Examining NNPC’s Investments Under New Petroleum Act

Emmanuel Addeh writes that despite the harsh business environment, the new Petroleum Industry Act appears to be revving up the investment drive of the Nigerian National Petroleum Company Limited (NNPC) in the oil and gas sector.

Almost two decades in the works, the Petroleum Industry Bill (PIB) finally became an Act of Parliament in August 2021, thereby paving the way for a more clement fiscal environment for operators in the oil and gas industry.

Not to be left behind in taking advantage of the long-awaited law, the Nigerian National Petroleum Company Limited (NNPC) has since begun forming alliances and partnerships.

This has driven up the number of deals sealed and markedly improved oil production from a low of 900,000 barrels in Q4, 2022, to between 1.5 million barrels per day and 1.6 million bpd when condensates are added.

Instrumental to the passing of the law, the Group Chief Executive Officer of the NNPC, Mele Kyari, has now set new investment benchmarks in the aftermath of the new law as the national oil company attempts to move away from its past.

Since then, multiple deals running into as much as $48.15 billion to rejuvenate the hitherto much vilified company have been signed, with other key investment projects slated for Final Investment Decisions (FID) including the $25 billion West African Gas Pipeline project otherwise known as the Nigeria-Morocco gas pipeline.

The deal will see the NNPC stake $12.5 billion to secure a 50 per cent equity in that project while it is also expending $2.8 billion on the ongoing Ajaokuta-Kaduna-Kano (AKK) gas pipeline.

At the last check, the NNPC said it had spent over $1.1 billion on the gas pipeline project, delivering 70 per cent of the trunk welding.

The AKK project spans 614 kilometres with a 15km Abuja terminal gas station, four gas stations, 22 block valve stations, pigging stations among others. Through the facility, NNPC will transport 2 billion Standard Cubic Feet (scuf) of natural gas per day to three power plants in Abuja, Kaduna, Kano with 1,300 megawatts (MW) capacity; and to other gas-based industries and off-takers.

“This project has not stopped for one day. We are continuing to fund it despite the fact that we do not have third party finance for this project. We have so far spent over $1.1 billion on this project from our cash flow,” Kyari recently said during an inspection.

In addition , to bolster revenue, the Nigerian government in June 2022 renewed talks with Algeria and Niger to kick-start the $13 billion (€12.8 billion) Trans-Saharan Gas Pipeline (TSGP) even as Europe looks to Africa to ramp up gas supply on the back of the Russia-Ukraine war.

Commenting on the issue, an Associate Professor of Energy and Natural Resources, Olanrewaju Aladeitan, said that what the NNPC was doing with the TSGP project was what Nigeria should have done in 1970s to take advantage of its huge has resources.

According to him, Nigeria should be taking advantage of the vacuum created by the non-supply of oil to Europe by Russia and expand its gas projects penetration the European market.

“If we had done that, by now we would be smiling to the bank because we would have utilised the opportunity of market that was left by the withdrawal of Russia. So if we can achieve the same aim through the Trans-Sahara pipeline, it will be fine.

“We also have the West African Gas Pipeline, which passes through Benin Republic, Togo to Ghana, and that has also been in the works for some time. This is what has informed Nigeria looking at constructing these pipelines to Europe and the gas can flow from there,” he maintained.

On how the projects will markedly transform the sector in Nigeria, a Senior Legislative Aid to a former Senate President on Gas and Power,  Mr Olabode Sowunmi, said the industry, particularly the gas sector, offers Nigeria great opportunities for industrialisation.

Sowunmi advocated consistency in the Nigeria Gas Master Plan, especially on projects such as AKK, Trans-Saharan Gas Pipeline and West African Gas Pipeline, expressing satisfaction that some reforms have started in the industry in view of the implementation of the PIA 2021.

In addition, the NNPC has also taken positive measures aimed at blocking the loopholes in crude oil leakages, theft and vandalism, working closely with the Nigeria’s security agencies and locals in the Niger Delta.

Energy experts say the step is expected to propel NNPC into a global profit-making brand like other major oil giants across the globe as the company in the last 24 months engaged in exploring new business ventures, investment opportunities.

To ensure energy security for the country, the company successfully signed and acquired a 20 per cent federal government stake in the Dangote 650,000-barrel-per-day oil refinery for $2.76 billion.

In addition, to boost Nigeria’s crude oil reserves, the national oil company has also secured over $3 billion local and foreign investment interests in the Kolmani Integrated Development Project.

Recall that the Kolmani project houses a 120,000-barrels per day refinery, a 500-million standard cubic feet per day gas processing plant, a 300-megawatt capacity power plant, and a fertiliser plant of 2,500 tons per day.

Earlier in 2023, the NNPC renewed oil production pact with its partners for 10 billion barrel aimed at putting an end to the protracted dispute between the state-owned company and the contractor parties in Oil Mining Licences (OMLs) 128, 130, 132 and 133, as well as 138 Production Sharing Contracts (PSCs).

According to the NNPC, the signing of the new PSCs remained a key milestone , which will ultimately unlock opportunities within the Nigeria upstream sector.

Penultimate week, the NNPCL signed a Heads of Terms (HoT) agreement with UTM Offshore Limited for the construction of the nation’s first indigenous floating liquefied natural gas (LNG) project with a $5.6 billion funding package from Afreximbank.

Speaking on the UTM deal, the NNPC in a statement said the agreement was a step towards bolstering Nigeria’s energy security and promoting the utilisation of its abundant gas resources.

“In a major step towards bolstering Nigeria’s energy security and promoting the utilisation of its abundant gas resources, the NNPC Ltd and UTM Offshore Limited signed a Heads of Terms (HoT) agreement.

“It is for the construction of the nation’s first indigenous Floating LNG project,” the company said.

In terms of profitability, though still far from Eldorado, the NNPC had grown its profit after tax from N287 billion in 2020 to N674 billion in 2021.

After a long hiatus, the NNPC has also commenced the payment of interim dividend and PSC profit oil into the Federation Account Allocation Committee (FAAC) with the payment of N123 billion in the June circle that was shared in July.

A breakdown of the amount showed that the national oil company paid N81 billion as monthly interim dividend and N42 billion as 40 per cent PSC profit oil in addition to compliance on payment of royalties and taxes.

An erstwhile Senior Special Adviser to the immediate past Minister of State for Petroleum Resources, Chief Timipre Sylva, Mr Horatius Egua, in his own assessment, said he believes that the passage of the PIA was instrumental to the new developments, stressing that the recent modest feats would not have been possible if the PIA was still in the doldrums.

“Thumbs up must be given to Chief Sylva, the leadership of the National Assembly and former President Muhammadu Buhari. You also know that it is one thing to have a law, but if you don’t have competent people to drive and implement that law, it becomes useless.

“So Mallam Kyari has done well in his own capacity as the boss of the NNPC Limited,” he said of the leadership of the NNPC.