Mele Kolo Kyari was appointed the 19th Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC) by President Muhammadu Buhari on Monday, July 8, 2019. He succeeded Maikanti Kachalla Baru (now late).
Prior to his appointment, Kyari, a Maiduguri-born Petroleum Engineering graduate from Bornu State was the Group General Manager in charge of the Crude Oil Marketing Department (COMD). He has worked with the NNPC and the Nigerian oil and gas industry for over 33 years.
On assumption of office, Kyari inherited an NNPC that was still struggling to shake off the negative image of a national oil company where nothing works.
Established on April 1, 1977 as Nigeria’s national oil company, 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.
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.
Days after his inauguration, the reform-minded oil, 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.
Kyari told 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 realizing 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.
As Kyari marks his first 365 days at the helm of affairs at the NNPC, and as he resumes the next milestone of his tenure, Nigerians count his visible footprints of achievements across all segments of the country’s petroleum industry – Upstream, Downstream, Gas & Power as well as his interventions in other sectors to give Nigerians a new lease.
Prior to Kyari’s appointment, the upstream sector of the country’s petroleum industry was facing a myriad of challenges. Prices at the international crude oil were experiencing a rapid decline.
Earnings from crude oil exports were significantly lower than the situation a few years ago. The average oil production volumes of 1.9 million barrels per day were significantly below the country’s approved 2.3 million barrels per day capacity in the 2019 Federal Budget.
New investments in the industry have stalled for several years as a result of the growing uncertainty over lingering issues that bordered on the poor operational environment. 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, 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.
1. NPDC’s Growing Output
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.
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 on assumption of office, he succeeded in mobilizing 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 were 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 of 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.
2. Alternative Financing Deal For NPDC
Within the last one year, Kyari ensured the execution of a funding and technical services agreement (FTSA) as well as a 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% and 21% 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 monetizing the nation’s enormous gas resources.
3. Revision Of Unit Costs for JVs, PSCs
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.
4. Sustaining Average Oil Output
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 stabilize 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 formalized.
5. Nigeria LNG Train 7 FID
For almost two years, the final investment decision (FID) for the construction of Train 7 of the Nigeria LNG project was delayed. The NNPC and other partners in the project could not come together to commit to the development of the project.
The outbreak of the coronavirus last year worsened the problem as the global economy came to a virtual standstill. But, Kyari did not allow all the crises to rob Nigeria of all the benefits derivable from the execution of the project.
At the height of the global pandemic, Kyari ensured the NNPC and its JV partners, including Shell, Total, and ENI, came together to execute the NLNG T7 FID on December 27, 2019. He went ahead to mobilize for the signing of the engineering, procurement and construction (EPC) contract for the project awarded to the Saipem, Chiyoda and Daewoo (SCD) JV Consortium.
The signing of the contract signaled the commencement of EPC activities for NLNG T7 Project. On completion, the production capacity of the six-train plant would expand exponentially by 35 per cent, from the extant 22 million tonnes per annum (MTPA) to 30 MTPA, and boost Nigeria’s competitiveness in the global LNG market.
The project has the prospects of further attracting foreign direct investment (FDI) in excess of $10 billion to Nigeria.
The FID on NLNG T7 Project was a sobering moment and important milestone achievement for Kyari, because the FID has confirmed that despite the downturn in the global economy, the partners in the projects were still willing and confident in Nigeria’s economy by agreeing to risk additional investment of over $10 billion after several postponements in the previous years.
As Kyari said, additional benefits include the creation of “over 12, 000 jobs will be created during the peak of construction phase, boost trade and commercial activities within the Niger Delta region as a result, support the development of local engineering and fabrication capacity in the country, provide opportunities for local content include procurement, logistics, equipment leasing, insurance, hotels, office supplies, aviation, haulage, and many more.”
6. The AKK Pipeline Project
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 utilize 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.
7. Completion of Power projects
In the last one year, Kyari has mobilized to ensure the completion of the second phase of the Okpai Power Plant, with the first and second turbines lined up for commissioning in the third quarter of this year to guarantee the supply of electricity to the national grid.
To ensure the sustenance of gas supply to power plants in the country and other domestic users leading to a peak energy capacity of 111,591.83 megawatts-hour is attained, Kyari ensured the execution of a funding and technical services agreement (FTSA) with NPDC on OML 11, while taking the FID on the $3.5 billion West African Gas Project (WAGL).
Thee rehabilitation, operations and maintenance of the Escravos Crude Oil Terminal is scheduled for December this year.
In addition, Kyari has already ensured the successful execution of the intelligent pigging of the West African Gas Pipeline project as part of regulatory compliance and flow assurance, which is instrumental to achieving delivery of Nigeria-Gas foundation volume of 133 million BTU and cumulatively of more than 190 million BTU through the pipeline system this year.
Kyari has also ensured that thee debts valued at over N80billion and $45million owed the NNPC, through its subsidiary in charge of gas development and supply, the Nigerian Gas Company (NGC) by gas off-takers, were recovered.
8. Uninterrupted Fuel Supply
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.
9. 2020 crude oil lifting contracts
In August 2019, a few weeks after his inauguration, Kyari announced the issuance of fresh crude oil lifting contracts to 15 local and international oil marketing and trading consortia/companies under the 2020 DSDP scheme.
With the country’s four refineries still operating far below their installed capacities, and unable to produce enough to meet the country’s daily national consumption need for petroleum products, the 15 contractors were to utilize the 445,000 barrels per day crude oil allocation for local refining to bring into the country petroleum products for domestic consumers.
But, Kyari said the difference in the latest issuance of the oil lifting contracts was that this would be the first time since the DSDP programme began in 2016 that the NNPC would officially be making public the list of all the contract winners.
Kyari said revealing the names of the beneficiaries to the public was a new normal for NNPC as part of the policy direction, pledge and commitment of his management to transparency and accountability in NNPC’s operations going forward.
To sustain the era of uninterrupted supply of petroleum products, Kyari assured that his management would continue to revamp downstream infrastructure to guarantee availability of 90 per cent pipeline for fuel distribution; ensure automation of the fuel distribution system, and grow NNPC Retail’s market share to 30 per cent.
10. “Operation White”
To build on the success of the DSDP programme, entrench energy security and deepen transparency in petroleum products supply and distribution, Kyari, in collaboration with the Minister of State for Petroleum Resources, Timipre Sylva, initiated an innovative programme, “Operation White”, to curb products diversion and smuggling, and ensure that the entire country was kept continuously wet with petroleum products.
Under the initiative, a team of 89 officials drawn from various government agencies involved in the petroleum products supply process was inaugurated, tasked with the responsibility of monitoring and tracking fuel distribution and consumption throughout the country.
The team included representatives from the NNPC, Department of Petroleum Resources (DPR), Petroleum Products Pricing Regulatory Agency (PPPRA), Petroleum Equalization Fund (PEF) as well as the Department of State Security (DSS).
Under the initiative, Kyari ensured actual volumes of petroleum products imported and consumed in the country were authenticated. The NNPC now has a customer express solution and online marketers’ portal, which is live for oil majors and Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN) to monitor loading and lifting of petroleum products from NNPC depots. Plans are on course for the system to go live for members of the Independent Petroleum Products Marketers Association of Nigeria (IPMAN) by the end of the second quarter of 2020.
11. Determining Nigeria’s National Daily Fuel Consumption
Kyari wants to eliminate the situation the Federal Government has not been able to determine the exact volume of petroleum products consumed daily in the country.
Various agencies have been presenting conflicting figures of the national fuel consumption volumes, ranging from about 35 million litres to 80 million litres per day. It was difficult to plan as a country.
Within few weeks of the “Operation White” initiative, the team was able to force down daily national consumption volume of premium motor spirit (PMS), popularly called petrol, from about 60 million litres to 52 million litres.
With the Federal Government’s border closure policy against its neighbours, NNPC was able to curtail the massive smuggling of petroleum products by unscrupulous elements across the Nigerian borders to other neighbouring countries in the sub-region. Since then, the national average has been between 45 and 50 million lires per day.
12. Strategic Fuel Reserve/Refineries Repairs
With the curtailment of massive smuggling of petroleum products across the country’s borders, Kyari ensured the NNPC maintained a national strategic fuel reserve capable of serving the country’s needs for a reasonable period till normalcy was restored.
Even during a period of a global pandemic, when the world economy was on lockdown, Nigeria has not experienced any concerns by way of disruptions in normal fuel supply as a result of the strategic fuel reserve.
Kyari made sure the NNPC thought ahead and built a strategic reserve of over two billion litres of PMS the country could fall back on till it was able to import more petroleum products.
13. Refineries’ Rehabilitation
At inception, Kyari promised to ensure that all the county’s four refineries at Port Harcourt, Warri and Kaduna were fully rehabilitated by 2022, to transform Nigeria from being a net importer of refined petroleum products into net exporter of the commodity.
Apart from encouraging private investors, like Dangote Group and other mini-refineries developers in the country to be involved in the construction of private refineries, Kyari ensured his agenda for the rehabilitation of the four refineries were on course.
The plan to undertake the rehabilitation of Phase 1 of the Port Harcourt was to complement the supply of petroleum products from the strategic reserve.
The plant equipment inspection and integrity study rehabilitation of Phase 1 of the Port Harcourt Refinery was completed since December 2019. But, the commencement of actual repairs has remained stalled, because some of the equipment suppliers were compelled to declare force majeure (declaration of their inability to deliver on their contracts due to unforeseen circumstances) as a result of the impact of COVID-19 pandemic, which made it impossible for the required spare parts to be brought into the country.
The technical audit of the Warri Refinery and Petrochemical Company (WRPC) has already kicked off.
14. Involvement of NNPC’s Local Workforce
Kyari has assured that his approach to the rehabilitation of the refineries would be different. Along with the Ministry of Petroleum Resources, he said the NNPC local engineers would be involved in the process by working with the original equipment manufacturers (OEMs) who are the owners of the technology used in building the refineries.
Kyari has ensured NNPC engineers working with the National Engineering and Technical Company (NETCO), the engineering and technical subsidiary of the corporation, would be involved. They will work with KBR, the original owners of the engineering technology for the refinery rehabilitation projects to handle the refineries’ rehabilitation programme.
Feasibility studies have already been completed for the construction of a condensate refinery, while the NNPC has given its commitment to sustain seamless supply and distribution of petroleum products.
After the rehabilitation of the refineries, Kyari said the NNPC has agreed with the government to take away the management of the refineries from the bureaucracy and hand over to private investors, as past experiences confirmed the government cannot handle business effectively.
Consequently, Kyari said the contract for the operation and management (O&M) of the rehabilitated refineries would be put up for bid by qualified professional managers to take over and manage, to cut off the bureaucratic bottlenecks, for ensure the refineries functioned well.
15.Diversification Of NNPC’s Portfolio
Unlike most of its peers around the world, Kyari said the NNPC has for too long focused its operations on a single business line – exploration and production of oil.
Despite the abundant natural gas reserve in the country, the huge volume being produced by the oil companies are only through accidental encounters in the course of oil production. There is no deliberate policy or programme by the government to harness the gas resources to contribute to the economic development efforts of the country.
Kyari said NNPC has a plan to expand its activities beyond its traditional operations to other unexplored frontiers, to grow its revenue streams, and cushion the impact associated with the volatility in the international crude oil market. The NNPC Retail Limited recently launched its range of lubricants into the Nigerian products market.
Apart from growing the country’s gas export potentials, Kyari said the NNPC and its partners were committed to developing the infrastructure necessary to encourage domestic utilization of gas among Nigerians as well as the generation of electricity for the country and the industries.
Besides, Kyari said the NNPC will continue to encourage the use of liquefied petroleum gas (LPG), otherwise known as cooking gas, among Nigerians in their domestic activities.
Also, he said plans are on course by the government to roll out a compressed natural gas (CNG) programme in the country soon to provide a viable alternative and cheaper fuel option for car owners.
These are all in addition to other business options in renewable energy sources like solar and biofuels for health, real estate to logistics, among others.
FINANCE & ACCOUNTS/OTHER ACHIEVEMENTS
16. Breaking 43 years Jinx with NNPC’s Audited Accounts
On assumption of office, Kyari promised the NNPC would embrace openness, transparency and accountability in his management approach. Despite pressures to dissuade him from opening up the system and break from the norm, Kyari kept his promise. He approved the regular publication of the Monthly Financial and Operational Report of the NNPC that highlight NNPC activities in the different aspects of the industry. Since 2016, the publication has been sustained.
Again, in 43 years of NNPC’s existence, never has its management been able to release to the general public the audited financial statements and accounts of all its strategic business units (SBUs) and Corporate Services Units (CSUs). The best that has usually happened was the submission of limited copies of such reports in highly confidential covers for the files of some restricted government institutions, like the National Assembly.
But, early last month, Kyari made history. He did not only conclude the audit of the 2018 Financial Statements and bring up-to-date the NNPC’s books and accounts, he released to the public all audited financial statements and accounts for the year ended December 31, 2018.
17. Timely Remittance Of Oil Revenues To FAAC
For years, the NNPC has always defaulted in remitting to the Federation Accounts revenues realized 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.
18. Revenue optimization
Kyari has also made it a policy of his management in the last one year to ensure revenue optimization by the NNPC in all its activities. In all NNPC’s projects, Kyari has always ensured all JV partners adhered strictly to efficient operational processes established by the NNPC under his management, to achieve cost conservation and allow the NNPC to deliver its business objectives at such low costs and reduced budgets, to guarantee steady revenue flows to the federation account.
19. Alternative Funding Arrangements
Since assumption of office, Kyari has secured several alternative funding mechanisms and financing deals for the NNPC and its partners, to save the government the headache of cash calls for oil and gas industry projects.
For instance, Kyari secured about $3.15billion funding for NPDC’s OML 13; $876 million for OML 65, and $3.4 billion for OML 11. Besides, Kyari has also concluded the necessary processes for a $1.8 billion financing for the AKK pipeline project as well as executed a term sheet with the Bank of China to raise escrowed $519 million from internal cash flows to support equity funding of oil and gas industry projects in the country.
Kyari has also achieved financial closure for ‘Project Eagle’ by raising $1billion for the NPDC through a Forward Sale Agreement (FSA), while also negotiating a term sheet with AFREXIMBANK for the $1billion funding for the Port Harcourt Refinery and Petrochemical Company (PHRC) rehabilitation project.
20. Regulatory Compliance
Kyari has also implemented various International Financial Reporting Standards (IFRS) 9, 15 and 16 across NNPC Group to ensure regulatory compliance as well as implemented the Centralized Invoice Processing System, integration of systems, applications and products to Remitta, SAP Funds management and issued conditions for financial autonomy of NNPC SBUs.
He has also inaugurated the NNPC Delivery Team charged with the responsibility of ensuring the effective performance tracking of top five priorities across the business as well as launch the NNPC Code of Conduct and Tip Portal.
21. Recruitment Of Graduate Trainees
Kyari has implemented NNPC’s People Strategy to address organizational optimization, resourcing, capacity development, retention, succession planning, compensation and rewards by recruiting onboarding and integrating 1,050 fresh graduates into various departments of the NNPC operations.
22. Roll out Integrated Management Systems
Kyari has ensured the NNPC automates its operations by rolling out the SAP enterprise management software in performance management, procure to pay, travel management to ensure an automated and integrated operational process.
23. End to Fuel Subsidy
For years, the Federal Government lost to fuel subsidy several billions of Naira that could have been used to provide other basic infrastructures for the people, like roads, hospitals, schools and other social amenities.
Each time any attempt was made towards the removal of subsidy by the government from the fuel pricing template of the PPPRA, there was so stiff resistance by the Nigeria Labour Congress (NLC) and other categories of Nigerians, who always threatened to embark on nationwide strikes capable of crippling the country’s economy.
While the situation remained, NNPC became the sole importer of petroleum products and supplier of last resort.
But, last April, when crude oil price at the international crude oil market dropped to about $12 per barrel, as a result of the impact of the coronavirus pandemic on the global economic, Kyari bit the fire and did what many thought was impossible in the past. He announced the end to fuel subsidy.
“There is no fuel subsidy anymore in Nigeria. It is zero subsidy forever. There would be no resort to either fuel subsidy or under-recovery of any nature going forward. NNPC will play in the petroleum marketplace, just like another marketer in the space,” Kyari announced.
Initially, the retail price of petrol was reduced to N125, from N145 per litre, later to N123 per litre and N121.50 per litre. Last week, a new price of N140.80 and N143.80 per litre was announced by the PPPRA, an indication that deregulation has come to stay in the country.
24. Highest Oil Output Despite Challenges
As at December when the Federal Government approved the 2020 Federal Budget, crude oil benchmark price was put at about $57 per barrel. But, by April, within a few months of the outbreak of the coronavirus pandemic, the price dropped to an all-time low level of less than $12 per barrel.
Despite the impact of the coronavirus pandemic, which ravaged the global economy and impacted the international oil market, Kyari said the NNPC achieved the best performance during the crisis period.
Kyari said at the peak of the crisis in April, the NNPC achieved the highest level of crude oil production per day never seen in at least ten years (about 2.4million barrels per day).
He said this was possible with the deployment of the latest technology under NNPC’s Business Continuity Plan activated during the crisis period to connect with its partners’ locations to sustain operations across the business value chain, despite disruptions and slowed down economic activities.
“What the NNPC did was to engage with its partners to bring down the high cost. We negotiated contracts, cut down on contract’s life cycle; select the right projects; engage the right institutions to bring down the cost. Our ultimate target is to bring the cost to at most $10 per barrel,” Kyari said.
As the Nigerian National Representative to the Organization of Petroleum Exporting Countries (OPEC), Kyari joined other members of the group to seek for solutions to the declining crude oil prices, which appeared to have impacted more on Nigeria, whose economy depended on more than 8o per cent oil revenues.
Kyari and the Minister of State for Petroleum Resources, Timipre Sylva joined OPEC to resolve on a programme to cut the crude oil output of its members by about 10 million barrels between May 2020 and April 2022.
Although the output cut programme has helped stabilize crude oil prices and the market, the impact on Nigeria has been a general slow down on growth, as the NNPC has to cut on its oil production, amid reduced oil exports.
However, Kyari said after the OPEC+ output cut programme in April 2022, NNPC’s target is to raise Nigeria’s oil production from 1.579 million barrels per day 3 million barrels per day and national oil reserve of about 35 and 40 billion barrels.
Kyari said NNPC has projects already in line to come on stream between 2021 and 2022 to bring incremental crude oil production volumes in excess of 600,000 barrels per day.
Besides, he said NNPC is also planning to increase the production of condensate from most of its oil field, as condensate is exempt from OPEC oil quota computation.
25. Reviving Moribund Subsidiaries
Apart from the diversification of the portfolios of its investment to create wealth, Kyari said NNPC is pursuing its drive towards profitability, by reviving its moribund subsidiaries and providing the building blocks for stronger strategic business units (SBUs) and Corporate Services Units (CSUs) to rake in more revenue to support the overall growth of the corporation.
Over the years, some of the SBUs remained largely financially dependent on the support from their parent company and hardly able to meet their obligations towards the discharge of their mandates.
For instance, the IDSL in Benin, which is supposed to be responsible for all the seismic data the NNPC requires in its oil and gas exploration activities, and its technical and engineering arm, NETCO in Lagos, which was supposed to make the technical and engineering inputs were all dormant for years.
But, since Kyari came to office, the two entities have not only been revamped and made to stand on their feet, they are now operating profitably and involved fully in the performance of their official functions in support of the entire NNPC business chain.
In the last one year, IDSL achieved 20% year-on-year revenue growth and completed eight reservoir studies alongside the upgrade of IDSL’s Data Processing Centre.
Also, IDSL has obtained an Integrated Management System (IMS) Certification in ISO 14001:2015 (EMS), ISO 9001:2015 (QMS) and ISO 45001: 2018 (OH&SMS), while NETCO executed 729,771 man-hours against a plan of 660,000; which is 11% above plan. Revenue performance from the agencies as shown in the NNPC audited actual plan about N38.05billion and N25.77billion respectively, which is 48% above plan.
26. Oil drilling in Kolmani River 11
For several years, the search for oil by the NNPC in the country’s inland sedimentary basins, particularly in the northern part, did not result in any successful commercial oil discovery, despite the huge resources deployed by the Federal Government into the exercise.
Kyari said during the year the NNPC discovered hydrocarbon deposits in commercial volumes in the Kolmani River II Well on the Upper Benue Trough, Gongola Basin, in the North Eastern part of the country.
The oil well was to evaluate Shell Nigeria Exploration and Production Company (SNEPCo) Kolmani River 1 Well Discovery of 33 BCF and explore deeper levels.
Kyari said the discovery of oil and gas in commercial quantity in the Gongola Basin would attract foreign investment, generate employment for people to earn income and increase in government revenues.
27. Benchmark For Legal Arbitration
Over the years, the NNPC has been spending a huge fortune on legal fees to defend itself against several litigations against foreign interests around the world.
When Kyari assumed office, the NNPC ha an arbitration case over a failed gas contract in the United States that dragged for years. Using foreign lawyers would have cost the NNPC about $3billion in legal fees.
But, Kyari said in line with his management’s two-pronged approach of performance and excellence across all departments and units of the corporation, NNPC lawyers would handle the case.
He said the idea was to entrench a high level of efficiency anchored on proficient implementation of business processes to emplace an appropriate reward system for exceptional performance among the NNPC workforce.
Kyari did not see spent billions of Naira to hire foreign legal experts to represent NNPC’s interest in courts abroad as appealing option, particularly where there were several qualified and competent Nigerian lawyers and legal experts on the corporation’s payroll doing nothing.
He approved that NNPC lawyers from Nigeria should travel to the United States to defend the corporation. The representation from the Corporation’s legal department not only succeeded in its assignment, it set a legal benchmark for the NNPC going forward.
The value addition was that the legal fees that could have been spent on the case if foreign legal experts were hired to handle the case was saved for the corporation.
28. Leadership For Oil Industry Fight Against COVID-19
Kyari has lead the oil and gas industry’s effort to support the government to limit the dread of the deadly Coronavirus pandemic in Nigeria.
He provided leadership to the decision to establish Petroleum Industry Intervention Fund on which platform the oil and gas industry mobilized about N21 billion to support the finance the provision of medical facilities and other interventions to curb the spread of the virus in the country’s six geo-political zones.
In all, Kyari’s one year in office may have opened up the system a bit, but there is a glimmer successive years would build on the foundation and bring more value to Nigerians.