Crude oil export revenue reached the highest mark in 13 months at the end of September 2017 but continued importation of petroleum products is sapping much of the earnings, NNPC’s oil and gas report for the month of October has shown.
Nigeria earned $3.68 billion from crude oil and condensate lifting in the month of September, a further improvement from $3.15 billion in August, according to the report. Sustaining upward creep in price and continuing gains in volume account for the improved performance in revenue.
Crude oil export earnings have been on a general uptrend since the second quarter of 2017 and there has been a sustained improvement every month since July. Crude oil export volumes grew from 60.5 million barrels in August to $64.69 million barrels in September.
Independent oil companies, including NPDC, accounted for the increase in export volume while government lifting dropped from 18.02 million barrels to 15.43 million barrels.
Growing exports also continued to encroach on crude oil volumes for domestic use, as operating capacities of local refineries remained quite low in October despite some improvement.
Crude oil utilisation in the domestic economy dropped to the lowest level in seven months in September at 6.5 million barrels – a drop of 33% from the figure in August.
Only 16.4% of crude supplied to refineries was processed in September, improving to 37% in October.
NNPC’s October report shows a progressive rebuilding of crude oil export lifting, as the uptrend in crude oil price is sustained. Nigeria is presently earning more per barrel of crude than recorded any time in the past one year.
Export revenue from crude oil in the nine-month period to September totaled $26.45 billion, accounting for over 71% of the $37.09 billion total earnings reported by NNPC from September 2016 to September 2017.
According to the report, independent marketers, including NPDC, accounted for $24.54 billion of the total export earnings while government lifting edged up to $11.83 billion.
Government’s ability to maximize the increased export earnings to propel economic recovery is constrained by increasing dependence on imported petroleum products. The increased dependence on imports reflects the drop in crude oil supply for domestic processing and the decline in refining capacity.
Given these developments against the improving crude oil price, the present shortages in products supply to the economy are viewed as foreseeable.
Inability to reinforce processing capacity of local refineries is seen to be the condition waiting to ignite the present crisis in the downstream operations.
The refineries have lost considerable operating capacity since June 2017 when Kaduna refinery stopped working. Port Harcourt refinery however improved its operating capacity from 13.4% in September to 31.4% in October, according to NNPC’s report.
It was expected that with improving crude oil prices, petroleum marketers would stop at some point from importing refined products. This has happened, as the pump price no longer affords them a margin for profit. Importing products at the increased prices can therefore only happen with a subsidy.
The crisis on the streets is traced to crisis in the policy making and implementing corridors – the failure of the organs of government to read the trends and act timely.
The hopes for sustaining the fragile economic recovery recorded in the last two quarters depends on how far government is able to act on the opportunity of improving export earnings to build a bigger economic capacity at home.
In the absence of local capacity for refining crude oil, increased import bills for petroleum products stand as a major limiting factor for maximising the impact of growing oil earnings on the domestic economy.