Nigeria’s Rig Count Soars as NNPC, Partners Set to Pump More Oil

*Raises hope of meeting OPEC October quota
*Buhari directs incorporation of NNPC Ltd, retains Kyari, Ajiya

Emmanuel Addeh in Abuja

For the first time since 2020, Nigeria’s rig count, which had been on the decline, soared to 11 in August, signalling readiness by the Nigerian National Petroleum Corporation (NNPC) and its partners to pump more oil.

This was just as President Muhammadu Buhari, in his capacity as Minister of Petroleum Resources, yesterday triggered Section 53(1) of the new Petroleum Industry Act (PIA) by directing the incorporation of the Nigerian National Petroleum Company (NNPC) Limited under the new law. The president also approved the formation of a new board, which would be overseen by Senator Ifeanyi Ararume, a career politician from Imo State.

The significance of this appointment is that the president has appointed a south-easterner into a high profile federal position and in a critically sensitive government company.

It is also worthy of note that the new board is made up of three women namely: Mrs. Lami O. Ahmed (North-central), Senator Margaret Chuba Okadigbo (South-east) and Barrister Constance Harry Marshal (South-south), which is a reflection of gender diversity and inclusiveness.

The other board members are Dr. Tajudeen Umar (North-east), Mallam Mohammed Lawal (North-west) and Chief Pius Akinyelure (South-west). However, the president retained the Group Managing Director, NNPC, Mallam Mele Kyari, as Chief Executive Officer, and Mr. Umar Ajiya as Chief Financial Officer of the corporation on the new board.

Meanwhile, in the last few months, Nigeria had been unable to meet the quota allocated to it by the Organisation of Petroleum Exporting Countries (OPEC), due to weakening infrastructure and difficulty in restarting oil facilities that were shut down because of the cuts in production assigned to the country.

But latest data from the OPEC Monthly Oil Market Report (MOMR) indicated that the country’s oil rigs have climbed from a low of five in the second quarter of 2021, to 11, as of last month. A further analysis of the data showed that while in 2018, the average rigs count was 13, it was 16 in 2019, but fell to 11 in 2020, a reduction by five oil rigs.

Since the third quota of 2020, the count had continued to slump, first to eight in that quarter, and seven in July, but with an addition of four rigs for the month of August, raising hope of more production.
Put side by side with a country like Algeria, the North African nation has a high of 50 and low of 21, while the United Arab Emirates (UAE), for instance, has a high of 62 and a low of 40.

In the oil industry, the rig count is a major index of measuring activities in the upstream sector, with a breakdown showing that Nigeria utilised six, seven, and six rigs in January, February, and March 2021, respectively, against 21, 23, and 21 used in the corresponding period of 2020, when production was about two million bpd.

Despite asking for a higher baseline, in June, July and August, Nigeria failed to meet the existing quota assigned to it by OPEC for the months, losing 90,000 barrels per day in the month of August alone. When cumulated for the entire month, this amounted to roughly 2.8 million barrels, making last month’s production of 1.43 million bpd one of the lowest in five years.
While Saudi Arabia and Iraq were the main drivers of OPEC’s production for August, with an additional production of 290,000 bpd and 200,000 bpd, respectively, Nigeria, which has a capacity to produce two million bpd, other things being equal, slumped from its July figure of 1.520 million bpd, according to an OPEC document.
Production growth in Nigeria, Africa’s highest oil producer, going by recent data, is proving a major challenge due to infrastructure challenges and technical difficulties, leading to shut-ins.

In addition to decreasing rig counts and highly degraded facilities due to old age and lack of investment, there have also been instances of community workers’ protests, which incessantly disrupt operations, leading to severe losses.
The previous month, a document obtained by THISDAY showed that the NNPC and its partners lost 6.035 million barrels of crude oil to emergency shutdowns.

In its August presentation to the Federation Account Allocation Committee (FAAC), which held between the 18th and 19th of last month, the corporation recorded that there were 32 of such incidents throughout its facilities in the country.
A breakdown of the losses, according to the document, indicated that the highest combined shortage of 1.62 million barrels was from Qua Iboe, with 200,000 barrels due to production shut-in arising from flare management and low well head pressure.

Still on Qua Iboe, a further 530,000 barrels were lost to shut-ins following tank top concerns, 650,000 barrels as a result of production cut-back as directed by the Department of Petroleum Resources (DPR), as well as a loss of 240,000 barrels due to a gas leak on one of the assets.

This was followed by losses from the Forcados facility, which shed 200,000 barrels, 84,000 barrels, 30, 000 barrels and 80,000 barrels, respectively on different days, with reasons ranging from leak repairs, tank top issues, fire incident, and declaration of force majeure.

Buhari Directs Incorporation of NNPC Ltd, Retains Kyari, Ajiya

Announcing the latest decisions and changes to the board, the Special Adviser to the President (Media and Publicity), Mr. Femi Adesina, in a statement, stressed that the president gave the order in his capacity as petroleum minister.
On the other hand, the member of the board representing the South-south, Senator Magnus Abe was replaced with Harry-Marshal, a lawyer. He also dropped Dr. Stephen Dike from the board and replaced him with Senator Margaret Chuba Okadigbo.

The statement explained, “This is in consonance with Section 53(1) of the Petroleum Industry Act 2021, which requires the Minister of Petroleum Resources to cause for the incorporation of the NNPC Limited within six months of commencement of the Act in consultation with the Minister of Finance on the nominal shares of the company.”

The statement pointed out that Kyari had been directed to take necessary steps to ensure that the incorporation of the NNPC Limited was consistent with the provisions of the PIA 2021.
The statement said, “President Buhari has also approved the appointment of the board and management of the NNPC Limited, with effect from the date of incorporation of the company.

“The president named Senator Ifeanyi Ararume as Chairman of the Board while Mele Kolo Kyari and Umar I. Ajiya were appointed as Chief Executive Officer, and Chief Financial Officer, respectively,” it stated.
With Buhari’s latest directive, the Minister of State, Petroleum, Mr. Timipre Sylva, ceases to be the alternate chairman of the board, since the NNPC would begin to operate under a new law, which would see it detached from the apron strings of the government.

When the process is fully consummated, NNPC would cease to exist as specified under the law and would eventually be transformed into a private company that would pay taxes and dividends to its shareholders, Kyari said in a recent interview.

The latest decisions by Buhari also imply that the new company would be incorporated under the Companies Allied Matters Act (CAMA), while all assets and liabilities of NNPC will be transferred to the new company.

Explaining this, Kyari had stated, “Coming back to the NNPC, the provision of the law clearly states that the corporation will be transformed into a CAMA company. The meaning of this is that the company will just be another privately owned company, in a sense.

“This company will pay taxes, royalties and dividends to its shareholders. This isn’t the situation today because the corporation has no such obligation. This has stalled its development, its growth and its prosperity.”

According to the new law, “The minister shall within six months from the commencement of this Act, cause to be incorporated under the Companies and Allied Matters Act, a limited liability company, which shall be called Nigerian National Petroleum Company Limited (NNPC Limited).

“The minister shall at the incorporation of NNPC Limited, consult with the minister of finance to determine the number and nominal value of the shares to be allotted, which shall form the initial paid-up share capital of NNPC Limited and the government shall subscribe and pay cash for the shares.”

In addition, section 53 (7) stipulates, “NNPC Limited and any of its subsidiaries shall conduct their affairs on a commercial basis in a profitable and efficient manner without recourse to government funds.”
Kyari had assured during an interview on Arise News Channel, THISDAY’s broadcast arm, “You are going to have a much more efficient, much more slimmer, much more commercial national oil company.”

Already, the federal government has inaugurated a transitional steering committee, headed by Sylva, to see to the detailed implementation of the new law, which is expected to bring about major structural changes to the oil and gas industry, including NNPC.

Eventually, the commercialised NNPC would witness the sale of shares to Nigerians, while any assets, interest and liabilities not transferred to NNPC Limited would remain with NNPC until extinguished or transferred to the government after which NNPC shall cease to exist.