Assessing Baru’s Claim on Oil Output

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Maikanti Baru

Chineme Okafor reviews claim of achievements by the outgoing Group Managing Director of the Nigerian National Petroleum Corporation, Dr. Maikanti Baru, especially that under his watch, the country maintained a crude oil production level of above two million barrels per day

The outgoing Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr. Maikanti Baru, had following his imminent retirement from the corporation, stated his accomplishments within the period he led the corporation.

Appointed in July 2016, as successor to erstwhile minister of state for petroleum resources, Dr. Ibe Kachikwu, Baru, is expected to step down from his position this month, for a new man – Mallam Melee Kyari, who has been appointed to replace him.

The outgoing NNPC boss, however made some claims recently which necessitated a fact-check by THISDAY.
According to a recent statement, Baru during his investiture as a fellow of the Nigerian Academy of Engineering (NAE) at the University of Lagos, said he was able to make a success of his career because of his engineering background. He explained engineering prepared him for the tasks he was responsible for during his work years.

He further described engineering as a branch of study which tasks the brains and sharpens people’s ability for logical thinking and problem-solving, adding that it helped to solve existential problems. Baru, in this regard listed his achievements at the NNPC, and said in the statement which was signed by the Group General Manager, Public Affairs of NNPC, Mr. Ndu Ughamadu, that under his watch, Nigeria maintained (crude oil), “production levels well above two million barrels per day.”

He equally explained that the crude oil production capacity of NNPC’s upstream subsidiary – the Nigerian Petroleum Development Company (NPDC), was also increased under his watch; while a boost in gas production to the extent that NNPC became the largest supplier of gas to Nigeria’s power sector was achieved.

Speaking further on his achievement, Baru said the corporation under him saved the country enormous financial resources through its Direct Sale Direct Purchase (DSDP) petrol supply scheme which prioritised NNPC as the major importer of petroleum products in the country on account of its dysfunctional refineries in Port Harcourt, Warri and Kaduna.

Baru, added on the list of his achievements that the NNPC under him helped rid Nigeria of huge financial commitments on cash-call funding for oil production by developing workable alternative funding arrangements. He said the NNPC also created a sustainable teamwork between the oil industry and host communities in the Niger Delta to limit security challenges that affected oil production some years back, and as well instituted transparency in NNPC’s contracting of major projects.
On the cost of crude oil production per barrel in the country, Baru said NNPC under him reduced it from $27 to $22, and further explored opportunities in frontier basins to boost Nigeria’s oil reserves base and production amongst others he mentioned.

Fact Check
To establish that Nigeria maintained two mbd oil production level under Baru, THISDAY accessed and analysed the monthly operations and financial reports of the NNPC from August 2016 – a month after Baru was appointed to lead the NNPC. The reports indicated that while oil production averaged two mbd between August 2015 and February 2016, it however fell to 1.9 mbd in March 2016, and was at 1.6mbd in July (when Baru was appointed). It further fell to 1.5 mbd in August, and rose to 1.6 mbd in September. Between October, November and December, the production figures were 1.7mbd, 1.9mbd and 1.5mbd, effectively showing that in Baru’s first five months, Nigeria did not produce up to two mbd of oil.

On year-to-date oil and condensates production for 2016, the corporation stated that average daily production was 1.8 mbd, and not 2mbd.
It said at that time that: “In December, 2016, crude oil production in Nigeria slowed down to 1.58mbd which represents 18.23 per cent decrease relative to November 2016 production and also lagged behind December, 2015 performance by 24.04 per cent.”
It suggested that militancy in the Niger Delta was responsible for the production slu

mp, adding: “Federal government’s engagement with the militants has continued to enhance production. Issues that overshadowed production during the period includes shutdown of Trans Niger Pipeline (TNP) and Nembe Creek Trunk Line (NCTL) due to pipeline leakages, shut down of Agbami Terminal for mini Turn Around Maintenance and the subsisting force majeure at Forcados and Brass Terminals.

“Areas much affected by the militant activities are the onshore and shallow water assets, where government take is high.”
Also, in 2017, the corporation’s report showed that except in July when oil production averaged two mbd, the rest of the months were below that, indicating that the 2017 year-to-date daily average production figure was 1.8 mbd.

In 2018, the report showed that only in February and October did the country achieve 2 mbd production feet, while the other 10 months were below that level. It noted that on the average, the year-to-date production figure for the year was 1.7 mbd.

Thus, from the reports of the corporation, Nigeria in 2016 and 2017 maintained an average oil production level of 1.8mbd respectively, and 1.7mbd in 2018. There was no part of the corporation’s operations report that showed oil “production levels well above 2 million barrels per day,” as claimed by Baru at his induction in Lagos.

In addition, Baru, said the corporation saved Nigeria huge financial resources on petrol importation through the DSDP – type of swap pact which replaced the crude-for-product swap deal the government of President Goodluck Jonathan had, and whereby a certain amount of crude is exchanged in return for the equivalent amount of refined petroleum products.

While the arrangement has been acclaimed for mostly ensuring that petrol supply remained steady and uninterrupted in Nigeria, the NNPC report however stated that in 2016, the corporation committed 127mb of crude worth N1.381 trillion or $5.531 billion to the initiative. In 2017, the figure was 105mb of oil worth N1.754 trillion or $5.756 billion; and in 2018, it was 117mb valued at N2.489 trillion or $8.160 billion.
Furthermore, on this, Baru in December 2018, told journalists that the corporation at a point in the year recorded under-recoveries (deficit) of N80 on every litre of petrol it imported into the country to keep the price per litre of petrol at N145. He had added that the under-recovery for December 2018 was between N20 and N25 a litre.

Also, the World Bank in its 2018 report, ‘Nigeria Biannual Economic Update’ said the country spent N731 billion subsiding petrol consumption. It had also said the NNPC deducted $2 billion from its gross oil revenue prior to the transfer to the federation account for the unbudgeted fuel subsidy or cost under-recovery.

On cash call payments to international oil companies (IOCs), the paper found from NNPC’s report between January 2016 and January 2017, the joint venture cash call account was credited with $2.50 billion; between January 2017 and January 2018, it was $2.97 billion and between January 2018 and January 2019, it was $4.39 billion. However, it could not confirm how much of the JV debt arrears the NNPC has settled with the IOCs.

With regards to pushing down cost of production from $27 to $22 per barrel, it could not be verified how true this was because it has remained a subject of debate. For instance, in August 2017, Kachikwu claimed the cost of production in Nigeria was too high at $32 per barrel, while Dafe Sejebor, the Group General Manager in charge of National Petroleum Investment Management Services (NAPIMS), said in an earlier statement that NNPC had driven down the cost of crude oil production from $78 dollars per barrel that it was as at August 2015 to $23 per barrel. But Baru, in Lagos said under him, it reduced from $27 to $22, but this could not be verified from NNPC’s report.