Oil theft
Business Feature

Oil Theft: FG won’t relent in chasing people with dubious sources of wealth –Kyari

The Chief Executive Officer of the Nigerian National Petroleum Company Limited, (NNPCL) Mele Kyari, in a recent interaction with the media in Abuja, said the government was on the trail of oil thieves. He stated that those persons with inexplicable sources of wealth are now under the watch of the Economic and Financial Crimes Commission (EFCC) even as he debunked the insinuation that some staff of the company collaborate with thieves to facilitate the stealing of crude. LAWRENCE OLAOYE was there. Excerpts:

 

You said you’re borrowing for the rehabilitation of refineries. How much are we borrowing? From where and when will the repairs be completed so that Nigeria can stop oil importation?

 

We’re borrowing from the Afreximbank and we’re also borrowing a billion dollars for this purpose. On when importation of fuel will stop, first, let me answer the issue around stoppage of importation of petroleum products. Even if all our four refineries in three locations, by the way, I’m sure you’re aware that in Port Harcourt there are two refineries, operating at 90 per cent of installed capacity.

 

They will only be able to raise 18 million litres of Petroleum Motor Spirit. That means even if all of them are working today, you will still have a net deficit of PMS imported to this country.

This is what it means because our population has grown, demand has grown, the middle class has grown. I’m sure everybody here owns one or two cars and so on and so forth, such that the volume of petroleum motor spirit required in this country has grown almost exponentially because there is clearly an exponential growth to our needs for petroleum motors spirit.

 

So, even if they all come back, we will not stop importation of petroleum products. But happily, also NNPC owns 20 per cent equity in the Dangote refinery. We’re not only owning 20 per cent equity, we have the first right of refusal to supply crude oil to that plant. But we saw this energy transition challenge coming.

We knew that time will come when you will look for people who will buy your crude and you will not find and that means that we have locked down the ability to sell crude oil for 330,000 barrels minimum by rights for the next 20 years. By right also, we have access to 20 per cent of the production from that plant. That means that whatever it does, you know we have a right to take 20 per cent of that production as part of our equity.

 

And this refinery, if it does come up, and it will come up because we are on the board of that company and we know what is happening now, that it will come on stream latest by the mid of next year.

 

Projection is the first quarter but we think that it can come up latest by the mid of next year. If it does, this refinery alone, because it has  a 650,000 per barrel capacity and a different technology which means that it can crack the crude in a manner that you can have more gasoline than a typical refinery.

 

That means that that refinery has the ability to produce up to 50 million litres of PMS. So, the combination of that and our own ability to bring back our refineries will completely eliminate any importation of petroleum products into this country next year.

As a matter of fact, when we’re done with our refineries and the Dangote refinery, then the small initiatives that we are doing, small modular condenser refineries that we’re building, if that happens, and we’re very optimistic it will happen. You will see that this country will now be a net exporter; it will be a hub of export of petroleum products, not just the West African sub region, but to the rest of the world.

The efforts you are making to construct the Saharan pipeline is impressive. But why are you able to do that yet you are unable to reconstruct the vandalized pipelines that transport products to all parts of the country?

I said that we are building every one of them concurrently. We’re not leaving any one of them. And as you’re aware, gas is the next transition fuel globally. It is where your money will come from. You will be stranded with your oil in another 30 years but you won’t be stranded with gas even in 50 years to come.

 

That’s why we’re building those infrastructures to make sure that Nigerians of tomorrow will be able to benefit from these resources today. As I mentioned, we’re doing a Build, Operate and Transfer Programme for the pipeline networks and we’re replacing them. So, I’ve not abandoned them.

 

Some people have said that commercializing the NNPC is a step in the right direction but it is only half baked until the shares of the NNPC are listed on the Nigerian Stock Market. How soon will that happen?

On how soon shares will be listed, for you to list shares, you must be IPO ready. It means that you must have systems and processes; you must have governance; you must have assets. You must have the correct and indisputable valuation that you are the potential buyers we will see; the stock exchange will demand for all these. And ultimately you can now list your shares.

 

And that is why I said earlier that we will be IPO ready by the middle of next year. It means that we’ll have systems, processes, policies, governance, assets that we can show valuations that are reliable that people can test as you already have today, and also did the right kind of governance structure and also risk management systems.

 

These are basic requirements of IPOs and all these will be ready by the middle of next year. And at the choice of its shareholders that it can be listed at any time because the law, Section 54 of the PIB, clearly said that you can dilute the interest of this company by shareholders. The shareholders are the 200 million Nigerians represented in today’s context by the Ministry of Petroleum, incorporated by the Ministry of Finance, very understandable.

 

Many Nigerians are unable to reconcile the fact that NNPCL is now an independent company. But with its board appointed by the government, can we have clarity on that?  NNPC says it would now make remittances to FAAC through royalties and dividends. But the defunct NNPC owes several billions in remittances to FAAC. Will these outstanding remittances be accommodated in the new arrangements in the form of your planned remittances and royalties and dividends?

Why would the board be appointed by the government? Board of companies are always appointed by shareholders. Shareholders are always represented. This is typical. If anyone here owns a company just go and try to incorporate your company.

They will tell you that you will have some shareholders. Those shareholders will appoint the board of those companies. In today’s context, Ministry of Petroleum incorporated by the Ministry of Finance, is holding in trust for the Federation, but they cannot do anything except the shareholders of record as we put it, the 200 million Nigerians say so, and that is why the PIA, provided the leverage of the National Economic Council to have a say in this process.

 

And therefore, by law, it is required that Mr. President appoints the board of these companies, on behalf of all of us, so that whenever you dilute interest, even if it is 10 per cent interest in these companies, that right for government appointments vanishes automatically. So, it now becomes a matter for the shareholders, which includes the private owners of this company to do.

 

So, this will come but not today. We are transmitting. But as soon as you hear  we’re ready for IPO, it’s all over. The board will be appointed by shareholders, which will include private equity holders.

On remittances to FAAC in the historical NNPC, to the best of our knowledge, we have reconciled our position with FAAC. We have no liabilities that we’re carrying forward to this new company and as a matter of fact, NNPC is not remitting any money to the Federation account.

 

That is very correct. But what is also never mentioned is that we are providing petroleum motor spirit to this country, as a matter of a commercial relationship between us and this federation.

That we are paying market price for petroleum motor spirit as we all know. We all know that AGO price is not always far from PMS price and you know what the price of PMS is.

 

So, whenever you do this, and you sell at some market price and once there’s no direct payments to any company, then the only way we can recover that cost is for us to hold back our fiscal obligations, which is taxes and royalties, so that we can use it to bridge that payment that we’re doing on behalf of all of us as a matter of our responsibility and as a matter of law.

The appropriation Act, clearly provided for subsidy on PMS. The appropriation Act is the Act of the National Assembly. That means it represents all of us and we’re merely executing the provisions of the law. And there’s no way you can do both of them. You cannot pay your fiscal responsibilities and also find money and pay for the PMS subsidies that we are all carrying on behalf of all of us.

As a matter of fact, the level of subsidy that we’re seeing because of the price differential versus the revenue that we’re able to generate, which is associated with some of the crude oil theft that I have mentioned to you, is no longer practical for our fiscal responsibility to even cover those costs, but we are managing it.

 

We’re here also by law. We are required to ensure energy security for our country. And we will do everything possible, and we have no fears around this and will continue to serve this country as a company.

Is there a timeline for the creation of the National Reserve Company and how much are you looking at for the contract?

On the National Reserve Company, every country in the world has a National Reserve Company but in a different manner. And there are very many ways of doing this. One is to require petroleum product marketing companies to maintain minimum reserves in their depots on behalf of the state. Of course, that means there’s a holding cost and the government will be ready to pay for that.

The second way is for the government to directly procure those products and keep them somewhere and that is why you have the network of the pipeline that we have and the depots that we have. The main intention is first to bring a product close to its consumers, and secondly to maintain them at national reserve locations.

So, we’ll bring back the pipeline so that these depots will serve that purpose. We have built another reserve facility in Atlas Cove and it is due for commissioning. We have completed it. And the end result is that you will now have a network of pipelines and depots that will now manage the National Reserves on behalf of all of us. It is typically a government responsibility.

It can be outsourced to private companies and it can also be done by an agency of government. In some countries, the military maintains the national strategic reserve of petroleum products.

This is not the situation we are dealing with currently. We’ve established the National Reserve Company, which will manage on behalf of the state and we’ll defer to any decision the state will not make in the interim.

There is no contrary view around how else we can do it. You made mention that the refineries are now being rehabilitated. But recently, there was a report that the staff of those refineries were paid N136 billion in salaries and allowances. What is the wisdom behind it when there is no production taking place?

 

This question has been raised severally in many fora and in the National Assembly. There are two options. When you have a refinery that is not working, typically what you do is that you prune them down; break that into crates and then ask everybody to go and they have security men to watch it.

 

Otherwise, the second option you have is to keep them as we’re doing.

You continue to lubricate the parts that you must lubricate, test run some of the parts that you have to test run. Otherwise, the day you want it, it won’t work. So, it is the second option we are doing. We have to keep it. We’re not ready to bring them down into pieces.

Typically, when you bring them down into crates, you will never want to bring them back. But we know that we will bring them back.

We know that we’re working on them. And that means that you are keeping personnel to continue to do those activities. And more than anything, the other implication is that, in fact, everybody has to be sincere so that you can stop the salaries.

And this also is a matter that has gone to the National Assembly and the informed position that we have, even by the clear wisdom of the National Assembly is that we can’t do this at this point in time.

And that’s why we’re paying the salaries. But what we have also done to minimise that, we have moved around many of the staff to locations where they will be put to work.

 

And we’ll continue to do this as we know that ultimately, the refineries will now be run on an O and M basis. So we’ll have no need for this cost as we go forward; it will continue to diminish.

There are retirements  that are happening as a result of age and very many other considerations and the numbers are coming down by virtue of statutory requirements.

 

Every year when the budget is being prepared, you have what they call the excess crude based on the fact that the National Assembly will have their own benchmark. The Federal Government will also have their own benchmark. How will this arrangement affect the new NNPC?

Still on excess crude, other countries have Sovereign Wealth Funds and are saving for the rainy day and we know that, we are going to exhaust this product one day. How will this affect the Sovereign Wealth Fund Account?

 

The Excess Crude Account, as you may be aware, is the difference between the budgeted sum and then the available resources, which sometimes because of price changes, is the Federal Ministry of Finance activity and not the NNPC activity. Our obligation is to deliver those resources to the Federation Account and they will do this. What is also different by law now, which connects to the question asked around PIA, is that the law provides that whenever there is a royalty on price, which means that that excess value that is delivered, it goes into the Sovereign Wealth Fund.

The sovereign wealth fund by law also can be funded either by the Excess Crude Account or by any means that the National Economic Council decides to fund it. So, there is no limitation as to how the Sovereign Wealth Fund can be funded. But there’s a clear provision in the PIA that says that a certain amount of money must go directly to the Sovereign Wealth Fund.

That was not there before.

 

The PIA is a law and one of the things it says is that we cannot be paying subsidies on petroleum products. But we are still doing it. Does it mean the PIA is in suspension or can we be executing the law piecemeal?

 

Yes, PIA is very clear. The petroleum products will be priced at the market. But the PIA did not exclude any intervention from the government. Government can decide to give any form of relief to its citizens.

And that is why the appropriation Act of 2022 clearly provided for this and we’re simply implementing this. So, it’s not in conflict with the PIA. It is called end-to-end, from the producing companies, NNPC personnel, members of the community, every cadre of people you can think of, from the elite in the community, everybody has some involvement.

Are they doing it on behalf of the institutions?

Absolutely not.

There are criminals everywhere and there are also good people everywhere. Majority of my workers are good people but I’m not saying there are no bad people in NNPC and there are some of the people that I told you will be part of the people that we will deal with and we will take them out. On the volume of crude oil,

On the comment by the Chief of Staff where he made statements around the volume of crude oil. Let us distinguish issues. When we said we are losing several 700,000 barrels per day of crude oil. We meant it. It is an opportunity lost. There is no company that will produce oil and then you lose 80 per cent of that and continue to produce the oil.

So, we deliberately shut down the pipeline whenever we see these infractions getting to a limit that we cannot control, that are not possible to be managed. So, as we speak today, we know for sure there are at least 700,000 barrels per day locked-in that we could have produced that we can’t do because we cannot guarantee the safety of the pipeline.

Needless to say that not 100 per cent of that is due to theft. There are technical issues that we are responding to but majority of this is associated with reasons around crude oil theft.

 

Now when you say how much of it is stolen, and I’ve seen the statistics, it is impossible to have barges stealing 200,000 barrels per day. I agree with the Chief of Naval Staff, you need thousands of barges to do this.

But don’t forget also that we have seen lines connected and I’ve shown you during my presentation, the site of the pipeline itself running for three to four kilometres.

 

So, when this happens, which I have also accepted, that enormous work has been done by the Navy and they have contained the marine activity but this is the reality. This vessel was arrested by the Navy carrying crude oil. So, if you can do this, we believe very strongly that up to 200,000 barrels of oil is stolen but not in barges.

 

Is there hope really that Nigeria will win this war against crude oil theft?

Because there are reports that people behind these are people who are highly influential in society and one wonders if you’re putting up these kinds of efforts to address this and these people are fighting back.

What would be the repercussions? Please if you know them, let us know. I can tell you they will not sleep in their houses today. I can tell you that no one is exempted. If it is me, I will not sleep in my house today.

So no one is exempted. That is why I said that the EFCC is now following the cash. People who go and build houses without income, people who build skyscrapers without any legitimate business, people who buy cars that they know that everybody knows that they can’t afford, lifestyle changes that you can’t explain. All these things are being followed and we know that the law will catch up with all these people and they will be disclosed and prosecuted

 

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