As NNPC’s Kyari Navigates on Transparency
The number of litigation on hanging over Shell Petroleum Development Company and its parent company, Royal Dutch Shell, many fear could threaten its operations in Nigeria, if not Davidson Iriekpen properly managed, writes
National Oil Companies (NOCs) in Africa stand on the brink of signiÀcant disruption as a new era of structurally lower oil prices challenges business models that have long relied largely on exploration and production of hydrocarbons, especially crude oil.
This scenario fundamentally puts Mallam Mele Kolo Kyari, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), on the spot. Especially so, as the unassuming geologist, whose tour of duty has traversed the entire value chain of the petroleum industry, approaches his second year anniversary on the saddle. He was appointed GMD by President Muhammadu Buhari, on 8th July 2019.
Perhaps currently charting his toughest course in the transformation eͿort of an industry where he has spent much of his professional life in, Kyari has since responded to his top-draw responsibility by quickly taking charge and working in close synergy with his corporation’s oversight Ministry, the Ministry of Petroleum Resources. Within his 19-month trajectory, he has clearly demonstrated a fundamental grasp of what fossil energy means and the imperative of adroit governance of the giant National Oil Company.
He set sail by deÀning a clear vision to transform the NNPC and sending an unequivocal message that the corporation’s lukewarm governance narratives of the past are gone for good. With Kyari’s new vision for the corporation boldly anchored on the principle of Transparency, Accountability, Performance and Excellence (TAPE), he set sail. Rallying both staͿ and critical industry stakeholders to join the common cause, he stressed that going forward - excuses for poor performance were simply unacceptable. According to the new boss, “We either deliver or walk away in shame.” Most importantly, he is walking his talk, hence, the positive impact and changes to the new ways of doing things in the Corporation.
Besides its role as the bedrock of the Nigerian economy, the petroleum industry has been one of the key deÀning phenomena of the country’s post-independence history. This fact centralizes NNPC in the nation’s political economy, given the corporation’s assigned role in the industry.
Perhaps, this unique centrality of the corporation in the Nigerian state has spawned its fair share of challenges and reproach. A 2010 joint report by Transparency International and Revenue Watch Institute found that NNPC had the poorest transparency record out of 44 national and international energy companies examined.
Beyond TI’s report, today’s disruption is happening at a scale and speed unprecedented in modern history. From the petroleum industry to several critical sectors - business models are supending operations around the globe, and leaders are struggling to cope.
Put simply, to thrive in the murky waters of rapid technology and business model changes, organizations require the right leadership. For any leader, having a clear vision and articulating it well is a core competency.
A powerful vision pulls in ideas, people and other resources. It creates the energy and will to make change happen. It inspires individuals and organizations to commit, to persist and to give their best. This turf incidentally is Mele Kyari’s forte - vision, discipline, persistence, humility and focus.
One of the most important governance initiatives that have dealt a death blow to the corporation’s reputation of extreme operational opacity is “Operation White.” It is a presidential-mandated collaborative initiative driven by NNPC with the active participation of regulatory and security agencies as well as other stakeholders in ensuring that all molecules of regulated petroleum products imported by NNPC are well accounted for and utilised in the country. This initiative eͿectively ended the era of lack of transparency in the corporation’s governance style.
According to Kyari, as a control mechanism, the ‘Operation White’ has so far produced signiÀcant results as the corporation now clearly knows the areas of losses as well as reliability and integrity status of each and every facility under its control.
In June 2020, for the Àrst time in 43 years, the Kyari-led NNPC released the 2018 Audited Financial Statements - and subsequently 2019 - to the public for scrutiny, earning plaudits for the corporation from members of the public.
Not surprisingly, on account of this unprecedented governance positive, top industry players, eminent stakeholders and the conservative Nigeria Extractive Industries Transparency Initiative (NEITI) lauded the decision of NNPC to make public its audited accounts for the Àrst time in its history with the publication of its 2018 and 2019 Audited Financial Statement (AFS) on its website.
Even the ravages and disruptions of the dreaded Novel Coronavirus pandemic (COVID-19) have not derailed the focus and integrity of service delivery and operational stability and reasoned interventions by Mallam Kyari the earthy, humble leader who has notched 19 eventful months in oce as the Group Managing Director of the NNPC.
SigniÀcantly, early in February, the NNPC again expressed its commitment to moving the national oil company from its opaque past towards being a more transparent global organisation. Speaking when he received the “Government Agency of the Year 2020 (Transparency)” from the New Telegraph Newspaper, an elated GMDNNPC Kyari said the company had since realised that it pays to be transparent and accountable at all times.
He reiterated management’s resolve to drive the corporation along the line of Transparency, Accountability & Performance Excellence (TAPE) agenda, noting that the media interest in the activities of the corporation and the oil and gas sector was a welcome development. Further, he expressed delight that eͿorts of the management to entrench the culture of transparency in the system have begun to receive recognition within and outside the corporation.
Earlier in January, an appreciative Governor Ifeanyi Okowa of Delta State had also felicitated with the GMD-NNPC during his 56th birthday and commended his eͿorts in achieving great reforms at the NNPC.
Okowa noted that the Corporation, under the management of the GMD has attained 1.5 billion Standard Cubic Feet production per day and its equity production at 1.38 billion cubic feet of gas per day as at November 2020.
His words: “Malam Kyari’s leadership at the NNPC as its 19th Chief Executive has been largely characterised by outstanding vision in commitment to eciency, openness, transparency and prudence in service delivery geared at attaining the objectives of the corporation and meeting the expectations of shareholders.
“The NNPC and its joint venture partners under his leadership have continued to contribute to poverty reduction, economic and social development, especially in the Àght against COVID-19 pandemic.”
Okowa further noted that the Corporation, with the Transparency, Accountability and Performance Excellence agenda, as introduced by the GMD has become more proÀtable over the years. According to the Delta governor, “Let me commend Malam Kyari and his team for what they are doing to improve on the operations of the NNPC. Kyari has continued to demonstrate transparency and accountability by publishing the monthly operational report of the
NNPC, with a step further of publishing its annual audited Ànancial statement, which had not been done in 43 years of its operations.
“Worthy of commendation is the Final Investment Decision on the four billiondollar NLNG Train 7 and his continued drive towards completing long-standing gas infrastructure projects such as the EscravosLagos Pipeline System Phase 2 and ObiafuObrikom-Oben gas pipeline.”
The public perception of NNPC has clearly changed in recent times. The credit goes to the eͿorts of Mallam Kyari and his management team – especially on the transparency turf.
According to advocates of corporate ethics, one key eͿect of transparency on any organization, besides showcasing its honesty and integrity, is that it helps to scale up performance as well as put managers on their toes to do their best knowing that there is no room to hide their ineciencies.
A scrutiny of the NNPC’s 2019 audited Ànancial account further authenticates of the theory that commitment to transparency leads to achievement of improved performance. For example, the Corporation reported a huge reduction in losses as it posted a loss of N1.7 billion in 2019 as against N803 billion losses reported in 2018.
Although, there remains considerable room for improvement, it is indisputable that the huge cut in losses is indicative of an emerging new era of growth for the Corporation. Further data of how the cost optimisation was achieved in the 2019 AFS revealed that general administrative expenses was trimmed down from N894 billion in 2018 to N696 billion translating into a positive variance of 22 per cent.
More, the majority of NNPC’s subsidiaries posted improved performance namely, the Nigerian Petroleum Development Company Limited (NPDC) which recorded N479 billion proÀt in 2019 compared to N179 billion in 2018 representing 167 per cent increase; the Integrated Data Services Limited (IDSL) recorded N23 billion proÀt in 2019 compared to N154 million in 2018 representing 14,966 per cent increase; the Petroleum Products Marketing Company (PPMC) recorded N14.2 billion proÀt in 2019 compared to N9.3 billion in 2018 representing 52 per cent increase; while the ReÀneries have maintained the same level of losses as in 2018 but which will reduce signiÀcantly in 2020 due to cost optimisation drive.
These disclosures were made by NNPC’s Chief Financial Ocer (CFO), Mr. Umar Ajiya. According to him, the 2019 Ànancial year performance was driven mainly by cost optimisation, contracts renegotiation and operational eciency.
According to optimistic analysts, if the current trajectory is followed, it is possible that 2020 will see NNPC on a solid proÀt path since its management has sustained the drive to reduce cost, promote eciency, and rev up proÀts.
Looking at the big picture, Nigerians remain optimistic that the NNPC is indeed on the march to fulÀll its glorious destiny as the biggest and most proÀtable national oil company in Africa. Navigating with transparency is clearly the way to go.
These are not the best of times for Nigeria’s leading oil Àrm, Shell Petroleum Development Company of Nigeria Limited (SPDC), a subsidiary of Royal Dutch Shell. Since it commenced oil exploration in Nigeria 65 years ago, never has it witnessed a barrage of litigations and judgments against it as it has done in the last four years. The oil giant, locally and internationally, faces a litany of suits and compensations that threaten its existence in Nigeria.
Last Thursday, an Upper Area Court in Abuja presided over by Justice Gambo Garba issued a criminal summons against the oil major and seven of its top executives for stealing 16 million barrels of crude oil through the use of a fraudulent and unapproved metering system. The executives summoned are Chibueze Uduanochie, Simon Ruddy, Bashir Bello, Osagie Okunbor, Igo Weli, Toyin Olagunji and Captain Callium Finlayson.
According to the summons dated February 25, the respondents should be in court on March 2 to answer the charge levelled against them by the complainant. The suit, marked DC/CR/200/2021, was Àled by the African Initiative Against Abuse of Public Trust.
According to the suit, the group alleged that as operators of the Bonny Terminal, Shell installed an unapproved metering system which it claimed was temporary and which it manipulated to deliberately understate the volume of crude oil that was injected into the terminal, thereby, short-changing the local oil companies, owners of the oil and the federal government the revenue due to them.
The oil companies include Belema Oil, Eroton, Aiteo, and Newcross.
Consequently, the group is seeking an order of court convicting the Shell Executives for the criminal acts of conspiracy, theft, and cheating which violate Sections 97, 287, and 323 of the Penal Code Law Cap 89 Law of Northern Nigeria, 1963.
In the court papers, the group alleged that the Department of Petroleum Resources (DPR) has investigated the allegations and indicted SPDC. It alleged that Shell admitted cheating the companies of about two million barrels and committed to refund the crude to the companies.
The group said they would press for the maximum punishment, six months in jail for conspiracy, Àve years for theft, and Àve years for cheating. Attached to the summons against top Shell executives is Shell’s letter admitting to using a non-sanctioned metering system and conÀrming the implementation of refund of crude oil from the Trans Niger Pipeline (TNP) to the Nembe
Creek Trunk Line (NCTL), which proves there was alleged fraud by Shell, and other documents to support the facts of this case.
THISDAY gathered that after the oil major’s initial denial and pushback against the allegation, it admitted to the theft in a letter to the DPR dated February 8, 2021, captioned: ‘Re: Reallocation of Bonny Terminal Gross Volume from June 2016 to July 2018 Based on Comparison Of Metered Gross Volume Between Coriolis Meter and Lact Unit Installed on the NTCL.’
“We refer to your letter Ref: DMR/CTO/ COA/COM/V.5/045 dated January 28, 2021, in respect of the above subject. We note your directives as contained in the abovereferenced letter and wish to conÀrm that The Shell Petroleum Development Company of Nigeria Limited (SPDC) will implement the refund of the 2, 081, 678 barrels of crude oil from the Trans Niger Pipeline (TNP) injectors (SPDC, TEPNG, NDPR, and WSPOL) to the Nembe Crude Trunk Line (NTCL) injectors (Aiteo, Belemaoil, Eroton, and Newcross) over the period from the end of January 2021 till November 2021 in accordance with schedule III as contained in the Department of Petroleum Resources (DPR) letter Ref: DMR/CTO/COA/COM/V.5/230 dated December 14, 2020«,” the letter said.
Before the summons, sequel to the suit Àled by Aiteo Eastern E&P Company Limited,
a federal high court in Lagos had in January ordered the immediate blockage of its accounts operated in 20 banks over the alleged theft. The presiding judge of the court, Justice Oluremi Oguntoyibo, while giving the order in suit no FHC/L/ CS/52/2021, held that she was making the order pending the hearing of the motion and determination of the motion on notice for interlocutory injunction Àled before it by the indigenous company.
Justice Oguntoyibo further restrained SPDC and other defendants, including Royal Dutch Shell, Shell Western and Trading Company Limited, Shell International Trading, and Shipping Company Limited as well as Shell Nigeria Exploration and Production Company Limited from withdrawing funds standing to their credit without Àrst “ringfencing” them to the value of the 16,050,000 barrels of crude oil.
According to the court, on no account must any transaction be carried out in the listed accounts without Àrst “ring-fencing any cash, bonds, deposits, all forms of negotiable instruments to the value of $2.7 billion and paying all standing credits to the Shell companies up to the value into an interest yielding account in the name of the chief registrar of the court, who is to hold the funds in trust” pending the hearing of the motion.