By Omotolani Oresanwo
Federal Government has been urged by the out-going Executive Secretary of Nigeria Extractive Industries Transparency Initiative, NEITI, Mrs. Zainab Ahmed to reduce Domestic Crude Allocation, DCA, to Nigerian National Petroleum Corporation, NNPC, to the refining capacity of the refineries.
NNPC currently receives 445,000 barrels per day for domestic refining, but with three out of the four refineries not operational, most of the crude are sent out on offshore processing deals.
NNPC in its September operational and financial report revealed that only the Port Harcourt refinery was in operation and was producing at 4.15 per cent.
Mrs. Ahmed, a minister designate, said during her valedictory session with journalists in Abuja that reducing the volume of DCA would encourage the refineries to improve their capacity and also eliminate wastages in the system.
She said: “First we need to address the issue of domestic crude allocation to the NNPC. The domestic crude is supposed to be used by local refineries but our refineries over time have been operating quite below their capacity.
“There might have been a little improvement but still far from their installed capacity, still below 30 per cent and the national oil company ends up going into swap processing agreement sending our crude oil out of the country so that we can have refined products.
“My advice, which NEITI has been recommending, is that we should reduce domestic crude allocation to NNPC. We have said over time that that will serve as incentive for refineries to actually improve their capacity because of the crude allocated about 20-30 per cent are refined and about 35 per cent are export on NNPC accounts.
“So, we have to reduce allocation to NNPC refining capacity plus a small margin, it would encourage more capacity development for the refineries.”
Ahmed whose five-year tenure as NEITI boss was due to end by the middle of this month, explained that “in the past the revenue from the sale of this domestic crude oil has served as a major means of financing operations, if we reduce that it means NNPC will have to look at some other ways to finance its operation and it will make them more efficient.”
While thanking NEITI staff for their support during her time at the agency, she said under her leadership NEITI conducted audits of the oil and gas sector for 2006-2008, 2009-2011, 2012 and 2013.
NEITI also conducted audits of the solid mineral sector for 2007-2010, 2011, 2012 and 2013.
Also the agency conducted first fiscal allocation and statutory disbursement audit covering the period 2007-2011.
Ahmed, who handed over the affairs of the agency to Dr. Ogbonnaya Orji, in acting capacity, expressed optimism that the federal government would speedily reconstitute its board to avoid Nigeria’s suspension from the global Extractive Industries Transparency Initiative, EITI, by December 31.
Meanwhile, in a major move, designed to enshrine transparency and eliminate the activities of middlemen in the crude oil exchange for product matrix, NNPC yesterday announced the replacement of the Offshore Processing Arrangement, OPA option in preference for the more efficient Direct Sale-Direct Purchase, DSDP, alternative.
This is expected to allow for the direct sale of crude oil by NNPC as well as direct purchase of petroleum products from credible international refineries.
The corporation, in a statement signed by its Group General Manager Group Public Affairs Division, Ohi Alegbe, explained that it came to this informed position after the evaluation exercise of pre-qualified bidders revealed that most of the 44 companies earlier shortlisted for the next stage of the tender process only had affiliations to refineries abroad, a situation which introduced toll on the value chain.
The corporation stated that if allowed to subsist, the development would in turn constitute a significant value loss to the federation by way of accruals.
“In this regard, only bonafide owners of refineries identified in the ongoing OPA Tender Evaluation process will be further engaged.
“The identified refineries will be subjected to due diligence and analysis by NNPC appointed consultants to confirm suitability in line with international best practice,” the corporation said.
NNPC noted that the call for commercial bids issued to the 44 shortlisted bidders made up of 34 international firms and 10 indigenous companies have been withdrawn.