WITH the completion of the repair of a damaged gas pipeline by the
Nigerian National Petroleum Corporation (NNPC), electricity supply is
expected to be boosted in the country.
And for the corporation, Central Bank of Nigeria (CBN) Governor Sanusi Lamido has been unable to give the actual amount the oil company is allegedly owing the Federation Account because he lacks adequate knowledge of how the sector works.
A statement Sunday in Abuja by the Acting Group General Manager, Group Public Affairs Division of the NNPC, Dr. Omar Farouk Ibrahim, said the completion of the repair of the Escravos-Lagos gas pipeline would re-inject the equivalent of 1,505 megawatts into the national grid.
Ibrahim stated that the repair, which had ended almost seven months of gas supply shortage caused by hacking of the pipeline in Delta State, would enable the re-injection of almost 200 million cubic feet per day (mmcf/d) of gas into the grid, the equivalent of about 700 megawatts.
Just last week the corporation also completed the repair of the Trans-Forcados Pipeline which accounts for 230 mmcf/d of gas, the equivalent of 805 megawatts.
The corporation hinted that with the latest successful repair of the ELPS, the NNPC within the last one week had been injecting a total of 430 mmcf/d of gas into the grid which translates to 1,505 megawatts every day.
Ibrahim also stated that an additional 60mmcf/d would be expected within three weeks when the ongoing repair at the Utorogu gas plant would be completed. He said that Nigerians should expect steady improvement in electricity through the course of the year.
He noted that despite short-term challenges being experienced as a result of a deliberate pipeline sabotage, the gas sector reform was on course.
“The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, directed an accelerated implementation of the Nigerian gas master-plan and this has resulted in an aggressive infrastructure development drive and major reforms of the commercial framework for gas in Nigeria. In the last three years alone, over 400km of new gas pipelines have been completed and we are expanding pipeline capacity and enhancing connectivity between various gas supply sources,” he stated.
According to him, all PHCN and NIPP power plants are now connected to gas pipeline infrastructure while an additional 450km is under construction, out of which 340km is due for completion by the end of 2014 and the balance by 2016.
He added: “The ongoing gas infrastructure work is the most extensive the nation has ever seen, with many new kilometres of pipeline being added every day. Gas production and supply has also grown to an all-time high of 1500mmcf/d from less than 500mmcf/d four years ago. A major part of this new supply is being directed to the power sector, whilst the non-power sector such as cement, manufacturing, etc have seen double increase in supply within the same period. Unfortunately, challenges of pipeline attack continue to undermine the impact of these great efforts.”
Reacting to Sanusi’s claim that the NNPC was yet to remit $20 billion to the government contrary to his earlier figure of $10.8 billion, the corporation’s Group Executive Director, Production and Exploration (GED E&P), Dr. Abiye Membere, said that though the late President Umaru Musa Yar’Adua gave a directive to stop subsidy on kerosene in 2009, the decision was later reversed but did not have a memo backing it because of his illness.
His explanation: “After the late President Yar’Adua’s directive to stop subsidy on kerosene, other series of meetings were held where it was decided that removing subsidy on kerosene would be greeted with formidable opposition. In fact, the memo that was sent to the PPPRA for suspension of the subsidy was categorical in saying public announcement should be avoided. So, there was a meeting attended by the then Minister of Finance, Dr. Mansur Muktar; former Petroleum Minister, Lukman Rilwan and the then Director of Budget Office with about nine other government officials where it was observed that kerosene subsidy cannot be treated the way subsidy was removed on diesel. It was then reasoned that kerosene is for the poor masses. The NNPC was then directed to step down the implementation of that presidential directive and that they would go back to the president to reverse it. It was at this point that the president fell ill and never made it. But the NNPC continued the subsidy regime.”
Indeed, The Guardian obtained a letter with reference number SH/PSP/24/A/819, dated June 17, 2009 and signed by David Edevbie, a former Principal Secretary to Yar’Adua which stated that a public announcement on removal of subsidy be avoided.
It read in part: “(i) Eliminate existing subsidy on the consumption of kerosene, taking into account that subsidy payments by government on kerosene do not reach the intended beneficiaries. Public announcement of this measure should be avoided.”
Membere noted that government had since accepted that the NNPC should continue to import kerosene and that subsidy would be paid by government.
In fact, Olusegun Aganga as Minister of Finance approved the payment of subsidy claims between 2009 and 2011 to the NNPC.
The NNPC GED (E&P) said the PPPRA and other government agencies scrutinised NNPC documents on subsidy claims as against the belief that it was done unilaterally by the NNPC.
According to him, payment to marketers does not attract the same attention the NNPC has attracted due to the nature of relationship between government and the NNPC.
He said: “There is a difference in government-to-government transaction as against private sector-government transactions. The private sector does not have anything to do with the Federation Account, which is why they are paid subsidy claims directly into their accounts. What do people want us to do in the NNPC? They want us to first collect the money from the ministry and then pay back into the Federation Account? Nigerians must understand how these things work.”
Membere declared that the “missing money” was never in the hands of the NNPC, adding: “This subsidy is not the money that the NNPC collected from government. For example, the subsidy on kerosene, it is not that government will pay the NNPC the remaining N100 on the product directly. What happens is that the NNPC sells the product at N50 and then pays that into the Federation Account and then expects government to balance it up in the Federation Account with the subsidy claims of the NNPC. Nigerians must understand that NNPC has never collected any money from government as subsidy claim. The NNPC simply paid the N50 we collected at pump into the Federation Account. Now, people turn around and say the NNPC is owing government. It is simply because the Federation Account is not balanced and they think that because the NNPC has defaulted simply because we have not paid the required figure forgetting that the balance of what we ought to pay is with the Federal Government. The Ministry of Finance has not denied this position. The CBN must know that the NNPC cannot pay what it does not have.”
According to Membere, the NNPC submits documents on domestic crude and subsidy claims to the Federation Accounts and Allocation Committee (FAAC), adding, “it is therefore done in a net-in net-out basis. All we do is to submit the subsidy claim and the crude we have sold and handed it over to government.”
On the Strategic Alliance Agreements (SAAs) signed with Atlantic Energy Drilling Concept Ltd and Septa Energy Nigeria Limited (subsidiary of United Kingdom-based Seven Energy), Membere stated that the companies were not operators but financiers.
“Contrary to the erroneous belief in some quarters, Septa and Atlantic do not carry out any operation. It is NPDC that carries out operation and pay the necessary fees to government through the NNPC. These companies provided alternate funding for NPDC to carry out operation. The $2 billion, which is the third party fund that was paid into the CBN account that the governor said he does not recognise, is the royalty and Petroleum Profit Tax (PPT) that the NNPC paid into the Federation Account. The NNPC paid its royalties and PPT out of the profit that arose from the operation of the NPDC.”
Membere also said it was wrong to expect the NPDC to pay any form of tax into the Federation Account, saying, “NPDC cannot pay into the account. It is the NNPC that pays because NPDC is a subsidiary of the NNPC. NNPC simply pays the tax into the Federation Account. The NNPC cannot pay all the profits directly into the Federation Account because the Federal Government is not the one funding the operation. In this case, the NPDC went to borrow money from a third party just as Shell does not pay its money into the Federation Account but pays into its parent company, which in turn pays government tax from its profits.”
And for the corporation, Central Bank of Nigeria (CBN) Governor Sanusi Lamido has been unable to give the actual amount the oil company is allegedly owing the Federation Account because he lacks adequate knowledge of how the sector works.
A statement Sunday in Abuja by the Acting Group General Manager, Group Public Affairs Division of the NNPC, Dr. Omar Farouk Ibrahim, said the completion of the repair of the Escravos-Lagos gas pipeline would re-inject the equivalent of 1,505 megawatts into the national grid.
Ibrahim stated that the repair, which had ended almost seven months of gas supply shortage caused by hacking of the pipeline in Delta State, would enable the re-injection of almost 200 million cubic feet per day (mmcf/d) of gas into the grid, the equivalent of about 700 megawatts.
Just last week the corporation also completed the repair of the Trans-Forcados Pipeline which accounts for 230 mmcf/d of gas, the equivalent of 805 megawatts.
The corporation hinted that with the latest successful repair of the ELPS, the NNPC within the last one week had been injecting a total of 430 mmcf/d of gas into the grid which translates to 1,505 megawatts every day.
Ibrahim also stated that an additional 60mmcf/d would be expected within three weeks when the ongoing repair at the Utorogu gas plant would be completed. He said that Nigerians should expect steady improvement in electricity through the course of the year.
He noted that despite short-term challenges being experienced as a result of a deliberate pipeline sabotage, the gas sector reform was on course.
“The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, directed an accelerated implementation of the Nigerian gas master-plan and this has resulted in an aggressive infrastructure development drive and major reforms of the commercial framework for gas in Nigeria. In the last three years alone, over 400km of new gas pipelines have been completed and we are expanding pipeline capacity and enhancing connectivity between various gas supply sources,” he stated.
According to him, all PHCN and NIPP power plants are now connected to gas pipeline infrastructure while an additional 450km is under construction, out of which 340km is due for completion by the end of 2014 and the balance by 2016.
He added: “The ongoing gas infrastructure work is the most extensive the nation has ever seen, with many new kilometres of pipeline being added every day. Gas production and supply has also grown to an all-time high of 1500mmcf/d from less than 500mmcf/d four years ago. A major part of this new supply is being directed to the power sector, whilst the non-power sector such as cement, manufacturing, etc have seen double increase in supply within the same period. Unfortunately, challenges of pipeline attack continue to undermine the impact of these great efforts.”
Reacting to Sanusi’s claim that the NNPC was yet to remit $20 billion to the government contrary to his earlier figure of $10.8 billion, the corporation’s Group Executive Director, Production and Exploration (GED E&P), Dr. Abiye Membere, said that though the late President Umaru Musa Yar’Adua gave a directive to stop subsidy on kerosene in 2009, the decision was later reversed but did not have a memo backing it because of his illness.
His explanation: “After the late President Yar’Adua’s directive to stop subsidy on kerosene, other series of meetings were held where it was decided that removing subsidy on kerosene would be greeted with formidable opposition. In fact, the memo that was sent to the PPPRA for suspension of the subsidy was categorical in saying public announcement should be avoided. So, there was a meeting attended by the then Minister of Finance, Dr. Mansur Muktar; former Petroleum Minister, Lukman Rilwan and the then Director of Budget Office with about nine other government officials where it was observed that kerosene subsidy cannot be treated the way subsidy was removed on diesel. It was then reasoned that kerosene is for the poor masses. The NNPC was then directed to step down the implementation of that presidential directive and that they would go back to the president to reverse it. It was at this point that the president fell ill and never made it. But the NNPC continued the subsidy regime.”
Indeed, The Guardian obtained a letter with reference number SH/PSP/24/A/819, dated June 17, 2009 and signed by David Edevbie, a former Principal Secretary to Yar’Adua which stated that a public announcement on removal of subsidy be avoided.
It read in part: “(i) Eliminate existing subsidy on the consumption of kerosene, taking into account that subsidy payments by government on kerosene do not reach the intended beneficiaries. Public announcement of this measure should be avoided.”
Membere noted that government had since accepted that the NNPC should continue to import kerosene and that subsidy would be paid by government.
In fact, Olusegun Aganga as Minister of Finance approved the payment of subsidy claims between 2009 and 2011 to the NNPC.
The NNPC GED (E&P) said the PPPRA and other government agencies scrutinised NNPC documents on subsidy claims as against the belief that it was done unilaterally by the NNPC.
According to him, payment to marketers does not attract the same attention the NNPC has attracted due to the nature of relationship between government and the NNPC.
He said: “There is a difference in government-to-government transaction as against private sector-government transactions. The private sector does not have anything to do with the Federation Account, which is why they are paid subsidy claims directly into their accounts. What do people want us to do in the NNPC? They want us to first collect the money from the ministry and then pay back into the Federation Account? Nigerians must understand how these things work.”
Membere declared that the “missing money” was never in the hands of the NNPC, adding: “This subsidy is not the money that the NNPC collected from government. For example, the subsidy on kerosene, it is not that government will pay the NNPC the remaining N100 on the product directly. What happens is that the NNPC sells the product at N50 and then pays that into the Federation Account and then expects government to balance it up in the Federation Account with the subsidy claims of the NNPC. Nigerians must understand that NNPC has never collected any money from government as subsidy claim. The NNPC simply paid the N50 we collected at pump into the Federation Account. Now, people turn around and say the NNPC is owing government. It is simply because the Federation Account is not balanced and they think that because the NNPC has defaulted simply because we have not paid the required figure forgetting that the balance of what we ought to pay is with the Federal Government. The Ministry of Finance has not denied this position. The CBN must know that the NNPC cannot pay what it does not have.”
According to Membere, the NNPC submits documents on domestic crude and subsidy claims to the Federation Accounts and Allocation Committee (FAAC), adding, “it is therefore done in a net-in net-out basis. All we do is to submit the subsidy claim and the crude we have sold and handed it over to government.”
On the Strategic Alliance Agreements (SAAs) signed with Atlantic Energy Drilling Concept Ltd and Septa Energy Nigeria Limited (subsidiary of United Kingdom-based Seven Energy), Membere stated that the companies were not operators but financiers.
“Contrary to the erroneous belief in some quarters, Septa and Atlantic do not carry out any operation. It is NPDC that carries out operation and pay the necessary fees to government through the NNPC. These companies provided alternate funding for NPDC to carry out operation. The $2 billion, which is the third party fund that was paid into the CBN account that the governor said he does not recognise, is the royalty and Petroleum Profit Tax (PPT) that the NNPC paid into the Federation Account. The NNPC paid its royalties and PPT out of the profit that arose from the operation of the NPDC.”
Membere also said it was wrong to expect the NPDC to pay any form of tax into the Federation Account, saying, “NPDC cannot pay into the account. It is the NNPC that pays because NPDC is a subsidiary of the NNPC. NNPC simply pays the tax into the Federation Account. The NNPC cannot pay all the profits directly into the Federation Account because the Federal Government is not the one funding the operation. In this case, the NPDC went to borrow money from a third party just as Shell does not pay its money into the Federation Account but pays into its parent company, which in turn pays government tax from its profits.”