Mele Kyari and the New NNPC

To impute that not a few Nigerians had written off the Nigerian National Petroleum Company Limited as a never-do-well entity before now, would be stating the obvious. Emmanuel Addeh writes that with recent development, it appears that the national oil company is gradually extricating itself from the vestiges of its not so enviable past, and willing to play as one ready to match its peers in other climes

A sleeping oil giant, literally speaking, and perceived to be a drain on the public purse in the past, the NNPC, many would agree, typified what was wrong with Nigeria: Inefficient, lacklustre and largely opaque.

But while a lot still needs to be done, the NNPC now appears to have realised that under the new regulatory framework, the Petroleum Industry Act (PIA), it should either shape up or shape out.

Obviously, while the decades of rot, perceived or real, cannot be wiped out overnight, at least there now seems a reawakening to the fact that it cannot operate in the new world by deploying its old ways.

Slowly, the national oil company, it would seem, is beginning to realise that its very non-strategic strategy of silence in the face of heaps of insinuations, innuendos, allegations as well as its see-no-evil, hear-no-evil posturing, will no longer work.

 As a commercially-driven organisation, it now appears to be tearing down the iron curtains of silence on information that tend to portray the company as a disreputable entity. The company attempts to explain in this long note, some misconceptions against it.

 $19bn for TAM?

For instance, THISDAY sought to know the veracity of a statement recently made by the Governor of Nasarawa state, Abdullahi Sule that the last administration wasted $19 billion to rehabilitate the four state-owned refineries without result, the same amount Dangote has invested in its 650,000 barrels-per-day refinery.

But the firm said that it had posted all its financial statements from 2015 to 2022 which can be found in the office of the Auditor General of the Federation, with all the information readily available.

The totality of the spending, inclusive of salaries and wages of workers, it said, can’t be compared with what it cost to set up Dangote Refinery, describing the allegation as an attempt to mislead Nigerians.

“ NNPC Ltd wishes to state that the figures stated by the governor were wrong, as the company, which represents the federal government in its efforts to rehabilitate the refineries through an Engineering Procurement and Construction (EPC) Contract with its partners, has spent only its approved counterpart funding which was clearly stated during the Memorandum of Understanding (MoU) signing for the respective refineries.

“For the records, the cost approved by the federal government for the rehabilitation of the nation’s three refineries are $1.5 billion; $740 million and $548 million for Port Harcourt, Kaduna & Warri refineries, respectively.

“The two EPC Contractors are Tecnimont (France), which handles the Port Harcourt Refinery rehabilitation and Daewoo (South Korea) which oversees the quick fix projects at both Kaduna and Warri refineries.

“Under GEJ, (Ex-President Goodluck Jonathan), no money was borrowed for Turn-Around Maintenance (TAM) and Under Muhammadu Buhari, only $1 billion was borrowed. Rehabilitation is still ongoing,” it stated.

 Between 21 & 25 SBUs

Recently, federal lawmakers, stressed that while NNPC claimed it has 25 subsidiaries, but on record, there were only 21, thereby raising issues as to the seeming confusion.

However , it was learnt that while there were 25 subsidiaries in NNPC limited prior to reorganisation, all unviable SBUs were shut down in a bid to reduce overhead cost and optimise revenue.

Also, businesses with duplicated functions were said to have been merged for economies of scale and optimisation while new units like new energies, were created, leading to the reduction in the number of subsidiaries from 25 to 21.

NUIMS & NNPC Assets

 On a report that at N21.04 trillion, a subsidiary–the Nigerian Upstream Investment Management Services (NUIMS), owns more assets than the parent company, which reported assets of N15.84 trillion in 2020, and N16.2 trillion in 2021, NNPC stated that at transition, there were Joint Venture (JV) assets of which 59 to 60 per cent belonged to the Federation.

NNPC said that the accounts referred to were the 2020 and 2021 Audited Financial Statements of NNPC and the separate accounts of NAPIMS (now NUIMS, a corporate service unit of NNPC not a subsidiary) for the same period.

“Speaking to the context of the accounts under scrutiny (2020 & 2021) before the transition of NNPC to a Limited Liability Company and NAPIMS to NUIMS, NNPC accounts was for NNPC and its subsidiaries, while NAPIMS account was in respect of the federations interest in the upstream oil & gas industry.

“Thus, the N21.04 trillion assets of NAPIMS were captured from the Audited Financial Statements of NAPIMS which represent the Federation’s equity share in the 12 JV arrangements in the upstream sector.

“The reported assets of N15.84 trillion in 2020, and N16.2 trillion in 2021 were captured from the then NNPC AFS and represented NNPC and its subsidiaries-owned assets and excludes federation’s upstream oil & gas assets managed by NAPIMS and reported in NAPIMS own audited financial statements,” it added.

However, NNPC said that based on the provisions of the PIA, all federations joint venture upstream oil & gas being managed by the then NAPIMS had been taken over by NNPC Limited. “This means the upstream assets comprising the equities in the JVs are now being managed by NUIMS and will be reported in the books of NNPC Limited which took effect from 1st July 2022,” it added.

Explaining the back and forth in the monies allegedly owed the federation, the NNPC said it has called for reconciliation of the finances.

“The claims are subject to reconciliation with federal agencies as approved by the presidency. Preliminary investigations show NNPC is owed N4.2 trillion in terms of subsidy and gas to power debts. NNPC owes government N2.8 trillion , thus giving a net figure of N1.3 trillion being owed to NNPC by the federation”

Why Participate in Road Tax Scheme

The national oil firm also defended its participation in the road tax credit with the government to construct some roads covering thousands of kilometres nationwide.

It stated that it decided to participate in the road tax- credit scheme to develop federal highways to minimise the accidents experienced by tanker drivers on the roads, with phase 1 comprising 21 roads totalling 1,804 kilometres at N621 billion while phase 2 covers a total equivalent single lane carriageway of 4, 445.16km at N1.9 trillion.

“Both ongoing projects serve as NNPC’s payment of Company Income Tax (CIT) due from two subsidiaries and parent company used to defray three-year company income tax liability. Without doing this, most of the federal roads will take 20 years to complete.

“We took advantage of this to make life easy for our tanker drivers. It is not a credit given to us by the FIRS. It’s our tax obligation being used to pay contractors working on the roads. We will keep paying our petroleum profit tax and royalties. This scheme has saved the government variation from contractors owing to the prompt payment within 30 days and saves the federal government funds,” the NOC contended.

On why it is engaging private depot owners rather than operating its own, NNPC said that owing to incessant theft on its pipelines, it shut down depots and established a build, operate and transfer scheme.

Accordingly, it added that those who own the depots now build parallel pipelines and will provide their own security. “Any loss recorded will be borne by the private owners. So, in other words NNPC is partnering with the private sector to run these depots to reduce government participation,” it said.

While responding to insinuations that it is both regulator and operator with negative results to show, NNPC said it is not a regulator and that even before the passage of the PIA , it turned the trajectory for the better.

“We have recorded profits. In 2020, The company recorded its first profit in 44 years with a N287 billion from a loss of N803 billion in 2018 and N1.7 billion in 2019, representing a 12,578.3 per cent increase in profit 2020. Its highest profit level since inception was recorded in 2021 with a N674.1 billion profit, representing a 134.8 per cent increase.”

On the call on President Bola Tinubu to privatise the refineries, NNPC said it was not averse to privatisation, but said it needed to bring the refineries back to operational levels to avoid selling them as scrap. “The PIA has also said the company will be sold to Nigerians through public offering,” the company said.

Thoughts on crude swap deal

In answering the question of whether it owes crude swap holders $2 billion from previous refined petroleum products supplies, it noted that it has a sales and purchase agreement relationship which restricts how much it can speak on the matter.

“No dispute has been recorded so far regarding when payments should be made or not. As at today, many of these suppliers are willing to give NNPC products on credit because of our credibility and with subsidy removal they are certain NNPC will fulfil its obligation to them,” THISDAY was told.

Furthermore, it disclosed that N$275 million has been paid and settlement is continuous as the relationship remains that of a willing buyer, willing seller arrangement.

“Reconciliation is carried out and settlement paid as at when due,” it stressed.

The Group Chief Executive Officer of the NNPC, Mele Kyari, had mentioned that NNPC was liquidating its exposures and rounding off the crude oil swap, apparently owing to the improved production levels. 

“This will enable us  buy our gasoline and pay cash to our suppliers. It’s our option to use crude to pay but the preference is to use cash settlements going forward.

“The current petrol supply agreement we have has all kinds of flexibilities and options such as using cash or crude to pay  immediately or within and beyond 120 days.  They are all willing to engage us as a limited liability company. No disputes,” NNPC maintained.

It also dispelled the insinuation that the crude swap is extending, saying it isn’t. “Petroleum product supply is separate from crude swap. Petrol product supply is just importing of product which can be cash or crude. We will stop that when our refineries start working.

“In crude swap deals, you price your crude and import  petrol at a set price meaning, I take product from you, knowing how much my crude is, and I can get the equivalent from you in petrol.

“Crude swap emphasised that there isn’t a price on both sides. But when crude is priced at the correct price and the product is sold to you at the correct price of your product that isn’t a swap,” the company said in the note.

China & the AKK Deal

In reacting to the allegations that Chinese contractors abandoned the AKK gas project owing to inflation in contract figure, NNPC reiterated that the project was initially approved at $2.8 billion.

However, it reiterated that following the refusal of the Chinese to finance the project owing to the country’s limitation on external exposure, NNPC re-engaged the contractors (OILSERV) to convert the contract from BOT to EPC which led to the renegotiation of $2.5 billion, thereby saving the country $300 million.

“Since then, NNPC has been funding contractors with its cash flow to the tune of $1.2 billion. The project and construction work has not stopped for one day. Out of 614 kilometres of pipe to be covered, 460 have been welded so far,” it stressed.