Nigeria: How Mele Kyari Plans to Run NNPC

Mele Kyari.
16 July 2019

Chineme Okafor takes a look at the promises of the new Group Managing Director of the Nigerian National Petroleum Corporation, Mallam Mele Kyari, who recently assumed the position

Mele Kyari's selection to head the NNPC was roundly cheered - his colleagues in both the state-run corporation and global oil industry, as well as other stakeholders connected with the industry, had reasons to celebrate his choice as the new helmsman, and now, he is faced with the job of moving a behemoth forward.

While felicitating with him, these stakeholders also as expected laid out their thoughts and what they think he should do to get the NNPC become an efficient national oil company.

As a national corporation holding in trust for Nigerians the country's hydrocarbon resources, the corporation is always the cynosure of all eyes because of its significance the country's wealth.

For example, the NNPC with regards to national energy security, is a significant entity, one which mostly determines how secured Nigeria's energy supply is or not, either in terms of petroleum products availability or electricity supplies. Its operations are frequently top priorities in discussions around Nigeria's national life.

Divulging his intentions

Shortly after taking over from the immediate past Dr. Maikanti Baru, who retired from the service of the corporation, Mele Kyari, open up to Nigerians his plans for the NNPC, and with which his contract of service would mostly be appraised.

Perhaps appreciating the need for the corporation to change its operational methods which industry experts had condemned as been inefficient and unproductive, Mele Kyari had said: "Going forward, we will seek to continuously entrench transparency, accountability, and performance excellence across all NNPC operations, and we will put the necessary structures in place to ensure compliance with these principles."

He explained that, "in the next couple of weeks, the COOs (chief operating officers) will join me to unveil the NNPC roadmap towards global excellence," adding that the proposed roadmap, "will guide our aspirations to achieve sustained outstanding performance to meet the short and long term growth objectives of the corporation as we transit to a national energy champion."

Mele Kyari, even disclosed that the corporation would deeply entrench technology and innovation in its operations to, "refine our business processes in line with best industry practice, improve efficiency, block leakages and create desirable outcomes that will strengthen the NNPC brand."

He called for the workers of the corporation to work on this path with him, explaining that: "To build this brand, there is need to improve the synergy of teams and commitment to business objectives towards a unified enterprise view."

Key priorities

Having indicated the need to cut down on its wastages by blocking leakages and improving efficiency, Mele Kyari, revealed his displeasure over Nigeria's continued reliance on imported petrol to operate its economy.

He said that: "It is painful that nearly all our petroleum products requirements are imported despite the existence of our three refineries and the numerous attempts by successive governments to encourage the establishment of private refineries. This has to stop."

This from experts' point of views suggest that he would have to find ways to keep the corporation expenditure on petrol subsidy, pipeline repairs and all other sources of leakages minimal.

According to a January 2019 operations and financial report of the NNPC, it spent monies worth N956,765,767,585 on various costs it incurred between October 2017 and October 2018, a length of 13 months.

In addition, there was also a N771, 391,262,249 that was spent to keep pump price of petrol in Nigeria at N145 per litre, in line with the desires of the federal government. The NNPC also reportedly imported 21,100,118,126.30 (21 billion) litres of petrol through its Direct Sales-Direct Purchase (DSDP) crude for product swap scheme between January 2018 and January 2019.

It even spent N155, 177,555,159 (N155 billion) to repair and maintain its petroleum pipeline across the country, and had a total of 2,278 breakages on its pipeline between January 2018 and January 2019, with the highest of 264 breaks recorded in December 2018, while the lowest of 82 was recorded in May 2018.

More on losses, the NNPC equally recorded a financial deficit of N2, 478,250,203 (N2.4 billion) and N27, 718,697,974 (N28 billion) on crude oil and products loses respectively. These according to the corporation's books accounted for most of its deficits, and which Mele Kyari, indicated he would fix.

With regards to Nigeria's reliance on imported petrol and how he would get it fixed, he said: "We will see to the successful completion of the ongoing rehabilitation of our refineries within record time. We will further encourage the establishment of private refineries either as independents or in some form of public private collaboration. We will also provide every necessary support to the Dangote Refinery in order achieve timely start-ups."

"This we believe will help in making our nation a net exporter of petroleum products within the life of this administration," he added.

But to accomplish this, Mele Kyari, would have to consider as suggested by the Nigerian Natural Resource Charter (NNRC) in its recent report on the workings of the NNPC that, "the problems with the refineries are multi-faceted and well documented - chronic funding, Turn-Around-Maintenance, poor management and political influence."

Downstream sector

Recently, the immediate past president of the Nigerian Association of Energy Economists (NAEE), Prof. Wumi Iledare, disclosed that Nigeria may save more than $5 billion annually if it reformed her downstream sector by deregulating its operations to enable for cost-efficiency, however, Mele Kyari, disclosed to Nigerians that he would spend his time at the NNPC finding solution to the challenges of the sector but not clearly stating if a deregulation would happen in sub-sector which holds the largest amount of jobs in the global petrol industry.

According to him: "Alongside, we will continue with the revamping and rehabilitation of all our downstream infrastructure particularly our pipeline network which has been subject of persistent attacks by vandals.

"As a matter of responsibility, the NNPC will continue to ensure availability of petroleum products to our citizens despite the huge challenges associated with this task."

Oil search in the north

Despite analysts' reported censuring of NNPC's search for oil in the north, as well as its recent challenges with same in the Chad Basin, the new man in charge hinted that the oil search would remain a part of the upstream strategy to upgrade Nigeria's reserve base.

This, was, however with his commitment to stabilising the fiscal regime in the industry and supporting processes to pass the Petroleum Industry Bills (PIBs) to revamp the industry.

He explained thus: "In the upstream sector we will continue to work towards resolutions of issues around stability of the Fiscal regimes, passage of the outstanding petroleum laws and engage partners to sustain the current self-funding model and improve production."

"In line with the aspiration to grow our nation's hydrocarbon reserve base to 40 billion barrels by the year 2020. We will sustain the tempo of the ongoing exploration campaign in the frontier basins, especially the Gongola Basin where His Excellence Mr. President flagged off the spudding of the Kolmani River II early this year," Mele Kyari, added, while noting that the corporation's upstream subsidiary, the Nigerian Petroleum Development Company (NPDC) would be supported to grow.

More gas for electricity generation

On its natural gas business, the NNPC recently disclosed that between January 2018 and January 2019, a total of 300.35 billion cubic feet (bcf) of gas was flared in Nigeria, while 468.23bcf was monetised and sent to the domestic economy with the power sector getting 291.04bcf and domestic industries - 177.19bcf.

It also stated that 1342.99bcf of gas was monetised for the export market where the Nigerian Liquefied Natural Gas (NLNG) got 1199.79bcf of the supply for the period, leaving the balance of 79.94bcf; 38.96bcf and 27.30bcf for the Escravos Gas to Liquid (EGTL); Natural Gas Liquids/Liquefied Petroleum Gas (LPG); and West African Gas Pipeline (WAGP) respectively. In his plan for gas, Mele Kyari, hinted that the power sector would get more volumes to produce more electricity for the country.

According to the new NNPC boss, "On the gas sector, our strategic aspiration is to open the domestic market further to support improved power generation and the growth of gas-based industries. NNPC will be ready to partner and support stakeholders along the power value chain to guarantee improved power generation and transmission and boost industrial growth."

Openness taking a front seat

Although he had hinted on this when he was first announced, and with the Nigeria Extractive Industries Transparency Initiative (NEITI) amongst others urging him to make this a priority going by the corporation's history with business opacity, Mele Kyari, said he would expand the space for operational accountability in the NNPC.

He noted that for the NNPC to maintain positive image, it needed to show more transparency in its operations and render shared values of integrity and professionalism at all levels of its works.

He even promised that, "the COOs and I will take full responsibility to ensure that the necessary enablers are in place to guarantee the excellent performance of businesses under their respective portfolios," adding that they will provide the needed leadership with inspiration and integrity.

"We will broaden our involvement in the Open Government Partnership (OGP) commitment of the federation in order to further elevate citizens' participation in the business of our national oil company.

"Under my leadership, NNPC will strive to be more credible, competent and accountable institution that manages the oil resources on behalf of the citizens of Nigeria in accordance with its mandate and the core persuasions of President Muhammadu Buhari," said Mele Kyari, who also noted that he has a strong foundation to build on, and willing partners to work with.

"Building on our experience in EITI reporting and close collaboration with NEITI, NNPC is now committed to joining the EITI's targeted effort on State-Owned Enterprise (SOE) transparency as a means of sharing best practices and improving disclosure of information on the management of the nation's oil and gas revenues," he explained.

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