NNPC trudges on amid global headwinds

…stakeholders, others thumb up Kyari’s leadership style



Globally, the petroleum industry has witnessed an unprecedented low turn in the last one year. This period has seen the reduction in production and very low oil price.


In Nigeria, it was a period of drama, trauma and some level of success. Incidentally, this is the period Mr Mele Kyari, the 19th Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), has been holding sway, having assumed office on July 7, 2019.


Unlike his predecessors that enjoyed a fairly stable business climate, Kyari had barely settled down when oil-reliant nations began purging as a result of the toxic economic situation caused by the COVID-19 pandemic and other calamities that trailed it.


The unprecedented oil crash aside, Kyari, on assumption of duties, also met unending litigation/dispute, sub-optimal and very high production cost, prostrate refineries, stranded capital projects and hostilities in the oil producing communities.


Rather than ride on these excuses to under-perform, the NNPC helmsman rolled up his sleeves and quickly implemented an in-house strategic plan, hinged on cost-cutting measures and automation, that gradually pulled the hitherto sinking NNPC ship from troubled waters and set it on a progressive course.


Fortified with many years of experience, Kyari is hardly incapacitated by the volatility and shocks that periodically upset the global oil industry. A geologist by profession, he was until his elevation as the NNPC GMD, the Group General Manager, Crude Oil Marketing Division from 2015 to 2019. At his inauguration, Kyari promised to run a transparent national oil company that can be scrutinised by Nigerians.


To this end, one of the major things he has done as the NNPC GMD was the scrapping fuel subsidy in April, setting the stage for full deregulation.


According to him, it made no economic sense spending billions of dollars annually to keep the price of petrol artificially low; rather than allow market forces determine the price, so the huge funds hitherto channeled into opaque subsidy payouts can take care of other critical issues requiring government funding. Stakeholders hailed him for the move and timing, saying it was done when oil demand was very low.


Automation While the rampaging COVID-19 pestilence shuttered economies and disrupted global supply chains, Kyari insisted that surrendering to the pandemic was never an option. Part of the success strategies was the automation of NNPC’s operations to align with global trends. He said in a recent tweet: “Today, we do 80-90% of our business through automation.


This company is changing for the better and it will remain an entity that all Nigerians will be proud of. “What we are doing differently about the refineries is to rehabilitate them first and then get them to be run, just like the NLNG Model, where the NNPC Group will be a minority partner. “Our long term goal is to be an integrated energy company that is commercially focused and wholly committed to deriving value for the benefit of its shareholders.


“The NNPC is leveraging technology and innovation to achieve the goal of building an energy company of global excellence. We call on stakeholders to collaborate with the corporation in an atmosphere that is beneficial to all and emplaces Nigeria on the path of growth and development”, he added.


Kyari, in an interface with the Nigeria Guild of Editors (NGE) revealed that the NNPC has prioritised low-cost oil production and taken additional measures to ensure cost discipline across its operations, including renegotiation of contracts and other business obligations, thus saving 40% of proposed budget and cost “We have rolled out strategy to achieve sub 10$/bbl UOC without jeopardizing growth”, he said.


Production target


The NNPC boss, in recent media engagements, said the Corporation targets increasing oil production from 2.3 million barrels per day to three million bpd and at the same time, working with partners to significantly reduce cost per barrel in order to improve the flow of the needed revenue to support economic diversification.


Kyari canvases the need for hard work and commitment to diversify the Nigerian economy away from over-dependence on oil revenues; in order to avoid the risk of market fluctuations that may impact the nation’s fiscal equation. He affirmed that the Buhari administration has made it a priority to ensure revenues from oil and gas resources are utilized to support the emergence and growth of other non-oil sectors of the economy.


“In order to achieve this objective, it means more money will be required from the oil and gas to fund new economic projects outside the Oil and Gas Industry. “The NNPC has been repositioned to support the vision of Mr. President for economic diversification.


NNPC targets increasing oil production from 2.3million barrels per day to 3million bpd and at the same time working with partners to significantly reduce cost per barrel in order to improve the flow of the needed revenue to support economic diversification. “The NNPC is encouraging private investors to join the train that traverses the oil and gas value chain to create more value and job opportunities for the nation’s teaming youths.


Nigeria is still a net importer of petroleum products due to the current state of NNPC refineries and the long absence of private investment in the refining sector. “We are inviting investors to key into the revamp and expansion of domestic refining capacity in order to support the growth of the Downstream sector and guaranty energy security for the nation.


“We are progressing with the establishment of condensate refineries to fast-track domestic supply of petroleum products. In the same vein, the corporation would support the actualization of the 650Kbbl/day Dangote Refinery, as well as other private initiatives along this line. Our plan is for Nigeria to become a net exporter of petroleum products by 2023.

Publishing audited accounts


On June 12, Kyari, made history. For the first time in NNPC’s 43 years of existence, it released its audited annual reports and financial statements for the year ended December 31, 2018. It encapsulated the performance of 20 of its subsidiary companies operating within and outside Nigeria.


The companies covered in the reports included the Nigerian Petroleum Development Company (NPDC), Warri Refining & Petrochemical Company Limited (WRPC), Port Harcourt Refining Company Limited (PHRC), Kaduna Refining & Petrochemical Company (KRPC), and Integrated Data Services Limited (IDSL), Nigerian Products and Marketing Company Limited (NPMC), Nigerian Pipelines and Storage Company (NPSC).


Others were the National Engineering & Technical Company Limited (NETCO), Nigerian Gas and Marketing Company Limited (NGMC), Duke Oil Services (UK) Limited, Duke Global Energy Investment Limited, Duke Oil Incorporated, NNPC Retail Limited, National Petroleum Investments Management Services (NAPIMS),


The Wheel Insurance, NIDAS Shipping Services, NIDAS UK Agency, and NIDAS Marine. Summarily, the report showed that its subsidiaries recorded a total revenue of N5.04 trillion with a profit of N1.01 trillion. The report did not also mask the losses the group recorded. It showed that all the refineries recorded poor results, with Kaduna Refinery and Petrochemical



Limited posting the worst performance, with an accumulated loss of over N423.43 billion compared to over N359.093 billion in 2017.


Apart from an operating loss of about N64.55 billion, Kaduna refinery reported administrative expenses of about N64.68 billion during the year, down from about N114.347 billion in 2017. The bulk of the losses were attributed to direct operational costs, despite that none of the four refineries in the country has been functional for years.


Applause came for Kyari because the move was a radical departure from old norms as the national oil company hitherto published only its unaudited operational statements. Industry watchers hailed the NNPC GMD for his audacious transparency stance that led to the release of the audited results.


The Executive Secretary, Nigeria Extractive Industries Transparency Initiative (NEITI), Mr Waziri Adio described the development as very good for the country’s image locally and internationally. He said, “Having such disclosures is good for transparency and accountability. I congratulate Mele Kyari and his team and urge them to make this a regular practice and in open data format.”


Hydrocarbon discovery Just like any CEO would clink glasses after a major feat, Kyari was elated in October 2019 when he announced the discovery of hydrocarbons in Kolmani River Well 2, in Bauchi, in the Upper Benue Trough, Gongola Basin. The drilling of the Kolmani River II Well was flagged-off by President Muhammadu Buhari on February 2, 2019.


NNPC acquired 435.54km2 of 3D Seismic Data over Kolmani prospect in the Upper Benue Trough, Gongola Basin. It was to evaluate Shell Nigeria Exploration and Production Company Kolmani River 1 Well Discovery of 33 BCF and explore deeper levels. The well was drilled with “IKENGA RIG 101” to a total depth of 13,701feet encountering oil and gas in several levels.


Another achievement under Kyari’s watch was the successful signing of Innovation Agreement with Nigerian Agip Oil Company (NAOC) to formalise the transfer of OMLs 60, 61 and 63 to the Nigerian Petroleum Development Company (NPDC). The GMD also launched the banners of the Corporation’s downstream Company, the NNPC Retail Limited, with a view to positioning the company as a market leader in the products distribution subsector in the country.



Under Kyari’s watch, NNPC attained over two billion litres of premium motor spirit reserve and completed phase one of Port Harcourt refinery rehabilitation. Kyari, at a recent stakeholder engagement said it was very difficult to explain why Nigeria, an oil-producing country would become a net importer of petroleum products. “The reason is simple: we could not fix our refineries and that is very difficult to explain. Why can’t we fix our refineries?


We started this very many years ago. However, all attempts to fix our refineries failed for very simple reasons and that was a strategy problem and we’re tackling that”.


Continued on www.Newtelegraphng.com


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