NNPC: Kyari’s Two Years in the Saddle

Peter Uzoho reviews the performance of the Nigerian National Petroleum Corporation, the Group Managing Director, Mallam Mele Kyari two years after his appointment

Last Thursday made it the second year in office of the current Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kolo Kyari as the 19th GMD of the national oil company. Already aware of the expectations of Nigerians, who are the shareholders of the NNPC, the nation’s oil and gas industry and other stakeholders in the affairs of the corporation, Kyari hit the ground running right from the day of his inauguration.

In his inaugural address, he had clearly indicated the direction his management intended to steer the corporation and two years down the road, his actions and strides vis-à-vis the key objectives he had set out for himself at his inauguration have earned the corporation phenomenal successes.

Upstream

One of the goals the GMD set at his inauguration was to increase the national crude oil reserves to 40 billion barrels. To achieve that goal, the GMD galvanised NNPC to rev up exploration 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 volume which the Minister of State for Petroleum Resources, Chief Timipre Sylva, had put at one billion barrels.

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 even as plans are also afoot to re-launch the 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.

Another goal set by Kyari was to boost the nation’s oil production to three million barrels per day, and to achieve that target, he immediately set about resolving disputes around a number of oil blocks that had led to production shut-in.

A case in point is the resolution of the dispute involving Shell and Belema Oil that shut in over 30,000 barrels per day production in the Oil Mining Lease (OML) 25. That dispute was effectively resolved to restore production in the oil block.

The NNPC GMD also led the corporation to execute the Abo OML 125 Heads of Terms, leading to the resolution of the issues around most of the deep offshore Production Sharing Contracts (PSCs).

This paved the way for the renewal of OML 125 and further investment in the exploration of the lucrative field to boost the nation’s crude oil production.

Recently, Kyari repeated a similar feat when he led the corporation to sign a series of agreements with Shell Nigeria Exploration and Production Company (SNEPCo) and other PSC partners to resolve the disputes around another deep offshore block, OML 118. That led 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 the nation’s crude oil production, the Kyari-led management has secured a number of alternative funding facilities for the corporation’s exploration and production arm, the Nigerian Petroleum Development Company (NPDC) and some of the Joint Ventures to facilitate further development of assets.

These include: the N875.75 million NPDC OML 65 Alternative Funding and Technical Services package with CMES-OMS Petroleum Development Company, the $3.15 billion 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 7,900 barrels per day 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.

Gas Development

In the area of gas development, 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 (FID) on the Nigeria Liquefied Natural Gas (NLNG) Train 7 Project in December 2019.

The project had been on the drawing board for over 10 years and is expected to generate over $20 billion 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 heat of the COVID-19 pandemic, with the signing of the Engineering, Procurement and Construction (EPC) contract of the NLNG Train-7 project. 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 multi-billion dollar project which, on completion, is expected to raise the NLNG 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 by President Muhammadu Buhari, signaling the commencement of construction work on the project.

NNPC also successfully flagged-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 TransNigeria Gas Pipeline (TNGP) with a capacity to transport about 2.2 billion 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 completion.

Kyari also led the corporation to achieve a $300 million reduction in the cost of the AKK Gas Pipeline contract via contract renegotiation from the initial $2.8 billion.

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 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 (LPG), commonly known as 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 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.

Kyari heralded 2021 with a significant step in the direction of bringing the proposed Brass Gas Hub into reality. He led NNPC to take the FID with the Brass Fertilizer and Petrochemical Company for the $3.6 billion Brass Methanol Plant in Odioma, Bayelsa State. He followed that feat up a few weeks later with the signing of a $260 million financing agreement for the Assa-North Ohaji South (ANOH) Gas Project with Seplat. The project will deliver 300 million 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 (GDA) for the Oil Mining Lease (OML) 143 with its partner, Sterling Oil Exploration and Production Company (SEEPCO). The project will boost the nation’s gas production by 1.2 trillion cubic feet (tcf). The corporation also secured the United State Trade and Development Agency (USTDA) Grant and commenced the upgrade of 1350MW Abuja IPP project development to World Bank Standard for bankability.

Downstream

Like aspects of its operation, NNPC’s downstream operation is also experiencing the Kyari’s Midas touch with the introduction of 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. It has emplaced a stable fuel supply system to guarantee zero fuel queues throughout the country in the last two years of Kyari.

The corporation is in the process of strengthening the products distribution system by revamping the pipeline network through a Build, Operate and Transfer (BOT) 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 products evacuation facilities are in top shape to support the operations of the refineries post-rehabilitation in 2023.

Keen on boosting petroleum products supply and distribution in riverine areas of the Niger Delta, Kyari had led NNPC to sign an agreement with the Nigerian Content Development and Monitoring Board (NCDMB) and Zed Energy for the construction of the N10.5 billion 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 diesel, petrol, kerosene and aviation fuel. It will close the infrastructure gap in the distribution of petroleum products and also help to stop illegal refining activities.

Refineries Rehabilitation

Another goal that the GMD set for his management at inauguration in 2019 was the rehabilitation of the refineries. Kyari has made good of that promise by driving the rehabilitation project to an advanced level. On April 6, 2021, he led NNPC to sign the $1.5 billion Engineering, Procurement & Construction (EPC) Contract Agreement with Tecnimont SpA, for the complete rehabilitation of Port Harcourt Refinery. On May 7, 2021, the GMD led NNPC and the contractor, Tecnimont S.p.A., to flag off construction work on the Port Harcourt Refinery rehabilitation project.

The GMD is in the process of making good his promise to introduce a new operational model for the refineries post-rehabilitation with the call for bids for the Operations & Maintenance (O&M) 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.

WRPC and KRPC EPC contracting has progressed to advanced stage with a certificate of no objection secured from BPP on the award of the contract and is currently awaiting the Federal Executive Council (FEC) approval of award to the most technically and commercially qualified globally reputable EPC company.

Transparency

One of the issues Kyari spoke passionately about during his inauguration was transparency and accountability. He emphasised that transparency and accountability would be the cardinal pillars of his management. He promptly followed up his inaugural pronouncement with the launch of his management’s strategic objectives two weeks later.

He christened it as Transparency, Accountability and Performance Excellence (TAPE). Since then, he has walked the transparency and accountability talk by opening up the books of the corporation the way no other management before his has done.

Some of the key accomplishments recorded in this regard include the publication of the 2018 and 2019 Audited Financial Statements of the Corporation and its 19 subsidiaries registered under the Companies and Allied Matters Act (CAMA) 1990 as amended alongside that of the National Petroleum Investment and Management Services (NAPIMS) to provide clarity on Joint Venture finances.

The AFS were published in the corporation’s website for all interested parties to access and scrutinise. This is the first time the corporation’s AFS were made public in such a manner.

A major revelation in the Audited Financial Statements of the two years so far published is the 99.7 per cent reduction of the corporation’s loss profile from N803 billion in 2018 to N1.7 billion in 2019. Following this trajectory, the corporation is likely to declare profit in the 2020 AFS which is billed to be released soon.

The Kyari-led management also sustained the Publication of the Corporation’s Monthly Financial & Operations Reports (MFOR) in line with the TAPE vision. NNPC remains the only national oil company that publishes its financial and operations reports monthly globally. Also, the GMD led the corporation to enlist with the Global Extractive Industry Transparency Initiative as an EITI Supporting Company which mandates, places NNPC in the group of over 65 extractive companies, state owned enterprises that commit to observing transparency and accountability standards defined by EITI.

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.

Stakeholders Engagement

In line with his promised at his inauguration to upscale engagement with stakeholders to ensure that stakeholders were carried along in the corporation’s operations, Kyari has kept faith with this pledge by devoting time to honour invitations from the relevant committees of the National Assembly, holding periodic engagement sessions with critical stakeholders including the media.

COVID -19 Interventions

Following the outbreak of the COVID-19 pandemic in early 2020, the group managing director quickly realised the vulnerable position of Nigeria with regard to condition of the existing healthcare system in the country. He rallied players in all the sectors of the oil and gas industry to raise over N21 billion to support the fight against the spread of the disease in the country. Under the leadership of 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, etc. 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 included drugs, sanitisers, masks, protective gears and equipment, and were also donated to all the states of the Federation.