Kyari: Getting It Right At NNPCL

On Monday, Nigerians woke up to an article published in one of the national newspapers (NOT THE WHISTLER) that the Nigerian National Petroleum Company Limited needs “housecleaning to compete with it’s peers”

The writer of the article had called on President Bola Tinubu to extend his house cleaning of the Central of Nigeria to the Nigerian National Petroleum Company Limited due to the writers’s claim that the NNPCL has not been profitable in line with it’s peers such as Saudi Aramco.

The writer in his analysis served readers with old allegations against the NNPC about unremitted revenue, non-payment of dividend, inability to fix the refineries, low investments in the oil and gas sector as well as low oil production.

It is unfortunate that in the entire article, the writer deliberately refused to acknowledge the vigorous and groundbreaking reforms at the NNPC since Mele Kyari was first appointed as the Group Managing Director of the oil company in July 2019.

That the writer could ignore the well documented progress at the NNPCL under the visionary leadership of the now Group Chief Executive Officer, Mele Kyari is a confirmation that he is really not in touch with the giant strides being achieved by the NNPC Boss since he took over in 2019.

Let’s take the issues one after the other.

Unprecedented growth in Profitability:

On July 7, 2019 when Kyari assumed the position of Group Managing Director of the now-defunct Nigerian National Petroleum Corporation (NNPC), the corporation was in a near comatose state. It was laced with many challenges ranging from grievous oil pipeline vandalism, corruption, incessant oil thefts, low production levels and lack of transparency.

For instance, a 2010 joint report by Transparency International and Revenue Watch Institute found that NNPC had the poorest transparency record out of 44 national and international energy companies examined.

These scenarios fundamentally put Kyari on the spot. Kyari’s appointment which, however, came as a game-changer was with a clear mission – to revitalize the struggling corporation which it was known for then and send an unequivocal message that the corporation’s lukewarm governance narratives of the past are gone for good.

There was a lot of mess to clear, but Kyari was ready and he came in with his sleeves rolled up and expectedly, he didn’t disappoint.

Within days of his appointment, Kyari unveiled his “Roadmap to Global Excellence” anchored on the TAPE Agenda. TAPE represents Transparency, Accountability and Performance Excellence—concepts that were hitherto unknown in the company. He led NNPC from a loss-making company to a profitable one in the year 2020 when, for the first time in its 44 years history, NNPC declared a profit after tax of N287bn. This went up to N674bn Profit After Tax in 2021.

With a vision boldly anchored on the principle of Transparency, Accountability, Performance and Excellence (TAPE), Kyari, under the defunct NNPC, demonstrated a fundamental grasp of what fossil energy means and the imperative of effective governance of the giant national oil company.

In June 2020, for the first time in 43 years, the Kyari-led NNPC released the 2018 Audited Financial Statements, and subsequently 2019, to the public for scrutiny, earning plaudits for the corporation from members of the public.

Significantly, in August 2021, the NNPC declared a N287bn Profit After Tax (PAT) for 2020, for the first time in 44 years. Kyari’s magic wand played out as the corporation reduced its losses from N803bn in 2018 to N1.7bn in 2019, and the eventual declaration of a net profit in 2020. By fiscal 2021, the corporation’s profit grew to a profit level of N674bn. Until this period, NNPC has been a loss-making entity, renowned for anomalies, undue political interference, and shades of burden.

Amidst the challenging operating environment which tested the resilience of institutions and businesses globally, the NNPCL weathered the storm by posting the N674.1bn profit in the 2021 financial period.

In spite of a tough and volatile operating environment, the NNPC Group’s investment strategy under the leadership of Kyari proved resilient and enabled the National Oil Company to deliver favourable outcomes as shown by the 2021 financials.

The 2021 financial year made it the fourth consecutive years that the NNPCL will be making its Audited Financial Statement public. This was one of the innovations made by Kyari when he took over the helms of affairs of the National Oil Company.

In 2018 when the NNPC first made public its Audited Financial Statement, it made a loss of N803.9bn.

But with the reforms implemented by the NNPC Boss, the loss position was reversed in the 2020 financial period when the NNPC posted its first profit in 44 years of N287bn.

Since then, the Company has bounced back to reckoning with impressive financial performance of N674bn in 2021.

The rise in profit is mainly occasioned by significant increase in revenue and less proportionate increase in cost of sales resulting to 1,556.9 per cent increase in gross profit.

Rise In Crude Oil Production

Despite the numerous challenges that bedevilled the sector, Kyari grew crude oil production to an enviable level. As at June this year, the NNPCL crossed 1.6 million barrels per day of crude oil and condensate combined.

The war against crude oil thefts and illegal refineries, have led to significant spike in oil production which went up to 1.6 million barrels per day in June with a projection to hit 1.8 million per day.

In addition, according to the fourth quarter 2022 figures released, Nigeria has regained its position as the largest crude oil producer in Africa, ahead of Algeria’s 1.021 million barrels/day and Angola’s 1.088mb/d in November 2022.

With oil theft and pipeline vandalism overwhelming Nigeria’s oil business in recent weeks, the NNPC Ltd had adopted the Saudi Aramco’s model of using video surveillance to monitor its pipelines carrying crude oil from wells to flow stations in the Niger Delta.

The NNPCL in collaboration with security agencies have also put up a control centre to provide surveillance of all the country’s oil and gas assets in the Niger Delta.

The surveillance system is known as the Central Coordination, Data Integration and Activation Control Room. Just like the Saudi Aramco, the NNPC Data Control Centre uses video visibility to monitor the country’s Niger Delta pipeline networks, where more than 90 percent of the country’s crude is explored.

The NNPCL is also working with its business partners to make sure every data concerning Nigeria’s assets are visible through the centre to enable quick action during emergency.

Through the Data Control Centre, the NNPC has the capability to see and monitor the movement of vessels in the coast of Nigeria’s territorial waters in real time.

From the facility, officials of the NNPCL, working with operatives of the Nigerian Navy and other security agencies can determine, in real time, if a vessel is carrying out operations within Nigeria’s coastal waters legally.

The Data Centre also uses an intelligence system to detect when an incident of crude oil theft has occured, the location, and the vessels involved.

Immediately such illegal operation has been established, officials of the Centre, through it’s Incidents Reporting System will immediately escalate such threat to the security agencies for immediate action.

So far, over 22 million litres of stolen crude have been recovered through intelligence provided by the Data Centre.

Similarly, over 22 million litres of Diesel, 0.15 million litres of Premium Motor Spirit, and 0.76 million litres of kerosene have also been recovered from criminals.

Through the operation, many suspects have been arrested while vehicles, speed boats, wooden boats, trucks have been seized and destroyed.

Other items recovered are metal tanks, ovens, dugout pits, reservoirs and cooking pots have been destroyed.

Beyond arresting crude oil thieves and shutting down illegal refineries, the NNPCL under the leadership of Kyari is expanding the frontiers for crude oil production. One of the most impressive accomplishments of Kyari’s stewardship at NNPCL was the flag-off of the Kolmani Integrated Development Project in Bauchi State in November 2022, marking the commencement of effort to commercially exploit oil in the Northern part of Nigeria.

It was deemed as one of the most massive projects. The Kolmani Oil Field, estimated to have a reserve of about one billion barrels of crude oil, OPL 809 and 810, lies in the Gongola Basin of the Upper Benue Trough, straddling Bauchi and Gombe States.

The project has the capacity to transport two billion standard cubic feet of natural gas daily to power plants in Abuja, Kaduna, Kano, and various gas-based industries, boosting the nation’s socioeconomic growth.

Attracting Oil & Gas Investments

Arguably, the signing of the Petroleum Industry Act (PIA) in August 2021 by former President Muhammadu Buhari was however a major breakthrough for Kyari as it opened the door for more significant changes in the national oil giant.

It is noteworthy that Kyari worked tirelessly to ensure the passage of the PIA, an initiative which is aimed at overhauling the country’s energy laws and creating a deregulated environment, freeing the oil sector from government control and unbundling the oil company.

The passage of the PIA gave birth to the new, refreshed, and rejuvenated NNPCL.

The birth of the NNPCL in 2021 wound up the Nigerian National Petroleum Corporation, NNPC, after 46 years of operation.

The PIA empowered NNPCL to operate like every private company in Nigeria with exemption from the Fiscal Responsibility Act, Public Procurement Act and TSA in order to ensure there are no excuses for failure.

Following this milestone, Kyari, initiated new investment benchmarks to further rejuvenate the once ineffective company.

The NNPC after the acquisition, became the biggest downstream company in Africa.

In September last year, the NNPCL sealed the acquisition of OVH making it to add to its assets reception jetty (ASPM) with 240,000MT monthly capacity, 8 LPG Plants, 3 Lubes Blending Plants, 3 Aviation Depots, and 12 warehouses.

Also, Oando’s 380 fueling stations have been added to NNPC’s existing stations making it the largest in Africa.

Through the deal, NNPC will leverage on Oando’s coverage across Africa to become a leading energy company.

The acquisition, under the leadership of the GCEO of the NNPC Ltd, Mele Kyari, shows his vision to make NNPC a force in the global energy market.

Apart from this deal, the NNPCL under Kyari in June this year sealed another deal with four National Oil Companies on the $25bn Nigeria-Morocco Gas Pipeline Project

These tripartite MoUs were respectively and successively signed between the Nigerian National Petroleum Company Limited (NNPC) and the Office National des Hydrocarbures et des Mines (ONHYM) of Morocco on one hand, and the Société Nationale des Opérations Pétrolières of Cote d’Ivoire (PETROCI), the National Oil Company of Liberia (NOCAL), the Société Nationale des Hydrocarbures of Benin (SNH-Benin), and the Société Nationale des Pétroles of the Republic of Guinea (SONAP) on the other hand.

The Nigeria-Morocco Gas Pipeline (NMGP) Project is an initiative of the Federal Government of Nigeria and the Kingdom of Morocco and was conceived during the visit of King Mohammed VI of Morocco to Nigeria in December 2016.

The Pipeline Cooperation Agreement for the project was executed in 2017.

The pipeline length of the project is 5,300 kilometers from Nigeria-Dakhla (Morocco) and 1,700 kilometers (onshore) from Dakhla (Morocco)-Northern Morocco.

The pipeline capacity for the project is 30BCM per year which is equivalent to 3.0 BSCFD

Already, MoUs have been executed for the project with ECOWAS, SMH of Mauritania and Petrosen of Senegal.

Through the doggedness of Kyari, he ensured that the deal was consummated as the project is aimed at monetizing Nigeria’s abundant natural gas resources, thereby generating additional revenue for the Country, diversification of Nigeria’s gas export routes, and elimination of gas flaring.

The project will also assist in supplying gas to Morocco, 13 ECOWAS Countries and Europe, integration of the economies of the Sub-region, improvement of living standards of people within the Sub-region, creation of wealth and poverty alleviation, assisting in the fight against the desertification through sustainable and reliable gas supply as well as providing avenue for other Countries along the pipeline route to develop and export their gas.

Once completed, the project will enhance the monetization of the natural gas resources of the affected African countries and also offer a new alternative export route to Europe.

The pact marks another important milestone in the quest to tackle the energy poverty that has been limiting the potential of the African continent to boost industrialisation.

As a commercial enterprise, the NNPC Ltd under Kyari sees this project as an opportunity to monetize Nigeria’s abundant hydrocarbon resources, by expanding access to energy to support economic growth, industrialization, and job creation across the African continent and beyond.

The footprints of Kyari in the oil and gas sector was also felt just last week as the NNPCL secured $7bn fresh investments from India for Nigeria’s petrochemical industry.

Kyari had accompanied Group President Bola Tinubu to India were the deal was announced

Tinubu had departed Abuja, Nigeria’s capital, for the G20 summit which was held from September 9 to 10 in New Delhi, the Indian capital.

The President’s visit to India was focused on attracting investments to Nigeria with lucrative opportunities for investors, but most importantly, jobs for Nigerians and new revenue opportunities for the country.

India is one of the growing markets for Nigeria’s Liquified Natural Gas and through this deal, the government will be able to create job opportunities for Nigerians.

Indian businesses serve as significant investments source in the midstream, downstream and upstream sectors of the oil and gas industry.

In the area of gas infrastructure, Kyari also led the NNPCL to achieve a $300 million reduction in the cost of the AKK Gas Pipeline contract via contract renegotiation from the initial $2.8 billion.

In December 2019, Kyari achieved the closeout of the Final Investment Decision of the multi-billion-dollar NLNG Train 7 Project that has been on the drawing board for over a decade. This was at a time that the Covid-19 was taking its toll on the global economy.

He also successfully renegotiated the Ajaokuta-Kaduna-Kano (AKK) Gas Pipeline contract. The AKK Gas Pipeline is an integral part of the Trans-Nigeria Gas Pipeline (TNGP) with a capacity to transport about 2.2 billion cubic feet of gas per day. The contract was renegotiated from the initial $2.8bin to $2.5bn, achieving cost savings of $300m in favour of the Nigerian government. Construction work on the project was flagged-off in June 2020.

He also led the signing of a $260m Financing Agreement for the Assa-North Ohaji South (ANOH) Gas Project with Seplat to deliver 300 million standard cubic feet of gas per day and 1,200 megawatts of electricity to the domestic market.

Financial intervention:

Those that say that the Nigerian economy has not been benefitting from NNPCL’s operations have obviously been living in denials. This is because just last month, the NNPCL secured a $3bn facility from Afreximbank to enable the Federal Government to stabilize the foreign exchange market and boost the value of the naira against the dollar.

The $3bn emergency loan from the Bank was to ease pressure on the naira.

The deal would provide the Federal Government with dollars to aid liquidity to stabilise the naira via incremental releases based on the government’s needs.

The funds for the loan will be released in stages or tranches based on the specific needs and requirements of the federal government.

A strengthened naira as a result of this initiative will lead to a reduction in fuel costs. This means that if the naira appreciates in value, the cost of fuel will drop and further increases will be halted.

A stronger naira will result in lower prices from the current level, making subsidies unnecessary. The deregulation policy remains unchanged.

The loan will be repaid against a fraction of proceeds from future crude oil production. It’s a strategic move that ensures a balance between our current economic needs and future production capabilities.

The $3 billion loan recently secured by NNPC from Afreximbank is not the first targeted financial intervention by the company.

In order to reposition NNPC for global competitiveness, Kyari and his team of technocrats had secured alternative project financing for several important projects including: $5bn corporate finance commitment from the Africa Export Import Bank to fund major investments in Nigeria’s Upstream sector; Alternative Financing and Technical Services package worth N875.75m for NPDC’s OML 65 in order to increase national production; Alternative Financing Package worth $3.15bn with Sterling Exploration and Energy Production Company Limited (SEEPCO) and other partners for the development of NPDC’s OML 13.

One can go on and on to highlight the remarkable impact Kyari’s leadership has brought to Nigeria’s oil and gas sector—successes which appeared to be well known to the president, and which is probably responsible for the president’s seeming confidence in Kyari’s leadership of the NNPCL.

Onuba, a Chartered Accountant wrote from Abuja.