Kyari’s reappointment good omen to stabilise fuel supply during yuletide
Prior to the yuletide season in few weeks today, the reappointment of the Group Chief Executive Officer of Nigerian National Petroleum Company Limited (NNPCL), Mele Kyari will change the narrative from the usual artificial scarcity of the Premium Motor Spirit (PMS) popularly known as Petrol as a result of the familiarity of the GCEO in operational activities in the energy sector.
During the annual Christmas festival in the past few years, the marketers in the oil Sector always create artificial scarcity of fuel, mainly hike the pump prices at the detriment of the poor masses but President Bola Tinubu in his prudent initiative steps this step to stabilise the system.
The President in accordance with Section 59 (2) of the Petroleum Industry Act, 2021 has given his approval for the appointment of a new Board and Management team for the Nigerian National Petroleum Company Limited (NNPCL), effective from December 1, 2023.
Those appointed includes Chief Pius Akinyelure — Non-Executive Board Chairman; Mallam Mele Kolo Kyari — Group Chief Executive Officer; Alhaji Umar Isa Ajiya — Chief Financial Officer; Mr. Ledum Mitee — Non-Executive Director ; Mr. Musa Tumsa — Non-Executive Director; Mr Ghali Muhammad — Non-Executive Director; Prof. Mustapha Aliyu — Non-Executive Director; Mr. David Ogbodo — Non-Executive Director; Ms. Eunice Thomas — Non-Executive Director.
The President also approved the appointment of two Permanent Secretaries: Mr. Okokon Ekanem Udo — Permanent Secretary, Federal Ministry of Finance; Amb. Gabriel Aduda — Permanent Secretary, Federal Ministry of Petroleum Resources
He emphasised on the importance of adhering to a performance-driven and results-oriented mandate in his Renewed Hope administration. The appointed team is expected to lead the implementation of an energy policy that maximises current oil and gas resources while paving the way for the exploration of new and cleaner energy sources in the future.
A peek into the achievements of Mr. Kyari, a Maiduguri-born Petroleum Engineer who inherited an NNPC that was still struggling to shake off the negative image of a national oil company where nothing works. The NNPC has been living in the dark shadows of a cesspool of monumental corruption and opacity; a place perpetually lagging behind its peers in other climes; where nothing is done properly and efficiency to the benefit of its shareholders, which are the Nigerian people but Kyari foresight in mastering the art brought total transformation.
Kyari knew NNPC needed a new vista and a break away from its decadent past. He saw his appointment as an opportunity of lifetime to give the NNPC a new direction in the way its operations and businesses are well conducted, and give Nigerians a renewed hope. The reform-minded oil guru and gas industry technocrat unfolded an agenda for NNPC’s rebirth. He called it the Transparency, Accountability and Performance Excellence (TAPE), a five-step strategic roadmap for NNPC’s attainment of efficiency and global excellence.
During the official unveiling of the TAPE agenda, Kyari said it was the only way to transform the NNPC and enhance its potential and capacity to compete with other national oil companies around the world. Kyyaritold members of the NNPC’s Management team to buckle up, shape up, ship in with the new direction, or ship out with the old ways of doing things.
He said the five steps for realising the objectives of TAPE were to ensure NNPC opened up its systems to public scrutiny; its operational processes were made transparent and accountable to the Nigerian people and the government; The new system would operate along with well-defined operational processes, benchmarked against established global best practices by world-class oil and gas companies; Set the right operational cost structure, to guarantee value-addition towards NNPC’s sustained profitability, and Set achievable goals, priorities and performance standards and criteria, by developing suitable governance structures for its strategic business units, and the entrenchment of team-spirit, work ethic and collaboration with all key stakeholders to achieve set corporate goals.
Key among the issues was the unresolved Petroleum Industry Bill (PIB), whose passage has continued to await the attention of the National Assembly and the government, fueling the pervading uncertainty among existing and prospective investors in the industry.
For instance, the final investment decision (FID) for the construction of Train 7 of the Nigeria Liquefied Natural Gas (NLNG) plant, of which NNPC is the principal partner, could not be taken after several postponements and delays. Partners could not reach a consensus on certain fundamental issues.
Also, there were some unresolved disputes that involved some communities in the Niger Delta region and some oil companies, which affected oil exploration and production activities in the region.
Although some of these issues remain unresolved completely, there are visible shreds of evidence of tangible steady progress in the last one year under the Kyari management at the NNPC.
The Nigerian Petroleum Development Company (NPDC) is the upstream exploration and exploration subsidiary of the NNPC. For years, the company has been struggling to grow its output capacity to about 250,000 barrels per day. Disputes by Niger Delta communities hosting some of its key oil fields frustrated its efforts, as its workers were denied access to critical oil fields.
Apart from the discovery of Oil in the Kolmani River-II Well, which is expected to significantly boost its oil production capacity, between NPDC and the Operations at oil mining lease (OML) 25, known as the Kula oil field, was shut down on August 11, 2017, following a dispute between Shell Petroleum Development Company (SPDC) and a local oil company, Belema Oil Producing Limited (BPL) over interests in the operations of the oil field in the Belema Community area.
Throughout the period of the dispute, the resolution of the dispute seemed far-fetched. The oil platform in Belema community in Akuku-Toru local council area of Rivers State was occupied by protesting community women and youth over alleged neglect and lack of development in the area. None of the parties conceded grounds.
But, Kyari was instrumental to the dialogue that restored normalcy in the area. Shortly after assuming office, he succeeded in mobilising all the parties in the dispute to the table for peaceful resolution of the dispute on September 17, 2019.
Following his intervention, all the issues were amicably settled. The traditional injunction that stopped oil production at the OML-25 oil flow station was removed.
A proposal of a roadmap for the development of the community was presented to the federal government and the NNPC in a new global memorandum of understanding (GMoU) granting the Belema community right to be involved in the maintenance and security of the oil facilities, while Shell remained the operator, along with its partner, the NPDC.
The significance of OML 25 is that it accounts for about 35,000 barrels of crude oil per day that production was shut-in during the period the oil field was shut down as a result of the dispute. The reopening of oil production activities in the area was a major boost to NPDC’s output and the country’s oil production capacity.
His intervention, which resulted in the resolution of all the issues that frustrated NPDC’s quest for increased oil production capacity ensured the company attained a new peak output of 331,400 barrels per day on May 28, 2020. In the 2019 financial year, Kyari ensured the NPDC maintained a unit oil production cost of $16.5 per barrel per day.
Within the last one year, Kyari ensured the execution of a funding and technical services agreement (FTSA) as well as an alternative financing deal for NPDC’s OML 13 valued at about $3.15 billion and OML 65 for $876 million. These agreements resulted is a 32 percent and 21 percent incremental production output in OMLs 40 and 30.
Also, 14 companies participated in the auction for the financing and redevelopment of OML 119 operated by the NPDC. The twin offshore block made up of Okono and Okpoho fields located approximately 50 kilometres offshore south-eastern Niger Delta operated by ExxonMobil.
Kyari described OML 119 as one of NNPC’s critical projects, which aligns with the Federal Government’s aspiration to boost the country’s crude oil and gas production, growing reserves, and monetising the nation’s enormous gas resources.
Kyari has also been able to save costs for the government through NNPC’s revision of joint venture and production sharing contract (PSC) operators’ unit costs, down to $19 per barrel and $18.3 per barrel, from the initial $31 per barrel and $24.3 per barrel respectively.
Concerned about the impact of high oil production cost on the government revenue, Kyari has, in the last one year, demonstrated commitment to achieving the industry target of reducing oil production cost to an average of $10 per barrel by 2021.
Under Kyari’s management in the last one year, the NPDC also acquired four new oil acreages (OMLs 11, 24, 116 and 98) while recovering debts for gas supplies totaling about N16.64 billion and $3.55 million.
In terms of gas development, Kyari has made significant progress in the development of an integrated gas handling facility, with the commissioning scheduled for the third quarter of this year.
Despite the challenges in the oil and gas industry, Kyari was able to ensure the NNPC subsidiary in charge of the government investment interests in the oil industry joint venture projects, the National Petroleum Investment Management Services (NAPIMS), was able to achieve an average oil production capacity of 1.8 million barrels per day prior to the recent decision by the Organization of Petroleum Exporting Countries (OPEC) to cut its members’ output to boost crude oil prices and stabilise the oil market.
Kyari has also supported NAPIMS to secure external funding for the SPDC’s Santolina 3 projects expected to deliver an average production of 16,300 barrels of oil per day, while also superintending over the resolution of the Escravos gas-to-liquids (EGTL) cost dispute with Chevron Nigeria Limited (CNL).
The settlement agreement is expected to bring in additional $2billion to the Federal Government in the next 20 years, while providing about 1.5 million litres of diesel per day to the country.
He took steps to resolve the disputes that affected activities in other oil concessions. Following his intervention, the “signing of novation agreement between NPDC and the Nigerian Agip Oil Company (NAOC) involving the transfer of OMLs 60, 61 and 63 was formalised.
Just as Nigerians were celebrating the milestone on the Nigeria LNG project, Kyari ensured President Muhammadu Buhari flagged off the EPC activities on the 614 kilometers-long Ajaokuta–Kaduna–Kano (AKK) pipeline project by NNPC last week.
Considered to be at the heart of the country’s economic growth, Kyari has pursued the execution of the project with single-minded commitment to see that it is completed on schedule in 2023.
The pipeline project represents phase one of the 1,300 kilometre-long Trans-Nigerian Gas Pipeline (TNGP) project being developed as part of Nigeria’s Gas Master Plan to utilise the country’s surplus gas resources for power generation as well as for consumption by domestic customers.
The TNGP project also forms part of the proposed 4,401 kilometre-long Trans-Saharan Gas Pipeline (TSGP) to export natural gas to customers in Europe.
The AKK pipeline system that will originate at the Ajaokuta terminal gas station (TGS) in the Kogi state will transport up to 3,500 million cubic feet (MCF) of gas per day from various gas gathering projects in southern Nigeria through Niger and Kaduna States, to terminate at a gas station at Kano State.
Apart from helping the government to save over $300 million, the AKK project would also attract over $2billion of FDI.
Prior to his appointment, hiccups in the supply of petroleum products was a common feature in the Nigerian economy. The incessant disruptions in fuel supply affected Nigerians’ ability to plan effectively. They could not predict when the next fuel scarcity would hit the country and send families to spend days and nights in long fuel queues at filling stations.
Kyari leveraged on the existing Direct-Sales-Direct-Purchase (DSDP) product supply arrangement he started and sustained while in office as the GGM COMD of the NNPC, to guarantee energy security for Nigerians.
For years, the NNPC has always defaulted in remitting to the Federation Accounts revenues realised from its operations. Every audit conducted by the Nigeria Extractive Industries Transparency Initiative (NEITI) on the activities of the oil and gas industry has always ended with reports indicting the NNPC for not remitting several billions of unreconciled balances to the Federal Government.
But, under Kyari, NNPC has always ensured timely and regular remittances of all revenues accruable to the Federation Accounts Allocation Committee (FAAC) for distribution to the three tiers of government.
Another priority that has placed the leadership of the oil Sector above the water is drastic reduction of oil thieves in collaboration with the security agencies compared to the mirage being witnessed by the past Administrations. The removal of the fuel subsidy by Mr. President also adds more accolades to management of the Sector by winding off cabals.
Ultimately, the reappointment of Kyari as the stewardship of the crude oil sector will bring stable policy formulation and implementation without rancour. However, much is expected from the GCEO especially in the area of ensuring that the three refineries become functional to the benefit of Nigerians.
