From Uche Usim, Abuja
For a national oil company that choked over huge debts and frightening overhead costs for 44 years, declaring a N287 billion Profit After Tax (PAT) in 2020 was a pleasant surprise many did not see coming, especially in the midst of a blistering pandemic that literally tossed giant economies into the intensive care unit (ICU).
However, sources familiar with the workings of the Nigerian National Petroleum Company Limited (NNPCL) insist there was no magic wand introduced by the current management other than corporate frugality, shunning irrelevant investments, embracing technology, downward renegotiation of contracts, streamlining operations by merging duplicated tasks, maintaining fiscal discipline and hard work.
Contrary to naysayers’ habitual attacks on the national oil company, industry records affirm that it recorded a profit of N674.1 billion in 2021.
The figure dwarfs the 2020 outing by N387.1 billion, making it the highest in its 46-year history.
Just a few days ago, the company remitted N123 billion into federation account as June 2023 interim dividend and Petroleum Sharing Contract (PSC) proceeds derived from crude oil sales.
Nonetheless, the company recorded a loss of N1.7 billion in 2019 before it returned to profit-making, arising from tailor-made business strategies adopted by the management.
The journey to NNPCL’s success began a few years ago with a target to boost the nation’s crude oil production to 3million barrels per day by resolving disputes around a number of oil blocks that had led to production shut-in. It also designed potent solutions to tackling crude oil theft and pipeline vandalism that assumed frightening dimensions in recent times.
NNPCL, through its partners, have has detained and even destroyed various vessels involved in oil theft; while the crews were prosecuted; thus sending signals to all real and potential culprits of economic sabotage that the party is over.
NNPCL’s intervention led to the reopening of the Oil Mining Lease (OML) 25 flow station after two years of inactivity as a result of squabbles between the host community/Belema Oil and Shell Petroleum Development Company (SPDC).
In May 2021, it achieved a similar feat when it signed a series of agreements with SNEPCo and other PSC partners to resolve the disputes around another deep offshore block, OML 118, leading to the renewal of that acreage with the prospect of a new $10billion investment in the development of the Bonga South-East Field. This will further boost the nation’s oil production.
Daily Sun learnt that the NNPCL, despite a litany of misleading narratives about its performance, has remained focused on delivering dividends to over 200 million Nigerians and taking measured strides to achieving energy security.
A source stated: “It’s totally untrue that the NNPC has been notorious for befuddled accounting, waste, losses, run-down refineries and non-remittances of cash due to the federation account.
“The NNPC has posted all its financial statements from 2015 to 2022. Most of these claims could be verified in the office of the auditor-general of the federation, rather than misinforming the public”.
On the allegation that the President Muhammadu Buhari administration wasted $19 billion to rehabilitate four state-owned refineries without result — the same amount the Dangote Group had invested in its 650,000-barrels-per-day refinery, he described it as a brazen attempt to mislead Nigerians and torpedo the integrity of the national oil company.
“The totality of the spending inclusive of salaries and wages of workers can’t be compared with what it will cost to set up Dangote refinery,’’ he explained.
In consonance with NNPCL’s blueprint to address the energy insufficiency nightmare, an oil marketer and Chairman of Skymark Energy and Power Limited, Muhammad Saleh Hassan, called for a deeper gas utilisation by ensuring a stronger synergy between the NNPCL and Presidential Advisory Council towards quickening investments that will guarantee sufficient supply of Compressed Natural Gas (CNG) to meet local energy needs, while drastically reducing the need for petrol.
He said: “As a stakeholder, I know that the new N617 per litre price is not outrageous. It is even the cheapest globally in the oil market. This means that the price can never drop in this country. In order to save the horrible situation, CNG is the way to go now. It is the best alternative. It is cheaper than PMS and doesn’t burn as fast as PMS which is even costlier.
“The government should support the Group Chief Executive Officer (GCEO) of NNPCL, Mr Mele Kyari, who has repeatedly proposed CNG to replace PMS.
“In view of the current reality and dynamics in the energy sector, especially the seeming unavoidable price hike, the Federal Government under the administration of President Bola Ahmed Tinubu should consider it imperative to implement the CNG proposal and save the citizenry the hell that they are constrained to suffer in the wake of the fuel price hike,” Hassan noted.
Hassan, however, pointed out that the NNPCL management was not to blame for the incessant fuel price hike because “it is market forces (marketers) that influence the price to make profit.
He called on the Presidential Policy Advisory Council to carry Kyari along in all the decisions they take in the energy sector, especially importation, marketing and price of fuel.
“Taking any decision without carrying along a strong stakeholder and energy expert like Kyari would continue to stir controversy and confusion that are now brewing in the wake of the staggering fuel price hike.
“Whenever the need arises, the Presidential Advisory Council should invite Kyari to the round table for him to continue giving his expertise ideas which should be followed religiously since he is the expert with a midas touch.
“Kyari is the engine room of the energy sector. He is the initiator of the Petroleum Industry Act (PIA) and fuel subsidy removal. He proposed CNG to replace PMS. He designed the energy transition programme that transmogrified the NNPC to a limited company (NNPCL). All these noble ideas were with a view to proffering lasting solutions to the nation’s perennial fuel crisis.
“The crisis in the energy sector is not a political issue to play politics around it. It is an issue of expertise”, he said.
An industry analyst who preferred to remain anonymous explained that claims that the Goodluck Jonathan administration borrowed $1.6 billion for Turn Around Maintenance (TAM) and additional $1.5 billion for the same TAM were false.
“These figures are wrong. The NNPCL which represented the Federal Government in its efforts to rehabilitate the refineries through an Engineering Procurement and Construction (EPC) contract with its partners, has spent only its approved counterpart funding.
“The details were clearly spelt out in the memorandum of understanding signed for the respective refineries.
“For the records, the cost approved by the Federal Government for the rehabilitation of the nation’s three refineries are $1.5 billion; $740 million and $548 million for Port Harcourt, Kaduna and Warri refineries, respectively.
“The two EPC contractors are Tecnimont (France), which handles the Port Harcourt Refinery rehabilitation and Daewoo (South Korea) which oversees the quick-fix projects at both Kaduna and Warri refineries.
“Under President Goodluck Jonathan, no money was borrowed for turn-around maintenance. Under President Buhari, only $1 billion was borrowed. Rehabilitation is still on-going.
“The three refineries are currently undergoing rehabilitation and are managed as rehabilitation projects supervised by a refinery coordinator.
“Once completed, the plan is to hand the assets over to reputable third parties with requisite experience to operate and maintain them”, he noted.
The source also dismissed allegations by a committee of the House of Representatives that the company failed to transfer N2 trillion to the federation account after the Petroleum Industry Act (PIA) came into effect in 2021 and that Buhari unveiled a company worth $64 billion (N28 trillion at N450/$1), but that only $58.8 billion or N26 trillion was transferred.
He disclosed further that the net book value of assets transferred to NNPC as at July 1, 2022 amounted to $58.8 billion worth of assets and not cash.
“This figure is without the Nigerian Pipeline and Storage Company (NPSC) which has all the depots and pipeline network that was transferred to NNPC in 2022.
“That figure didn’t include NPSC which wasn’t moved initially at the time of being a limited liability company. So how much are we worth in asset?’’
On another allegation by members of the House of Representatives that equipment worth $250 million the NNPC ordered for the Port Harcourt Refinery years ago had not been accounted for, the source explained that over 100 containers with materials meant for the refineries were left to rot at Nigerian Ports.
“This was before Buhari’s administration and it was attributed to the reckless procurement process in the past.
“Things started to change for the better with the rehab programme in 2021. This follow-up also led to the reduction in the cost of turnaround maintenance,’’ according to the source.
Daily Sun gathered that part of NNPCL’s moves to maintain optimal performance and ensure that its over 200 million stakeholders get the right dividends was to merge some of its subsidiaries for better operability and profitability.
To this end, the former refining and petrochemical directorate was merged with downstream for better synergy accompanied with an improved cost effective structure.
“To streamline our shipping operations; three entities; NIDAS, NIKOMA and Marine logistics were merged to become NNPC shipping company.
“The most notable merger of all is that of the Integrated Data Services limited, NNPC oil field services, and Frontier exploration to become NNPC Services Limited (EnSERV) with focus on exploration, seismic data management, and general Oilfield services.
“They have recorded great feats with exploration activities in Kolmani in Gombe state, Ebenyi in Nasarawa and Wadi B in Maiduguri in just one year”, a source explained.
He added that there were 25 subsidiaries in NNPC limited prior to the reorganization.
“All unviable Special Business Units (SBUs) were shut down in a bid to reduce overhead cost and optimize revenue. Businesses with duplicated functions were merged for economies of scale and optimization. New Units were created like new energies.
“This led to the reduction in the number of subsidiaries from 25 to 21”, he added.
The source added that the national oil company remains determined to deepen transparency, operate an open-door policy, and dismantle bureaucratic bottlenecks, all to ensure Nigerians get sufficient value for its activities.
