Energy Transition: Nigeria given 8 years to wind down production of LNG – GCEO, NNPCL

The Group Chief Executive Officer,GCEO of the Nigerian National Petroleum Corporation Limited, NNPCL, Mele Kyari, has revealed that the Nigerian Government has been given 8 years to wind down production of Liquefied Natural Gas(LNG), in compliance with the United Nations Sustainable Development Goal.

Kyari, who was represented by the Chief Financial Officer of the company, Mr Umar Ajia, made this known when he appeared at the resumed hearing of the House of Representative ad hoc committee session investigating subsidy regime from 2013 to date, on Monday.

The NNPC GCEO noted that Nigeria is not willing to agree with the UN SDG plan to phase out gas for 8 years on the backdrop of energy transition. He insisted that LNG is Nigeria’s transitional fuel.

Asked to respond on the reason for the persistent rise in the illegal transportation of Nigerian PMS through the border communities.

He also noted that the porous borders of Oyo and Ogun state is the reason why the two states consume more Premium Motor Spirit, PMS, or petrol, than Lagos state that has more commercial activities.

He said. “Do Oyo and Ogun states have more vehicles than Lagos? This explains that these are states with porous borders and that will explain why this bulk evacuation is going out of Oyo and Ogun states, probably neighbouring countries.”

Kyari said N3.4 trillion could only subsidize 66.7 million litres of fuel. According to him, the landing cost of PMS currently stands at N327.68 per litre.
He said: “We have about 1.6 billion litres incoming, land and marine. This is what is the minimum level we have to maintain, especially as we approach winter.

“Most of the refineries we procured are actually shutting down their operations because of the clamour for green energy and COP26 compliance.

“Even gas that is transition fuel for us is being given 8 years. Of course, we do not agree. When you look at the PMS outlook, we want to be closing each and every month with a two-billion closing stock.

“That is the only way you can sustain petroleum so that the marketers do not see some slack and take advantage by beginning to hoard products that can create artificial scarcity which can lead to queues.

“There is a huge arbitrage for anybody to move product to outside. We are not saying that the bulk of the product is smuggled.

The reality is that there is no study to validate the actual consumption. What we are reporting daily is what the authority, which is the regulator, publishes. They are represented at every depot in Nigeria.

“Exchange rate has been moving steadily from N195.5 per dollar to now N390.6 to a dollar, on average. The subsidy scheme is two ways, the FX subsidy and price.

“The shipping cost has doubled. Therefore, the landing cost of PMS has moved from N87 per litre in 2015 to about N327.68 per litre today. When you compare it to what we sell, you have N209 on every litre.

“When you multiply the N209 per litre with an average of 66.7 million litres, you are talking about N3.4 trillion subsidy for the year.

“The reality today is that if one were to take statistics of the number of vehicles in Nigeria, how many Keke Napep do we have? How many pumping machines do we have? On a routine visit, I saw nothing less than a million Keke, take an average that, each one uses 4 litres every day, that is 4 million litres, in one city.

Kyari confirmed that the Acquilla installation dedicated to checkmating illegal transportation of petroleum products through the border communities has failed to achieve its purpose.

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He said, “If you have N5 million, you can cross the borders with trucks laden with PMS and that is the bitter truth. We have porous borders; yes we have Customs but I do not know.

“PMS crosses everywhere, to Cameroon through the North East, Nigerian PMS gets to Mali. Our neighbouring countries hardly import PMS; in fact, some of them do not have the cover to back up imports.

“Cameroon’s refinery got burnt sometime last year or so, since that time, they have not imported PMS but they are still using PMS. If you go to Niger, you find that PMS is sold in bottles.

“To them, it is a cheaper source, why to waste their foreign exchange, so we are subsidizing our neighbours, that is a simple truth,” he said

Kyari however revealed that Nigeria is not ready to suspend the Direct Sales Direct Purchase, DSDP, contract earlier scheduled to end in August, to avoid the scarcity of PMS during Christmas and the 2023 general elections.

He noted the NNPC Ltd Board has approved the extension of the DSDP contract for the next six months.