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… explains how NNPC rides out hard times, responds to changing needs
Mele Kolo Kyari, a highly committed and visionary leader, with an uncanny ability to solve problems creatively, was appointed the 19th group managing director of the Nigerian National Petroleum Corporation, NNPC, on July 8, 2019. Since then he has deployed his acumen and professional experience garnered over the years to change the opacity of the NNPC by publishing its accounts. He has been able to entrench team spirit in the corporation and work well with his management team as well as staff at all levels to achieve his lofty objectives.
Consequently, under his leadership, NNPC is on a trajectory towards global excellence and becoming an integrated energy corporation. From partnering with EITI, promoting deregulation of the downstream sector, introducing cost discipline by setting a $10 per barrel unit operating cost, rehabilitation of ailing refineries, pipelines and depots, deepening domestic gas utilisation to public disclosure of NNPC accounts, the first in the Corporation’s 43-year history, he has, within one year, demonstrated an unalloyed commitment to Transparency and Accountability.
Kyari began his professional career as a field geologist with the Geological Survey of Nigeria before joining the services of the NNPC in 1991 as a Processing Geophysicist. In his early years in the industry, he was engaged in the development and delivery of key deepwater exploration projects leading to the discovery of major deepwater fields in the Niger Delta. He also enabled the development of robust basis of determining entitlements of all parties in the Production Sharing and Joint Venture arrangements and especially secured disputed Federation entitlements from the Production Sharing Contracts, PSCs.
In 2015, as group general manager, Crude Oil Marketing Division, NNPC, he transformed the management and sales of the various Nigeria’s crude oil grades and Natural Gas Liquids, NGLs, through transparency, process automation and business conduct to world-class standards. This led to the optimization of revenues accruable to the Federation and the timely recovery of sales proceeds. He ensured Bulk Supply of Petroleum Products to the nation and remitting the total cost of Federation Crude Oil to the Federation account through the Direct-Sales, Direct Purchase, DSDP, initiative.
Kyari also contributed immensely to the resolution of various disputes with International Oil Companies, IOCs, on the performance of the Production Sharing Contracts leading to potential exit from national contingent liabilities. As the Oil and Gas Champion for the Open Government Partnership for Nigeria, he has advocated for transparent national dealings in petroleum trade by the NNPC.
In 2016, he was appointed as Nigeria’s National Representative on the Economic Commission Board of the Organization of the Petroleum Exporting Countries, OPEC, where he provided leadership and participated in engagements relating to Crude Oil and Gas production and associated market issues.
A winner of the Prestigious African Leadership Magazine’s 2020 “Special African Business Leadership Award”, Kyari is currently a member of the Nigeria Mining and Geosciences Society as well as a Fellow of the Nigerian Association of Petroleum Explorationists, FNAPE.
A graduate of the University of Maiduguri with a Bachelor of Science in Geology, Kyari likes reading, writing, doing voluntary works and farming.
Amidst the global coronavirus, COVID-19, pandemic and its impact on the oil and sector, Realnews sought for an exclusive interview with Kyari. The interview, which was done through a questionnaire because of his hectic schedule, touched on all the topical issues affecting the sector ranging from recent deregulation of the downstream sector, the Petroleum Industry Bill, what is being done to the epileptic refineries, the NLNG Train 7 project and the Brass NLNG among others. His thought provoking responses is a must read. Excerpts.
Realnews: Congratulations Sir. This July makes it exactly one year since you assumed office as the group managing director of the NNPC. What has been your experience so far?
Kyari: It’s been a great experience so far. Though not devoid of challenges, but we have been tackling the challenges headlong.
Realnews: Prior to your assumption of office as GMD, you were in the Open Government Initiative that helps the government to track the buyer and seller of crude oil. Also, on May 13, 2018, you became Nigeria’s National Representative at OPEC. How did the membership of this organization help Nigeria in tracking stolen crude?
Kyari: The problem of stolen crude oil was prevalent some years back. At the Crude Oil Marketing Division, we decided to automate the entire process of crude oil sales and delivery. The automation ensured that every molecule of crude is tracked right from the terminals down to the vessels. Another thing we achieved with the automation was the complete elimination of discretionary approvals. This has helped a great deal in tackling crude oil theft in the country.
Realnews: What would you say are your major achievements so far?
Kyari: If you remember, when we came in, we promised greater transparency and accountability in the conduct of the Corporation’s businesses. We immediately followed that promise up with the launch of our strategic objective which is the TAPE (Transparency, Accountability, and Performance Excellence) agenda. Looking back this past year, you will agree with me that we have been very upfront with information concerning our operations. Besides the Monthly Financial and Operations Report, we have made public the 2018 audited financial statements of all the subsidiaries by publishing them on our website. We have published critical data about the Corporation’s staff strength and demography on the website in compliance with NEITI’s Open Data Policy. In fact, as at today, no one can justifiably hang a tag of opacity on NNPC anymore.
We have sustained petroleum products supply and distribution across the country, ensuring that the days of supply shortage and long queues of vehicles at petrol stations are behind us and over. We have also resolved a number of disputes on the JV and PSC fronts to facilitate more production activities in keeping with our vision of boosting national production to 3 million barrels per day. In the area of gas supply to the domestic market, especially the power sector, we have also done much. We have not only sustained, but we have also increased the volume of gas supply. All these are things you can go out there and verify for yourself.
Realnews. How has the Oil and Gas Sector been affected by the COVID-19 Pandemic and how are you responding to the challenge apart from the health intervention being championed by the Petroleum Industry in which you are prominently involved?
Kyari: As you may have been aware, the COVID-19 pandemic caused a lot of shock in the business world, and particularly in the global oil and gas sector. At the height of the lockdown, you would recall that crude oil prices crashed to sub-zero level. We were able to sustain production in the face of that and didn’t have to shut down our wells as was the case in some climes. The situation opened our eyes to certain opportunities for cost reduction in our operations and we are driving that aggressively along with our partners to see that the average cost of production per barrel in the country is brought down to $10 and below. And we are beginning to see results in that direction.
Realnews. What measures have put in place to ensure the country gets adequate funding from crude oil sales to implement the 2020 budget?
Kyari: Efforts at ensuring sustainable revenues from oil are at two levels. First is the global level where OPEC and non-OPEC oil producers have come together to agree on measures to stabilize the market. That was what led to the production cut agreement which kicked off in May. Since that agreement, we have begun to see a rebound in the price of crude oil, which has helped in improved oil revenue for the Federation. Second is the marketing level where we are doing everything to ensure that we maintain and even increase the nation’s market share. By this, I mean our ability to ensure that we have reliable customers who buy our crude. So far, we have done very well in this by retaining our customers even throughout the period of oil price meltdown.
Realnews: Is Nigeria having problem meeting OPEC production quota cut? If so, why?
Kyari: No! As a key member of OPEC, Nigeria is committed to all production cut agreements. We do our best to keep to our production quota always.
Realnews: A fire outbreak was reported at the NPDC recently. How is that affecting production of crude oil in the country?
Kyari: The incident you are referring to happened at the Benin River Valve Station during the installation of a ladder on a platform meant for discharging production from the Gbetiokun Field in OML 40. The fire was immediately put out and normalcy has since been restored.
Realnews: In your opinion, will you say that NPDC has lived up to expectations compared with other National Oil companies such as Petrobras?
Kyari: I believe NPDC has done very well considering where it is coming from and the peculiar challenges it has faced over the years. Yes, it is not where we want it to be yet, but it has definitely made its mark as the largest supplier of gas to the domestic market.
Realnews: How do you see the current withdrawal of petrol subsidy? How is it impacting on NNPC Downstream Sector activities?
Kyari: It is a good development for the Downstream Sector and for the nation’s economy. You would recall that we have been agitating for the deregulation of the Downstream Sector for years. The subsidy regime was actually harmful to the market as it created distortions which were responsible for products leakages and arbitrage. In fact, at a point, Nigeria was almost subsidizing petrol for the entire West African coast. Yet the subsidy was not benefitting the average Nigerian as much as it was benefitting the big men who have multiple big cars. With the removal of subsidy, the huge sums of money that used to be spent for under-recovery is now freed up for the government to use for infrastructural development.
As to how it is impacting on our downstream business, I can tell you that it is good for us. During the subsidy regime, other marketers could not import products. This made NNPC the sole importer of petroleum products, creating a sort of monopoly which was neither good for us nor for the market. Now we can import, sell and make a little profit while the other marketers are also importing and making profit. This serves as a boost to the general economy. We believe that with time, the market will stabilize and the combination of market forces and competition will bring down the price of petrol.
Realnews: Would you say that Nigeria has finally liberalized its Downstream Sector. Does the bridging of petrol supply still obtains in the oil and gas sector? If yes, Why? Is it not against the spirit of liberalisation of the Downstream Sector?
Kyari: The Downstream Sector, as at this moment, is fully liberalized and deregulated. If you remember, some months ago the PPPRA used to fix a pump price range for marketers. That has stopped now. This means any marketer can source products from anywhere and sell at any price dictated by the market. How much more liberalized or deregulated can a market be than that?
As for bridging, I think there is some misconception about it from your question. Bridging is simply the movement of petroleum products from coastal depots to the inland depots by trucks because of the unavailability of the pipelines due to vandalism. So, I will say yes, there is bridging of products. That is the only way we can get products to all parts of the country under the circumstances. I really don’t know how that negates the spirit of liberalization.
Realnews: It has taken too long for the PIB to be enacted into law in the country. Why? Kindly describe your engagement with the National Assembly to ensure the bill is passed?
Kyari: It is unfortunate that the PIB is yet to be passed into law after so many years of its initial presentation to the National Assembly. What I can tell you, however, is that there is enough political will in the current administration to get it passed. Under the able leadership of the Honourable Minister of State for Petroleum Resources, Chief Timipre Sylva, we are working very closely with the National Assembly to ensure that it is passed into law this time around.
Realnews: What is the state of the three refineries now?
Kyari: The refineries are deliberately shut down. We shut them down for a comprehensive rehabilitation to correct the colossal loss of capacity by the refineries. The diagnostic phase of the rehabilitation of the Port Harcourt Refinery has been concluded. The second phase will commence soon. And we will extend same to the other refineries.
Realnews: Can you give a deadline when the refineries will roar to live?
Kyari: Like I said when I assumed office as GMD, we will make sure that all the refineries get back on stream before the end of this administration in 2023. I still stand by that.
Realnews: What is the state of Liquefied Petroleum Gas (LPG) now? What are the measures being taken to encourage its consumption across the country?
Kyari: There is a plan to drive the adoption of LPG as the primary fuel for cooking in place of kerosene and firewood across the country. There is a committee at the Ministry of Petroleum Resources set up by the Minister of State for Petroleum Resources that is working on that. But from our own end, the NPDC is building an LPG Unit at the Oredo Gas Handling Facility to deliver 240 metric tons of LPG into the domestic market. The plant is almost ready. It will be commissioned in October, all things being equal.
Realnews: Nigeria through the NLNG has embarked on Train 7 project. When will this project be completed? What is the total cost? What is the significance of such a project to Nigeria and the exploitation of gas resources in the country?
Kyari: The NLNG Train 7 Project is a very significant aspect of our gas commercialisation/monetization drive. As you may know, Nigeria is adjudged a gas province. We have more gas reserves than crude oil. What we are trying to do is to commercialize the gas and turn it into a major revenue earner for the country. The NLNG is one of the major projects in that direction. The Train 7 will increase the capacity of NLNG from the current 22 metric tons to about 30 metric tons. That is a significant increase that will translate to more gas revenue for the country. The total cost of the project is about $10bn and we are looking at approximately five years for its completion, which is 2025.
Realnews: Nigeria has set several deadlines to stop gas flaring. What is the state of gas flaring in the country now? When will the country end gas flaring and what other projects apart from the NLNG is on ground to ensure gas flaring stops?
Kyari: You will recall that the Minister of State for Petroleum Resources declared 2020 as the year of gas in Nigeria. What this means is that we have adopted a very aggressive approach towards delivering gas projects. These projects are designed to enhance gas gathering and deepen gas penetration and adoption within the country for industrial use, power generation, and feedstock for petrochemical companies such as fertilizer plants. Some of the projects include Phase Two of the Escravos – Lagos Pipeline System (ELPS II), the Obiafu – Obrikom – Oben (OB-3) gas pipeline which are at about 90% completion level. Of course, you are aware that we just flagged off construction work on the Ajaokuta – Kaduna – Kano (AKK) gas pipeline project. The AKK will take gas to the Northern corridor and provide alternative fuel for many of the factories that have gone moribund due to power issues. All these projects will help take up and convey most of the gas that is currently being flared for use in driving industrial growth. When these projects come on stream, Nigerians will see a significant reduction in gas flaring.
Realnews: What is the state of Brass LNG and Olokola LNG? Will it ever take off?
Kyari: When the Brass LNG and Olokola LNG were conceived, the thinking was that we could pursue them at the same momentum like the NLNG. But today, there is a shift of focus to the domestic market. The focus now is to have a balance between gas for export and gas for the domestic market. In that regard, we are concentrating on delivering gas to the vast industrial complex that has sprung up in the Lekki region where Olokola is situated. We are still studying the market to decide if the Olokola LNG will go on. But the priority now is to push as much gas as possible to the growing Lekki Industrial Complex.
As for the Brass LNG, what we are doing now is to turn it into an Industrial Complex for gas-based industries in line with the change in focus. The first industry coming up there is the Brass Fertilizer which will be starting off with a Methanol Plant.
Realnews: What is your relationship with various unions in the Oil and Gas Sector like? Did NNPC sack any staff of the refineries recently and why?
Kyari: We enjoy very cordial relationship with the two unions in the industry, NUPENG and PENGASSAN. We have not sacked any staff in the refineries. There have been reports that we have sacked some staff, but that is not true. The true position is that when the refineries were in full operation, we got some companies to supply us labour to support our staff. These people were essentially staff of those companies we engaged, they were paid by those companies. Now that the refineries have been shut down for rehabilitation, it does not make any economic sense to keep them since there is virtually no work going on there. That is the true situation.
Realnews: Despite all efforts to make activities of the NNPC transparent, it is still seen as opaque. Why? You may also use this opportunity to react to allegations against the corporation like the inflation of the insurance contract and sale of forgotten crude oil in China.
Kyari: I am sure this your question is based on a carry-over attitude from past impression. I told you earlier all that we have done to open up the Corporation to the public. There is virtually no information you need about NNPC today that you cannot get from our website or that is not already in the public space. So, where is the opacity you are talking about?
You mentioned inflation of insurance contract and sale of forgotten crude oil in China. If you have been following the reports on these issues, you will know that they are not factual. Investigations into the allegation of inflated insurance contract have shown that there was nothing like that and that the Corporation’s insurance policy has been doing very well. On the alleged forgotten crude oil in China, we have explained now and again that it was a plot to defraud the country and that there was nothing like that. Since we exposed the fraudsters, have you heard them come out again with counter explanation? In any case, we are seeking legal redress on the matter.
Realnews: Could you comment on the recently launched Ajaokuta-Kaduna-Kano gas pipeline? How will such project help boost Nigeria’s economy?
Kyari: Like I explained earlier, the AKK is designed to take gas to the northern corridor of the country. Kaduna and Kano used to be the hub of the textile industry in Nigeria. There are over 40 textile companies in Kano and Kaduna that are in coma due to power issues essentially. What the AKK pipeline will do is to supply them gas as fuel in place of electricity. With the availability of gas, these factories and even new ones will spring back to life. You can imagine the multiplier effect of that in terms of employment generation and impact on the national economy!
– Oct. 28, 2020 @ 16:45 GMT |
Tags: Exclusive Interview: How Kyari is turning oil industry around
