Government reduces fuel price to N121.50 as Senate decries high oil production cost

The Federal Government yesterday reduced the pump price of Premium Motor Spirit (PMS) popularly known as petrol from N123.50 to N121.50.

The information was contained in a circular issued by the Petroleum Products Pricing Regulatory Agency (PPPRA) to marketers dated May 31, 2020.

It read: Please recall the recently approved pricing regime which became effective March 19, 2020, and the provision for the establishment of a monthly price band within which petroleum marketers are expected to sell PMS at the retail stations.

“After a review of prevailing market fundamentals in the month of May and considering marketers’ realistic operating costs as much as practicable, we wish to advise of a new PMS guiding pump price with the corresponding ex-depot price for the month of June 2020 as follows: price band N121.50 – N123.50 per litre.”

However, the marketers have alleged that they were not carried along in the decision-making process.

The Executive Secretary, Major Oil Marketers Association of Nigeria, (MOMAN), Clement Isong, noted that while the stakeholders, especially station dealers, would “struggle to implement” the new price, there was a need for government to always carry the traders along in arriving at a price for the product.

Also speaking, national president of the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), Dr. Billy Gillis Harry, pointed out that the decision would create losses for marketers, as their purchasing power will be adversely impacted.

Besides, the Senate has berated the Nigerian National Petroleum Corporation (NNPC) for the $21.2 production cost per barrel of crude oil, which it described as exorbitant.

The corporation had pegged the charge at $25 in the 2020 budget before reviewing it downward in the revised appropriation document following the persistent fall in oil revenues on account of the COVID-19 pandemic.

The Chief Operating Officer, NNPC Upstream, Yemi Adetunji, who was addressing the upper legislative chamber’s Committee on Finance in Abuja yesterday, advanced security challenges, pipeline vandalism and administrative issues for the high production cost.

Disagreeing, the lawmakers decried the $3 marginal gain on a barrel, calling on the Federal Government to diversify the economy.

The committee chairman, Senator Solomon Adeola Olamilekan, requested the national oil company to brief the panel on what constitutes the fee as well what it was doing as an agency of government to crash the cost.

His words: “With the benchmark of $25 as proposed, Nigeria is just going to have just $3 as its own returns on investment?

“Looking at the proposed oil and mineral revenues in the MTEF that have dropped from almost N8.86 trillion to N3.33 trillion, are you saying that it is a worthwhile investment for us as a nation, going by the fact that the cost of producing one barrel is $21 and the benchmark is $25 for over 180 million Nigerians?”

“We are beginning to be afraid as to why we are channelling all our efforts to this oil and gas if the returns on investment are nothing to write home about.”

Other contributors, including Senators James Manager, Shaibu Gumau and Jibrin Issa, equally faulted the explanations offered by NNPC particularly the security concerns and the administrative cost raised by the corporation.

Manager reminded the minders of the nation’s oil resources than Saudi Arabia, Iran and Russia have their peculiar security issues too yet the cost of producing crude in these countries is on the low side.

Issa, on his part, said he expected the organisation to dwell more on fixed cost but was surprised to be regaled with administrative and security charges.

Responding, Adetunji stated that NNPC was exploring means to trim down the administrative cost.

“This year, we have a multi-disciplinary approach in terms of planning and engagement of various partners to ensure that we draw down on all the various cost items,” he said.