X-raying Mele Kyari’s two years at the NNPC
Mele Kyari, group managing director (GMD) of the Nigerian National Petroleum Corporation (NNPC) on July 8, 2021, marked two years as the henchman of the corporation. He was officially inaugurated as the 19th GMD of the Corporation on that day in 2019.
How has the GMD of the most significant corporation in the Nigerian state fared these last two years? Is the future of the corporation and by extension, the Nigerian economy that largely depends on oil revenues looking any brighter? Has his performance these last two years justified his retaining the office to complete his tenure? These and many other questions we seek answers to in this piece as the GMD and his team rolled out the drums to celebrate.
When Kyari assumed office in 2019, he pledged to entrench transparency and accountability, shore up oil production and reserve, raise gas reserves and crush the monster of corruption draining the life blood out of the corporation. Has the envisioned change sprouted the desired expectations and dividend for Nigerians?
The man Kyari, obviously has good intentions to drive the nation’s oil industry, but urgently requires the political will to achieve his vision. While there have been measurable improvements, more still needs to be done.
Nigeria practically depends on the proceeds from the oil sales which the NNPC manages, for its survival, meaning therefore that the NNPC must be profitable.
Mele Kyari, in his inaugural address clearly spelt out the direction his management intended to steer the Corporation. He explained that they had plans for the Upstream, Gas Development, Downstream, Refineries Rehabilitation, Transparency and Stakeholders Engagement.
Two years later, an assessment of his stewardship indicates that in the Upstream sector, the GMD promised to increase the national crude oil reserves to 40billion barrels and boost the nation’s oil production to 3 million barrels per day. To achieve the goals, he has put in motion activities geared towards boosting the nation’s crude oil reserves to meet the 40 billion barrels target. He galvanized NNPC to rev up exploration work in the inland basins with the drilling of the Kolmani River II Well culminating in oil discovery in commercial quantity in the Upper Benue Trough. Drilling activities are ongoing in Kolmani River III Well with huge prospects while in the Bida and Sokoto Basins, seismic data collection is in progress. Plans are also afoot to re-launch the exploration work in the Chad Basin.
Also, he immediately set about resolving disputes around a number of oil blocks that had led to production shut-in. A case in point is the resolution of the dispute involving Shell and Belema Oil that shut in over 30,000barrels per day production in OML 25. That dispute was effectively resolved to restore production in the oil block.
The Corporation signed a number of agreements with SNEPCo and other PSC partners to resolve the disputes around another deep offshore block, OML 118, leading to the renewal of that acreage with the prospect of a new $10 billion investment in the development of the Bonga South-East Field.
NNPC secured a number of alternative funding facilities for the NPDC and some of the Joint Ventures to facilitate further development of assets, including the N875.75m NPDC OML 65 Alternative Funding and Technical Services package with CMES-OMS Petroleum Development Company, the $3.15bn Alternative Financing Package with Sterling Exploration and Energy Production Company Limited (SEEPCO) and other partners for the development of NPDC’s OML 13. The corporation also achieved First oil of about 7,900bpd on 1st April, 2020, while it expects oil production to peak at 94,000bpd and 542mmscfd of gas within four years. Incidentally, as revealed in audit reports by the Nigerian Extractive Industries Transparency Initiative, parliamentary probes and global agencies, the target to raise oil reserves may not hit its mark with the level of corruption in its operations, from the upstream to midstream and downstream sub-sectors.
On Gas Development, the Kyari- led NNPC has focused heavily on the gas sector in line with the aspiration of the President Muhammadu Buhari government to diversify the economy by transforming the nation into a gas driven economy. Part of its achievement includes driving and achieving the Final Investment Decision on the NLNG Train 7 Project in December 2019. The project was on the drawing board for over 10 years.
It is expected to generate over $20billion of revenue to the Government over the project’s lifecycle, 10,000 direct and 40,000 indirect jobs. It is however, apparent that Nigeria is very far from meeting the gas demand of Nigerians despite that far more Nigerians are currently engaged in the use of firewood and kerosene which are not only expensive but also unhealthy with the hazard to the environment. A key constraint has been the absence of a liberal gas pricing regime.
In May 2020, at the heat of the Covid-19 pandemic, the NNPC signed the Engineering, Procurement and Construction (EPC) contract of the NLNG Train-7 project. The contract was signed with the SCD JV Consortium comprising affiliates of Saipem, Chiyoda and Daewoo. The execution of the EPC contract signals the effective commencement of the detailed design and construction phase of the multi-billion dollar project which, on completion, is expected to raise the NLNG production capacity by 35 per cent from the current 22 million tonnes per annum (MTPA) to 30 MTPA.
NNPC flagged-off the construction of the Ajaokuta-Kaduna-Kano (AKK) gas pipeline project on 30th June, 2020. The project, which has been described by the President as a game-changer, is an integral part of the Trans-Nigeria Gas Pipeline (TNGP) with a capacity to transport about 2.2billion cubic feet of gas per day. The infrastructure designed to feed gas into the AKK – the Escravos Lagos Pipeline System II (ELPS II) and Oben-Obiafu-Obrikom (OB3) gas pipeline are also being aggressively executed and expanded to increase delivery capacity from 1.5BCF/D to over 3.5BCF/D. The ELPS II has reached 96.34 per cent completion.
The GMD also led the Corporation to achieve a $300million reduction in the cost of the AKK Gas Pipeline contract via contract renegotiation from the initial $2.8billion. In late 2020, The NNPC commissioned the Oredo Integrated Gas Handling Facility (IGHF) and the Liquefied Petroleum Gas Storage and Dispensing Unit. The facilities are wholly owned and constructed by the Nigerian Petroleum Development Company (NPDC) to address domestic gas supply challenges. The facilities currently deliver over 200 million standard cubic feet of dry gas per day and 330 metric tonnes of Liquefied Petroleum Gas (cooking gas) which is equivalent to 16 units of 20tonnes LPG trucks per day into the domestic market.
The GMD-led NNPC provided an alternative to Premium Motor Spirit (petrol) as the sole automotive fuel in order to reduce the huge importation bill of the product through an initiative spearheaded by the Minister of State for Petroleum Resources, dubbed Autogas initiative. The corporation executed a JV agreement with NIPCO to help in the marketing and distribution of the product to get as many Nigerians as possible to migrate to the use of gas as automotive fuel.
The GMD began the year 2021 with a significant step of bringing the proposed Brass Gas Hub into reality. He led NNPC to take the Final Investment Decision (FID) with the Brass Fertilizer and Petrochemical Company for the $3.6bn Brass Methanol Plant in Odioma, Bayelsa State. He also signed a $260m financing agreement for the Assa-North Ohaji South (ANOH) Gas Project with Seplat. The project will deliver 300 million standard cubic feet of gas per day and 1,200 megawatts of electricity to the domestic market.
The corporation on 22 April, 2021, executed a Gas Development Agreement (GDA) for the Oil Mining Lease (OML) 143 with its partner, Sterling Oil Exploration and Production Company (SEEPCO). The project is expected to boost the nation’s gas production by 1.2trillion cubic feet (tcf). Finally, it also secured the United State Trade and Development Agency (USTDA) Grant and commenced the upgrade of 1350MW Abuja IPP project development to World Bank Standard for bankability.
On the downstream operation, the GMD introduced Operation White, which has streamlined petroleum product importation, supply and distribution across the country. NNPC has ensured a stable fuel supply system to guarantee zero fuel queues throughout the country in the last two years of Kyari. However, the volumes imported have increased significantly under Kyari leading vast smuggling of Nigeria’s petrol across the border prompting the Economic and Financial Crimes Commission to get involved in reining in errant petrol marketers.
The revamping of the pipeline network through a Build, Operate and Transfer (BOT) model whose process is already at an advanced stage is strengthening the products distribution system. Kyari led NNPC to sign an agreement with the Nigerian Content Development and Monitoring Board (NCDMB) and Zed Energy for the construction of the N10.5bn Brass Petroleum Products Terminal. expected to provide a depot for 50 million litres of petroleum products, two way product jetty, automated storage and automated bay for AGO, PMS, DPK and ATK to boost petroleum products supply and distribution in riverine areas of the Niger Delta.
It is instructive to note that the fuel queues may have reduced considerably but fuel subsidies have worsened under Kyari, now estimated at over N150 Billion monthly.
Rehabilitation of refineries is an area the GMD scored a pass mark, although Nigerians are skeptical about the workability of the refineries given their long years of idling away. Kyari is driving the rehabilitation project to an advanced level. He led NNPC to sign the $1.5bn Engineering, Procurement & Construction (EPC) Contract Agreement with TecnimontSpA, for the complete rehabilitation of Port Harcourt Refinery. On 7th May, 2021, he led NNPC and the contractor, TecnimontS.p.A., to flag off construction work on the Port Harcourt Refinery rehabilitation project. He is in the process of making good his promise to introduce a new operational model for the refineries post-rehabilitation with the call for bids for the Operations & Maintenance.
The GMD harped on transparency and accountability as the cardinal pillars of his management and promptly followed up with the launch of his management’s strategic objectives. He christened it as Transparency, Accountability and Performance Excellence (TAPE).
He started with the publication of the 2018 and 2019 Audited Financial Statements of the Corporation and its 19 subsidiaries registered under the Companies and Allied Matters Act (CAMA) 1990 as amended alongside that of the National Petroleum Investment and Management Services (NAPIMS) to provide clarity on Joint Venture finances. The AFS were published in the Corporation’s website for all interested parties to access and scrutinize. This is the first time the Corporation’s AFS were made public in such a manner.
The Audited Financial Statements of the two years so far published revealed that there was a 99.7% reduction of the Corporation’s loss profile from ₦803bn in 2018 to ₦1.7bn in 2019. Following this trajectory, the Corporation has affirmed that it is likely to declare profit in the 2020 AFS . The NNPC also sustained the Publication of the Corporation’s Monthly Financial & Operations Reports (MFOR) in line with the TAPE vision. This development makes the NNPC the only national oil company that publishes its financial and operations reports monthly globally. Following this track record, the GMD also led the Corporation to enlist with the Global Extractive Industry Transparency Initiative as an EITI Supporting Company which places NNPC in the group of over 65 extractive companies, state owned enterprises that commit to observing transparency and accountability standards defined by EITI. The successful completion of a controversy-free recruitment exercise for 1,000 young graduate trainees to rejuvenate the Corporation’s talent mix is another key achievement of the NNPC under the leadership of Kyari.
The NNPC GMD has improved engagement with stakeholders to ensure that stakeholders are carried along in the Corporation’s operations. He devotes time to honour invitations from the relevant committees of the National Assembly, holding periodic engagement sessions with critical stakeholders including the media.
Myari’s achievement in the last two years would not be complete without a mention of his leadership role during the outbreak of the COVID pandemic in early 2020. He rallied players in all the sectors of the oil and gas industry to raise over N21bn to support the fight against the spread of the disease in the country. It is instructive to note that following the monetary and material contributions of the NNPC, the Chairman of the Presidential Task Force on Covid-19 and Secretary to the Government of the Federation, Mr. Boss Mustapha had cause to commend the corporation for its various donations and strong support for the fight against the spread of the disease in Nigeria.
In the final analysis, the NNPC under Kyari has recorded some landmark achievements, but new challenges abound.
It is expected that going forward, Kyari must swiftly address the teething problems facing the national oil company. He has a responsibility to purge the NNPC of the various debilities afflicting it especially inefficiency and cutting down of waste indicative of the revelation of N228.1 billion loss between April and November 2018, when revenue plunged from N520 billion to N292.3 billion. This becomes especially important in view of efforts to commercialise its operations.
Nigerians will call for greater transparency when the national oil company is commercialised under the new PIB. The expectation is that Kyari must deploy his expertise to canvas for the privatization of the country’s comatose refineries and discourage investing money into its rehabilitation after assessments have shown that it is unwise to continue to plunge funds into rehabilitation given that all the refineries may have become obsolete. Many say that the corporation’s decision to have a stake in any refinery operating in the country which produces above 50, 000 bpd, is a masterstroke and would bring a lot of economic benefits.