• Thursday, March 28, 2024
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BusinessDay

Expectations from new NNPC boss amid collapsing oil sector

Oil sector

Expectations filled with optimism and pessimism has begun to trail the appointment of Mele Kyari as the new Group managing director of NNPC Nigerian National Petroleum Corporation (NNPC) after the state behemoth’s lacklustre performance in the past four years.

Four years ago, fixing Nigeria’s refineries, solving pipeline vandalism, listing on the Nigeria Stock Exchange (NSE) and making the corporation profitable were some of the most urgent tasks before the ex-oil firm boss Maikanti Baru, which, unfortunately, didn’t come to limelight.

However, President Muhammadu Buhari’s decision to reshuffle the leadership of NNPC on Thursday has once again raised anxiety in the oil sector which is in urgent need of disentangling itself from the web of economic stagnation, stalled reforms and a risk of rising militancy.

Kyari, who was previously head of NNPC’s crude oil marketing division and Nigeria’s National Representative to the Organisation of Petroleum Exporting Countries (OPEC), replaced Maikanti Baru who has held the post since July 2016.

A stakeholder close to NNPC said apart from making petroleum products available at all cost, the major hurdle before the new NNPC boss is how to end favouritism and nepotism in the corporation and make the refineries working again knowing  that Dangote refinery will be coming on stream during his tenure.

“He needs to finally solve the insecurity problems, issues surrounding pipeline vandalism, determine the fate of Brass LNG and Okokola LNG, and move oil exploration to other part of the country,” inside sources told BusinessDay.

Toyin Akinosho, publisher of Africa’s oil and gas report, said the new GMD is a system person because he is coming from the most opaque division of NNPC. Therefore does not expect much from him.

“He is not an agent of change. He is from the elite side of NNPC which may not help the industry reforms,” Akinosho told BusinessDay.

Godwin Izomor, managing director of MG Vowgas Limited, a Port Harcourt-based Engineering, Procurement and Construction firm, said the new group managing director will work towards increasing the nation’s crude oil reserves and also try to attract investment inflow into the industry.

Bank-Anthony Okoroafor, the Chairman of Petroleum Technology Association of Nigeria (PETAN), however believes the new GMD is the right person to grow Nigeria’s oil reserve based on his experience as a geologist.

“The promotion of Roland Ewubare, chief operating officer of Upstream is a fantastic move that will solidify what is already on ground because he understands the industry and he will be ready to move it forward it to the next step,” Okoroafor  told BusinesDay.

President Buhari also approved the appointments of new heads for the company’s upstream and refinery arms, NNPC said in a statement. No official reasons were given for the changes and all the appointments will take effect from July 8.

Some sources in the Nigerian oil industry suggested Baru could retire, while others said he might be transferred to a petroleum ministry office.

Although Maikanti Baru deserves credit for easing the bottlenecks in the cash call for upstream work programmes and removing NPDC’s chokehold on Nigerian independents, allowing a more vibrant upstream segment which has allowed investments streamed into many Brownfield projects.

However, operations in the oil fields of the Niger Delta have not entirely recovered from the historic MEND attack of February 2006, which reset the dynamics in the region around the distinctions between licence to – and freedom to – operate.

Also, there is still a huge refining gap that ensured that over 90 per cent of petroleum products in demand being imported and a commercial model that entitled NNPC to take 445,000 barrels of crude oil per day of oil.

Nigeria’s oil sector, the heartbeat of Africa’s biggest economy, though responsible for 90 per cent of the country’s foreign exchange earnings, still contributes little to grow the gross domestic product. Its contribution has remained in the one-digit margin, with an all-time highest contribution of 9.84 per cent in Q3 2017.

While other state-owned oil corporation like Brazil’s Petrobras, Russia’s Rosneft, Norway’s Equinor and Mexico’s Pemexv, all saw improved financial results in 2018 and made operating profits, the reverse was the case for Nigeria’s NNPC.

BusinessDay analysis of full 2018 report showed between January 2018 to December 2018, Africa biggest oil producing country spent N730.9 billion on under-recovery popularly called subsidy while N140.6 billion was also spent on old perennial problems such as pipeline repairs and management cost.

NNPC reports showed gains of N393.5 billion made by its upstream and gas processing subsidiaries such as the Nigerian Petroleum Development Company (NPDC), Integrated Data Service Limited (IDSL), National Engineering and Technical Company Limited (NETCO), Nigerian Gas Company Limited (NGC), Nigerian Gas Marketing Company (NGMC). But the gains were wiped off largely by its downstream subsidiary’s operations which recorded deficits north of N351.7 billion, according to figures from the organization’s operations and financial report for 2018 actual.

In full-year 2018, Nigeria lost N24.9 billion on product losses, while Cash call payment for the development of joint venture oil and gas assets ate into the Federal Government’s revenue last year as a total of N1.829trillion was paid to oil companies.

 

OLUSOLA BELLO AND DIPO OLADEHINDE