With Just A Click, You Can Know How Much Crude Is Sold – Nigeria’s New OPEC Envoy

Malam Mele Kyari, Group General Manager, Crude Oil Marketing Division, in this interview with the NNPC Quarterly, provides a refreshing perspective on the operations of the division, strides being made and other sundry issues.

Can you throw light on how the Crude Marketing Division which you oversee works?

You have to understand that the assumption that all that we do in Crude Oil Marketing Division is selling of crude oil, it is not correct. In reality, what we do is that we run the business aspect of this corporation.

First, we have to secure the entitlements of the federation. That is the most critical aspect of our job. So we have to work with our partners, with NAPIMS, with the finance division to make sure that at the end of every morning we know how much volume the corporation will be entitled to, and that’s a very tedious process.

You have to know the cost of operation, who is producing what, what are the leakages that are in the system, how much progress and losses are there and so on. So, you have a clearly technical business part of this Division that deals with that so that at the end of the day we are able to have a landing, most especially in terms of commercial numbers, through technical considerations to tell us that this is the volume that is due to the corporation. This is the nature of our job.

We have clearly what we call the Crude Oil Stock Management Department that handles that and then they advise us on the amount of volume the federation is entitled to and from there you have to sell it. That means you have to select your customers through a transparent tender process then we now have a Shipping and Terminal Department that will advise us on whose turn it is to buy from us, who has the right to lift etc.

The Shipping and Terminals Division helps in determining the numbers. They handle the relationship between us and our terminal operators. They also determine if we have secured all the necessary clearances from all the regulatory agencies.

You now have another level of marine related activities that has to do with sorting out some of the fine details in this regard.

Now you come to the Commercial Department. First, they have to evaluate the cargo following the contract we have with the customer. They evaluate together with the customer so that at the end of the day we now relate with their banks on the amount of money that they are going to pay to the federation account etc.

After that the Finance department steps in to make sure that these statements are correct, that they are properly evaluated, and also that they are current with the necessary accounts and the date that it is due.

Then we report to the Federation Accounts Allocation Committee on monthly basis that this is how much we have sold, this is the volume that has come, this are the next position that we have taken, we are owing this gentleman or this gentleman is owing us and all these are completely captured by the Finance and Accounts in addition to their other obligations in the Division but this is the critical thing that they do.

On top of this, we have a Regulatory and Compliance Department which makes sure that everything I have told you from the Crude Oil Stock Management to the Shipping and Terminals to the Commercials and to the Finance Department are all within the laid down regulations of the Corporation and of the business and of the contracts that we have in place. We have a Legal Department which provides legal scrutiny and advice on all our contracts.

In addition to all the internal processes that I have highlighted, all our transactions are visible to the Central Bank of Nigeria, all the accounts that we operate are resident in the Central Bank of Nigeria.

Can you throw more light on the role of the Division in the operation of crude oil export terminals?

The Crude Oil Marketing Division has terminal representatives at all terminals and we witness every loading activity that takes place in this country. This is in addition to 11 other agencies of government and representatives of buyers and sellers. That means that for every loading that must take place you will need these 11 Institutions, including the NNPC to witness that transaction.

People don’t realize that the key to the lifting valve in every terminal is actually in the custody of the Department of Petroleum Resources, no terminal operator can lift a barrel without the DPR opening the valve for them and then if they do that it has to also be validated, the quantity scheduled and quantity loaded will have to be validated by the DPR and other executives of government before the person can sell it.

And also there is the system where every person that goes to the terminal has to clear with the Crude Oil Marketing Division and the terminal operator will give clearance to valid equity and entitlement. And it is practically impossible for anybody to come to the terminal and load without such clearances from all the stakeholders.

If you ask me, “is crude oil theft taking place?” Yes, absolutely. We know that it is going on and as a matter of fact, you will see a fraction in every crude oil delivery line to the terminal on routine basis. The Nigerian Navy, the Department of State Security, the terminal operator sometimes even engage in fights with vandals who carry out these activities . As at today, I’m aware that there are over 200 vessels that have been arrested by the Nigerian Navy and at various locations. So theft is going on but not at the terminal, we have done a number of things to ensure that it is not the current situation.

Again we are working with the Department of State Security to make sure that we can put another layer of control and delegation at the terminal in the very near future. This will help eliminate that feeling or any assumption that such activities could be taking place at the terminal and that is in addition to the other intervention activities we know that is going on now to curtail the state of criminal activities at the various lines.

There have been reforms in the Crude Oil Marketing Division, what are the gains of these?

First and foremost, in terms of stakeholder management, by the click of a button we can give any information our stakeholders ask for and that has not been the practice in the past because of the absence of full automation. There was some automation in our system but because we have now moved it to the next level we can respond to stakeholders request by the click of a button and that makes it easy for stakeholders to acknowledge that in every circumstance there is room for improvement so we are happy about that.

Secondly, it has made our procedures for delivering the value of the products very easy in such a way that we do not have delays or missing of product cargoes, delays in our delivery of crude oil cargoes, we have put checks and balances in such a way that we don’t have issues around pricing of our crude oil and at the end of the day every stakeholder knows the value of the crude and there are no arguments around whether or not it has selected the right pricing option or not and so on. There are so many things we have done that at the end, the result we have is that we have everybody aligned, from our buyers to those who buy from them, from our terminal operators to the Nigeria Ports Authority, everyone is involved.

Speaking of automation, what do you really mean?

When we say that we are automated, it means that from the beginning of the sales process, and that beginning starts with determining your entitlements, what is really the volume that is available to you? Then when you know that you also have to sell it to your customers that is also done on our platform after deciding which customer gets the allocation, those steps are done online and from there how do they pay for it, etc.

The price rate is automated so that at the end of the day we have completely eliminated human intervention in these processes in such a way that you know that the number you receive is actually the number that anyone cannot manipulate.

One can see that there is greater transparency now. But can you paint the scenario before the option of open public bid for annual crude term contract?

The difference is that major stakeholders were not involved in the bid process. Yes, the bids did take place but it was not open to the public and it is very understandable at that point in time, you know the requirements were not as stringent like we have today.

The determination also of stakeholders to make sure that there is greater accountability and transparency was not as manifest as it is now. Altogether, that is not to say that there was no transparency, but the key issue is that there was third party intervention, the NGOs and so on, and they all want to know and everybody wants to see how transparently you are in running your business and we just responded to that. That is not to say that it was all wrong in the past but there is now a greater need for inclusion of stakeholders in our processes and that is why we usually have the bid open to all.

What has been the lesson so far from this openness?

The openness so far is demonstrated by two things: first the trust that it has created and you now see stakeholders who ordinarily don’t believe in our processes with major international upstream companies are now participating in our open bid process.

For us that is a signal of a greater acceptance of the accountability of our processes. A number of these companies now know what we are doing. For instance, this year we have 254 applicants, that is a lot higher than 224 or so we had in 2015. We see greater interest in the work we are doing so in that respect, it has brought respect to our company and the whole world now knows that we operate a more transparent process.

What do you consider the biggest change in crude oil management matrix?

What has changed today is number one: we have elevated the level of accountability and transparency, which is a great feat that can be verified by all stakeholders.

Two, we have succeeded in automating our processes to almost 98 percent and I believe that within the first quarter of this year maximum we will be able to clock 100 percent or if there are technical issues, latest by the last quarter of 2018, we will achieve it. What that means is that we have a seamless process that can be seen end to end on an electronic platform that can be validated by all, so that human intervention is reduced probably to the barest in terms of the decision making because you already have your input, your processes, your system and therefore it is not open to any changes that man can introduce. So to that extent I think we have done great on it.

The issue of scam artistes remains a challenge. How has your division tackled the operations of crude oil scam artistes?

We have brought it down to a minimal level in the sense that what these people typically do is to forge documents with the signatures of everybody you can think of in NNPC, every senior management staff has one document or the other printed or forged in their name allocating crude oil to parties.

But I remind you that this scam has two parties, one party is the scam artist himself who forges the document and then the other is the gullible person who sometimes I call the co-culprit, in the sense that nobody can come and offer you discount of ten dollars or twelve dollars per barrel of crude, as soon as you see this it’s either you are not in the business or you have forged yourself, it is impossible to make 12 dollars per barrel of crude, it is not possible. In fact at the best of companies, the maximum people make is probably a dollar and that’s under extreme circumstance. So how can anybody offer you ten dollars, 12 dollars and you accept that it is correct?

So what we did was to open a corridor of communication with the stakeholders, engage the public, make press statements, make available our email and create an email where such people can contact us and whenever we have such persons we report to the necessary agencies of government and make sure that they take action.

Some arrests have been made, some prosecutions have been done and at the end of the day we have seen these actions have gone down drastically. We are still working further with the relevant security agencies of government to make sure that we bring to justice those who have scammed others and we also make sure that at the end of the day, these incidences are minimized.

But today we have a platform of communication with potential victims as our emails are available to them on routine basis and they always contact us and then we always get back to them and clarify to them that this document is normal or not. So as at today it has gone down to the barest minimum but we still see incidents of people been offered crude oil allocation.

What do you intend to be your legacy at the COMD?

First, I will like to start from a perspective of the teamwork. You know I have a great team and it is a shared vision, key focus today is to make sure that we have a working transparent system and processes which we have practically achieved.

Secondly, we automate our processes and then, thirdly elevate stakeholders’ engagement to such a level that will clear up all areas of misunderstanding between us and our stakeholders.

If you do these, you would have achieved the entire objective of setting up the Division and therefore, what you need to do now is continuous improvements in systems and processes so that in time requirements may change, realities of the market may change but the people who are going to come in the future will at least have a system that will make them have this interest for improvement and probably in 5 to 10 years’ time, we should have a situation where – and this is our dream- we make sure that NNPC takes full control of its resources that are available to us under the Crude Oil Marketing Division and at the end of the day, those resources are accountable, completely known to the stakeholders and then ultimately that we have a system that the government can rely on.

That will be the dream. That’s where we are today. I’m a believer in continuous improvements. I’m not sure what we are doing today is the ultimate, so the ultimate will be determined by the younger people coming behind us.

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Culled from NNPC Quarterly Magazine