Despite the challenges of unprecedented oil crash, crippled refineries, unending hostilities in the oil producing communities, as well as unending litigation/dispute, abandoned capital projects, sub-optimal and very high production cost, that faced Mele Kyari, the 19th Group Managing Director of the Nigerian National Petroleum Corporation, upon on assumption of office, Iwonume Ekeghe writes that he has been able to hold his own by instituting laudable reforms that has yielded viable results
In the past one year, the petroleum industry witnessed an unprecedented oil crash that rippled globally. Invariably, this led to reduction in production and very low oil price for all affected nations. Nigeria was not left out of this slump in prices and its attendant consequences. At the thick of this crisis was Mr Mele Kyari, the 19th Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), who had assumed office on July 7, 2019.
He had barely settled down when the crisis hit. The situation has been exacerbated by the COVID-19 pandemic. Having met the challenges of oil slump, crippled refineries, unending hostilities in the oil producing communities, as well as unending litigation/dispute, abandoned capital projects, sub-optimal and very high production cost, he didn’t fold and roll, rather, he rolled up his sleeves and got to work.
At his inauguration, Kyari promised to run a transparent national oil company that can be scrutinised by Nigerians. One of his first move was to quickly implement an in-house strategic plan, hinged on cost-cutting measures and automation. Months after, those moves paid off as they set the corporation on a progressive course.
One of the major things he has done as the NNPC GMD was the scrapping fuel subsidy in April, setting the stage for full deregulation. According to him, it made no economic sense spending billions of dollars annually to keep the price of petrol artificially low; rather than allow market forces determine the price, so the huge funds hitherto channeled into opaque subsidy payouts can take care of other critical issues requiring government funding.
But many of those who know him are not surprised at how he has been able to change the fortunes of the corporation. Fortified with many years of experience, Kyari is geologist by profession and was until his elevation, the Group General Manager, Crude Oil Marketing Division from 2015 to 2019.
Aligning with Global Trends
Known to work in line with global best practices, he soon automated NNPC’s operations to align with global trends. As disclosed in series of tweets on his Twitter page, he wrote, “Today, we do 80-90 per cent of our business through automation. This company is changing for the better and it will remain an entity that all Nigerians will be proud of. What we are doing differently about the refineries is to rehabilitate them first and then get them to be run, just like the NLNG Model, where the NNPC Group will be a minority partner.
“Our long term goal is to be an integrated energy company that is commercially focused and wholly committed to deriving value for the benefit of its shareholders. The NNPC is leveraging technology and innovation to achieve the goal of building an energy company of global excellence. We call on stakeholders to collaborate with the corporation in an atmosphere that is beneficial to all and emplaces Nigeria on the path of growth and development”.
Under Kyari, the NNPC has prioritised low-cost oil production and taken additional measures to ensure cost discipline across its operations, including renegotiation of contracts and other business obligations, thus saving 40 per cent of proposed budget and cost.
This he made known during an interface with the Nigeria Guild of Editors (NGE), adding that “we
have rolled out strategy to achieve sub 10$/bbl UOC without jeopardising growth”.
Targeted Increased Production
As quoted in recent media engagements, Kyari said the corporation targets increasing oil production from 2.3 million barrels per day to three million bpd and at the same time, working with partners to significantly reduce cost per barrel in order to improve the flow of the needed revenue to support economic diversification.
Kyari has continuously reiterated his commitment to diversify the Nigerian economy away from over-dependence on oil revenues; in order to avoid the risk of market fluctuations that may impact the nation’s fiscal equation. This he said is a priority by the Buhari administration to ensure revenues from oil and gas resources are utilised to support the emergence and growth of other non-oil sectors of the economy.
Thus, he said the NNPC has been repositioned to support the vision of President Muhammadu Buhari for economic diversification. A further breakdown shows the NNPC targets increasing oil production from 2.3million barrels per day to 3million bpd and at the same time working with partners to significantly reduce cost per barrel in order to improve the flow of the needed revenue to support economic diversification.
Establishment of Condensate Refineries
“We are progressing with the establishment of condensate refineries to fast-track domestic supply of petroleum products. In the same vein, the corporation would support the actualization of the 650Kbbl/day Dangote Refinery, as well as other private initiatives along this line. Our plan is for Nigeria to become a net exporter of petroleum products by 2023.
In line with his initial promise, on June 1, 2020, for the first time in NNPC’s 43 years of existence, it released its audited annual reports and financial statements for the year ended December 31, 2018.
The report encapsulated the performance of 20 of its subsidiary companies operating within and outside Nigeria. Also, the report showed that its subsidiaries recorded a total revenue of N5.04 trillion with a profit of N1.01 trillion but at the same time, it did not mask the losses the group recorded.
That move drew commendations from virtually all quarters as the move was a radical departure from the past where the corporation old norms published only its unaudited operational statements.
The Executive Secretary, Nigeria Extractive Industries Transparency Initiative (NEITI), Mr Waziri Adio described the development as very good for the country’s image locally and internationally.
Discovery of Hydrocarbons
On October 2019, Kyari announced the discovery of hydrocarbons in Kolmani River Well 2, in Bauchi, in the Upper Benue Trough, Gongola Basin. The drilling of the Kolmani River II Well was flagged-off by President Muhammadu Buhari on February 2, 2020.
NNPC acquired 435.54km2 of 3D Seismic Data over Kolmani prospect in the Upper Benue Trough, Gongola Basin. It was to evaluate Shell Nigeria Exploration and Production Company Kolmani River 1 Well Discovery of 33 BCF and explore deeper levels. The well was drilled with “IKENGA RIG 101” to a total depth of 13,701feet encountering oil and gas in several levels.
Another achievement under Kyari’s watch was the successful signing of Innovation Agreement with Nigerian Agip Oil Company (NAOC) to formalise the transfer of OMLs 60, 61 and 63 to the Nigerian Petroleum Development Company (NPDC).
The GMD also launched the banners of the corporation’s downstream company, the NNPC Retail Limited, with a view to positioning the company as a market leader in the products distribution subsector in the country. Also under his watch, NNPC attained over two billion litres of premium motor spirit reserve and completed phase one of Port Harcourt refinery rehabilitation.
On the ongoing refinery rehabilitation exercise, he said upon completion, the services of a company would be procured to manage the plants on an Operations and Maintenance (O&M) basis, adding that the ultimate plan was to get private partners to invest in the refineries and get them to run on the Nigerian Liquefied Natural Gas (NLNG) model where the shareholders would be free to decide the fate of the refineries going forward.
Gas Footprint Expansion
The NNPC GMD says there are ongoing plans to aggressively expand the domestic gas footprint with the delivery of the Escravos-Lagos Pipeline System (ELPS) II to double capacity from 1.1billion standard cubic feet of gas (BSCF) to 2.2BSCF and the OB3 gas pipeline to connect East and the West.
According to him, the gas commercialisation programme is meant to leverage the nation’s huge natural gas reserve base to stimulate growth and enable Nigeria’s migration from the current mono-economy into a diversified economy.
This journey began on June 30 when President Buhari laid the foundation for the Ajaokuta-Kaduna-Kano (AKK) pipeline project valued at $2.8 billion and Kyari, who is very passionate about the project said it would enable the injection of 2.2 billion standard cubic feet of gas per day (bscf/d) into the domestic market upon completion, and facilitate additional power generation capacity of 3,600 megawatts (MW).
The 614 kilometer pipeline is expected to spark off economic activities that would ultimately deliver on a bundle of broad national economic aspirations in the petroleum industry through which the government targets to position the country’s abundant natural reserves as the key enabler for economic diversification from oil dependence.
In essence, the AKK pipeline promises a double barrel economic advantage for the country by earning direct income for the government and also helping develop indigenous industrial capacity by providing cheaper, cleaner and more sustainable energy. It will become a consistent revenue earner for all stakeholders including the government by operating a tariff based gas transmission services to assist producers wheel gas to market. It will also entitle the government to tax income, equity dividend and direct market returns on volume gas sales.
So, the AKK pipeline holds potential to feed power plants with adequate fuel energy to generate adequate electricity for homes and businesses. The pipeline can also directly feed industry and commerce with cleaner, cheaper gas energy. In both ways the AKK pipeline is going to enable the industrial sector of the economy optimise its potential for growth, job creation and contribution to gross domestic product (GDP).
Chairman of the Oilserv Group, Mr Emeka Okwuosa, whose firm is involved in the project said the consortium led by his company is working in concert to provide best in class EPC services for NNPC and Nigeria in consonance with the company’s track record of delivering world class pipeline construction even in most challenging terrains.
Passage of Deep Offshore Act
On the recent passage of the Deep Offshore Act into law, Kyari said the development has set the petroleum industry on the path of irreversible growth, adding that Nigeria as Africa’s leading exporter of LNG and the fourth in the world after Qatar, Australia and Malaysia, is ready to capture more LNG market with the Final Investment Decision of the NLNG Train 7.
Despite the ravaging COVID-19 pandemic, the NNPC under Kyari’s watch has, so far, pooled N21 billion from stakeholders in the oil and gas sector to prosecute the war against the pandemic. While 53 per cent has been earmarked for strengthening the nation’s health sector in form of constructing medical infrastructure across the six geopolitical zones in the country, the group’s Governance Committee comprising managing directors of oil companies and other Industry players, headed by the NNPC GMD, also allocated 26 per cent of the intervention funding to the deployment of logistics and in-patient support systems and 21 per cent of the sum to provision of medical consumables across the nation.
Given that one of the challenges he faced upon assumption of office was unresolved disputes, he tackled that headlong by ending long-standing disputes that threatened crude oil production and Nigeria’s economy alike.
His intervention led to the reopening of the Oil Mining Lease (OML) 25 flow station after two years of inactivity as a result of squabbles between the host community/Belema Oil and Shell Petroleum Development Company (SPDC) since its inactivity robbed Nigeria 35,000 barrels of crude oil per day.
According to Kyari, such a loss was too colossal and unconscionable to ignore, especially for a country whose main economic pillar is crude oil export. By mid-September 2019, barely a month in office, he had brokered peace and got all parties in dispute to sheathe their swords.
Also, the Managing Director of Shell, Osagie Okunbor, was happy that the squabble had been resolved, just as he hailed the NNPC GMD for his efforts.
The President and Founder, Belema OIL, Jack Rich-Tein, in his remarks said that the agreement signaled that stakeholders shared common interest and value of lifting the country high and strengthening relationships.
To ensure a thriving entity, the corporation last Monday, said it will adopt new business models and organisational structures for all its Strategic Business Units (SBUs) and Corporate Service Units (CSUs). This they said would ensure the commercial viability of the national oil company (NOC) to enhance its competitiveness in the global oil and gas industry.
Also, the focus is to reposition the NNPC into a commercially-focused and profit-driven organisation governed by best management practices using current technology to transform its operations.
With all the reforms Kyari has initiated since assumption of office, which are yielding viable results, most industry watchers are rooting for him to transform the corporation in all ramifications.