As Crude Oil Price Hits $45 Per Barrel...
Fuel Import: NNPC to Pay N17bn Subsidy
AP spends N1.5bn on new outlets
By Mike Oduniyi and Chinazor Megbolu
The Nigerian National Petroleum Corporation (NNPC) will spend a total of N17.05 billion this month, to subsidise the sale of its imported fuel in the domestic market. The huge subsidy by the corporation is as a result of increase in the price of crude oil which yesterday reached a record high of $45 per barrel in the international market.
The amount includes subsidy on NNPC direct imported fuel cargoes as well as on the 90,000 metric tonnes of premium motor spirit (PMS) to be imported by major oil marketers this month.
Major fuel marketer, African Petroleum (AP) Plc, has however, expended the sum of N1.5 billion on the construction of new retail outlets to handle the expected surge in products distribution.
THISDAY checks revealed that the NNPC expects the delivery of at least six cargoes of fuel or 241.38 million litres of petrol this month from the total 40 cargoes of PMS it ordered for the third quarter (July-September) this year.
Major marketers on the other hand, said yesterday that they would be importing three cargoes or 120.69 million litres of PMS this month. They, however, added that they will still rely on NNPC blending price to maintain the current pump price of petrol as no approval has been granted yet to raise fuel prices.
NNPC chief spokesman, Dr. Levi Ajuonuma, told THISDAY yesterday that following the sharp increase in crude oil prices in the international market, the amount the corporation will pay to maintain the current domestic price of petrol has now risen to about N550 million daily from N400 million in June.
"The development is of course bleeding the NNPC and also a serious haemorrhage on the national economy. Our import schedules have to go on accordingly, but on the other hand we can't raise fuel prices because of the court injunction," Ajuonuma said.
The court case arose from the face off between the Federal Government and the Nigeria Labour Congress (NLC) over the increase in fuel price, following the deregulation of the downstream oil sector.
Following the increase in petrol price to about N50 per litre last June and a nationwide protest called by the NLC, an Abuja High Court had ruled that fuel prices be reverted to pre-February 9 , 2004 level, pending the determination of a suit filed by the government.
NNPC last month, placed orders for the importation of 46 cargoes of products made up of 40 cargoes of petrol and six cargoes of kerosene. However, while the contracts were given out to traders at a premium plus $48 per metric tonne, current market price has shot up to a premium of about $60 per metric tonne.
The NNPC still sells fuel at its depots to marketers at N33.50 a litre. The marketers used this ex-depot price to blend with the landing cost of their imported fuel, to retail the product at N43.90 per litre.
Oil prices surged higher yesterday with the Light sweet crude traded at $45.04 per barrel while the Brent closed at $41.45 per barrel. The price increase was said to have been sparked by disruptions to oil exports by Iraq which holds the second largest proven oil reserves in the world.
The Middle East country's oil fields in the south had been shut down on Monday following threats of sabotage.
Also speaking to THISDAY on the development, the Managing Director of African Petroleum Plc, Engineer Abdullahi Sule, said the trend was also a concern to operators in the downstream oil sector because of its effect on fuel prices.
Sule, who spoke in Lagos during the commissioning of one of AP's 30 new filling stations, said the six major oil marketing companies namely Oando, Conoil, Mobil, Texaco, Total and AP, would be importing a total of 90,000 metric tonnes of fuel this month.
The figure, he said, was the same volume imported last month. The marketers, according to Sule, however, will maintain the current price of fuel since the NNPC has not changed its ex-depot price.
"Fuel price is determined by the ratio of import we make or if there is a change in the prices we have from the NNPC. But right now we never have a policy on increase in fuel price," the AP chief executive said.
Sule said the 30 retail outlets, which cost the company a total of N1.5 billion, was to create an edge over its competitors and to effectively participate in the deregulated regime.
"AP Plc now manages about 500 retail outlets nationwide, that is AP owned, dealer assisted and dealer developed outlets, scattered across the country to ensure that our products are available to our customers," he said.
The stations were constructed in conjunction with Global Fleet Oil and Gas Limited, and are located across the South west zone.
"We are certain that together, AP Plc and Global Fleet Oil and Gas Limited shall create indelible prints in the downstream sector of the Nigeria oil and gas industry in the very near future," he added.
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