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Petrol may sell below N87 per litre next year – NNPC

By on December 20, 2015

Following recent disclosure by the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu that government would review and present new cost-reflective pricing template for domestic petrol sales and consumption, the Nigerian National Petroleum Corporation (NNPC) and Petroleum Product Pricing Regulatory Agency (PPPRA) yesterday said that they had begun work on it and that a new template would be out by the first quarter of 2016.
THISDAY gathered from officials of these agencies that from the expected price modulation model which the government seeks to adopt, pump price of petrol may initially drop from the current N87 per litre next year when the government perhaps shaves off a couple of costs that influence domestic price of the product.
THISDAY learnt from the officials working on the new template for petrol that the government had already identified possible costs reduction areas from which about N10 per litre may be cut off.
Accordingly, these areas may include the amount of bridging claims paid out by the Petroleum Equalisation Fund (PEF); foreign exchange differentials, amongst other logistics costs which marketers incur in the course of bringing in and distributing products in the country.
After a meeting in Abuja, the Group General Manager, Corporate Planning and Strategy of NNPC, Bello Rabiu disclosed to journalists that the PPPRA would release the new pricing template before the end of Q1 2016.
Rabiu said that the adjustments that would be made in the new template could ultimately lower the cost of product importation and distribution in the country.
He noted that due to the uncertainty in the prices of crude oil in the global market and abundance of crude oil, the cost of bringing petrol has subsequently dropped from what it used to be some two years back.
According to him, as at Thursday the cost of bringing one litre of petrol to the country was N65 while the logistics involved in taking it to the depot and to the filling stations were about N10.55 and N15.49, which brings the open market price as at today at N91.52 per litre.
Rabiu said: “We are engaging industry stakeholders to review the PPPRA template that actually drives the cost of importation. This is because the actual cost of PMS minus the retail price of the product is subsidy. So if the cost falls to N80 per litre today, then where will the need be for subsidy? If the cost is less than the current retail price of N87, then it means there is no subsidy.
“So, we are looking at the template to have it reviewed considering the realities on ground now in the sector. What if after the review, we are able to take away about N10 from this current template, which today puts the cost of petrol at N91.52 litre, then it means the cost may come down to around N82 per litre.
“That is why we said there is no need for subsidy in the 2016 budget. We say this because we know that the price of crude oil will not go so high in the next 12 months because of the high level of saturation in the market. So as soon as it is appropriate, we will announce a new price for PMS.”
Rabiu stated that the adjusted template would be used subsequently to modulate prices down or up on a periodic basis if required, adding that if oil prices continue to fall and inefficiencies are eliminated within the template, there will be surely negative subsidy.
He noted that the negative subsidy shall be remitted to the Petroleum Support Fund in line with the current PPPRA guidelines.
“The savings under such a regime could be domiciled in the PSF as a buffer to and future subsidy (if any) that may arise during high oil price regime or invested by the industry in supply and distribution efficiency improvement projects such as decongestion of Apapa area, Single Point Monitoring in Port Harcourt and Warri, complimentary rail services, inland waterways.
“Now if you take away N87 which is the regulated price it means that subsidy is basically N4.85. If we are consuming 41 million litres, it means we are subsidising N200 million a day,” Rabiu said.
He noted that since the country had not been consuming up to the acclaimed consumption level, it means that the federal government has been paying much more than what it should pay for subsidy.
“We are trying to ensure that we pay for only what the country consumes,” he added.
Kachikwu on Thursday also stated in a different forum that figures bandied about as Nigeria’s daily domestic fuel consumption were unscientific and faulty. He submitted that a scientific figure was being worked out.
Rabiu however said in his analysis of how government intends to prune down the cost of petrol that the N91.52 per litre that was adopted in 2000 to 2002 was over inflated but that the corporation is now trying to optimise the cost of supplying fuel in Nigeria.
According to him, the cost is now reducing naturally as the present importation cost that is N65 was N71 about three years ago. He added that with the review, a new template would indicate that there is no need for subsidy in the country.
Also, the Managing Director of Petroleum Pipelines and Products Marketing Company (PPPMC) Limited, Mrs Esther Nnamdi-Ogbue stated that the, “new price will be to the benefit of every Nigerian and there is no cause for alarm.”
She also said that the Kaduna Refinery and Petrochemical will begin production today, adding that the Atlas Cove and Mosimi pipelines are now functional just as the PPMC is making efforts at operationalising the line from Ibadan up to Ilorin.
Nnamdi-Ogbue stated that at the moment, the country produces seven million litres of petrol from her local refineries.
“The good news is that for the first time in the past 100 days we have crude being pushed from Warri to Kaduna. We also have Atlas Cove Mosimi line working. Kaduna is ready to start up. I am sure by tomorrow (Saturday) we start producing from our refinery in Kaduna,” Nnamdi-Ogbue said.
She attributed the development to the engagement of private security guards to carry out surveillance on the pipeline, adding that the partnership with the Department of State Security (DSS) has equally yielded great positive results.
She said: “It now reduces the burden for trucking all the way from coastal town to the hinterland. We also have efforts being made not only to Mosimi but to Ibadan and Ilorin, and that will also reduce a lot of tension.
“Why have we done that? Because we have brought in private security companies to guard our pipeline, then we have joint task-forces but we still have our lines being compromised.”
She said that between now and the end of the month, 12 vessels of products will be coming in with at least 30,000 metric tonnes each, stressing that she expects no queue at petrol stations during the Yuletide.

 

[ThisDay]