidity problems mount, it has turned to oil majors themselves to cover costs for joint venture projects, so-called "cash calls", making its oil debt to them even greater.

ADVERTISEMENT

NNPC already owes at least $3 billion in cash calls, according to NNPC head Emmanuel Ibe Kachikwu, and its finance minister said it plans to dip into money reserved for cash calls if revenue this year falls short of expectations.

"NNPC has always had difficulties meeting its cash call – and that's the bottom of the issue," said Dolapo Oni, head of energy research at pan-African lender Ecobank. "The IOCs get more cargoes diverted to them to cover these costs."

Nigeria badly needs revenue to fund a proposed 6.06 trillion naira ($30.6 billion) budget aimed at stimulating the economy. It is also increasingly turning to its crude to tame fuel shortages that began last month.

"There aren't enough cargoes available to NNPC," Oni said of efforts to swap more crude for gasoline, adding "they had to allocate those extra barrels to the IOCs" to cover debts.

Still, given the gravity of the situation, NNPC could continue to fight for cargoes.

ADVERTISEMENT

"Stopping a rebellion over fuel shortages is a priority right now," one source told Reuters.

JOIN OUR PULSE COMMUNITY!

Unblock notifications in browser settings.
ADVERTISEMENT

Eyewitness? Submit your stories now via social or:

Email: eyewitness@pulse.ng

Recommended articles

Lagos postpones eagerly anticipated Easter boat regatta indefinitely

Lagos postpones eagerly anticipated Easter boat regatta indefinitely

Third Mainland Bridge reopens in 1 week, formal ceremony later - Minister

Third Mainland Bridge reopens in 1 week, formal ceremony later - Minister

Sanwo-Olu opens 'Sunday market' on Good Friday for Easter shopping

Sanwo-Olu opens 'Sunday market' on Good Friday for Easter shopping

Wike thanks Tinubu for the opportunity to serve

Wike thanks Tinubu for the opportunity to serve

Barrister Bida pens special birthday prayer for President Tinubu, Nigerians

Barrister Bida pens special birthday prayer for President Tinubu, Nigerians

Tinubu’s aide distributes food items to 1,750 persons in FCT, Kwara

Tinubu’s aide distributes food items to 1,750 persons in FCT, Kwara

Court grants senator accused of forging NYSC certificate ₦50m bail

Court grants senator accused of forging NYSC certificate ₦50m bail

BREAKING: Delta monarch declared wanted by military surrenders to police

BREAKING: Delta monarch declared wanted by military surrenders to police

Renowned Canada-based Nigerian playwright, Oguntokun is dead

Renowned Canada-based Nigerian playwright, Oguntokun is dead

Pulse Sports

Nigeria vs Mali: Has Finidi George done enough to land Super Eagles job permanently?

Nigeria vs Mali: Has Finidi George done enough to land Super Eagles job permanently?

I want to emulate Keshi and win the AFCON - Finidi George shares ambitious Super Eagles dream

I want to emulate Keshi and win the AFCON - Finidi George shares ambitious Super Eagles dream

Michelle Alozie: I had to do it because of African referees

Michelle Alozie: I had to do it because of African referees

AC Milan star reveals he was named after Super Eagles legend Tijani Babangida

AC Milan star reveals he was named after Super Eagles legend Tijani Babangida

Give him the job! Super Eagles fans beg NFF to make Finidi George permanent coach after Nigeria's win over Ghana

Give him the job! Super Eagles fans beg NFF to make Finidi George permanent coach after Nigeria's win over Ghana

Super Eagles 2-1 Black Stars: Nigerians praise Iwobi, Lookman, Finidi George after friendly victory against Ghana

Super Eagles 2-1 Black Stars: Nigerians praise Iwobi, Lookman, Finidi George after friendly victory against Ghana

ADVERTISEMENT
ADVERTISEMENT