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From Uche Usim, Abuja
No one saw it coming. No one thought the Nigerian National Petroleum Corporation (NNPC) could ever open its books for public scrutiny let alone declaring a N287 billion profit after tax (PAT) in 2020. That was the first time since its establishment 44 years ago and also explains why tongues are wagging as to how the feat was achieved, especially in the midst of a blistering pandemic that forced the global economy to be on ventilators.
Nonetheless, the NNPC, on Wednesday, published its 2020 audited financial statements on its website for public appraisal. The same thing it did last year for the 2018 audit report.
The feat trails behind President Muhammadu Buhari’s recent announcement of the declaration of N287 billion PAT for last year.
While announcing the outstanding feat a little over a fortnight ago, President Buhari, who is also the Minister of Petroleum Resources, said: “I have further directed the Nigerian National Petroleum Corporation to timely publish the audited financial statements in line with the requirements of the law and as follow-up to our commitment to ensuring transparency and accountability by public institutions.”
However, for the group managing director of the NNPC, Mr. Mele Kyari, there was no magic wand other than corporate frugality, shunning irrelevant investments, embracing technology, maintaining operational discipline and hard work. These new operating parameters are consistent with his inaugural address as the 19th NNPC GMD on July 8, 2019.
Experts say Kyari came with his own operational blueprint, anchored on transparency and accountability, two traits that have remained recessive since NNPC’s creation.
Having been in the industry for almost three decades, and two years at the helm, Kyari has seen the bad and the ugly and knows the exact buttons to press to achieve a total system reset.
Among the highlights of the 2020 AFS is the corporation’s group profit, which rose from a loss position of N1.7 billion in 2019 to a profit of N287 billion in 2020, for the first time in 44 years.
Kyari, had at various times since the President’s declaration of profit, attributed the turnaround to aggressive cost cutting, automation of the system and renegotiation of contracts downwards by about 30 per cent, among other tough measures.
Further highlights of the AFS revealed that while the corporation’s group financial
position increased in total current assets by 18.7% compared to that of 2019, its total current liabilities increased by 11.4% within the same period.
The group’s working capital remained below the line at N4.56 trillion in 2020 as against N4.44trillion in 2019, the AFS further revealed.
Similarly, the corporation’s group revenue for the 2020 financial year stood at N3.718 trillion as against N4.634 trillion in 2019, a decrease that could be attributed to the decline in the production and price of crude oil due to the global impact of the COVID-19 pandemic.
This is the third consecutive year that the NNPC is publishing its AFS. The first time it released its audited annual reports and financial statements was last year and it was for the year ended December 31, 2018.
The report encapsulated the performance of 20 of its subsidiary companies operating within and outside Nigeria.
The companies covered in the reports included the Nigerian Petroleum Development Company (NPDC), Warri Refining & Petrochemical Company Limited (WRPC), Port Harcourt Refining Company Limited (PHRC), Kaduna Refining & Petrochemical Company (KRPC), and Integrated Data Services Limited (IDSL), Nigerian Products and Marketing Company Limited (NPMC), Nigerian Pipelines and Storage Company (NPSC).
Others were the National Engineering & Technical Company Limited (NETCO), Nigerian Gas and Marketing Company Limited (NGMC), Duke Oil Services (UK) Limited, Duke Global Energy Investment Limited, Duke Oil Incorporated, NNPC Retail Limited, National Petroleum Investments Management Services (NAPIMS), The Wheel Insurance, NIDAS Shipping Services, NIDAS UK Agency, and NIDAS Marine.
Summarily, the report showed that its subsidiaries recorded a total revenue of N5.04 trillion with a profit of N1.01 trillion.
The report did not also mask the losses the group recorded. It showed that all the refineries recorded poor results, with Kaduna Refinery and Petrochemical Limited posting the worst performance, with an accumulated loss of over N423.43 billion compared to over N359.093 billion in 2017.
Apart from an operating loss of about N64.55 billion, Kaduna Refinery reported administrative expenses of about N64.68 billion during the year, down from about N114.347 billion in 2017.
The bulk of the losses was attributed to direct operational costs, despite that none of the four refineries in the country has been functional for years.
Applause came for Kyari because the move was a radical departure from old norms as the national oil company hitherto published only its unaudited operational statements.
Industry watchers hailed the NNPC GMD for his audacious transparency stance that led to the release of the audited results.
The former 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.
He said, “Having such disclosures is good for transparency and accountability. I congratulate Mele Kyari and his team and urge them to make this a regular practice and in open data format.”
While the rampaging COVID-19 pestilence shuttered economies and disrupted global supply chains, Kyari insisted that surrendering to the pandemic was never an option.
Part of the success strategies was the automation of NNPC’s operations to align with global trends.
He said in a tweet: “Today, we do 80-90% 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”, he added.
Kyari, in an interface with the Nigeria Guild of Editors (NGE) revealed that 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% of proposed budget and cost.
“We have rolled out strategy to achieve sub 10$/bbl UOC without eopardizing growth”, he said.
The journey to NNPC’s success began with a target to boost the nation’s crude oil production to 3million barrels per day by resolving disputes around a number of oil blocks that had led to production shut-in.
Top on the list was his intervention that 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).
The crisis began in 2017 when the host communities chased away SPDC staff from the facility over issues around unemployment, underdevelopment, disruption of social lives and others.
Since then, the facility laid idle and efforts to bring the warring parties to the dialogue table defied all institutional efforts.
However, when Kyari became the NNPC boss in July, 2019, he braced the odds and reopened dialogue on the matter since the inactivity of OML 25 and its adjoining blocks robbed Nigeria 35,000 barrels of crude oil per day.
As far as the NNPC GMD was concerned, 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 sheath their swords.
In May 2021, Kyari repeated a similar feat when he led the Corporation to sign a series 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 $10billion investment in the development of the Bonga South-East Field. This will further boost the nation’s oil production.
In furtherance of the goal of boosting the nation’s crude oil production, the NNPC on Kyari’s watch, has secured a number of alternative funding facilities for the NPDC and some of the Joint Ventures to facilitate further development of assets. These include: the N875.75 million 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.
First oil of about 7,900bpd was achieved from the project on 1st April, 2020, while production is expected to peak at 94,000bpd of oil and 542mmscfd of gas within four years.
On gas development, the NNPC has focused heavily on the gas sector in keeping with the aspiration of the administration to diversify the economy by transforming the nation into a gas driven economy.
In this regard, NNPC drove and achieved the Final Investment Decision on the NLNG Train 7 Project in December 2019. The project was on the drawing board for over 10 years. The project is expected to generate over $20 billion of revenue to the Government over the project’s lifecycle, 10,000 direct and 40,000 indirect jobs.
The Corporation followed that feat up in May 2020, at the heat of the COVID-19 pandemic, with the signing of 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.
On 15th June, 2021, the ground-breaking ceremony of the NLNG Train 7 Project was conducted signaling the commencement of construction work on the project.
NNPC also successfully 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.
Kyari 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.
Additional major stride in the gas sector was witnessed in late 2020 with the commissioning of 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 of 16 units of 20tonnes LPG trucks per day into the domestic market.
In order to provide an alternative to Premium Motor Spirit (petrol) as the sole automotive fuel and reduce the huge importation bill of the product, the GMD led NNPC to key into the Year /Decade of Gas initiative spearheaded by the Minister of State for Petroleum Resources to launch the Autogas initiative. It 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.
He heralded 2021 with a significant step in the direction 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 followed that feat up a few weeks later with the signing of 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.
On 22 April, 2021, NNPC 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 will boost the nation’s gas production by 1.2trillion cubic feet (tcf).
The Corporation 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.
NNPC’s downstream operation Kyari introduced ‘Operation White’, which has helped in streamlining petroleum products importation, supply and distribution across the country.
As the sole importer of petroleum products in the country, NNPC has succeeded in keeping the nation well supplied. NNPC has emplaced a stable fuel supply system to guarantee zero fuel queues throughout the country in the last two years of Kyari.
The Corporation is in the process of strengthening the products distribution system by revamping the pipeline network through a Build, Operate and Transfer (BOT) model whose process is already at an advanced stage.
The vision of revamping the pipelines is in tandem with the Refineries Rehabilitation Project to ensure that products evacuation facilities are in top shape to support the operations of the refineries post-rehabilitation in 2023.
To boost petroleum products supply and distribution in riverine areas of the Niger Delta, Kyari-led NNPC to sign an agreement with the Nigerian Content Development and Monitoring Board (NCDMB) and Zed Energy for the construction of the N10.5 billion Brass Petroleum Products Terminal. The facility will serve as a strategic reserve for the country as it is 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. It will close the infrastructure gap in the distribution of petroleum products and also help to stop illegal refining activities.
To get the refineries up and running, the NNPC, on April 6, 2021, signed the $1.5 billion Engineering, Procurement & Construction (EPC) Contract Agreement with Tecnimont SpA, for the complete rehabilitation of Port Harcourt Refinery.
On May 7, 2021, the GMD led NNPC and the contractor, Tecnimont S.p.A., to flag off construction work on the Port Harcourt Refinery rehabilitation project.
He has introduced a new operational model for the refineries post-rehabilitation with the call for bids for the Operations & Maintenance Contract for the refineries advertised recently in the media. The O & M model would ensure that the refineries are managed by contractors with requisite experience who would ensure that they are regularly maintained as and when due.
The Warri Refinery and Petrochemical Complex (WRPC) and Kaduna Refinery Complex (KRPC) EPC contracting has progressed to advanced stage with a certificate of no objection secured from the Bureau of Public Procurement (BPP) on the award of the contract. Currently awaiting the Federal Executive Council (FEC) approval of award to the most technically and commercially qualified globally reputable EPC company.
