Oil & Gas
NIGERIANS, who described Mele Kyari as the man with the magic wand have good reasons for doing so, especially for breaking the jinx over the passing of the Petroleum Industry Bill, PIB. For the past 16 years, about six group managing directors of the Nigerian National Petroleum Corporation, NNPC, have unsuccessfully waged the campaign to pass the PIB. But within two years of his taking over office as the group managing director of NNPC on July 8, 2019, Kyari has become the man who wrestled the elephant PIB to the ground by corralling all the efforts led by the minister of petroleum resources to ensure that the National Assembly passed the bill last week. The bill will soon be sent to President Muhammadu Buhari, who is also the petroleum minister for assent.
No doubt, the oil and gas industry stakeholders heaved a sigh of relief that alas the did over the PIB has been done. This made some of the chief executives of the international oil and gas companies to take turns to acknowledge the role the Kyari-led NNPC in getting the PIB passed at the just ended Nigeria Oil and Gas conference to laud Kyari.
Passing the PIB will undoubtedly spur investments into oil and gas exploration, which witnessed a lull due to the uncertainties over the PIB as investors will now be sure under which laws they are operating in. But the PIB is not the only lofty thing Kyari has achieved for the past 24 months he has run the affairs of the nation’s cash cow.
In his inaugural address, as is usually the case in such speeches, he clearly indicated the direction his management intended to steer the Corporation. A look at his actions and strides vis-à-vis the key objectives he set out for himself at his inauguration would give a clear picture of his achievements in the last two years.
Upstream
One of the goals the group managing director set at his inauguration was to increase the national crude oil reserves to 40 billion barrels. To achieve that goal, he galvanized the NNPC to rev up exploration work in the inland basins with the drilling of the Kolmani River II Well, culminating in oil find in commercial quantity in the Upper Benue Trough. The drilling of Kolmani River III Well is ongoing with very high prospect of oil find. Seismic data collection is ongoing in the Bida and Sokoto Basins. Plans are also afoot to re-launch the exploration work in the Chad Basin. All these are geared towards boosting the nation’s crude oil reserves to meet the 40 billion barrels target.
Another goal set by Kyari is to boost the nation’s oil production to 3 million barrels per day. To achieve that target, he immediately set about resolving disputes around a number of oil blocks that had led to production shut-in. A case in point is the resolution of the dispute involving Shell and Belema Oil that shut in over 30,000 barrels per day production in OML 25. That dispute was effectively resolved to restore production in the oil block.
He also led the Corporation to execute the Abo OML 125 Heads of Terms leading to the resolution of the issues around most of the deep offshore Production Sharing Contracts. This paved the way for the renewal of OML 125 and further investment in the exploration of the lucrative field to boost the nation’s crude oil production.
Recently, in May 2021, Kyari repeated a similar feat when he led the Corporation to sign 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 $10 billion investment in the development of the Bonga South-East Field. This will further boost the nation’s oil production.
In furtherance of the goal of boosting the nation’s crude oil production, the Kyari-led management has secured a number of alternative funding facilities for the Nigerian Petroleum Development Company, NPDC, and some of the Joint Ventures to facilitate further development of assets. These include: the N875.75m NPDC OML 65 Alternative Funding and Technical Services package with CMES-OMS Petroleum Development Company, the $3.15bn Alternative Financing Package with Sterling Exploration and Energy Production Company Limited (SEEPCO) and other partners for the development of NPDC’s OML 13.
First oil of about 7,900bpd was achieved from the project on 1st April, 2020, while production is expected to peak at 94,000bpd of oil and 542mmscfd of gas within four years.
Gas Development
The NNPC has focused heavily on the gas sector in keeping with the aspiration of the administration to diversify the economy by transforming the nation into a gas driven economy.
In this regard, the NNPC drove and achieved the Final Investment Decision on the NLNG Train 7 Project in December 2019. The project was on the drawing board for over 10 years. The project is expected to generate over $20 billion of revenue to the government over the project’s lifecycle, 10,000 direct and 40,000 indirect jobs.
The Corporation followed that feat up in May 2020, at the heat of the Covid-19 pandemic, with the signing of the Engineering, Procurement and Construction, EPC, contract of the NLNG Train-7 project. The contract was signed with the SCD JV Consortium, comprising affiliates of Saipem, Chiyoda and Daewoo.
The execution of the EPC contract signals the effective commencement of the detailed design and construction phase of the multi-billion dollar project, which on completion, is expected to raise the NLNG production capacity by 35 percent from the current 22 million tonnes per annum, MTPA, to 30 MTPA.
On 15th June, 2021, the ground-breaking ceremony of the NLNG Train 7 Project was conducted signaling the commencement of construction work on the project.
The NNPC also successfully flagged-off the construction of the Ajaokuta-Kaduna-Kano, AKK, gas pipeline project on 30th June, 2020. The project, which has been described by the President as a game-changer is an integral part of the Trans-Nigeria Gas Pipeline, TNGP, with a capacity to transport about 2.2 billion cubic feet of gas per day.
The infrastructure designed to feed gas into the AKK – the Escravos Lagos Pipeline System II (ELPS II) and Oben-Obiafu-Obrikom (OB3) gas pipeline are also being aggressively executed and expanded to increase delivery capacity from 1.5BCF/D to over 3.5BCF/D. The ELPS II has reached 96.34 percent completion.
Kyari also led the Corporation to achieve a $300 million reduction in the cost of the AKK Gas Pipeline contract via contract renegotiation from the initial $2.8 billion.
Another major stride in the gas sector was witnessed in late 2020 with the commissioning of the Oredo Integrated Gas Handling Facility, IGHF, and the Liquefied Petroleum Gas Storage and Dispensing Unit. The facilities are wholly owned and constructed by the Nigerian Petroleum Development Company, NPDC, to address domestic gas supply challenges. The facilities currently deliver over 200 million standard cubic feet of dry gas per day and 330 metric tonnes of Liquefied Petroleum Gas (cooking gas), which is equivalent of 16 units of 20 tonnes LPG trucks per day into the domestic market.
In order to provide an alternative to Premium Motor Spirit (petrol) as the sole automotive fuel and reduce the huge importation bill of the product, the GMD led NNPC to key into the Year/Decade of Gas initiative spearheaded by the minister of state for petroleum resources to launch the Autogas initiative. It executed a JV agreement with NIPCO to help in the marketing and distribution of the product to get as many Nigerians as possible to migrate to the use of gas as automotive fuel.
Kyari heralded 2021 with a significant step in the direction of bringing the proposed Brass Gas Hub into reality. He led NNPC to take the Final Investment Decision, FID, with the Brass Fertilizer and Petrochemical Company for the $3.6 billion Brass Methanol Plant in Odioma, Bayelsa State.
He followed that feat up a few weeks later with the signing of a $260 million financing agreement for the Assa-North Ohaji South, ANOH, Gas Project with Seplat. The project will deliver 300 million standard cubic feet of gas per day and 1,200 megawatts of electricity to the domestic market.
On 22 April, 2021, the NNPC executed a Gas Development Agreement, GDA, for the Oil Mining Lease (OML) 143 with its partner, Sterling Oil Exploration and Production Company, SEEPCO. The project will boost the nation’s gas production by 1.2 trillion cubic feet, tcf.
The Corporation also secured the United States Trade and Development Agency (USTDA) Grant and commenced the upgrade of 1350MW Abuja IPP project development to World Bank Standard for bankability.
Downstream
The NNPC’s Downstream operation is also experiencing the Kyari’s Midas touch with the introduction of Operation White, which has helped in streamlining petroleum products importation, supply and distribution across the country.
As the sole importer of petroleum products in the country, the NNPC has succeeded in keeping the nation well supplied. It has emplaced a stable fuel supply system to guarantee zero fuel queues throughout the country in the last two years of Kyari.
The Corporation is in the process of strengthening the products distribution system by revamping the pipeline network through a Build, Operate and Transfer, BOT, model whose process is already at an advanced stage.
The vision of revamping the pipelines is in tandem with the Refineries Rehabilitation Project to ensure that products evacuation facilities are in top shape to support the operations of the refineries post-rehabilitation in 2023.
Keen on boosting petroleum products supply and distribution in riverine areas of the Niger Delta, Kyari led NNPC to sign an agreement with the Nigerian Content Development and Monitoring Board, NCDMB, and Zed Energy for the construction of the N10.5 billion Brass Petroleum Products Terminal. The facility will serve as a strategic reserve for the country as it is expected to provide a depot for 50 million litres of petroleum products, two way product jetty, automated storage and automated bay for AGO, PMS, DPK and ATK. It will close the infrastructure gap in the distribution of petroleum products and also help to stop illegal refining activities.
Refineries Rehabilitation
Another goal that the GMD set for his management at inauguration in 2019, was the rehabilitation of the refineries. Kyari has made good on that promise by driving the rehabilitation project to an advanced level. On 6th April, 2021, he led NNPC to sign the $1.5 billion Engineering, Procurement & Construction (EPC) Contract Agreement with Tecnimont SpA, for the complete rehabilitation of the Port Harcourt Refinery.
On 7th May, 2021, the GMD led NNPC and the contractor, Tecnimont S.p.A, to flag off construction work on the Port Harcourt Refinery rehabilitation project.
He is in the process of making good his promise to introduce a new operational model for the refineries post-rehabilitation with the call for bids for the Operations & Maintenance Contract for the refineries advertised recently in the media. The O & M model would ensure that the refineries are managed by contractors with requisite experience, who would ensure that they are regularly maintained as and when due.
The WRPC and KRPC EPC contracting has progressed to advanced stage with a certificate of no objection secured from BPP on the award of the contract. Currently awaiting FEC approval of award to the most technically and commercially qualified globally reputable EPC firm.
Transparency
One of the issues Kyari spoke passionately about during his inauguration was Transparency and Accountability. He emphasized that transparency and accountability would be the cardinal pillars of his management. He promptly followed up his inaugural pronouncement with the launch of his management’s strategic objectives two weeks later. He christened it as Transparency, Accountability and Performance Excellence, TAPE. Since then, he has walked the transparency and accountability talk by opening up the books of the Corporation the way no other management before his team has done. The key accomplishments in this regard include:
The publication of the 2018 and 2019 Audited Financial Statements of the Corporation and its 19 subsidiaries registered under the Companies and Allied Matters Act, CAMA, 1990 as amended alongside that of the National Petroleum Investment and Management Services, NAPIMS, to provide clarity on Joint Venture finances. The AFS were published in the Corporation’s website for all interested parties to access and scrutinize. This is the first time the Corporation’s AFS were made public in such a manner.
A major revelation in the Audited Financial Statements of the two years so far published is the 99.7% reduction of the Corporation’s loss profile from ₦803 billion in 2018 to ₦1.7 billion in 2019. Following this trajectory, the Corporation is likely to declare profit in the 2020 AFS, which is billed to be released soon.
The Kyari-led management also sustained the publication of the Corporation’s Monthly Financial & Operations Reports, MFOR, in line with the TAPE vision. The NNPC remains the only national oil company that publishes its financial and operations reports monthly globally.
The GMD also led the Corporation to enlist with the Global Extractive Industry Transparency Initiative as an EITI Supporting Company, which mandates and places NNPC in the group of over 65 extractive companies, state owned enterprises that commit to observing transparency and accountability standards defined by EITI.
Another key achievement of the NNPC under the leadership of Kyari on the transparency terrain is the successful completion of a controversy-free recruitment exercise for 1,000 young graduate trainees to rejuvenate the Corporation’s talent mix.
Stakeholders Engagement
Kyari also promised at his inauguration to upscale engagement with stakeholders to ensure that stakeholders are carried along in the Corporation’s operations. He has kept faith with this pledge by devoting time to honour invitations from the relevant committees of the National Assembly, holding periodic engagement sessions with critical stakeholders, including the media.
COVID -19 Interventions
Following the outbreak of the Covid-19 pandemic in early 2020, the GMD quickly realised the vulnerable position of Nigeria with regard to the condition of the existing healthcare system in the country. He rallied players in all the sectors of the oil and gas industry to raise over N21 billion to support the fight against the spread of the disease in the country
Under the leadership of the NNPC, 26% of the fund was deployed for the provision of logistics and in-patient support equipment such as ambulances, ventilators, isolation centres, etc. He ensured that every state of the Federation benefitted from the donations.
Twenty-one percent of the sum was deployed for the provision of medical consumables. These include drugs, sanitizers, masks, protective gears and equipment, etc. These were also donated to all the states of the Federation.
The balance of 53% of the sum was designated for the construction of standard medical facilities with one in each of the six geo-political zones of the country. The ground-breaking ceremony of Infectious Diseases Hospitals had been held in Bayelsa, Kano, Maiduguri and Owerri.
All these achievements prompted Boss Mustapha, chairman of the Presidential Task Force on Covid-19 and secretary to the government of the federation, to commend Kyari-led NNPC for its various donations and strong support for the fight against the spread of the disease in Nigeria.
