PIA: Reaffirming NNPC’s Investment Promotion Mandate

Okoro Ukpe

The writer of the article “NNPC’s Grab and Grab Will Demarket the Nigerian Hydrocarbon Opportunity,” published in Africa Oil + Gas Report, was clearly out to misinform members of the public against the operations of the Nigerian National Petroleum Company Limited (NNPC).

This hatchet job was focused on allegations about the NNPC exercising its rights of pre-emption in the ongoing divestment of ExxonMobil’s Joint Venture Assets located in the south-east shallow offshore in Nigeria.

Unfortunately, if not that the writer was ignorant, he would have noted the sweeping reforms that the Petroleum Industry Act (PIA) introduced in the oil and gas sector, which even saw President Muhammadu Buhari, recently mandating the board of the NNPC Limited, to ensure that the firm focuses on profitability and operates at par with its industry peers across the world.

Buhari said: ”The Nigerian National Petroleum Company Limited is mandated to focus on profitability and continuous value creation beyond the simple fulfilment of legal and regulatory requirements.

“NNPC Limited is expected to operate at par with its industry peers across the world, while acting as Enabler Company that will foster the development of other sectors of our economy.”

Indeed, with the PIA, the NNPC is now a commercial entity. President Buhari signed the PIA into law on August 16, 2021. Following the assent of the president, the NNPC Limited was incorporated by the Corporate Affairs Commission (CAC) on September 22, 2021 after it received application for its registration from the federal government.

The PIA also raised stakeholders’ expectations on the company, even as it has given it a wide room to stimulate investments in the oil and gas industry. The company’s preference is to source lenders that can provide the funding in a ratio based on the capacity of each of the lenders.

Section 65 of the Act encourages NNPC Limited and its joint venture partners to explore the use of incorporated joint venture companies. The NNPC is also required to declare dividends to its shareholders and retain 20 per cent of profit as retained earnings to grow its business like any other incorporated entity incorporated under the Companies and Allied Matters Act, as provided under Section 53(7) of the Petroleum Industry Act. Also the NNPC Limited supervises the mechanism of funding the Joint Venture Operations through the cash-call process.

Clearly, from the foregoing, as a commercial entity, the NNPC Limited in striving to ensure that its stakes in the Joint Venture Contracts are not weakened if further shares are issued, would exercise its right of pre-emption. And by doing that, it is simply protecting its investments in the JVCs. With this, there is no need crying wolf where there is none in the case of the ongoing divestment of ExxonMobil JV assets and the illusion of “to grab and grab,” that was created by the writer does not hold water.

More so, Group Managing Director of NNPC, Mallam Mele Kyari, said recently that the company’s operational leaning would henceforth be business-like, with a profit motive, since it is now a CAMA entity.

He had said under the new arrangement, the company would raise between $3.5 billion and $5 billion in corporate finance to fund major upstream investments under its funding strategy for selected upstream investments.

To achieve this objective, Kyari said NNPC planned to acquire pre-emptive rights in select Joint Venture (JV) operations in the industry as well as take over the ownership of some non-investing partnerships.

The NNPC strategy, Kyari said, also included investing in strategic assets to address integrity, bottlenecking, and growth issues in the oil industry, such as “rigless” activities and oil drilling campaigns. He said the company preferred to find lenders who could provide this funding in a ratio based on each lender’s capacity to help finance part of NNPC’s key investments, including acquisition of equity interests in quality upstream oil and gas producing assets.

According to him, this remains an integral part of NNPC’s corporate strategy to rebalance its oil and gas portfolio, by divesting from some toxic assets, to enable it acquire choice strategic assets that would help support its long-term strategic objectives.

This saw the company recently securing a $5 billion corporate finance commitment from the African Export-Import Bank (Afreximbank) to fund major investments in Nigeria’s upstream sector. The funding arrangement was the first major deal by the national oil company since the enactment of the Petroleum Industry Act (PIA) and the incorporation of NNPC as a limited liability company under the Companies and Allied Matters Act.

Under the contract, Afreximbank agreed to enter into a finance advisory and fundraising role to raise $5 billion to, “acquire, invest and operate energy producing assets in Nigeria as part of NNPC’s growth strategy following its incorporation as a limited liability company.”

Furthermore, the bank committed to underwrite $1 billion as part of forward sales based trade finance transaction. The finance commitment would enable NNPC fund some of its major investments in the country’s upstream oil and gas sector.

So, there is no cause for alarm as the federal government has through the PIA, renewed its commitment to attracting investments in the oil and gas industry as the legislation provides the needed improvements in fiscal and governance frameworks, emphasises transparency and accountability as well as provides a level playing field for all players.

The NNPC no longer has access to government funding, but now survives based on its internal resilience and efficiency. It is now a going concern and just like every other limited liability company, its level of productivity is what would determine if it would remain in business.

Ukpo wrote in from Abuja