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Insecurity slashes oil revenue by 53%

By on September 29, 2014

The Federal Government recorded a shortfall of N580.6bn in oil revenue within the first quarter of the year, investigation has shown.

Documents obtained from the Ministry of Finance put the actual net oil revenue that accrued into the Federation Account for the three-month period at N509.35bn, depicting a shortfall of N580.62bn (or 53.27 per cent) from the N1,089,970,000 projected for the quarter.

This is in spite the favourable oil prices at the international market, which averaged $108.23 per barrel in the first quarter of the year.

The oil price of $108.23m is above the 2014 budget oil price benchmark of $77.5 per barrel approved by the National Assembly and signed by President Goodluck Jonathan.

The Budget Monitoring and Implementation report for the first quarter of 2014 jointly signed by the Minister of Finance, Dr. Ngozi Okonjo-Iweala, and the Director-General of the Budget Office, Dr. Bright Okogu, detailed the performance of the 2014 budget.

In the report, the Federal Government said while the oil prices had been favourable in the international market, the country was yet to take advantage of this development owing to drop in the volume of oil lifted during the period.

The drop in the volume of oil lifted during the quarter was attributed to supply challenges following unrelenting crude oil theft, illegal bunkering and pipeline vandalism that had persisted during the period.

The report stated that data from the Nigerian National Petroleum Corporation showed that the average oil lifting (including Condensates) in the first quarter of 2014 was 2.23 million barrel per day, depicting a shortfall of 0.16mbpd (or 6.69 per cent) below the 2.39mbpd projected in the 2014 Budget.

It said, “The volume of oil lifted in the period was also 0.08mbpd above the 2.15mbpd and 0.07mbpd below the 2.3mbpd recorded in the fourth and first quarters of 2013 respectively.

“The drop in the volume of oil lifted during the quarter could be attributed to supply challenges following unrelenting crude oil theft, illegal bunkering and pipeline vandalism that had persisted during the period.

“In the first quarter of 2014, the actual net oil revenue that accrued into the federation account was N509.35bn, depicting a shortfall of N580.62bn (or 53.27 per cent) below the projected quarterly estimate of N1.08trn.”

Similarly, the report explained that the net oil revenue in the first quarter was lower than the N1.05trn net oil revenue recorded in the fourth quarter of 2013 by N471.09bn (or 44.79 per cent).

Given a breakdown of the oil revenue performance in the first quarter of 2014, the report noted that only royalties (oil and gas) of N250.56bn, gas flared penalty of N0.67bn and Petroleum Profit and Gas Taxes of N623.42bn surpassed their respective quarterly expected estimate.

It said while royalties surpassed its estimate of N185.89bn by N64.64bn (or 34.79 per cent); gas penalty and PPT exceeded their target of N0.62bn and N505.97bn by N0.05bn (or 7.97 per cent) and N117.45bn (or 23.21 per cent).

It added that crude oil sales of N843.47bn, gas sales of N67.15bn, rent of N0.09bn and other oil and gas revenue of N0.17bn fell below their quarterly projections of N960.18bn, N137.56bn, N0.22bn and N0.77bn by N116.71bn (or 12.16 per cent), N70.41bn (or 51.18 per cent), N0.13bn (or 60.24 per cent) and N0.60bn (or 78.48 per cent) respectively.

The Chairman, Forum of Commissioners, Federation Account Allocation Committee, Mr. Timothy Odaah in an interview called for concerted efforts to address the issue of oil theft and pipeline vandalism.

He said, “Oil theft is like any other crime in Nigeria. The Federal Government and other levels of governments are doing so much to stop oil theft but the evil continues to thrive. Of recent, government approved N1tn for the purpose of stoppage of oil theft and other vandalism.”

The African Development Bank Group in its African Economic Outlook 2014 said the drop in oil revenue occasioned by oil theft and pipeline vandalism might dampen the positive economic outlook for the country for the rest of the year and beyond.

It stated that while prospects in the country was being driven by performance in the activities in the non-oil sector such as agriculture, information and communication technology, trade and services, the recent decline in oil production had become worrisome.

It said, “Growth of the oil sector was hampered throughout 2013 by supply disruptions arising from oil theft and pipeline vandalism, and by weak investment in upstream activities with no new oil finds.”

Negative growth of the oil sector may also continue to drag down overall growth until a lasting solution is found to the challenge of oil theft, the group added.

 

[Punch]