NNPC…Walking away from dark years

The dream was for the Nigerian National Petroleum Corporation (NNPC) to become a world-class oil and gas firm, but this has remained unattainable. Its current management is, however, taking steps that, if not derailed, can make it achieve the founder’s vision, writes CHINAKA OKORO.

 

The dream became reality in April 1977. The vision was for it to be the best oil and gas company in the world. So, the pioneers at the Nigerian National Petroleum Corporation (NNPC) worked vigorously to achieve this vision. Along the line, unfortunately, there were setbacks and the needed shared commitment to excellence took a backseat.

Forty-three years after, this grand vision has not been achieved because the NNPC was built on a system that permits opacity instead of accountability and transparency accepted by global best practices. Its books, for decades, were not made available for public inspection. Only the firm knew how much Nigeria earned from crude oil and other associated businesses. The firm shut out stakeholders that could contribute towards its growth. So, when matters of transparency and accountability were discussed anywhere around the world, NNPC was blacklisted.

Oil firms owned by the governments of Saudi Arabia, Iraq and Iran operate structures that allow the public to contribute to their growth by scrutinising their books and providing insights on how to be better.

For a sector that contributes about 90 per cent of foreign exchange earnings of the country, many felt things should change. Over the years, there were protests for this to happen, but the more things seemed to change the more they remained the same.

When Mallam Mele Kyari assumed office on July 8, last year, he acknowledged the need for the firm to open its books. In his maiden speech, he said the firm would be accountable to Nigerians, who, he identified as its true owners. He ordered that operational discipline must cascade down to all NNPC subsidiaries.

On June 12, the NNPC released its audited annual reports and financial statements for the year ended December 31, 2018 for the first time in its history. It captured the performance of 20 of its subsidiaries operating in and outside Nigeria.

The companies covered in the reports are the Nigerian Petroleum Development Company (NPDC), Warri Refining & Petrochemical Company Limited (WRPC), Port Harcourt Refining Company Limited (PHRC), Kaduna Refining & Petrochemical Company (KRPC), and Integrated Data Services Limited (IDSL), Nigerian Products and Marketing Company Limited (NPMC), Nigerian Pipelines and Storage Company (NPSC).

The report also covered are the National Engineering & Technical Company Limited (NETCO), Nigerian Gas and Marketing Company Limited (NGMC), Duke Oil Services (UK) Limited, Duke Global Energy Investment Limited, Duke Oil Incorporated, NNPC Retail Limited, National Petroleum Investments Management Services (NAPIMS), The Wheel Insurance, NIDAS Shipping Services, NIDAS UK Agency, and NIDAS Marine.

It showed that its subsidiaries recorded revenue of N5.04 trillion with a profit of N1.01 trillion. It, however, showed that all the refineries recorded poor results, with Kaduna Refinery and Petrochemical Limited posting an accumulated loss of over N423.43 billion. Aside the operating loss of about N64.55 billion, the refinery also reported administrative expenses of about N64.68 billion during the year. The bulk of the losses were traceable to operational costs.

Kyari promised to advance actions on the firm’s preparation and release of its 2019 audited financial statement.

In a recent tweet, the NNPC Group Managing Director said: “Today, we do 80-90% of our business through automation. This company is changing for the better and it will remain an entity that all Nigerians will be proud of.

“What we are doing differently about the refineries is to rehabilitate them first and then get them to be run, just like the NLNG Model, where the NNPC Group will be a minority partner.

“Our long term goal is to be an integrated energy company that is commercially focused and wholly committed to deriving value for the benefit of its shareholders.

“The NNPC is leveraging technology and innovation to achieve the goal of building an energy company of global excellence. We call on stakeholders to collaborate with the corporation in an atmosphere that is beneficial to all and emplaces Nigeria on the path of growth and development.”

Nigeria Extractive Industries Transparency Initiative (NEITI) Executive Secretary Waziri Adio praised the Kyari-led management, saying it was very good for the country’s image locally and internationally.

“Having such disclosures is good for transparency and accountability. I congratulate Mele Kyari and his team and urge them to make this a regular practice and in open data format,” Adio said.

Akwa Ibom State Governor Udom Gabriel Emmanuel, while receiving the NNPC Board members to the Government House, Uyo, acknowledged the positive impact the leadership of the corporation was having on the economy, adding that its adherence to transparency and accountability was commendable.

The Kyari-led team is also using Artificial Intelligence (AI) to boost the accounting processes of its corporate headquarters, subsidiaries, companies and Corporate Services Units (CSUs). This development is helping to ‘kill’ the era of opacity in the extractive industries.

The new state of things has not escaped the attention of the international community. On August 18, the Extractive Industries Transparency Initiative (EITI) made the corporation one of its Partner companies. This is a step towards achieving the founder’s aim of being a world-class company. EITI’s endorsement has made it a member of a group of 65 other extractives companies, state-owned enterprises, commodity traders, financial institutions and industry partners committed to accountability.

Henceforth, the EITI expects the NNPC to promote transparency throughout the extractive industries, helping in public debate and provision of opportunities for sustainable development; publicly disclosing taxes and payments; publicly disclose beneficial owners and take steps to identify the beneficial owners of direct business partners, including Joint Ventures and contractors; engage in rigorous procurement processes, including due diligence in respect to partners and vendors; deliver natural resources in a manner that benefits societies and communities; and ensure that company processes are appropriate to deliver the data required for high standards of accountability.

Also, the NNPC must advance its inclination to transparency by ensuring revenue and payment to government; contracts governing petroleum exploration and production, and consolidated group-level financial statements.

Kyari added that NNPC’s choice as an EITI partner company aligns with its corporate vision and principles of Transparency, Accountability and Performance Excellence (TAPE), which he has championed since assumption of office. He promised to collaborate with NEITI and EITI and other such bodies to deepen transparency in the corporation.

EITI Board Chairperson Helen Clark commended NNPC for fulfilling the conditions to be accepted into its fold. Clark noted the corporation’s huge role in Nigeria’s economy, adding that the new status would afford the corporation the opportunity to deepen its commitment to transparency and ensure that Nigerians benefit from crude cash.

Minister of Finance, Budget and National Planning Mrs Zainab Ahmed said the increased transparency in NNPC’s revenues was already contributing to improvements in Nigeria’s domestic resource mobilisation efforts.  Mrs Ahmed, who was and a former EITI Board member, urged the corporation to keep the flag flying.

The NNPC has also prioritised low-cost oil production, thus saving 40 per cent of proposed budget and cost.

“We have rolled out strategy to achieve sub 10$/bbl UOC without jeopardising growth,” he said.

His eyes are on increasing oil production from 2.3 million barrels per day to three million bpd.

“In order to achieve this objective, it means more money will be required from the oil and gas to fund new economic projects outside the Oil and Gas Industry.

“The NNPC has been repositioned to support the vision of Mr. President for economic diversification. NNPC targets increasing oil production from 2.3million barrels per day to 3million bpd and at the same time working with partners to significantly reduce cost per barrel in order to improve the flow of the needed revenue to support economic diversification,” Kyari told editors recently.

Observers are of the view that for Kyari’s target-driven style to be effective, it must not be allowed to be bogged down by bureaucracy. They believe that government owned enterprises must be open for national treasures to benefit Nigerians.