₦airaland Forum

whiteroses:
what kind of post is this it is toooooo loooooooooooooooong for crying out loud.

Important issues are not discussed properly with 1 or 2 lines of statements.

If the post is too long, hit the back button and read posts that are shorter and let those that are interested in the real issues read through.

I don't know if the articles will be a whole lot shorter on the original sites.

By the way, azorjiu was refering to quoting articles without referencing the owner.

It is sad that these people keep lying through their teeth in this never ending subsidy.

You may take a look at the following article written by a former colleague and a former presidential aspirant.

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http://supanigeria.org/index.php?option=com_content&task=view&id=21&Itemid=35

PETROLEUM PRODUCTS PRICES AND SUBSIDIES IN NIGERIA. Email

The prices of petroleum products in Nigeria have been a source of contention and controversy. This paper proposes to clarify the actual total cost by adding the costs of all components in retail supply of Premium Motor Spirit (PMS aka Petrol or Gasoline) the most widely demanded and utilized petroleum product.

BACKGROUND

The prices of petroleum products in Nigeria have been a source of contention and controversy. This paper proposes to clarify the actual total cost by adding the costs of all components in retail supply of Premium Motor Spirit (PMS aka Petrol or Gasoline) the most widely demanded and utilized petroleum product. The cost components are finding, developing, producing, refining, distributing and marketing. The amount of subsidy on the retail price is then determined by the difference between the actual cost and the retail price.

The method adopted for this cost determination is similar to that used by the American Petroleum Institute (API) for the analysis of the actual total cost of gasoline (PMS) in the U.S. It splits the retail cost into the major components: cost of crude oil, the cost of refining and marketing and the sum of all taxes. This method is simple and accurate.

The most accurate industry data has been obtained from and confirmed independently for this effort by industry experts. The draft paper was also reviewed and endorsed by several other experts. The data and analysis herein are as at October, 2005. Exchange rate applied is N130/USD.

THE PETROL PROCESS

To purchase petrol in Nigeria, we typically drive to a Fuel Station. The fuel attendant pumps the requested quantity and payment is made in cash, electronically (Value card, Top card, etc.) or otherwise.

The Fuel station typically receives its supply from road tankers which have been loaded at an NNPC or other fuel depots. The NNPC depots receive their supply from local refineries through pipelines. Imported petroleum products are evacuated from ocean-going tankers to local depots which then supply to Fuel stations by road tankers.

Local refineries receive their feed Crude oil through pipelines from oil terminals. The Crude oil is produced by oil companies from wells in their OMLs (Oil Mining Lease). The Federal Government of Nigeria (FGN) is the senior partner in Joint Ventrure (JV) oil producing companies. The NNPC manages FGN investments in the JVs. Production Sharing Contracts (PSCs) are a different relationship from Joint Ventures. This determination is based on JV production which represents most of the Nigerian production. PSC production can be similarly treated.

COMPONENT COSTS

Crude oil is first discovered (Exploration), then the discovery is developed (Field Development) before it can be produced (Production Operations). It is then refined into petroleum products which are distributed and sold for utilization. The costs of Exploration, Field Development, Production Operations, Refining, Distribution and Marketing (Retail sales) are identified herein. The sum of all product cost components is the actual cost of the product.

EXPLORATION COSTS

Exploration costs typically include seismic acquisition and interpretation costs. Exploratory well costs can be included in development costs since the exploratory well can be easily converted to a development well. 3D Siesmic acquisition costs vary based on contractor, coverage, terrain, time, season, water depth, methods, commercial terms, special considerations, etc. Typical costs range from 20 – 70,000 USD/KM2. Interpretation costs range typically from 2-8,000 USD/KM2. We will use 50,000 USD/KM2 as estimated cost of 3D seismic acquisition and interpretation. For a 10 KM2 field with 20 Million barrels recovery; exploration costs can be estimated to be about: - 0.025 USD/Bbl. This is equivalent to, 0.02 N/Litre.

DEVELOPMENT COSTS

Opportunity development costs depend on field location, size, development philosophy and concept. Development cost will include capital costs of field facilities design, procurement, transportation, installation and commissioning. Cost of wells and pipelines to existing terminals are also included. It will typically vary from 2-5 USD/Bbl.

At the NAPE (National Association of Petroleum Explorationists) annual conference in 2005, offshore development costs was indicated as 5 USD/Bbl. However, historical data for completed projects offshore are closer to 3 USD/Bbl. Onshore development costs are also significantly lower than offshore costs. To averagely represent the entire JV operational environment scenarios (offshore and onshore) this paper will capture development cost as: - 4 USD/Bbl. This is equivalent to, 3.27 N/Litre.

OPERATION COSTS (OPEX)

Current (2005) production operation costs of major oil companies surveyed indicated a range of 1.5-4 USD/Bbl. This includes all overhead costs across relevant functions. This paper will capture OPEX as: - 3.0 USD/Bbl. This is equivalent to, 2.45 N/Litre.

Therefore, actual crude oil production cost to the Nigerian JV can then be estimated as:

(0.025 + 4.0 + 3.0) USD/Bbl = 7.025 USD/Bbl.

(0.02 + 3.27 + 2.45) N/Litre = 5.74 N/Litre.

Previous government (NNPC) estimates (1994 - ’98) yielded 5 USD/Bbl. The difference in these estimates can be attributed to rising oil industry service costs due to international market dynamics, inflation and/or to estimate basis differences.

For typical refinery yield of 95%; 5.74 N/Litre translates to – 6.04 N/Litre.

This compensates for volume losses inherent in the crude oil refining process.

REFINING COSTS

Installed refining capacity in Nigeria stands at 445,000 Barrels per day (BPD).

This is made up of:

1. Old Port Harcourt Refinery - 60,000 BPD

2. New Port Harcourt Refinery - 150,000 BPD

3. Warri Refinery - 125,000 BPD (Upgraded from 100)

4. Kaduna Refinery - 110,000 BPD (Two trains, 60+50)

Refining cost data from these refineries could not be obtained during our survey. Even when such data is available, they are very unreliable. According to the Nigerian Vice-President during an interview with Thisday newspaper in August 2005, "We have never got correct statistics from NNPC. They will never be able to tell you the correct thing. We have that problem with NNPC".

To estimate refining costs, we can rely on international industry data from similar refineries. Contemporary refining technology is of the Fluid Catalytic Cracking (FCC) process like most Nigerian refineries. This process requires fluidizing the solid catalyst and re-circulating it continuously from the reaction section of the cracker to the catalyst regeneration section and back to the reaction section.

Data published by the American Petroleum Institute (API) estimates Gross Refining and Distribution/Marketing Costs and Profits at $1.00 per Gallon in October 2005. Using a 50/50 split as established by historical U.S. cost trends, it can be clearly concluded that Refining costs and Profits, account for $0.50 per Gallon. This value includes the profits of the refineries.

The estimate can be used for this determination since it is from mostly FCC process based refineries just as most Nigerian refineries. Actual refining costs may be lower in Nigeria since labour costs are significantly lower in Nigeria. $0.50 per Gallon translates to $21/Bbl. We will capture refining costs as $21/Bbl. This is, 17.17 N/Litre.

DISTRIBUTION COSTS

Distribution costs in Nigeria are established by regulation. This is the cost margin allowed for Road Tankers that transport Petrol from the Depots to the Fuel Stations. As at Oct. 2005, it was, 2.42 N/Litre.

MARKETING COSTS

Marketing Costs in Nigeria are also established by regulation. This is the cost margin allowed for Oil marketing companies that operate Fuel Retail Stations. As at Oct. 2005, it was, 5.87 N/Litre.

TOTAL COST

The total cost can then be determined as the summation of all relevant cost components previously estimated viz., Exploration, Development, Production Operations, Refining, Distribution and Marketing.

Total Cost = (6.04 + 17.17 + 2.42 + 5.87) N/Litre.

= 31.50 N/Litre

Therefore, we can conclude that the Average cost of the Petrol dispensed at retail Fuel Stations in Nigeria is, 31.50 N/Litre.

CURRENT RETAIL PRICE

Current retail Price as established by regulation has been, N65/Liter since 2005. This regulated price is split to cost components in line with the following benchmarks;

56.71 - Depot Price.

2.42 - Transportation Margin.

1.15 - Dealer’s Margin.

4.72 - Marketing Company Margin.

65.00 Retail Price.

SUBSIDY

Subsidy can be determined as Actual Cost – Sale Price.

Consequently,

Subsidy = (31.50 – 65) N/Litre.
=-33.50N/Litre

CONCLUSION

We can confidently conclude that government makes a profit of 33.50 N/Litre on PMS (Petrol) at the current price of 65 N/Litre. This translates to a very high 106% profit per litre.

In addition the government benefits from royalties, taxes and fees which were not factored in this simplified analysis. When factored, the actual crude cost per barrel to government is significantly less and its profit correspondingly higher.

The claim of subsidies on petroleum products is clearly incorrect.

POST SCRIPT

This analysis has been deliberately simplified to ensure wider appeal and easy comprehension. A much more detailed and rigorous analysis will be inappropriate for the objective indicated. It will also come to the same conclusion and have only an added academic value.

For imported Petrol, this estimate will not apply.

Imported Petrol has unnecessary additional costs like;

1. International Crude Oil Sale Price and Profit Margins.

2. Transportation Costs of Products from source Country to Nigeria.

3. Port Charges, Taxes and Export duties at source Country.

4. Insurance costs for transportation.

5. Brokerage costs for agents.

To improve domestic supply and reduce cost, the following can be considered;

- Maximize existing local refining capacity utilization.

- Increase existing local refining capacity by building additional refineries.

- Improve JV crude oil development and production efficiency to reduce costs.

C SUPA 2006.

References;

> Offshore Engineering Operations Overview, JM Campbell and Company.

> Nigerian Association of Petroleum Explorationists (NAPE), 2005 Annual Conference Proceedings.

> API Statistics: U.S. Pump Price Update – Oct. 3, 2005, API Website.

> National Petroleum News, Vol. 96, No. 6, June 2004.

> Thisday Newspapers, August 22, 2005.

> Petroleum Marketing Monthly, June 2004, Energy Information Administration.

> Behind the bottom line, Energy Information Administration, June 2006.

SUPA Paper number: TP01-626.

Big B1:
It's not what you do, it's how is done:::::Style is a KING



Bravo!

BigB1,

Na wah for you. After posting a good piece you wentg ahead to praise it in a new reply.

Well, Adenuga has done well for Nigeria no doubt and should be encouraged.

However, when one decides to question the source of his wealth you should understand that it is equally in order so as to ensure that people do not take what belongs to everybody and return a token and expect to be applauded.

texazzpete:
At least, any person with a brain here can't envisage the scenario of an american nuclear attack on any other country in the near future. can you say the same for North Korea or Iran?

No one envisaged that when it dropped 2 atomic bombs on civilian populations before (the only country that has done so).

If the US can invade Iraq based on a pack of lies and today hundreds of innocent civilians have been sent to their early graves with people losing their lives in tens or hundreds everyday in that country today, then I wonder how one can trust the US with nuclear weapons.

texazzpete:
The Nigerian police carry guns. so do the armed robbers! Should we let everyone carry guns now? Would you like the next door maiguard and the neighborhood madman to have a gun too?

So, in this case, the Nigerian police is the US and the armed robbers are those countries that have refused to take instructions from the White House, very very interesting.

@Tonyblu,

Thanks for this important question.

I guess we will benefit when we proactively look for ways to solve our problems instead of complaining all the time and doing nothing.

Now, I think Nigerians can expose rigging not necessarily stop it since the rigging is usually done after the elections before the results are released.

I also believe that the results of any election are announced right there at the polling station after the elections with the representatives of the candidates as witnesses.

If this is so then all we need do is setup a centralized database (will require getting a lot of information from INEC especially the list of polling stations and candidates for each polling station) and get a volunteer or a respresentive that will return (submit the results as announced in each polling station).

If the results are continually fed into the database, people will see the results in real time as the elections are taking place and with this, the world can know the result even before INEC announces it and INEC's results will only be different if they have taken time to rig or falsify the results.

I believe this is similar to what other nations do during elections that makes it possible for the world to know the outcome even before the electoral body saddled with the responsibility of conducting elections come out with the official figure.

This is not only possible but doable and such a project must be devoid of any political bias for it to make sense.

Site not accessible. Unfound URL, confirm address.

Easyy:
chidi, thanks.

I am sorry I am unable to respond to your post. It's rather incomprehensible to me

I hope he takes this response in good faith as I have tried to tell him same thing over and over again.

He hardly organises his post and yet will not hesitate to abuse another when his opinions are not taken.

Unfortunately, bias, sentiments and sometimes outright misinformations and lies will not let us discuss this issue the way it should be discussed.

1. If country A thinks it has a right to own nuclear weapons then country B or any other country for that matter reserves the right to own one too.

2. What if Iran opts out of the NPT today and develop uncountable nuclear weapons just like Israeal, Pakistan and India are doing, what will happen?

3. The US rather than destroy or even reduce its nuclear arsenal is building more sophisticated ones and we see people on this forum trying to tell us that the US is destroying its nuclear arsenal.

It is still had to understand why Bush was voted/rigged into office in 2000 as the US under his leadership has become the most disliked nation on earth and for the first time in a very long time the president of the US is disliked more than the prime minister of Israel in the Arab world, thanks to the clueless and lying invader.

Whether as a status symbol, intimidating instrument or whatever, nuclear weapons in the hands of any country is a bad omen and should be frowned at.

After all only the US has used atomic bombs in civilian populations on two occassions so I wonder why it thinks a nuclear weapon in its hands is safer than one in the hands of Iran or even Iraq.

@Nigeria1,

Donzman wants his house in Festac shown not Onitsha.

Do you really need to know a place well before you can point it on the map?

I am also waiting for the satellite picture of Donzman's house.

The chips are down, over to you Nigeria1.

My broda, he is the worst and while other presidents may make mistakes and ask for second chances he seems to be asking for his 14th (and still counting).

I guess the only thing he gets right are the words Saddam, Iraq, Iran and the democrats.

Come oo, when you dey sleep you dey dream about Afam?

Since I have some minutes to burn I will attempt to reply your post.

Happy reading.

chidichris:
in a war zone like iraq where every eye is on iran as the major sponsor of the militant as have been proved by their military products found in the militants possessions, who is here to condeme, an arrest which involved questions and later release.
even american soldiers in iraq have been arrested, questioned and released or even convicted in the same Iraq what more Iranians.
if we talk about critics, talk about americans even right there in the house of which bush is loosing seats to the opposition and that is democray at work.
my dear, since you are all briliant, why don't you seperate bush and america.
america from the unset has certain policies which have made them outstanding from religion to economics and believe you me, if not for america africa would still be where they were muchly as slaves thanks for their intervention and liberations. it is this same america in their policies condemed the idea of colonialism and slavery and proved their stands in their total refusal to colonise any african country or otherwise.

If not for america? Do you really know anything about the slave trade to thank americans for stopping it?

chidichris:
bringing you back to your topic, look back and find out the relationship between iran and other gulf countries. on this i want assure you that the only country tehran is enjoying a good link with is syria.
be well informed that saudia arabia the head of islam is not in good terms with iran, kuwait, bahrain, oman, qatar, uae, name them are all afraid of the radical muslim ideologies of tehran as they are bent on sponsoring extrimism in most of the countries.
why are we always running away from the truth, mr. afam and co, are you all aware that is it open and white clear that the strenght of hamas and hezeboulah is tehran or will it be another arguement to say these groups are terrorists.

This goes to show that you do not understand the history or the happenings in the middle east, Iran is the only wholly shia nation in the middleeast.

Being close to Syria is as a result of the US crazy foreign policies that tagged the 2 countries axis of evil out of about 5 countries so tagged.

As regards Hezbollah and Hamas, what makes it wrong for anyone that sympathizes with their problems to support them in kind or in cash and makes it right for anyone that sympathizes with Israel to support it in kind and in cash as the US is doing?

chidichris:
since you are saying we are blind with western press, have you taken your time to read about iranian press.
the longest period i saty without going to iran is 3 months and i do discuss with iranians on on one, please believe me, they are in real bondage.
if we must call a spade a spade, one even in his deep sleep will rightly mention bad leaders all over the world based on eternal and external policies of such countries.
if you must know good leaders, trace how they come to power.
afam, if you are a reightous man, did you in your reightousness condem the call for the destruction of isreal by tehran? no instead you praised him as your role model.

You have no business talking about righteousness here, why claim to stick to the truth when in reality bias, religious bigotry, sentiments and veiled hatred are part of what you put down here?

chidichris:
the bible said, those who leave by sword will die by sword and the words are yes and amen so for all that leave by sword will end up by sword.
9/11, subway bombing in britain, embassy bombings here and there killing of innocent citizens are all worthy of your praises while arrest and release ends your condeminations.
i still wonder what a man sees in leftists as leaders like obasanjo and iranian president will always have our support mr.afam.
please make out time on your own and read what iranians outside iran are saying about their own president. the man have diverted much of the country's revenues in sponsoring militants and extremists and it may please you that they economy is going down on daily bases to the extent they are owing egypt heavily as allow egypt ownership of sugar companies in iran.
i hope u also know that your hero lost many seats and positions in his first ever organised public elections of which you and him knows how popular he is in his home ground.
even your obasanjo knows that in an open field, he will win no elections and that is why he will always force candidates to withdraw willingly or face efcc.

Get your information right about the elections in Iran that some candidates lost.

If you have something against OBJ, state it and stop confusing issues.

nigeria1:
The first law I was told in Engineering was called the law of never assume. This law state that you never assume anything without a prove.

Come oo, where did you get this law from? Who told you? What branch of Engineering?

belloti:
You can call Buhari all sort of names but the bottomline is you want yaradua just because you see him as OBJ stooge and by implication a continuation of the agenda. We are the people that knows yaradua very well and we are giving you a hint of his incompetence but all you are saying yes we know buhari is not corrupt but we still don't like him for reasons best known to us. Its all foolish sentiments that wont take you anywhere.

Well, if you know Yar'adua very well why don't you share with Nigerians his incompetences so that we too will know.

So far, all the negative comments I have been hearing about him is that he was picked by OBJ and that he is not as healthy as a professional boxer.

I believe that we are our own worst enemy.

Buhari backdated a decree to execute 3 Nigerians, truncated a democratically elected government and yet he wants to get involved in something he does not believe in.

Still on Okotie, this man is the chairman of his political party and at the same time the presidential candidate of that party, abi hin never hear of organisation/division of labour before?

How can one person run everything just like his church that does not have/entertain branches?

Yar'adua must be very very good for even his opponents not to have any negative thing to say about him apart from crying about OBJ recommending him and that he may not be as fit as a boxer as if say na fighting competition hin wan enter.

Atiku's latest comment is a threat to national security and I wonder if he ever consulted with people with brains before making such a statement. Seems he finally shot himself this time around.

software:
I think so too. please how can i post a new topic on nairaland? Thanks everybody

There is a New Topic link on every section of this forum. You won't see the link while reading or replying a particular thread.

Orikinla:
Personally, I don't want any Hausa, Yoruba or Igbo to become President.
I want a credible leader from the South-South.

Sounds more like the tribal/ethnic sentiments that seems to be dividing the country more than uniting it.

I had thought the present generation were more interested in meritocracy.

Our journey as a nation still far be dat.

Orikinla,

The issue of rotational presidency or power shift is something that must be looked into with all sense of seriousness even though to me they are not democratic principles, yet ignoring them or wishing them away will not make sense.

The idea of hoping to see another southern president emerge for a possible 8 years is something I believe won't happen.

It is all about being a realist and not just basing my discussion on theory or idealism.

Enjoy. With time we shall get there but for now, we must all work towards building a united Nigeria.

It seems he will self destruct soon with is many unguarded and inciteful statements that could be easily translated to mean threat to national security and which will be enough reason to try him and jail him, I hope he has a good adviser somewhere.

Interestingly, he is now working against the younger brother of his political god father, the same man that gave him the backbone PDM in the PDP.  

Interesting times lie ahead for Atiku.

Do you imagine a Southern presidential candidate winning the next election considering the current clamour for power shift or rotational presidency?

Based on this, I think it will be too simplistic to be paying to much attention to the presidential candidates from the south at this point in time.

Orinkinla,

Who are the others and what are the parties?

I do not believe in change for the sake of it.

Unless there are alternatives that are better than what the PDP is doing today I prefer a Nigeria under the PDP than one with unpredictable consequences and expectations, we have gambled enough with our future in this country already.

If PDP is voted out of power which party do you suggest should be voted in?

Do we really have alternatives that we can trust based on promises or past projects?

Do not also forget that the majority of the candidates in the other parties will readily dump their parties if they are given any opportunity to become the flag bearers of the PDP in any elective post.

I share the same sentiments, I feel the only thing separating Atiku from a well deserved place at Kirikiri is the immunity he enjoys.

On the selective nature of the fight against corruption, you cannot fight on all fronts and it will be suicidal for anyone to start or concentrate such fight on friends and relations when you have both real and perceived enemies involved in corruption.

kaecy5:
since when did isreal metamorphosed to a football club??

chelsea for life

Chelsea ke? Why not Arsenal? A team that plays the most beautiful football, a team that sometimes make the opponents clap for them even on the field of play.

Leave those body builders in Chelsea and support a team worth supporting, GUNNER for LIFE.

@Kaecy5,

I dey jare, how body?

Just saw on CNN where the latest ratings from about 5 channels returned between 25% and 35% for Bush and it seemed to be a small improvement.

Mariory seems to be taking things easy as it seems we almost always agree on OBJ and the present government but when it comes to US or Israel he rushes to his arsenal.

David? He may be taking a more serious approach to his studies I think, makes sense for him sha as even the aides of Bush are having a tough time explaining the president's many blunders.

Even with democracy alive and well in the US, the president has been getting very low approval rating for more than 2 years now and recently is even going against the position of the senate, the Iraqi Study group recommendation etc to send more troops to Iraq and asking for the people of US to give the new but ineffective strategy a chance (that should be the 10th or 11th chance based on the number of blunders anyway).

By all standards, can we say that democracy makes sense when the people being led oppose the president yet the president does what he wants as if he is a dictator (at least he once stated that dictatorship would be a whole lot easier).

Which is better, a democratically elected president like Bush that is largely unpopular even in his own country (getting support mainly from Nigerians living in the US blindly supporting him) or a democratically elected government in Palestine (the Hamas) that is largely supported by the people of Palestine but is having problems because the West led by the US and its ally Israel don't like them?

I take God beg you, you dream about Afam last night? This is the 4th abi 5th post I am opening today with Afam as the target.

Advice, learn to do what I do, ignore posts you do not agree with unless you value the position of the poster on any issues you take interest in.

I hardly take your posts serious because they do not make logical sense. It seems you are hurt or something like that. If you know where you baf, go there go look for your towel abeg.

It seems the number of people that lose sleep over Afam's positions is growing by the day. I need a glass of cold water abeg.

Simple advice, face the issues squarely and focus less on personalities as they say lesser minds prefer to discuss people.

chidichris,

I will respond to your questions when you begin to organize your thoughts properly as doing otherwise will be a waste of time.

It seems what Afam thinks on issues you take interest in matters so much to you.

@Buluti,

I agree with you, ignoring me may be the best for you because you cannot stand people replying to you in kind.

You make derogatory remarks and when necessary you mask them and post them as veiled insults, on the other hand I leave no room for guesswork, I respond directly to individual post and try to throw back as much as I catch.

Some people are bold enough to say their minds while others prefer generalizing all in the name of playing games with words.

On your lecture on statistics and error margin, as Ishmeal asked you, could you tell the forum what error margin to apply on the NPC result? All these open ended statements do not add up, you seem to be siding every position on this issue and such inconsistency does not make sense.

The census result may not be exact (as a matter of fact it is an estimate) but I have not seen any reasonable statement to discard it totally, what is so difficult to understand in the statement above.

When I ask you to organise your thoughts before putting them down you will think I am abusing you but in reality you need to do just that.

I have never stated that holding americans hostage in the US embassy in Iran was not a crime even though Iran can justify the action (whether right or wrong) because the ultimate sovereignty reigns with Iran as the US embassy is on Iranian soil.

On the subject of this thread, it is wrong and unjustifiable for US (not the host country) to raid and arrest Iranian diplomats in another country Iraq under whatever reasons.

Now, if the statements above don't make sense to you then ask your friends as I will not waste my time responding to your ill thought out comments just as I have ignored your last post on Tehran.

And all well meaning Nigerians would ordinarily be happy about this development but as usual many will be more interested in saying that OBJ is using it to fight his enemies.

If the only good thing that OBJ can do in his lifetime is to stop corrupt politicians from contesting the next election then Nigeria will be very grateful to him as we have had enough of these corrupt politicians that turn defenders of democracy the moment their dirty deals are exposed.