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Published On: Wed, Jul 15th, 2020

Radical transformation at NNPC under Mele Kyari

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WEDNESDAY COLUMN by USSIJU MEDANER

info@medaner.com, justme4justice@yahoo.com

One thing I rarely do is to sing praises of people, especially individuals who are opportuned and entrusted to serve the country in whatever capacity; but when I do, it is definitely well deserved. So on this occasion, it is relatively so easy for me to tell the story of Mr. Mele Kolo Kyari, the Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC), because the outcomes of what I have observed as effected policy changes and the revolutionary transparency of the operations of the corporation since his appointment as the GMD are quite unprecedented, and the beneficial upshots to the nation are equally monumental. Before I proceed, I would like to also state that I have never met him before so anyone should not entertain the thought or ascribe to Mr. Kyari as the sponsor of this article; and I personally bear the responsibility of the content.
In the last 365 days, NNPC has witnessed a huge number of positive reforms, responsible for setting the corporation on a fresh course for transformative growth. Fortunate enough, I am not alone in this position; those who were familiar with GMD both from his past and during his ongoing tenure all attested and have been unanimous in their assessment that Mr. Kyari has always demonstrated excellent qualities that could only have driven him to become, perhaps, the best in a long period to sit at the helm of affairs of NNPC.
I felicitate with the Group Managing Director of the NNPC as he marks the anniversary of an achievement laden first year in office on the 8th of July 2020. As Mr. Kyari clocks one-year in office as the 19th GMD of NNPC, I took time to underline changes in the policy direction of the corporation and the multitude of all-round achievements of NNPC especially the gains on local content development of the corporation in the last one year and the improve localisation of the dividends of crude oil to the nation and the people of Nigeria. It is of necessity that the story not only be told, but be told with full impact and dissemination as it so deserves across the entire corners of Nigeria and across the global.
Within a year, the record of great feats of the corporation soared high. The corporation recorded a successful signing of a funding and technical services agreement and an alternative funding deal for both the NPDC OML 13 and 65 at a cost totaling about $4 billion. As at 2018, NNPC, the international companies, IOCs, were owing Nigeria about $21 billion in debt as well as revenue leakages, without any candid action taking to recover the debts. Then, PSC, Joint Operating Agreement, marginal fields acquisitions and other important agreements Nigeria made with the OICs and even expected revenue from successful bids, remittance and non-remittance of revenue to federation account, among others, were skewed to our disadvantage; so much that the House of Representatives became concerned enough to demand for reasons for the loss of such huge revenue and why appropriate steps were not taken promptly over a long period to remedy the situation.
The battle to recover these funds however began midway into 2019 when the Federal government sued NNPC, Agip, Shell and others to recover the huge funds lost to alleged under remittance and diversions of oil and gas revenues meant for the Nigeria federation. As at today, the story is changing as most of these debts are being recovered
In April 2019, the Revenue Watch Institute (RWI) categorised NNPC in its publication of National Oil Company Database, as one of those National Oil Companies (NOCs) with record challenges of transparency. The institute concluded that NNPC hardly disclose to the public its net income from core revenue, capital and operational expenditures, cash flow from operations, its total assets worth and even employees’ statistics. The expectation was for transparent public reporting of the corporation activities, a feature that has been missing in the corporation for decades. Not only the institute, Nigerians have also been calling for transparency and accountability in the running of the country’s foremost industry, so much that Mr. Kyari was charged with the prospect of initiating a see-through process in its management.
The disparity that has attracted worrisome concern over the transparency of NNPC include among many others the audit report of NEITI which has severally indicted the corporation of lack of accountability and transparency evidenced in the overtime recorded differences in actual volume of crude oil lifted and actual volume of production by the corporation.
So, the announcement of the principle of Transparency, Accountability, Performance and Excellence (TAPE) vision in the early days of Mr. Kyari’s leadership of NNPC paved the way for what is expected from his regime as the driver of the corporation and as he began to fulfil his promise of driving the corporation towards global excellency. Today, if there is any index of transparency and accountability coming from NNPC, it is the more open, regular and accessible open accountability of the corporation by its public declaration of the financial position of the corporation and the change in the sequence of auditing of its operations that we are currently witnessing.
The TAPE vision of Mr. Kyari was energised by the immediate development of five key priority areas of deliverables for the corporation. NNPC’s key priority areas under Mr. Mele Kyari include: growing the nation’s reserves and increasing production; the expansion of the gas sector footprint towards stimulating industrialisation; enhancing local refining capacity; efficient and seamless petroleum products supply to guarantee energy security for the country; security of critical oil and gas infrastructure in the country; capitalisation and commercialisation of the corporation’s new businesses; development of the corporation’s human capital and excellent service delivery; and ensuring financing for growth and effective liquidity management.
To what extent has NNPC met these operational objectives? As we speak, some of those KPAs have well been delivered while a few of them are still being pursued vigorously across the entire value-chain of the NNPC.
As regards to the plan for the Upstream Directorate, NNPC is currently championing the initiative to grow the nation’s reserves- which it has started successfully – and also increase its production. As at April 2020, the nation’s daily crude oil production hits an all-time high level of 2.3millions barrels per day. In the Refining and Petrochemicals Directorate, NNPC is now pursuing a deliberate shift to get the refineries back to their default capacities using the Operations & Maintenance (O&M) Model, thereby enhancing local refining capacity. We now have a rehabilitation program for the four refineries to bring them back to a minimum of 90 per cent of installed production capacity by 2023 underway.
In the last one year, NNPC, in its Downstream Directorate, has witness continuous nationwide petroleum products supply, even when the global oil industry was hard hit with both drop in price and demand, and the impact of the coronavirus pandemic on the natural flow of events, the supply of the product, considered highly necessary and critical in guaranteeing Nigeria’s energy security wasn’t in any way affected. Instead, the well managed operation led to a marginal drop in price of PMS for a while during the period. Also, during this same period of time, the nation has enjoyed relative stability in the nation’s critical oil and gas infrastructure.
Few days ago, President Muhammadu Buhari commissioned the AKK project. The project which was billed to cost the nation $2.5 billion was initially fixed at $2.8 billion, but the intervention of NNPC under Mr. Kyari saved the country $300 million from re-negotiating the project cost. This is a marked departure from the norm of those in similar positions who often create avenues to raise contract value for personal benefit and it is commendable coming from Mr. kyari.
During the same period, NNPC successfully achieved the Amendment of the Deep Offshore (and Inland Basin Production Sharing Contract) Act and the signing of Final Investment Decision on the Nigerian Liquefied Natural Gas (NLNG) Train 7 project. As such, we would be expecting the commission of the much anticipated NLNG Train 7 in record time which, potentially, could generate additional over $20billion of revenue to the Government, 10,000 direct and 40,000 indirect jobs over the project’s lifecycle. The corporation also achieved the launching of its 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.
The corporation in the very period began ensuring the optimisation of its costs as well as the improvement of operational efficiency via efficient management of its Finance and Accounts Directorate. The corporation now enjoys a more robust, growth focused system, an effective liquidity management, and an excellent service delivery.
At the heart of the coronavirus pandemic, when other institutions were shutting down and could not fathom a way to contribute to the nation’s response to the crisis, NNPC under the current GMD surprised the bookmaker’s expectations. Almost a quarter of Mr. Mele Kyari stay as the driver of NNPC till now, has been burdened by the impact of the global pandemic; and a time of global crisis in the oil and gas industry that saw to marked decline of crude oil prices, yet, in an uncommon gesture, the GMD, under the guidance of the Minister of State for Petroleum Resources, Chief Timipre Sylva, within a short period rallied his colleagues in the Industry to come up with an intervention initiative to the tune of $58 million (N21bn) to support the Federal Government’s efforts at combating the deadly coronavirus. That was an unparalleled exhibition of corporate compassionate and empathetic gesture during such a major national crisis.
It was some 19 years ago that the federal government intent to reposition the nation’s petroleum industry to become more beneficial to the nation by entrenching transparency, accountability and efficiency that will increase the total take of the country from the critical industry; led to the formulation of the Petroleum Industry Bill (PIB). Unfortunately, the bill which is long expected by many to increase the nation’s revenue from oil and lay down a strengthened legal and regulatory framework for the Nigerian oil industry, has continued to suffer delays because vested interests that would prefer the industry remain in their pockets. These vested interests spreading among the multinationals, politicians and even individuals within NNPC held the nation hostage for close to two decades. When it was obvious that the failure to bring PIB on board would have a huge damaging effect on the nation today and in the future, leaders of the past and drivers of the NNPC Administration had mostly chosen to be undaunted by the continuous non-passage of the bill.
We are talking of a bill with the capability to secure the much needed long term macroeconomic stability for the country, reform the Extractive Industry institutional framework, support enhanced production to ensure Nigeria remains the top African oil producer, kick-start a domestic gas-to-power market, provide clarity and stability for Nigeria and its partnership within the oil and gas industry for the next decade, increase oil and gas production whilst protecting the environment and definitely support economic diversification of Nigeria as well as local content development. A bill with the assured capacity to increase the nation’s revenue base, deregulate the industry and raise environmental protection standards. The coming on board of a bill that would present the opportunity for the nation to kick-start the country’s domestic gas market by creating demand for companies to shift to gas power as a lasting and more efficient solution to the nation’s ongoing problem of power shortages.
In 2015, after 15 years of ball play among, apparently the vested interests who preferred the bill to not see the light of the day, hope came but was not sustained until NNPC became interested and focused on the bill about a year ago. In the last twelve months, we have seen a lot of efforts in the right direction and hope that the bill would finally receive presidential signature before the end of 2020. This is a big plus of the reform spearheaded in NNPC by Mr. Kyari.
Another major feat of NNPC under the leadership of Mr. Kyari, is the commercial discovery of crude oil deposits in the northern hemisphere of Nigeria. Over the last three decades the Federal Government of Nigeria, via NNPC has continuously incurred huge resources in an attempt to explore oil in the northern part of the country. Whatever was done differently that led to the major discovery of hydrocarbon (oil and gas) deposit in the Kolmani River II well on the Upper Benue Trough, Gongola Basin under the leadership of Mr. Mele Kolo Kyari is a reason enough to shower him with praise.
The implication of oil discovery in the north is massive for the country. Though long expected, we are about to see an expanded revenue base, job creation, and a possible lift of the long term regional impression of marginalisation; we could see true acceptance among regions in the long run when no region is perceived any longer erroneously as a pest any longer.
The commitment of NNPC to the implementation of local content is equally commendable. We can now boast of an increasing number of indigenous companies and firms already participating in the nation’s oil and gas industry. The Nigerian Content 10-year Strategic Roadmap has received a major boost in the last year with developments and decisive decisions that support the realisation of the minimum 70 percent Nigerian Content in the Nigerian Oil and Gas Industry according to the NCDMB’s agenda. On record, the Mr. Mele Kolo Kyari led NNPC has in the last year, maximised the results from the $200 million Nigerian Content Intervention Fund (NCI Fund) earlier launched to provide funding support to local service companies. Continued support for development and launching of modular refineries directly run by Nigerians with provision of flexible funding and investment interventions from the government is a great development in that direction.
One major problem the nation has been enduring since the beginning of the era of oil and gas business in Nigeria has been the glaring acute inefficiency in the management of the industry occasioned by the complacency of the past managers of NNPC at various periods. Obviously, and from insinuations and recorded facts, mismanagement of the nation’s oil resources arising from foul plays from many quarters has mostly led to the scenario where in the past and till recently, accountability became lost from the operation of the corporation. These foul plays have equally put the nation in a precarious condition of undue litigation capable of robbing the country of huge fortune. So, it become a welcome development to have a GMD, who is more interested in getting the corporation to increase its level of efficiency, reduce costs and increase revenues across the value chain of its businesses within the shortest possible period and has in a short period of time navigated the country safely from litigations that saved us huge resources from arbitrations. We are now recording efforts leading to more benefits to the nation from the industry.
There is no limit to the height of efficiency NNPC could attain if the available variables to the corporation are well coordinated by those who are in charge. For as long as the fossil fuel industry remains the mainstay of our economy, the need to strive for open management of the sector would persist.
Today, we celebrate the current GMD, Mr. Mele Kyari for setting a new foundation for the nation’s oil industry but beyond today’s celebration, we would and should all hope for sustainability of what we are celebrating today.
GOD BLESS THE FEDERAL REPUBLIC OF NIGERIA

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