NNPC’s decommissioning burdens hit N466.7b amid 2,003 oil wells • Company takes fresh N53b loan for oil search in Maiduguri, Nasarawa
Nigerian National Petroleum Company Limited (NNPCL) is facing a serious financial sustainability and liquidity management crisis as unviable and unprofitable subsidiaries push the company’s indebtedness to N22 trillion. This is in addition to an existing $6.8 billion debt to oil traders and another $5.4 billion in forward sales agreement and other loans obtained to finance oil search and power generation projects in the northern region of the country.

With oil wells under the company rising to 2,003, the oil company, which disclosed a profit of N3.2 trillion in 2023 will be spending N466.7 billion as worried about the growing intercompany debt within NNPC’s subsidiaries, stressing that it raises concerns about liquidity and overall financial health. They are also worried that the rise in the indebtedness between 2022 and 2023 suggests that these subsidiaries may be struggling to generate sufficient cash flow to meet financial obligations. In 2022, the debt of the companies was about N18.4 trillion. This, according to them, creates a potential strain on NNPC’s consolidated position, indicating that liquidity issues at the subsidiary level could have broader impacts on the group, adding that the concentration of receivables in a few subsidiaries increases credit and cash flow risks, while also pointing to potential operational inefficiencies with fear that these entities may not be self-sustaining and could require continuous financial support. Earlier in the month, the NNPC Ltd acknowledged that the company is significantly indebted to petrol suppliers as the financial strain has placed considerable pressure on the company.
Also, the company instead of managing its refinery, which has about N4.5 trillion debt, announced a tender for private companies to manage the assets, especially the Warri and Kaduna refineries. While NNPC may view the large intercompany balances as strategic investments in key sectors such as refining, gas infrastructure, and trading, the long-term financial sustainability of the company, stakeholders hinge exposure on the performance of these subsidiaries, noting that if these investments do not begin to yield returns soon, NNPC’s leverage ratio could worsen, making it more vulnerable to market risks, particularly fluctuations in oil and gas prices. The subsidiaries of NNPC Ltd with debts as of December 31, 2023, include PortHarcourt Refining Company Limited (N1.97 trillion), NNPC E&P Limited (N159.257 billion), Kaduna Refining and Petrochemical Company Limited (N1.36 trillion), NNPC Gas Infrastructure Company Ltd (N1.86 trillion), NNPC Energy Services Limited (N154.153 billion), Warri Refining and Petrochemical Company Limited (N1.17 trillion), NNPC Engineering and Technical Company Limited (N34.099 billion), NNPC Retail Limited (N38.673 billion), NNPC Gas Marketing Company Limited (N20.998 billion), Nigerian Pipelines and Storage Company Limited (N236.059 billion), NNPC Trading SA (N503.069 billion), NNPC Properties Limited (N10.486 billion), NNPC Medical Services Limited (N56.502 billion), NNPC National Petroleum Telecommunication Limited (N16.825 billion), Maiduguri Emergency Power Plant (N71.080 billion), and NNPC Gas and Power Investment Company Limited (N9.261 billion). Additionally, while NNPC Shipping and Logistics Limited owes N28.557 billion, related parties owe N14.34 trillion to NNPC Ltd.

Stakeholders called for the shutdown of the company’s unprofitable ventures amidst a plan by the organisation to go public. Some of the subsidiaries of the company with a consistent history of profitability are Petroleum Products Marketing Company Limited, NNPC, NNPC HMO and Antan Producing Limited.
In December 2023, under Project Gazelle, which is the Afrieximbank loan, NNPCL entered into a forward sales agreement with Project Gazelle Funding Limited to supply 90,000 bpd of crude oil from Production Sharing Contract (PSC) assets to settle a $3 billion funding.
The company used the funds to prepay future taxes and royalty obligations due to the federation on PSC assets managed by NNPCL. As of December 31, 2023, $2.25 billion had been drawn from the $3 billion facility. The interest rate is 3-month LIBOR plus 6.5 per cent, with a margin and liquidity premium of 6 per cent and 0.5 per cent respectively. NNPCL stated that principal repayment will begin in June 2024. In another forward sales agreement, referred to as Eagle Exporting, NNPC Exploration & Production Limited (NEPL) had capital commitments of $352.88 million (N158.3 billion) as of December 31, 2023.

This commitment stems from an agreement with Eagle Export Financing Limited for the delivery of crude oil. Under this contract, Eagle Export Funding Limited made an upfront payment, and NEPL is obligated to deliver at least 1.8 million barrels of crude oil. The deliveries, which began on August 28, 2020, must be scheduled and delivered by NEPL to the relevant terminal. Additionally, NNPC entered into a forward sale agreement with Bestaf for $300 million to fund the acquisition of Chevron Nigeria’s 40 per cent interest in OML 86 and 88, known as Project Brogue. By December 31, 2023, $218.3 million had been repaid, leaving a capital commitment of $81.7 million to Middleton Funding Limited as of December 31, 2022.

The company, in July, also disclosed plans for an additional $2 billion in crude oil backed loans from international creditors to boost its financial inflow. Amidst other loans, the Afrieximbank $3 billion loan and the $2 billion and other outstanding on Project Brogue, Eagle Exporting and Project Bison create a debt of $5.8 billion.
When added to the $6.8 billion petroleum products debt, NNPC owes a debt of $12.6 billion. Going by the analysis provided by the company, decommissioning provision, which is expected to occur within six to 40 years, depending on the asset, was estimated at an increasing cost of N466.7 billion for 2023, following the addition of a new well which brought the company’s oil well to 2,003. These costs, which NNPCL said were calculated based on the current economic environment, are expected to be reviewed regularly to account for potential changes. However, actual decommissioning expenses will depend on future market conditions, particularly oil and gas prices, as well as the timing of when the fields stop producing economically viable output. Amid concerns over the profitability of oil exploration in the northern region, especially in the face of liquidity constraints, a loan of N53.33 billion was taken by NNPC Energy Services Limited for the Keana drilling campaign in Nasarawa, Chad Basin re-entry as well as other 3D Seismic acquisition projects.
The loan repayment is expected over three years. Interest of N1.69 billion has been paid on the loan, however, principal repayment has not started, NNPC said in its statement. Convener of the South South Reawakening Group (SSRG) and Chairman of the Board of Trustees for Community Development Committees of Niger Delta Oil and Gas Producing Areas (CDC), Joseph Ambakederimo, said the mounting debt reflects the inability of NNPCL and its subsidiaries to effectively manage the country’s oil and gas resources.
Ambakederimo suggests that NNPCL’s role in economic development is in question, with its ongoing financial struggles contributing to the dollar shortages affecting the Central Bank of Nigeria’s reserves. He also highlighted the broader economic challenges the country faces, such as currency instability, infrastructure deficits, and recurring fuel shortages, which he attributed to the inefficiencies within NNPCL.

Ambakederimo stressed the need for President Bola Tinubu to order a comprehensive audit of NNPCL and its subsidiaries, suggesting that the company’s perpetual state of transition is being manipulated for political reasons.
Drawing comparisons to successful state oil companies like Saudi Aramco and Malaysia’s Petronas, he argued that without decisive leadership changes and a shift in strategy, NNPCL would continue to fail, and failure should no longer be rewarded.

The Director, Institute for Oil, Gas, Energy, Environment, and Sustainable Development (OGEES Institute), Prof. Damilola Olawuyi said NNPC’s journey towards commercialisation has been marked by the announcement of several initiatives aimed at transforming the company into a competitive player in the global oil and gas industry but the initiatives, include the revamp of aging infrastructure, especially refineries; enhancing technology efficiency and full-scale digitalisation of operations; advancing low-carbon energy transitions; and penetrating international markets to compete with global oil giants such as Saudi Aramco, Qatar Energy, and the UAE’s ADNOC have been dismal. Olawuyi said: “While some of these plans are beginning to take shape, the overall pace has been far from encouraging,” adding, “The challenges posed by the COVID-19 pandemic, ongoing global divestments from the oil and gas sector, the impact of the Ukraine war on oil markets, and Nigeria’s transition to a new government in 2023, have certainly played a role in this.” He however noted that these factors should not obscure the need for a more aggressive and result-oriented approach from NNPC. One of the key areas of concern to him is the company’s financial transparency.

In addition to concerns about transparency, Prof. Olawuyi pointed to logistical challenges that continue to plague NNPC operations, stressing that the logistical issues surrounding fuel distribution and supply across the country have yet to be fully resolved. A Business Adviser to several companies in the Upstream, Midstream and Downstream Oil and Gas Sectors in Nigeria, Dan Kunle said core investors must take over non-performing entities of the NNPCL, otherwise the projected gains would remain elusive. “The subsidiaries should be privatized. The core share of those subsidiaries should be in the hands of private investors. They destroyed the industry completely. This destruction should make every state in the country begin to look for what they can do,” Kunle said. Kunle said if the subsidiaries are left in the hands of NNPCL in the next two years, it may be very difficult for investors to bring in their funds and revive the sector.

https://guardian.ng/news/only-seven-of-20-subsidiaries-viable-as-nnpcl-battles-n22tr-debt

Kyari is a waste of Matter
What exactly is he good at?

Nigeria is facing 10000 battles and its not possible to fight and win all in just 8years

7 our of 20 is below 50% and the debt is huge

An External Auditor should Audit NNPC account every 3 months abeg

Still looting Nigerian resources searching for an illusive oil in the Nasarawa and Maiduguri. "If we dont kill NNPC, the NNPC will kill Nigeria." - Nasir El-Rufai.

Hmmm..

Omooba77:
NNPC’s decommissioning burdens hit N466.7b amid 2,003 oil wells • Company takes fresh N53b loan for oil search in Maiduguri, Nasarawa
Nigerian National Petroleum Company Limited (NNPCL) is facing a serious financial sustainability and liquidity management crisis as unviable and unprofitable subsidiaries push the company’s indebtedness to N22 trillion. This is in addition to an existing $6.8 billion debt to oil traders and another $5.4 billion in forward sales agreement and other loans obtained to finance oil search and power generation projects in the northern region of the country.

With oil wells under the company rising to 2,003, the oil company, which disclosed a profit of N3.2 trillion in 2023 will be spending N466.7 billion as worried about the growing intercompany debt within NNPC’s subsidiaries, stressing that it raises concerns about liquidity and overall financial health. They are also worried that the rise in the indebtedness between 2022 and 2023 suggests that these subsidiaries may be struggling to generate sufficient cash flow to meet financial obligations. In 2022, the debt of the companies was about N18.4 trillion. This, according to them, creates a potential strain on NNPC’s consolidated position, indicating that liquidity issues at the subsidiary level could have broader impacts on the group, adding that the concentration of receivables in a few subsidiaries increases credit and cash flow risks, while also pointing to potential operational inefficiencies with fear that these entities may not be self-sustaining and could require continuous financial support. Earlier in the month, the NNPC Ltd acknowledged that the company is significantly indebted to petrol suppliers as the financial strain has placed considerable pressure on the company.
Also, the company instead of managing its refinery, which has about N4.5 trillion debt, announced a tender for private companies to manage the assets, especially the Warri and Kaduna refineries. While NNPC may view the large intercompany balances as strategic investments in key sectors such as refining, gas infrastructure, and trading, the long-term financial sustainability of the company, stakeholders hinge exposure on the performance of these subsidiaries, noting that if these investments do not begin to yield returns soon, NNPC’s leverage ratio could worsen, making it more vulnerable to market risks, particularly fluctuations in oil and gas prices. The subsidiaries of NNPC Ltd with debts as of December 31, 2023, include PortHarcourt Refining Company Limited (N1.97 trillion), NNPC E&P Limited (N159.257 billion), Kaduna Refining and Petrochemical Company Limited (N1.36 trillion), NNPC Gas Infrastructure Company Ltd (N1.86 trillion), NNPC Energy Services Limited (N154.153 billion), Warri Refining and Petrochemical Company Limited (N1.17 trillion), NNPC Engineering and Technical Company Limited (N34.099 billion), NNPC Retail Limited (N38.673 billion), NNPC Gas Marketing Company Limited (N20.998 billion), Nigerian Pipelines and Storage Company Limited (N236.059 billion), NNPC Trading SA (N503.069 billion), NNPC Properties Limited (N10.486 billion), NNPC Medical Services Limited (N56.502 billion), NNPC National Petroleum Telecommunication Limited (N16.825 billion), Maiduguri Emergency Power Plant (N71.080 billion), and NNPC Gas and Power Investment Company Limited (N9.261 billion). Additionally, while NNPC Shipping and Logistics Limited owes N28.557 billion, related parties owe N14.34 trillion to NNPC Ltd.

Stakeholders called for the shutdown of the company’s unprofitable ventures amidst a plan by the organisation to go public. Some of the subsidiaries of the company with a consistent history of profitability are Petroleum Products Marketing Company Limited, NNPC, NNPC HMO and Antan Producing Limited.
In December 2023, under Project Gazelle, which is the Afrieximbank loan, NNPCL entered into a forward sales agreement with Project Gazelle Funding Limited to supply 90,000 bpd of crude oil from Production Sharing Contract (PSC) assets to settle a $3 billion funding.
The company used the funds to prepay future taxes and royalty obligations due to the federation on PSC assets managed by NNPCL. As of December 31, 2023, $2.25 billion had been drawn from the $3 billion facility. The interest rate is 3-month LIBOR plus 6.5 per cent, with a margin and liquidity premium of 6 per cent and 0.5 per cent respectively. NNPCL stated that principal repayment will begin in June 2024. In another forward sales agreement, referred to as Eagle Exporting, NNPC Exploration & Production Limited (NEPL) had capital commitments of $352.88 million (N158.3 billion) as of December 31, 2023.

This commitment stems from an agreement with Eagle Export Financing Limited for the delivery of crude oil. Under this contract, Eagle Export Funding Limited made an upfront payment, and NEPL is obligated to deliver at least 1.8 million barrels of crude oil. The deliveries, which began on August 28, 2020, must be scheduled and delivered by NEPL to the relevant terminal. Additionally, NNPC entered into a forward sale agreement with Bestaf for $300 million to fund the acquisition of Chevron Nigeria’s 40 per cent interest in OML 86 and 88, known as Project Brogue. By December 31, 2023, $218.3 million had been repaid, leaving a capital commitment of $81.7 million to Middleton Funding Limited as of December 31, 2022.

The company, in July, also disclosed plans for an additional $2 billion in crude oil backed loans from international creditors to boost its financial inflow. Amidst other loans, the Afrieximbank $3 billion loan and the $2 billion and other outstanding on Project Brogue, Eagle Exporting and Project Bison create a debt of $5.8 billion.
When added to the $6.8 billion petroleum products debt, NNPC owes a debt of $12.6 billion. Going by the analysis provided by the company, decommissioning provision, which is expected to occur within six to 40 years, depending on the asset, was estimated at an increasing cost of N466.7 billion for 2023, following the addition of a new well which brought the company’s oil well to 2,003. These costs, which NNPCL said were calculated based on the current economic environment, are expected to be reviewed regularly to account for potential changes. However, actual decommissioning expenses will depend on future market conditions, particularly oil and gas prices, as well as the timing of when the fields stop producing economically viable output. Amid concerns over the profitability of oil exploration in the northern region, especially in the face of liquidity constraints, a loan of N53.33 billion was taken by NNPC Energy Services Limited for the Keana drilling campaign in Nasarawa, Chad Basin re-entry as well as other 3D Seismic acquisition projects.
The loan repayment is expected over three years. Interest of N1.69 billion has been paid on the loan, however, principal repayment has not started, NNPC said in its statement. Convener of the South South Reawakening Group (SSRG) and Chairman of the Board of Trustees for Community Development Committees of Niger Delta Oil and Gas Producing Areas (CDC), Joseph Ambakederimo, said the mounting debt reflects the inability of NNPCL and its subsidiaries to effectively manage the country’s oil and gas resources.
Ambakederimo suggests that NNPCL’s role in economic development is in question, with its ongoing financial struggles contributing to the dollar shortages affecting the Central Bank of Nigeria’s reserves. He also highlighted the broader economic challenges the country faces, such as currency instability, infrastructure deficits, and recurring fuel shortages, which he attributed to the inefficiencies within NNPCL.

Ambakederimo stressed the need for President Bola Tinubu to order a comprehensive audit of NNPCL and its subsidiaries, suggesting that the company’s perpetual state of transition is being manipulated for political reasons.
Drawing comparisons to successful state oil companies like Saudi Aramco and Malaysia’s Petronas, he argued that without decisive leadership changes and a shift in strategy, NNPCL would continue to fail, and failure should no longer be rewarded.

The Director, Institute for Oil, Gas, Energy, Environment, and Sustainable Development (OGEES Institute), Prof. Damilola Olawuyi said NNPC’s journey towards commercialisation has been marked by the announcement of several initiatives aimed at transforming the company into a competitive player in the global oil and gas industry but the initiatives, include the revamp of aging infrastructure, especially refineries; enhancing technology efficiency and full-scale digitalisation of operations; advancing low-carbon energy transitions; and penetrating international markets to compete with global oil giants such as Saudi Aramco, Qatar Energy, and the UAE’s ADNOC have been dismal. Olawuyi said: “While some of these plans are beginning to take shape, the overall pace has been far from encouraging,” adding, “The challenges posed by the COVID-19 pandemic, ongoing global divestments from the oil and gas sector, the impact of the Ukraine war on oil markets, and Nigeria’s transition to a new government in 2023, have certainly played a role in this.” He however noted that these factors should not obscure the need for a more aggressive and result-oriented approach from NNPC. One of the key areas of concern to him is the company’s financial transparency.

In addition to concerns about transparency, Prof. Olawuyi pointed to logistical challenges that continue to plague NNPC operations, stressing that the logistical issues surrounding fuel distribution and supply across the country have yet to be fully resolved. A Business Adviser to several companies in the Upstream, Midstream and Downstream Oil and Gas Sectors in Nigeria, Dan Kunle said core investors must take over non-performing entities of the NNPCL, otherwise the projected gains would remain elusive. “The subsidiaries should be privatized. The core share of those subsidiaries should be in the hands of private investors. They destroyed the industry completely. This destruction should make every state in the country begin to look for what they can do,” Kunle said. Kunle said if the subsidiaries are left in the hands of NNPCL in the next two years, it may be very difficult for investors to bring in their funds and revive the sector.

https://guardian.ng/news/only-seven-of-20-subsidiaries-viable-as-nnpcl-battles-n22tr-debt

NNPCL declared N3.29 trillion profits, while under bandage of N22 trillion debts. We really have Accountants in Nigeria Nlfpmod. Most of these things are lies and propaganda, to make APC look good. N22 Trillion debts.

iwaeda:


NNPCL declared N3.29 trillion profits, while under bandage of N22 trillion debts. We really have Accountants in Nigeria Nlfpmod. Most of these things are lies and propaganda, to make APC look good. N22 Trillion debts.

It is well my brother, nobody is sure what to believe........

Omooba77:

It is well my brother, nobody is sure what to believe........

Adupe egbo mi. Aku ominira, ki Olorun Oba ko tu wa lara.

iwaeda:

Adupe egbo mi. Aku ominira, ki Olorun Oba ko tu wa lara.

Amin loruko Jesu......
Nlfpmod........

Omooba77:


Amin loruko Jesu......
Nlfpmod........

iwaeda:

Hmmm...

Omooba77:

Hmmm...

NNPCL should be sold off by Tinubu......