KYARI: NNPC CAN RECOUP INVESTMENT IN DANGOTE REFINERY IN FIVE YEARS
its shareholders and I think we will say, with all humility, that this company is doing great today. There are challenges but we are surmounting them and those challenges are very obvious in the energy industry. We are learning and we are making all the changes and today, nearly 70 per cent to 80 per cent of all our processes are automated. I do not have to deal with any hard copy documents and this is history and is very abnormal. So, it’s not a picture of a company that is overwhelmed. Today, when you go to our website, for every transaction that we we do on behalf of this country, it is completely published on our website, including our working documents.
Given the OPEC cut, is there any hope that Nigeria may be able to ramp up production very soon?
During the Covid-19 pandemic, it was a very conscious and considered decision for the oil producing community to come together to cut production. This may never come back because people’s choices have changed and a number of things have happened. The net effect is that you lose transportation for taking out some volume out of the market. Getting back to the pre-Covid levels is still far away, and that will be by at least 2022. There are engagements that are going on at the OPEC level because even producing countries don’t like prices that are too high. When you cross $80 to the barrel, it constrains your consumers who will make choices because they don’t want to go out of the budget. Producers are aware that when prices are too high, they will lose their customers and for you to do that, you have to bring it to a level that your customers can afford. To curtail this, we need to increase production or increase supply and that’s what will happen. Even right now, we are unable to produce maximally for several reasons which are also technical because when you shut down an oil well, it doesn’t mean that it is going to come back. That is the reality of this business and even where you have a reason to come back to this well, it will cost you more money. There are many cost implications to that, but obviously
as the production environment is changed by the OPEC arrangement, we will benefit from it.
The other issue is the cost of producing a barrel of oil in this country relative to other places like Saudi Arabia?
We realised during the heat of covid-19 that we couldn’t continue to produce at that cost and still be effective or profitable, so we told our contractors that it will no longer work, so that we needed to renegotiate. We were able to get up to 30 per cent terms from our contractors. It is possible to optimise. We have set a target for this and we are sure that it is possible to bring it to about $10 per barrel. The end result is that we have substantially brought down cost and though I can’t put a number to it, but I’m sure that we have been able to bring down our operating revenue by at least 30 per cent of what it used to be one year ago. We are working on three legs to make sure production is optimised so that value will come , in the international space, price is optimised by this arrangement, but we want to have price range of between $50 to $60, which we are very comfortable with.
We are seeing that the numbers are changing and obviously we are proud that this is working.
Let’s talk about gas?
In the past, oil companies were looking for oil. So, gas was not the focus. And even the legislations that were on ground were actually focused on oil development and almost oblivious of the reality that we are a gas country. For instance, the inland basin act which guides the operations in the deep-water and the production sharing contract are simply an arrangement based on crude oil and very silent on what we do with the gas. We have declared 2020 as the year of gas and then the decade of gas, meaning that we are shifting attention from oil to gas as a transition fuel and as the vehicle that can deliver prosperity to our country. We are short of power in this country. Enormous work is going on, but there’s a space to be filled.
What is the latest data on vandalism and what is the NNPC doing, working in concert with the security agencies to put a lid on this?
There are still a number of infractions on our facilities in very many locations. But it is different now because today the level of vandalism that we see is far less than five years ago. So, there’s massive improvement because of two things. One, because of the engagements that are now different and there are a number of clean and clear engagements to ensure a more clement environment and then the activities of the government security apparatus. The numbers are going down. Things have changed and obviously there are still challenges and part of the changes is the petroleum industry bill which has provision for the local communities. There is also the more technical issue which is sometimes mistaken for vandalism. Many of the pipelines were laid 30 years to 40 years ago and they have deteriorated and have undergone rust . But it is cheap excuses to say they are vandal actions.