As NNPC Goes after Old Debts

With the recent push to recover monies owed it from business transactions, the Nigerian National Petroleum Corporation (NNPC) may have started its business accountability drive as ensconced in the 12 Business Focus Areas (BUFA) it launched in February, wr

Though one of the downstream operator – MRS, has reportedly refunded the corporation what it took from it, the NNPC said the other firm - Capital Oil, was yet to refund it 82 million litres of petrol valued at N11 billion, which it allegedly sold without its permission

In February, the Group Managing Director of the NNPC, Dr. Maikanti Baru had announced that the corporation would implement a lead policy framework tagged: ‘the 12 Business Focus Areas (BUFA),’ which was aimed at institutionalising efficiency, profitability and growth in the day-to-day activities of the corporation.

Baru stated then that going forward, the corporation would strive to manage the resources entrusted in its care by the federal government, with the expectation that tangible values from its operations would be derived and delivered to the country.

He explained that through the BUFA framework, which has 12 key focal points, the NNPC would work to ensure that all its assets are properly secured, new business models developed to grant business autonomy to its various units, and challenging issues around the Joint Ventures Cash Calls eventually settled for good.

He also noted that ramping up crude oil production and reserves growth in the country’s oil fields would be pursued within the BUFA framework, while the Nigerian Petroleum Development Company (NPDC) would be strengthened as the corporation’s cash cow.

Gas development for both domestic and export markets, upgrade of the corporation’s existing refineries in Kaduna, Warri and Port Harcourt, opening up of business opportunities to expand in-country refining of oil, foray into renewable energy and frontier exploration, as well as revamp of the country’s oil and gas infrastructure would according Baru be part of the pursuits of the BUFA framework.

Additionally, the GMD highlighted the corporation’s pursuit of profitable ventures and common services, as well as pushing the borders of professionalism and accountability in the corporation’s business engagements, as the other aspects of the BUFA framework which his management would stick with to reposition the NNPC for all round profitability.

At the launch of the preliminary work of the committee he had set up in December 2016 to develop the framework, Baru directed the corporation’s Chief Operating Officers (COOs), to start immediate implementation of the BUFA plan, and equally asked them to revert to the top management in outstanding situations that required further intervention.

He noted then that the BUFA would be reviewed jointly by the top management and the committees that developed it, after which its full implementation will kick-off with the expectation that its impact would be far-reaching and remarkable in the corporation’s future operational outlooks.

BUFA implementation Though reforms in the operations of the NNPC was started by the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, who as a former head of the corporation initiated turnaround steps to make the various subsidiaries of the NNPC profitable and semiautonomous, they were however strengthened with the BUFA, which Baru set up.

In addition to sustaining the monthly publication of the financial status of the various subsidiaries of NNPC, thus, keeping the subsidiaries in touch with accountability, the corporation also reportedly began to review its past business transactions with its various partners to reconcile outstanding differences.

As part of the business transactions reviews for accountability, the NNPC announced last week that three oil marketing firms - Aiteo Energy Resource Limited, Ontario Oil and Gas Limited and Televaras Group of Companies, had agreed to refund to it over $184 million recorded against them as under-delivered petroleum products in the various crude oil swap transactions they entered with it.

The corporation said in a statement by its Group General Manager, Public Affairs Division, Mr. Ndu Ughamadu, in Abuja, that the three oil companies were found to be indebted to the corporation when a reconciliation of transactions executed during the defunct crude for product swap regime was done by the parties.

Quoting Baru, the statement stated that the reconciliatory exercise which yielded the $184 million refund from the firms was part of an ongoing extensive reconciliation process with them and investigation into the execution of the swap deals.

Under the defunct swap programme, it was alleged that its procurement and management was opaque. The NNPC exchanged a huge chunk of the 445,000 barrels per day (bd) crude oil it got for domestic refining with the oil marketing firms for refined products.

Similarly, the swap programme attracted calls for investigation of its management which the House of Representatives heeded to with its investigation of the operation in 2016.

In addition to that, the Nigeria Extractive Industries Transparency Initiative (NEITI) stated in its audit of the transactions, that during its operations, Nigeria lost $518 million on the back of the inefficiencies identified with them.

NEITI also explained in its audit that while the swap deal resulted to a loss of $211.88 million to the corporation, it also lost $306.16 million to the Offshore Processing Agreements (OPAs).

The crude-for-products exchange arrangement which the corporation investigated its management and got concerned firms to repay it $184 million, was however replaced in 2016 with a new arrangement referred to as Direct-Sale–Direct-Purchase (DSDP).

Under the DSDP, all the cost elements of middlemen are eliminated and the corporation given the latitude to take control of the crude oil transaction it enters into through competitive bids.

Baru however said on the development: “We have engaged them and positively too, so far Aiteo has been very cooperative and we had extensive reconciliation across all our chains of businesses where they are involved. In the case of Televaras, they have agreed to make tranche payment of $10 million while Ontario has also agreed to come to the table with our team and present their repayment schedule.”

He equally added that Ontario has already pledged to repay $17 million. He thus thanked the company for its cooperation so far, and added that the ongoing recovery process was geared towards ensuring probity and accountability in the operations of the NNPC in line with current reforms in the industry.

Throughput agreement reforms Another area that may have attracted the BUFA framework was the management of NNPC’s throughput transactions which it indicated a fortnight ago that it would review its management with third parties in the downstream sector to curtail repeated breaches and losses to it.

This decision as stated by the corporation was based on its discovery and disclosure that two downstream oil operators had breached the various throughput agreements it had with them and sold about 130 million litres of petrol it kept in their storage facilities as strategic reserves.

The NNPC stated that it would in addition to investigating the recent breach, also set up new modalities to guide its engagement of throughput partners, as well as take punitive actions against parties involved in the anomaly.

Though one of the downstream operator – MRS, has reportedly refunded the corporation what it took from it, the NNPC said the other firm - Capital Oil, was yet to refund it 82 million litres of petrol valued at N11 billion which it allegedly sold without its permission.

Baru, however stated that the NNPC under his leadership would recover the outstanding stock of its missing petrol in Capital Oil Depot.