NNPCL CLINKS TO MEGA PROFITS

For the first time in 46 years, the oil giant reaped its  biggest harvest, writes Jide Adekunle

And so, last Monday, the NNPC Limited announced it made a profit of N3.3 trillion as it released its 2023 Audited Financial Statement (AFS). This sum represents an increase of over 700 billion (28%) when compared to the 2022 profit of N2.548 trillion. While the money does not reduce the price of rice or garri, it was indeed a cheery item that reinforced confidence in Nigeria’s oil and gas sector. 

The Nigerian National Petroleum Company Limited (NNPCL) traces its history from 1971 when the Nigerian National Oil Corporation (NNOC) was founded. It was created to oversee the oil industry after the discovery of oil in commercial quantities in Oloibiri in present day Bayelsa State in 1956. It was however, not until 1977 that the NNOC and the Federal Ministry of Mines and Power merged to birth the Nigerian National Petroleum Company (NNPC). Retaining its primary role as a state regulator in the oil and gas industry, NNPC mediated between the government and the private oil and gas companies. However, all through its years in this role, the company never made profit until 2019.

It posted a N803 billion loss in 2018 which drastically reduced to N1.7 billion in 2019. It was in 2020 that it declared N287 billion as its first ever profit. In 2021, its profit grew to N674.1 billion and grew phenomenally in 2022 to N2.548 trillion. The recent financials which saw the 2023 profit declared as N3.297 trillion, is the highest since the company’s inception, 46 years ago. Amazing.

If in just about four years, the company moved from loss to huge profits, then its future is very bright. The Chairman of the NNPCL board, Chief Pius Akinyelure, said that the shareholders of the company have approved a final dividend of N2.1trn in line with PIA 2021 provisions. But this accelerated progression towards profitability must be further harnessed as a matter of urgency as it seems NNPCL has potential to earn more. Already, NNPCL’s Executive Vice President, Upstream, Mrs. Oritsemeyiwa Eyesan, projected that the company would produce two million barrels of crude oil per day by December 2024. This is exciting news, considering how hard-pressed the country is for increased revenue. Currently, the country produces 1.65m barrels per day of crude oil. Any increase in production is a needed plus.

Under the NNPC’s watch, the country’s oil and gas industry lacked superlatives to describe its existence. It rotted with corruption, was largely unproductive, with the four refineries in its care working in fits before conking out. Different sessions of Turn Around Maintenance (TAM) only turned around the allocated funds with no traction whatsoever in productivity. That the sector underperformed would be an understatement. Perhaps, the ‘public corporation’ structure of the NNPC was responsible for its stultified growth. It was not until 2021 during the tenureship of President Muhammadu Buhari that what would become a lifeline for the company emerged in the form of the Petroleum Industry Act (PIA). By the act, NNPC transformed from a public corporation to a private liability company. Welcome NNPC Limited.

This new found power bestowed on NNPC meant it could pursue commercially viable projects throughout the energy value chain, a role it seems to be adapting well to.  “Our fiscal performance reflects both strategic foresight and operational resilience,” NNPCL’s Chief Financial Officer, Mr. Umar Ajiya, said at the press conference to present the company’s 2023 books. “Despite inherent challenges of our operational and economic environment, we have improved the productivity and the financial performance of this great company.”

Some of the challenges. For one, not many people knew that NNPCL did not sell fuel at landing cost. Ajiya said the company, acting on behalf of the federal government, opened credit agreements with PMS suppliers. 

“What has been happening is that we have been importing PMS, which has been landing at a specific cost price, and the government tells us to sell it at half price,” said Ajiya. 

“So the difference between the landing price and that half price is a shortfall. And the deal is between the Federation and NNPC Ltd., to reconcile, sometimes they give us money, so there is no money exchanging hands with any marketer in the name of subsidy.” 

The challenges do not dull the gains of the company though. With the new bite the PIA has given NNPCL, the company is set to explore vast commercial ventures. One of those is in the area of gas. Locally and internationally, NNPCL is exploring revenues inherent in gas.  

“We are expanding and upscaling our gas and transportation infra structure to meet domestic needs and exports, including LNG,” said NNPCL on its website. And realising the downside of fossil-fuels, the company is mindful of its carbon footprints.

“We are creating sustainable, low-carbon energy options supported by our investment in the production and supply of renewable energy.”

In a recent interview, NNPCL’s Chief Corporate Communications Officer, Olufemi Soneye, said the company expanded the scope of the “AHL Gas Processing Plant in Imo State, the ANOH Gas Processing Plant, the 23.3 km ANOH to OB3 Gas Pipeline in Kwale, the IGHF in Oredo, and the Methanol Plant in Bayelsa. Upcoming critical gas projects include the OB3, Ajaokuta-Kaduna-Kano (AKK) Gas Pipeline, and the Nigeria-Morocco Gas Pipeline Project (NMGP). These projects aim to enhance domestic gas utilisation, improve power generation, create jobs, and increase national revenue.”

It is no longer business as usual. The country should have toed this line many years ago. Soneye also said NNPCL is partnering with downstream players to deepen CNG/Autogas utilisation across the country. Also, the company is further exploring the country’s oil and gas reserves. He noted that these efforts have yielded fruits in “achievements like the Kolmani Spud-in and oil discovery in Gombe/Bauchi, the Ebenyi-A Well Spud-in in Nasarawa, and the Wadi-A Well Re-entry in Borno.”

While NNPCL backed Dangote Refinery with $1bn, it also aided other local firms like First E&P which it supported to deliver the 60,000 bpd Madu-Anyala fields. 

“There are many other businesses in the industry today that speak about how NNPC Ltd’s partnership has been instrumental in their success,” Soneye said. And that’s exactly how to ensure the sector grows. 

Interested in owning a part of this new company? Well, according to Ajiya, NNPCL’s initial public offering (IPO) would come on board soon after a decision by the shareholders and board. One thing is certain. When the company’s shares eventually go on offer, it’ll be one to grab. 

In today’s world, energy is key and a lifeblood of the economy. And it is great that NNPCL is profitable. But, if the Saudi Arabia national oil and gas company, Aramco, can become one of the richest companies in the world, there is no reason why Nigeria’s NNPCL should not be a very rich company too. What is needed is continued commitment and transparency by the regulators as well as vigilance and forthrightness to further stem crude oil theft and pipeline vandalism. May this be done.

· Adekunle writes from Abuja