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2018-05-16 12:00:00

HEAVY NIGERIAN OIL

HEAVY NIGERIAN OIL

BLOOMBERG - It's meant to be a cash cow, but the state oil company of Africa's biggest producer is bleeding money.

Nigerian National Petroleum Corp., the Abuja-based behemoth that dominates the OPEC member's energy industry, has made losses for at least the last three years, statements on its website show. It will probably register another in 2018, according to Ecobank Transnational Inc., as its refineries and fuel-retailing arm fail to generate profit.

The pain for NNPC, which produces oil and natural gas in partnership with Royal Dutch Shell Plc, Exxon Mobil Corp. and Chevron Corp., comes even as national energy firms from Norway to Saudi Arabia thrive with crude prices recovering from their crash in 2014. And it lays bare President Muhammadu Buhari's difficulty in fulfilling his pledge to modernize a company that's been a byword for inefficiency and opacity since its creation in the 1970s.

With oil accounting for more than half of government revenue and 90 percent of export income, the company is a primary target of those seeking access to state funds and is vulnerable to political interference.

Tensions erupted last year between Emmanuel Kachikwu, the chairman of NNPC, and Maikanti Baru, the managing director, over how more than $20 billion of contracts were agreed.

"The very public power tussle shows the difficulties in reforming the organization," Malte Liewerscheidt, an analyst at Teneo Intelligence, said in an email from Abuja. Until a pending but long-delayed law designed to overhaul the petroleum sector and split up parts of NNPC comes into effect, "political considerations will continue to interfere with vital business needs," he said.

Loss After Loss

The state oil company doesn't publish full financial results, though it releases limited numbers on its operating performance. These include earnings for core units, but exclude items such as taxes and dividends from a 49 percent shareholding in Nigeria LNG Ltd., one of the world's biggest exporters of liquefied natural gas.

Those numbers show that NNPC made an 82 billion naira ($246 million) operating loss in 2017. That was an improvement from 2015 and 2016, but still far from the operating income it budgeted for of 600 billion naira. In each of the past three years, NNPC forecast a profit and finished in the red.

Struggling

Higher oil prices have boosted exploration and production, the most profitable part of NNPC and which made an operating income of almost $600 million in 2017. But its ill-maintained refineries, which operate at a fraction of their combined capacity of 445,000 barrels a day, lost about $100 million. Even bigger shortfalls came in the fuel-retailing business, which has to contend with the government's price cap on gasoline prices, and the corporate headquarters unit, which lost almost $400 million, more than any other part of the company.

While NNPC's extraction business will probably improve this year, the refineries and retailing subsidiaries will continue to be a drag, especially if the government maintains the ceiling of $0.40 a liter for gasoline, according to Ecobank. The bank predicts that NNPC will make an operating loss of as much as 80 billion naira in 2018.

Ndu Ughamadu, a spokesman for NNPC, said that while its refineries are struggling to make money, the company's overall performance will probably be better this year.

The problems at NNPC offset the benefits to Nigeria's struggling economy of Brent crude's more than 50 percent rise in the past year to almost $80 a barrel. Still, there have been improvements within the company and the country's overall oil sector, according to Moody's Investors Service.

NNPC's reduction of debts owed to joint-venture partners may help increase Nigeria's oil production to around 2.5 million barrels a day by 2020 from 2 million today, said Aurelien Mali, an analyst at Moody's Investors Service.

"The clearing of arrears is a huge step forward that will unleash extra investment from international oil companies," Mali said in an interview in Lagos, the commercial capital, on May 9. "NNPC is key for the government. It's going in the right direction."

It has some catching up to do. Its financial position contrasts with those of state oil firms in other major producers. Saudi Aramco is gushing cash, making net income of $34 billion in the first half of 2017 alone, according to numbers seen by Bloomberg. Brazil's Petrobras, Mexico's Pemex and Norway's Statoil all improved their results in 2017 and made operating profits. So did Angola's Sonangol in 2016, when it last published data on its performance.

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Earlier:

 NIGERIA'S OIL PRODUCTION 2.07 MBD
2018, May, 14, 10:55:00

NIGERIA'S OIL PRODUCTION 2.07 MBD

PLATTS - Nigeria's oil production rebounded to 2.07 million b/d in April this year, after it slipped to 2.02 million b/d in the preceding month, according to estimates released Thursday by the oil ministry.

 WBG WANTS NIGERIA
2018, May, 7, 08:25:00

WBG WANTS NIGERIA

WBG - For Nigeria to tap its spatial drivers of development, policymakers may want to focus on investments that reinforce clusters and economies of scale; optimize the connectivity between rural areas and the major urban markets; and address structural and land management issues in major urban nodes and along major growth corridors to remove or alleviate barriers that undermine the growth potential.

 NIGERIA NEED CHANGES
2018, March, 18, 11:25:00

NIGERIA NEED CHANGES

PLATTS - The objective of this program is to increase its domestic refinery utilization rates to 90% from current levels of 10-20%, Kragha said speaking to Platts in Cape Town on the sidelines of the African Refiner Association conference.

 NIGERIA'S ECONOMY UP TO 1.92%
2018, February, 27, 13:05:00

NIGERIA'S ECONOMY UP TO 1.92%

REUTERS - Oil production rose to 1.91 million barrels a day (mbpd) in the last quarter of 2017 compared with 1.76 mbpd in the same period of 2016, the statistics office said.

 NIGERIAN OIL PRICE: $45-$46
2018, January, 26, 12:15:00

NIGERIAN OIL PRICE: $45-$46

BLOOMBERG - “We’ve gotten to a point where we don’t care,” whether prices will be sustained at the level that they have recently risen to, Adeosun said during an interview in her office in the capital, Abuja. “We’ve been able to balance our budget at $45-$46 per barrel and we’ve got to learn to live comfortably at that level.”

 NIGERIA'S FUEL DEFICIT
2018, January, 8, 19:10:00

NIGERIA'S FUEL DEFICIT

BLOOMBERG - A bigger problem is that Nigeria caps gasoline prices, often at levels below retailers’ costs. The cap today is set at 145 naira, or $0.40, a liter, which would translate to $1.52 per gallon.

 NIGERIA'S CHALLENGES
2017, December, 27, 12:20:00

NIGERIA'S CHALLENGES

IMF - Overall growth is slowly picking up but recovery remains challenging. Economic activity expanded by 1.4 percent year-on-year in the third quarter of 2017—the second consecutive quarter of positive growth after five quarters of recession—driven by recovering oil production and agriculture.

 

 

Tags: NIGERIA, OIL, NNPC

Chronicle:

HEAVY NIGERIAN OIL
2018, May, 21, 10:40:00

U.S. PETROLEUM DEMAND UP BY 750 TBD

API - American Petroleum Institute reported that the first four months of this year saw U.S. petroleum demand average 750 thousand barrels a day above the same period in 2017 despite higher prices, a sign of solid economic activity. April also saw the U.S. produce a record 10.5 million barrels per day (MBD) of oil.

HEAVY NIGERIAN OIL
2018, May, 21, 10:35:00

IMF: EGYPT'S GROWTH UP

IMF - “Egypt’s growth has continued to accelerate during 2017/18, rising to 5.2 percent in the first half of the year from 4.2 percent in 2016/17. The current account deficit has also declined sharply, reflecting the recovery in tourism and strong growth in remittances, while improved investor confidence has continued to support portfolio inflows. In addition, gross international reserves rose to $44 billion by end-April, equal to 7 months of imports.

HEAVY NIGERIAN OIL
2018, May, 21, 10:30:00

U.S. RIGS UP 1 TO 1,046

BAKER HUGHES A GE - U.S. Rig Count is up 1 rig from last week to 1,046, with oil rigs unchanged at 844, gas rigs up 1 to 200, and miscellaneous rigs unchanged at 2. Canada Rig Count is up 4 rigs from last week to 83, with oil rigs up 6 to 38 and gas rigs down 2 to 45.

HEAVY NIGERIAN OIL
2018, May, 18, 09:20:00

OIL PRICE: ABOVE $79

REUTERS - Brent crude futures LCOc1 were at $79.57 per barrel at 0310 GMT, up 27 cents, or 0.3 percent from their last close. Brent broke through $80 for the first time since November 2014 on Thursday. U.S. West Texas Intermediate (WTI) crude futures were at $71.62 a barrel, up 13 cents, or 0.2 percent, from their last settlement.

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