For decades, the commercialisation of the Nigerian National Petroleum Corporation (NNPC) was the subject of discussions among critical stakeholders in the oil and gas sector. This was largely because there was hardly any framework for its implementation.
But with the unveiling of the entity in 2021 as a Company and Allied Matters Act (CAMA) firm under the brand name of the Nigerian National Petroleum Company Limited (NNPCL), as encapsulated in the Petroleum Industry Act (PIA), the ground was set for a reformed national oil company that was ready to compete with its peers globally.
Before the passage of the PIA, many stakeholders in the industry had admitted that the old NNPC, has not had an enviable past because of the seeming loss of faith by Nigerians and its partners in its operations. But that perception has since changed with the implementation of the PIA under the leadership of the Group Chief Executive Officer of the NNPC Ltd, Mallam Mele Kyari.
Indeed, under the Kyari-led management, the 44-year-old corporation has joined the global Extractive Industries Transparency Initiative (EITI). It also declared its first profit in about four and a half decades, released its Annual Financial Report to the public, and has generally been more open to public scrutiny.
With the company now fully transitioned into a commercial entity, stakeholders are now seeing a new NNPC that is ready to do things differently.
For instance, at the just concluded 2023 Upstream Investment Management Services Ltd (NUIMS) Annual Value Assurance Review (AVAR) Workshop, Africa’s richest man and the Chairman of Dangote Group, Aliko Dangote; Chairman of Heirs Holdings Ltd, Tony Elumelu; Deputy Managing Director, Deepwater Asset, TotalEnergies Upstream Nigeria Limited (TUPNI), Victor Bandele; the Managing Director of Shell Nigeria Exploration & Production Company (SNEPCo), Elohor Aiboni and other critical stakeholders expressed their appreciation to the leadership of the Nigerian National Petroleum Company Ltd and the NNPC Upstream Investment Management Services (NUIMS) for the level of collaboration geared towards delivering key projects to unlock value for stakeholders.
AVAR workshop
The AVAR is a strategic forum where key issues that shape the oil and gas upstream business landscape are reviewed, and the direction is set with the sole objective of guaranteeing short-term success and long-term value is delivered to all stakeholders.
The NUIMS 2023 AVAR is geared towards consolidating on gains for growth in the PIA era, with a laser focus on the ways NUIMS can better attract and manage capital for sustainable growth by emplacing plans to protect, preserve, and promote NNPC Limited’s upstream business objectives.
The outcomes of AVAR will also serve as relevant input to the ongoing efforts by NUIMS to be well-positioned to attract the required investments into the industry.
Stakeholders’ view
This year’s event has the theme, ‘Consolidating for Growth in PIA Era.’ was attended by the Group Chief Executive Officer of the NNPC Mele Kyari; the Executive Vice President (Upstream), NNPC Adokiye Tombomieye; the Chief Upstream Investment Officer, NNPC Upstream Investment Management Services, Bala Wunti; the Chairman, Heirs Holding, Tony Elumelu and other top investors in the Nigerian economy.
Speaking at the event, the Chairman, Dangote Group, Aliko Dangote said that the NNPC Limited has what it takes to become the African version of Saudi Arabia’s Aramco, adding that the oil giant can generate billions of dollars in revenue if the right decisions are made.
While stating that the PIA brought the transformation of NNPC from a government establishment to a commercial entity with no recourse to government funding, Dangote said that NUIMS has a critical role to play in unlocking funding to take advantage of the huge opportunities in the sector as well as to actively manage the investments to repay its loans, generate reasonable returns, and fund investments in new opportunities.
“I truly believe that NNPC should be our African Aramco. There is nothing that is impossible. You can make it possible and do not let anything scare you. It is just the same thing with us. If I tell you about our own story, you will be shocked as to how. It was not only the refinery that we started about six years ago. We had 32 projects that we all rolled out at the same time.
But then, on the way we had lots of hitches here and there where the devaluation of the currency, COVID-19, and challenges of infrastructure set in. If you want to do a real project in Nigeria, you have to look at the infrastructure that we have, because the infrastructure we have is not meant for mega projects.
We need to look at our infrastructure and see how we can take ourselves to the next level and it has to be driven by NNPC because they are the largest conglomerate and whatever happens to NNPCL, their assets, it actually happens to us either directly or indirectly”, he said.
He stated that if the NNPCL does not perform well, it affects the economy while adding that NUIMS, being an investment arm of NNPCL, plays a critical role in managing the Federal Government’s interest in the oil and gas industry.
“You are a partner in the Joint Venture (JV) assets and the Concessionaire in the Production Sharing Contract (PSC) arrangements. As important as its oversight function is, my expectation in this post-PIA era is that NUIMS should pivot from being overly focused on its role as a ‘watchdog’ to acquiring the mindset of an aggressive Investment Manager.”
The billionaire further said that the NNPCL needs to roll out massive investments in terms of oil and gas to meet demand, adding that there are many off-takers waiting to invest.
Dangote said, “My businesses in Nigeria require 635 million scf of gas per day with further additional demand as we expand capacity. No businessman will leave such an opportunity on the table. Unfortunately, I hardly get 300 million scf per day and there is no clarity as to when the required gas will become available.”
According to the Chairman of Dangote Group, a good investment manager actively seeks out investment opportunities, assesses them, and takes an investment decision and the NNPCL principal objective should focus on delivering strong returns; growing the investment portfolio, and managing portfolio risks.
He pointed out that the NNPC must first look into the cost component of its production as Nigeria has one of the highest break-even prices globally for extracting oil and gas which results in a long payback period.
Dangote said,“Let the NNPCL begin with delivering strong returns, which of course is a function of price and cost. While price in your industry is determined by the market and so clearly outside your control, the same cannot be said about cost. More aggressive cost targets need to be adopted and NUIMS staff rewarded with juicy bonuses if they meet these targets.
You need to benchmark costs with producers in similar basins and aim to be the lowest amongst your peers. Some existing government policies, as laudable as they may be, also need to be re-evaluated. For instance, we need to strike a delicate balance between encouraging local participation in the oil & gas sector and compromising efficiency and cost.”
The Chairman, Dangote Group, suggested to the NNPCL that the next course of action as a manager should be to grow its investment portfolio explaining that it would reduce the influence of IOCs.
Also speaking at the event, the Chairman of Heirs Holdings Ltd, Tony Elumelu, lauded the NNPC for the effort it made to curb crude oil theft.
According to him, due to the efforts of the NNPC Ltd, Heirs Oil & Gas has witnessed 96 per cent recovery rate.
Elumelu said, “When I listened to the Group CEO speak today, talking about us moving to 2.5 million barrels we challenged him to do more. I believe that it is achievable. From losing 97 per cent of our 50,000 barrels production, interestingly and it will be bad of me to have this platform and not share this here.
That day, I got a call from the GCEO and I thought he was going to kill me for speaking up, to my greatest surprise, he said to me Tony, we are sorry about what is happening, we are doing something about it, it will be corrected.
They worked as a team and the Board of the NNPC, the FG, and the security agencies, and last month our recovery factor was 96 percent. So GCEO NNPC, you have delivered”.
He added, “Today, we lifted 501,000 barrels of oil bringing our total lifting this year alone to 2.6 million barrels of oil. I am a great beneficiary of the new NNPCL.”
For his part, the Deputy Managing Director, Deepwater Asset, TotalEnergies Upstream Nigeria Limited (TUPNI), Mr. Victor Bandele, said the intervention of Kyari has unlocked fresh 30,000 barrels per day of crude oil from OML 130.
Bandele expressed his deep-felt appreciation for the Group Chief Executive Officer’s patriotic intervention in enabling the deep-water Production Sharing Contract (PSC) to engage the services of Gerry De Souza Drillship to commence the long-due drilling campaign of seven development wells and one exploratory well.
This assisted in arresting production decline on the asset and unlocking up to 30,000 barrels per day of new oil from the Egina and Akpo fields before the end of the year 2023.
This will generate more value for stakeholders, improve the capacity utilisation of the best-in-class Egina Floating, Production, Storage, and Offloading (FPSO) Vessel, and ensure the attainment of the desired benefits from the attractive crude oil prices in the market.
He reiterated his confidence in the leadership of NNPC Ltd and applauded the Upstream Investment Managers, NUIMS, under the Chief Upstream Investment Officer, Bala Wunti, for always being a step ahead and setting the pace for innovation in the Nigerian upstream oil and gas industry.
The DMD also announced to the gathering that TUPNI has secured the alignment of all the partners on OML 130 to progress with the lease renewal with a target to close out before the end of May 2023. The lease renewal will pave the way to firm up discussions on the Preowei and Egina West projects lined up by TUPNI and the OML 130 partners to introduce additional volumes to the Egina FPSO.
TUPNI is also on course to hit the milestone of one billion barrels of Crude Oil production on the Akpo field within a period of 15.5 years. He attributed this success to excellent reservoir management and the instrumental role played by NUIMS and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) in providing the necessary support.
Bandele, impressed by the objectives of the NUIMS Value Assurance Review, promised to replicate the same in his organization.
Sharing her thoughts at the event, the Managing Director of Shell Nigeria Exploration & Production Company (SNEPCo), Elohor Aiboni, expressed her appreciation to the leadership of NUIMS on the level of collaboration geared towards maximizing the potential of the deep-water assets and delivering key projects to unlock value for stakeholders.
Aiboni was full of praise and appreciation for the NUIMS leadership for creating an enabling environment that fosters collaboration among its partners.
Citing the recent lease renewal, the MD restated SNEPCo’s commitment to growing their assets, willingness to deliver big-ticket projects, and exploiting near-term opportunities to continually grow output volumes by working closely with NUIMS.
SNEPCo recently surpassed the one billion barrels of crude oil production milestone and is currently outperforming its production target for 2023 raising daily production output from approximately 90,000 BPD to 131,000 BPD.
Improvements were recorded from the onshore and swamp assets following the launch of the industry-wide security architecture.
Also, activities in the deep-water space have also picked up contributing to the overall improvement in production output.
Aiboni stated further that there is no reason Nigeria cannot grow its crude oil production output to four million barrels per day, leveraging on the vast array of prolific assets, especially in the deep-water space.
She further expressed her appreciation to the leadership of NUIMS for the level of collaboration geared towards maximizing the potential of the deep-water assets and delivering key projects to unlock value for stakeholders.
Speaking at the event, Kyari said the challenges facing the oil and gas industry globally has made it compelling for the NNPC to come up with more ingenious ways of doing things.
He admitted that there have been challenges with security and underinvestment in recent times, adding that with the passage of the Petroleum Industry Act, the NNPC is better positioned to create value for Nigerians.
He said, “The crux of the industry is to make sure the upstream industry works. If the upstream works, there would be cash in the country. We are in a cash crunch in the country today, we are in a forex crunch today because the upstream has not gotten to a level where we can have a surplus to support the economy.
“And the reason is that we have challenges of security, decarbonization issues, energy transition, and the reluctance of financial institutions to lend.
“The practicality of all these is that there is difficulty in having access to capital today and this is very obvious, the whole world is lamenting today and there is an absolute supply gap in gas in the market in the short term and for a while to come and everyone is taking a step backward on what could be done to arrest the situation. “As a company, NNPC is leading this process, we are required to ensure that production cost is optimum, we have interest in nearly every business in the upstream sector and even in the midstream and our performance determines what happens in the industry. We are in a position to go back to normalcy.
“Production targets that we have kept over the years of 2 million barrels are realizable but have remained on the PowerPoint and this is the time to take them off the PowerPoint and resolve the insecurity, investment, and financing issues.”
As a National Oil Company, Kyari said the NNPC must cooperate with its partners to solve the energy challenges facing the country.
He said it is only through collaborative efforts with its stakeholders and partners that the NNPC can guarantee energy for the nation’s industrialization.
Kyari added, “We can solve the problem of energy poverty in the country, we can also support the rest of the world, particularly West African countries, to resolve the energy crisis that we are facing today. We can also help to resolve the issue of food security and by doing this, we will make more money for the country and businesses make more money.
We will invest in power and we are doing it and we believe that at the end of the day, we will create sufficient power for the country so that industries will spring up everywhere and create that prosperity that we desire.
We have the best workforce that we have anywhere in the world and we have seen many things that they have done. This means that our short term is real, our short term is achievable and as a company, we will satisfy the requirements of our partners and shareholders.
Our performance will speak for our us and our country and this is what we are focused on doing, we will work with you, we will work with the industry, we will work with our partners, we will work with our shareholders and ultimately, we will deliver value in a short time of three years and this is sufficient to bring all the value on the table.
We are getting all the support from the security agencies to make sure this works and we are getting maximum cooperation and we will overcome the security challenges and this company will deliver value for all of us.”
In his speech at the event, Tombomieye said the enactment of the Petroleum Industry Act (2021) came with so many expectations for NNPC Limited, which has been transformed into a fully commercial entity.
He said the oil and gas reserve base in Nigeria is enormous as available data indicate that the current crude oil and condensates production of 1.210 million barrels per day as of April has fallen short of the desired aspirations of 1.395 mmbopd for NUIMS.
According to him, additional efforts will be required to meet the objectives of growing reserves, oil and gas production, and monetizing the subsurface resources.
He said, “There is no gainsaying that several challenges have be-devilled our operations over time, ageing facilities, obsolete technologies, evacuation challenges, high production cost, inadequate workforce, inadequate funding.
“NUIMS has consistently demonstrated the zeal to overcome some of these challenges, as depicted in the recent strides for the emplacement of the industry-wide Security architecture, which has assisted in restoring production in some corridors.
“We are no longer in the PowerPoint era, and you must channel your energy towards reducing costs and growing production and revenue. Nigerians are watching us, and we must remain accountable to them.
“The Board and Management of NNPC Limited have tasked us with specific deliverables. We have executed the KPIs with timelines on when to deliver and can no longer afford to return with excuses to our principals for nonperformance.
“Let us consider ourselves partners in progress, and every contribution is for the collective good of the Company. Knowing fully that the strength of a chain is at its weakest link, we must strive to support each other on this journey of making the Upstream Directorate the shining light of the Company as it has always been.”
Conclusion
Through the event, it is evident that while the NNPC Ltd is hungry for even more success, it has remained committed to supporting all its partners to achieve shared prosperity.
