Akainzo:



Bros, you need some education/enlightenment big time.

The highest Production cost per barrel in Nigeria is $12, at a time it went as low as $8 until the Niger Delta militancy. So please read more!

I like this my needing education. Even Saudi oil stand at $10 per barrel.

atlwireles:


Anybody calling Nigerian Oil subsidies a scam, is not worth much weighted up or down. You called yourself an industry insider, so you know the cost of production for Nigerian crude is about $20-40 per barrel.

Please lead another demonstration, so government can sell you petrol at cost price. You wonder why you people are dying of poverty, because some of you are constantly trying to reinvent the wheel. Goodluck with your free/cheap oil.

Bros, first the cost of Production per barrel in Nigeria is maximum $12.
Secondly, a barrel of crude and a litre of PMS are 2 different things. So if our government sells PMS at cost price, then we should be paying far less than N97.

Akainzo:


Bros, first the cost of Production per barrel in Nigeria is maximum $12.
Secondly, a barrel of crude and a litre of PMS are 2 different things. So if our government sells PMS at cost price, then we should be paying far less than N97.

Your chewing gum argument, will get you far with me.. Like I said, you people should lead a demonstration and demand for crude pricing at cost. Happy driving on cheap oil.

atlwireles:


The price NNPC pays, is based on the 30 days NYSE average. NNPC is not buying crude at cost, they pay the same price as shell, chevron and Exxon. Back in 2012 when price was set at N97, a barrel was almost $120. Today price is down to $81, we are actually paying more for petrol in Nigeria today, than someone in west Texas, today. This was the same thing that happened with Yaradua, when he reduced price to N65, only to regret it 6 weeks later. Because crude jumped by almost 40%.

There are people that want to sell oil at cost. I am not only of them. Oil is a commodity, like cocoa, rice, palm oil etc. Let try it that way. That's all Nigeria is trying to do.

At the Bold part in your above comment, are you by any chance implying that NNPC buys Crude Oil in the spot market? Or are you trying to imply that NNPC buys crude oil for refining at International Price?

Please clarify!

atlwireles:


Your chewing gum argument, will get you far with me.. Like I said, you people should lead a demonstration and demand for crude pricing at cost. Happy driving on cheap oil.

I like the way you avoided answering. It shows you do not know.

To help you, what you were probably referring to will be the Final Upstream cost of a barrel of crude in Nigeria (which entails the total production cost + Other costs of doing the business in Nigeria)

For local refining, what we need to use in the production cost/barrel and that is still max $12 as of 2014. (And my guy, I KNOW.)

Akainzo:


At the Bold part in your above comment, are you by any chance implying that NNPC buys Crude Oil in the spot market? Or are you trying to imply that NNPC buys crude oil for refining at International Price?

Please clarify!

NNPC does not need the spot market. In 2005 Obj changed the price formula, where NNPC contract are based on the 30 days NYSE price average, for the 445,000 barrels allocated for our local refineries.

atlwireles:


Your chewing gum argument, will get you far with me.. Like I said, you people should lead a demonstration and demand for crude pricing at cost. Happy driving on cheap oil.

Tell me the reason why new
refineries hasn't been built either by
private or the government for the past 12
years.

Akainzo:


I like the way you avoided answering. It shows you do not know.

To help you, what you were probably referring to will be the Final Upstream cost of a barrel of crude in Nigeria (which entails the total production cost + Other costs of doing the business in Nigeria)

For local refining, what we need to use in the production cost/barrel and that is still max $12 as of 2014. (And my guy, I KNOW.)

We actually had this price discussion yesterday. As the price of crude keeps falling, we trying to review our options. The following is our breakdown.

Nigeria $20-40
Sauidi $10
United states $70
Canadian sand $75

Just like you, I have my little knowledge. You don't need to shake a stick at me.

blym4real:
Tell me the reason why new
refineries hasn't been built either by
private or the government for the past 12
years.

The government does not have the money,and the private sector hates the business model.

atlwireles:


The price NNPC pays, is based on the 30 days NYSE average. NNPC is not buying crude at cost, they pay the same price as shell, chevron and Exxon. Back in 2012 when price was set at N97, a barrel was almost $120. Today price is down to $81, we are actually paying more for petrol in Nigeria today, than someone in west Texas, today. This was the same thing that happened with Yaradua, when he reduced price to N65, only to regret it 6 weeks later. Because crude jumped by almost 40%.

There are people that want to sell oil at cost. I am not only of them. Oil is a commodity, like cocoa, rice, palm oil etc. Let try it that way. That's all Nigeria is trying to do.

^^^^
Its getting murkier and murkier. I am still trying to decipher the link between the cost price and pumphead price per litre of PMS (petrol) sold here AND the export sale price to oil majors AND the price of gasoline in the USA.

But some things are remarkably clear now. Apparently you do not believe that crude oil should be sold to the NNPC at cost price, and that global prices should apply to local transactions. If we apply that logic I would like to believe that cocoa and tea extracts sold by Nigerian farmers to the likes of Nestle, Cadbury or anyone else should be sold at international prices. I would like to believe that you have advocated the sale of palm oil to housewives in Wuse market at international prices. I want to buy Ofada rice and Idah cassava at international prices in our local markets and I want the government to superintend this. Isn't that a fair argument?

I do not want to go off on a tangent sir. The kernel of my argument is that if the cost price per litre of locally produced PMS/DPK/AGO is lower than the pumphead price, (low enough to make normal profits) then it makes absolutely no sense for the Nigerian government to dis-invest in local refining capacity and then turn around to run a criminal, thoroughly compromised petroleum product import scheme. Does it make sense?

VolvoS60:


^^^^
Its getting murkier and murkier. I am still trying to decipher the link between the cost price and pumphead price per litre of PMS (petrol) sold here AND the export sale price to oil majors AND the price of gasoline in the USA.

But some things are remarkably clear now. Apparently you do not believe that crude oil should be sold to the NNPC at cost price, and that global prices should apply to local transactions. If we apply that logic I would like to believe that cocoa and tea extracts sold by Nigerian farmers to the likes of Nestle, Cadbury or anyone else should be sold at international prices. I would like to believe that you have advocated the sale of palm oil in Wuse market at international prices. I want to buy Ofada rice and Idah cassava at international prices in our local markets and I want the government to superintend this. Isn't that a fair argument?

I do not want to go off on a tangent sir. The kernel of my argument is that if the cost price per litre of locally produced PMS/DPK/AGO is lower than the pumphead price, (low enough to make normal profits) then it makes absolutely no sense for the Nigerian government to dis-invest in local refining capacity and then turn around to run a criminal and thoroughly compromised petroleum product import scheme. Does it make sense?

Whatever pricing formula you look at, the facts start with NNPC paying the same price for 445,000 as you would in the international market. The race starts from there.

atlwireles:


We actually had this price discussion yesterday. As the price of crude keeps falling, we trying to review our options. The following is our breakdown.

Nigeria $20-40
Sauidi $10
United states $70
Canadian sand $75

Just like you, I have my little knowledge. You don't need to shake a stick at me.

Bros, If it cost $70 per barrel to produce crude from the Shale in US, no single oil company will touch it talk less of the $75 in Canada.

I will repeat, you are mixing cost of production per barrel with Final upstream cost. The highest per barrel cost in Naija as of 2014 is $12.

atlwireles:


The government does not have the money,and the private sector hates the business model.

I am baffled by your answer. Nigeria government does not have the money to build refineries.

Akainzo:


Bros, If it cost $70 per barrel to produce crude from the Shale in US, no single oil company will touch it talk less of the $75 in Canada.

I will repeat, you are mixing cost of production per barrel with Final upstream cost. The highest per barrel cost in Naija as of 2014 is $12.

How many companies have already suspended new projects in last 2 weeks? When oil hits $70, expect massive shut downs in North america. The Saudi and Russians know this, that why OPEC has refused any production cuts. Even though the market is over supplied by almost 2 million barrels per day.

atlwireles:


NNPC does not need the spot market. In 2005 Obj changed the price formula, where NNPC contract are based on the 30 days NYSE price average, for the 445,000 barrels allocated for our local refineries.

That change was to be able to calculate the differential that should be the "Subsidy" to be accrued to NNPC. This helps to determine a true and fair value for the cost of the unused crude allocated for local refining.

So please do not muddle things up.

Nuhu Ribadu-led Petroleum Revenue
Special Task Force has detailed how the
Nigerian government and national oil company,
Nigerian National Petroleum Corporation, treat
huge oil revenues accruing to the federation as
a reserve of money that could be used for illicit
purposes without accountability.
In its 178-page report, obtained by PREMIUM
TIMES last night, the committee revealed how
oil money in the custody of the NNPC were
spent on extra-budgetary purposes such as the
acquisition of a N2.23billion chopper for the
president and a purported sponsorship of the
World Cup.
In what appears a brazen misuse of public
funds, the NNPC also gave out N700.5million in
loan to Sao Tome & Principe based on
instruction from the presidency. It also made a
curious payment of N2.421billion to a foreign
company, Royal Swaziland Sugar Company.
The reason for the payment is unclear.
The Corporation also claimed to have
underwritten a N521million expenses incurred
by the Federal Ministry of Petroleum Resources.
This is in addition to the N250million the
agency told the committee it spent on court
cases involving the ministry.
The ministry has its own budgetary allocation
and it is unclear why the NNPC is paying for its
expenses. The nature of some of the expenses
are also unclear.
The committee also found that the NNPC was
being used as illegal lender to presidential
committees, ministries and parastatals. For
instance the corporation claimed it incurred
about N20billion on the Presidential
Implementation Committee on Maritime Safety
and Security, based on instruction from the
presidency.
The Ribadu committee also determined that
about $1billion in signature bonuses,
discrepancies in payment by the NNPC, and
debts from oil companies were unaccounted for
by the NNPC and the Department of Petroleum
Resources.

Akainzo:


That change was to be able to calculate the differential that should be the "Subsidy" to be accrued to NNPC. This helps to determine a true and fair value for the cost of the unused crude allocated for local refining.

So please do not muddle things up.

You muddled it, I don't get what you are talking about.

atlwireles:


Whatever pricing formula you look at, the facts start with NNPC paying the same price for 445,000 as you would in the international market. The race starts from there.

^^^^
Another poster is disputing your assertions about NNPC's purchase of crude at international prices. He has also disputed your claims about local production costs per litre. Remember I asked you these same questions. Are you absolutely sure of what you have said so far?

VolvoS60:


^^^^
Another poster is disputing your assertions about NNPC's purchase of crude at international prices. He has also disputed your claims about local production costs per litre. Remember I asked you these same questions. Are you absolutely sure of what you have said so far?

The fact NNPC pays for our local 445,000 barrels in Nigeria at the international price is not a secret. There's nothing to dispute here. The local production cost in Nigeria is about 20-40. Talk to any futures trader, they will tell you what numbers their firms use in hedging cost in Nigeria.

blym4real:
I am baffled by your answer. Nigeria government does not have the money to build refineries.

^^^^
I am equally as baffled.

If as atlwireles says, "the government has no money to build refineries", then where is the money to finance the importation of refined petroleum products going to come from?

blym4real:
I am baffled by your answer. Nigeria government does not have the money to build refineries.

Nigeria does not have money to build roads,modern railway, hospitals and schools. Just add refineries to the long list. The reality is, most of us in this country make assumption about Nigeria that are so far from reality. Nigeria is a poor country.

I need that cash right in my bank acct.

atlwireles:


The fact NNPC pays for our local 445,000 barrels in Nigeria at the international price is not a secret. There's nothing to dispute here. The local production cost in Nigeria is about 20-40. Talk to any futures trader, they will tell you what numbers their firms use in hedging cost in Nigeria.

Bros, you do certainly mix things up. A futures trader is talking about "Cost of Lifting", which translates to Upstream Cost and not production Cost.

Nigeria does not pay for it at International price, it is only used to account for the crude oil used for the subsidy system. At the worst, one would use a weighted average system and not use the spot price considering that there are other associated costs with spot cargo that are not incured by local refining.

atlwireles:


Nigeria does not have money to build roads,modern railway, hospitals and schools. Just add refineries to the long list. The reality is, most of us in this country make assumption about Nigeria that are so far from reality. Nigeria is a poor country.

Accept that we are being governed poorly, but the Revenue this nation generates is quantum. the only problem is what are we spending the monies generated on?

We are only poor because we are wasteful, lack planning and the government supports corruption. But we do have the revenue to be a great nation given our resources.

Akainzo:


Bros, you do certainly mix things up. A futures trader is talking about "Cost of Lifting", which translates to Upstream Cost and not production Cost.

Nigeria does not pay for it at International price, it is only used to account for the crude oil used for the subsidy system. At the worst, one would use a weighted average system and not use the spot price considering that there are other associated costs with spot cargo that are not incured by local refining.

I like your nice semantics. "Cost of lifting" and "account for crude oil with international price". In my world is Naira and kobo. You've said nothing different.

Thanks for this chat, I have to go.

Visit:http://ralpheme., and go to the forum,there,you will see "click to go to mega forum",click on it and sign up,the first ten to sign up will be chosen as admin.

atlwireles:


Nigeria does not have money to build roads,modern railway, hospitals and schools. Just add refineries to the long list. The reality is, most of us in this country make assumption about Nigeria that are so far from reality. Nigeria is a poor country.

. With all due respect sir, you don't know what you are saying. The government that can budget over 1 billion naira for presidential feeding yearly, that can pay the highest salary in the world to it house of rep members and the senators, that can operate the largest presidential cabinet and so many more.

bushdoc9919:
[

Norway has a population of eleven million people, is the world's second largest producer of oil, and has a strong diversified economy with a strong industrial component.

Nigeria produces far less oil, and our industries barely exist.



You keep avoiding the elephants in the room...the fact that

1,Our refineries are not producing at full capacity

2.The fact that we do not have enough refineries

3.The fact that we are importing refined crude...at market prices.

All we need to do is to increase domestic production....if you want a subsidy that works.

^^^^
The only elephant in the room is that the government has refused to invest in new refineries. Not only that, it has also put in place a 'subsidy' on fuel importation (not on local production but on importation!) which discourages prospective investors interested in building new local refining capacity.

The Government simply wants to increase the price of fuel because the pool of Funds is gettings ridiculously low due to unregulated looting of the treasury. What about the domestically produce fuel, does it incured dermorage too?why fix price for products you don't sell alone?(Total, Oando, MRS, etc)they all sell fuel too?why not allow them fix there prices as they import from various sourcesThe Government ensures that private refinery don't take off (by fustrating them with impossible conditions) in order to justify the need to fix prices as they like..
MTN, GLO, AIRTELL, ETSALAT, all decides to sell there products as they seem it fit, Customers decides which is cheaper, better network quality, better serviced etc. All this organisations have no business with the Government whatsoever safe for taxes.E.g,MTN sold Sim card for 35,000.00nara when it all started, but today it's free, thanks to market forces
Let the major marketers also import there fuel to us allowing markets/cunsumers forces decides the prices.

NGN972 billion is enough to build two more greenfield refineries or 50 modular refineries with less than 20,000 barrels per day capacity.

atlwireles:


I like your nice semantics. "Cost of lifting" and "account for crude oil with international price". In my world is Naira and kobo. You've said nothing different.

Thanks for this chat, I have to go.

^^^^
That's not good enough sir.

People have given very cogent reasons why the principal actors in the current government (and others before it) should be in the dock answering hard questions. You can't give a perfunctory defence and leave it at that.

This government (like others before it) is criminally incompetent. It cannot cut the waste at the highest levels in its operations but it is remarkably purposeful when it comes to policies which hurt the most vulnerable. What is sad is when people like you come here and try to defend the indefensible.

The government sells crude oil to the NNPC at international prices (if what you say is true). No doubt the reasons given for this will be something along the lines of 'instilling discipline to compete at market rates and prices', etc. Things begin to unravel when we consider the actual outcomes - outcomes such as the inexplicable refusal of this government (like others before it) to invest in new refineries. Is granting 'subsidies' to import refined PMS/DPK/AGO a sensible course of action? 'Subsidies' which far exceed the cost of new refineries? Whose interests are served by this?

You can't privatize the gains (among a chosen few) and socialize the losses.

Nigerians are being held hostage by their own docility and stupidity. We do not want to hold our governments accountable!!! This is the price we pay for our actions.

If the government cannot build refineries, it might as well privatize the provision of all public goods and all forms of infrastructure. It has become fashionable for irresponsible governments to abdicate their responsibilities in the provision of public goods. Interestingly though, these same governments retain a monopoly on the so-called 'legitimate' use of force. This is one area the government is not willing to privatise or deregulate. As things stand today, I or any other citizen who so desires cannot set up and run a private army or a private police force. Why is this so?