From Uche Usim, Abuja
When Mr. Mele Kyari, the 19th group managing director of the Nigerian National Petroleum Corporation (NNPC), was inaugurated on July 8, 2019, he came with his own operational blueprint anchored on transparency and accountability. Having been in the industry for almost three decades and two years at the helm, Kyari has seen the good, the bad and the ugly.
He was just settling down to business when the dreaded COVID-19 pandemic erupted and dislocated the global economy. Crude oil prices fell to an all-time low, leaving Nigerian vessels stranded at sea with no buyers.
He stored the products in various offshore tanks till prices appreciated, rather than sell at a scalding loss.
The unprecedented oil crash aside, Kyari, on assumption of duty, also met unending litigation/disputes, sub-optimal and very high production cost, prostrate refineries, stranded capital projects and hostilities in the oil-producing communities.
One of the goals the GMD set at his inauguration was to increase national crude oil reserves to 40 billion barrels. To achieve that goal, he galvanized the national oil company to rev up exploraton work in the inland basins, with the drilling of the Kolmani River II well culminating in oil find in commercial quantity in the Upper Benue Trough. The drilling of Kolmani River III well is ongoing with very high prospect of oil find. Seismic data collection is ongoing in the Bida and Sokoto basins. Plans are also afoot to re-launch exploration work in the Chad Basin. All these are geared towards boosting the nation’s crude oil reserves to meet the 40 billion barrels target.
Also on the cards was a goal to boost the nation’s oil production to three million barrels per day, by resolving disputes around a number of oil blocks that had led to production shut-ins.
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 was idle and efforts to bring the warring parties to the table defied all efforts.
However, when Kyari became the NNPC boss in 2019, he braved 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 was crude oil export. By mid-September 2019, barely a month in office, he had brokered peace and got all parties in the dispute to sheathe 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 production sharing contract 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. This will further boost the nation’s oil production.
In furtherance of the goal of boosting crude oil production, the NNPC, on his 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 N875.75m 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.
First oil of about 7,900bpd was achieved from the project on April 1, 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 $20bn 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 peak of the COVID-19 pandemic, with the signing of the engineering, procurement and construction (EPC) contract of the NLNG Train-7. 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 multibillion-dollar project, which, on completion, is expected to raise the NLNG’s production capacity by 35 per cent from the current 22 million tonnes per annum (MTPA) to 30 MTPA. On June 15, 2021, the ground-breaking ceremony of the NLNG Train 7 project was conducted, signalling the commencement of construction work on the project.
NNPC also successfully kicked-off the construction of the Ajaokuta-Kaduna-Kano (AKK) gas pipeline project on June 30, 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 2.2bn 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 execution.
Kyari also led the corporation to achieve a $300m reduction in the cost of the AKK gas pipeline contract via contract renegotiation from the initial $2.8bn.
An additional major stride in the gas sector was witnessed in late 2020 with the inauguration 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 20 tonnes 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 with the Brass Fertilizer and Petrochemical Company for the $3.6bn Brass Methanol Plant in Odioma, Bayelsa State.
Kyari followed that up a few weeks later with the signing of a $260m financing agreement for the Assa-North Ohaji South gas project with Seplat. The project will deliver 300m standard cubic feet of gas per day and 1,200 megawatts of electricity to the domestic market.
On April 22, 2021, NNPC executed a gas development agreement for OML 143 with its partner SEEPCO. The project will boost the nation’s gas production by 1.2trn cubic feet (tcf).
The corporation also secured the United States Trade and Development Agency grant and commenced the upgrade of the 1,350MW Abuja independent power plant project development to World Bank standard for bankability.
In 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’s stewardship. The corporation is in the process of strengthening the products distribution system by revamping the pipeline network through a build, operate and transfer 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 product 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, the Kyari-led NNPC signed 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. 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 $1.5bn engineering, procurement and construction (EPC) contract with Tecnimont SpA for the complete rehabilitation of Port Harcourt Refinery.
On May 7, 2021, the GMD led NNPC and the contractor, Tecnimont SpA, to commence rehabilitation work on the Port Harcourt Refinery. He has introduced a new operational model for the refineries, post-rehabilitation, with the call for bids for the operations and 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 and Kaduna Refinery Complex 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’s approval of award to the most technically and commercially qualified globally reputable EPC company.
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. It 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, Warri Refining & Petrochemical Company Limited, Port Harcourt Refining Company Limited, Kaduna Refining and Petrochemical Company, and Integrated Data Services Limited, Nigerian Products and Marketing Company Limited and Nigerian Pipelines and Storage Company.
Others were the National Engineering and Technical Company Limited, Nigerian Gas and Marketing Company Limited, 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 N5.04trn with a profit of N1.01trn. 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 N423.43bn, compared to over N359.093bn in 2017.
Apart from an operating loss of about N64.55bn, Kaduna refinery reported administrative expenses of about N64.68bn during the year, down from about N114.347bn in 2017.
The bulk of the losses were attributed to direct operational costs, despite the fact 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 that led to the release of the audited results.
Executive secretary of the Nigerian 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 recent 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, 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 per cent of proposed budget and cost.
“We have rolled out strategy to achieve sub $10/bbl UOC without jeopardizing growth,” he said.
Another key achievement of the NNPC under the leadership of Kyari on the transparency terrain is the successful completion of a controversy-free recruitment exercise for 1,000 young graduate trainees to rejuvenate the corporation’s talent mix.
Kyari also promised at his inauguration to upscale engagement with stakeholders to ensure that stakeholders are carried along in the corporation’s operations. He has kept faith with this pledge by devoting time to honour invitations from the relevant committees of the National Assembly, and holding periodic engagement sessions with critical stakeholders, including the media.
Following the outbreak of the COVID-19 pandemic in early 2020, the GMD quickly realized the vulnerable position of Nigeria with regard to the condition of the healthcare system in the country. 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
Under the leadership of the NNPC, 26 per cent of the fund was deployed for the provision of logistics and in-patient support equipment such as ambulances, ventilators, isolation centres, etcetera. He ensured that every state of the federation benefitted from the donations.
Twenty-one per cent of the sum was deployed for the provision of medical consumables. These include drugs, sanitizers, masks, protective gears and equipment, among others. These were also donated to all the states of the federation.
The balance of 53 per cent of the sum was designated for the construction of standard medical facilities with one in each of the six geo-political zones of the country. The ground-breaking ceremony for the infectious diseases hospitals have been held in Bayelsa, Kano, Maiduguri and Owerri.