The Nigerian National Petroleum Company Limited is selling Premium Motor Spirit, popularly called gasoline, at a loss due to its mandate from the Federal Government regarding the PMS subsidy, Minister of State for Petroleum Resources, Chief Timipre Sylva, said on Monday.
Sylva’s comments came as oil traders said supply problems in the downstream oil sector that often lead to fuel shortages could persist until June, under the government’s plan to end the gasoline subsidy. in that month.
The oil minister spoke in Abuja at the resumption of the scorecard series (2015-2023) by the president, Major General Muhammadu Buhari (retired).
Last week, Minister of Finance, Budget and National Planning Zainab Ahmed said that the Federal Government had budgeted around N3.6 trillion for fuel subsidies until June 2023.
Sylva, speaking in Abuja on Monday, insisted that the subsidy had been a burden, but stressed that it was a mandate from NNPC that caused the oil company to continue selling PMS at a loss.
He said: “Managing the supply situation under this subsidy regime is not easy. We all must agree that a lot of money is being burned in our cars, but somehow we have to put up funds to continue keeping the country wet.
“Sometimes, if you really think deeply, you start to wonder what magic we are doing to keep this country consistently wet. Taking into account that you buy something, say for N10, and you are going to sell it at a loss.
“And then you are expected to buy the same thing again and sell it again at a loss. So, at every moment, he is looking for more money to continue buying it, because he is forced to sell it at a loss.
Sylva added: “So if you are a businessman, look at it from this perspective, you are now in the business where you are forced to sell to the public at a loss. That is not an easy job, I must tell you.”
Responding to a question about how she would feel about buying gasoline at N300/litre, Sylva said she wouldn’t feel bad about it.
“If you ask me how I will feel as a private citizen buying gasoline at 300 N/litre, unfortunately I will tell you that I will not feel bad knowing the current situation. And if you compare Nigeria with other countries, you will understand,” he stated.
The minister added: “When you convert the N300/litre you are talking about to other currencies, then you will understand. Many of you travel to the UK or the US, how much do you buy petroleum products there? Even in Arab communities that produce crude oil.”
He said the cost of the product in Nigeria was not as high as in other countries, but stressed that the current national consensus was that the gasoline subsidy was no longer sustainable.
“Unfortunately we continue in a subsidized regime, we all know that. As a country, I think it is a national consensus now that the subsidy is not sustainable, but together we will make it happen,” Sylva said.
He said that until the cost of petroleum products was driven by the market, investors would continue to shy away from investing in the downstream oil sector.
“Under a subsidized regime, who is going to invest? If you build a refinery, how is your refinery going to make a profit under a subsidized regime? But if you have a market-driven situation, you’ll see a lot of investors coming in.
“And the more refineries we have, this problem of access to petroleum derivatives will be a thing of the past,” Sylva said.
The Federal Government revealed on Monday that it had acquired shares in four refineries that operate in various parts of the country.
He described the refineries to include the integrated 650,000 barrel per day Dangote Refinery in Lagos; 12,000bpd Azikel Modular Refinery at Bayelsa; 5,000 bpd Waltersmith modular refinery at Imo; and the 2,500 bpd Duport Modular Refinery in Edo.
The government also announced that Port Harcourt Refining Company’s 60,000 bpd component in Rivers state would begin operations in the first quarter of this year, noting that the facility had been completed.
Minister of State for Petroleum Resources Chief Timipre Sylva and Nigerian National Petroleum Company Limited Group CEO Mele Kyari revealed this in Abuja at the current administration’s ministerial qualifications series.
Commenting on the Federal Government’s stake in the Dangote Refinery, Sylva said it was 20 percent, adding that the government had also bought shares in three other refineries.
He said: “We have a 20 percent stake in the Dangote Refinery and we have also taken a 20 percent stake in the Azikel Refinery. We take 30 percent in Waltersmith, and we also have 30 percent in Duport Refinery.
“The Duport Refinery is already finished. They have completed the construction. It only remains to start operations. I am sure that within the next month or so, the Duport Refinery will also start operating.”
The minister explained that the Dangote Refinery already had a contract established with the NNPC, regarding the supply of crude, but pointed out that some modular refineries generally accessed crude from assets closer to the plants.
“So they (the modular refineries) have this contract (for crude oil supply) with the private sector owners of these assets that are close to them,” he said.
On the rehabilitation of the Port Harcourt Refinery, the minister said that the deadline for the start of operations of the plant had been moved to the first quarter of this year.
He said: “I announced it last year, and from the beginning, we’ve been saying the same thing, we didn’t say we were going to complete the rehabilitation of the two refineries in Port Harcourt by May of this year.
“Our promise has been that the 60,000 barrel per day refinery, within the Port Harcourt refinery, will be rehabilitated by the end of the fourth quarter of 2022.”
Sylva then asked Kyari to talk about how far the NNPC had gone with the rehabilitation of the Port Harcourt refinery.
In response, Kyari said: “The full rehabilitation of the refinery will take 42 months from the date of contract award. Typical of each refinery, we do the rehabilitation in phases.
“And our promise is to start up the fuel plant, which is a 60,000 barrels per day component of this activity by the last quarter of 2022, but this is not practical. But we will get it up and running in the first quarter of 2023. Otherwise, all other processes are underway.”
Reacting to the NNPC chief’s comments, Sylva said: “In other words, what you are saying is that the rehabilitation of the 60,000 barrel per day refinery has been completed and will begin in the first quarter of 2023 as promised.”