By Bassey Udo
On August 16, 2021,
President Muhammadu Buhari signed the Petroleum Industry Act (PIA), 2021 into law, giving the country’s petroleum industry a new regulatory and legal framework for reforms.
Part of the reforms with the new law was the transformation of the Nigerian National Petroleum Corporation(NNPC) from a state-owned national oil and gas company to an incorporated public liability entity limited by shares, under the full regulation of the Companies and Allied Matters Act (CAMA).
Under the new arrangement, the new NNPC Limited is expected to function independently as a commercially-driven business, with a new orientation and mindset to compete with its contemporaries within and outside Nigeria, make profit and declare benefits and interests to its investors.
The official unveiling of the new NNPC on Tuesday, July 19, 2022, by President Buhari is expected to transform it from a notorious liability cost centre to a multi-billion Naira profit-making global enterprise where its operational processes and systems align with acceptable standards and principles of transparency, accountability and efficiency.
Although the Group Managing Director/CEO of the new NNPC, Mele Kyari, dreams of the company transforming into Africa’s most profitable oil and gas company, the question remains: What should Nigerians, and indeed the global investment community expect from the new company?
Ownership restructuring
The old NNPC was owned 100 percent by the government. As a national oil company financed solely by the government, the influence and control of its operations by the government was palpable. As such, one reason often cited to support the current transition into a public entity has always been the failure of the NNPC to meet the dreams and aspirations of its founding fathers due to the overbearing influence of the government, as government business is always seen as no one’s business.
Although the PIA failed to spell out clearly the ownership structure in the new NNPC, at least by defining the extent of government’s involvement, in terms of equity holding, the expectation among Nigerians is for a fundamental review of the current ownership structure to allow a drastic reduction of government’s control of the company.
Those knowledgeable on the issue cite the Nigeria LNG experience as a good model to adopt. In NLNG, the NNPC holds a minority 49 percent stake on behalf of the Federal Government against the majority 51 percent by its partners.
But there are views among industry experts that the government involvement could further be limited to as low as 30 percent equity to guarantee more stake in the company for Nigerians investors.
Capital market listing
The new NNPC management should immediately unfold its plan to list its shares in both the Nigerian, New York and other international stock markets, to afford Nigerians and other investors around the world to buy into its ownership. If a small indigenous oil and gas exploration and production company like Seplat Energy is already listed in both the Nigerian and New York Stock Exchange, experts say they expect the new NNPC to follow.
With its new status as an operator primed to play at the local and international investment arenas along with its peers, the expectation is that enlisting its shares in the capital markets will stand the new NNPC in good stead for easy access to capital for big investments to grow its portfolio.
Trim the bloated workforce
Over the last decade, virtually all the strategic business units (SBUs) and Corporate Services Units (CSUs) of the old NNPC operated consistently at a loss.
Until the 2020 financial year, when the old NNPCpublished its audited financial statement, the first time in the 43 years of its existence, which showed a profit after tax (PAT) of N287 billion, accumulated loss stood at about N1.53trillion.
Yet, the workers in the loss-declaring SBUs and CSUs were still drawing in full their salaries and entitlements on a regular basis. With the new orientation and profit-making mindset, concerned Nigerians expect the new NNPC management to shade its weight, by prioritizing extensive rationalization of the company’s workforce, leaving only a trim, functional workforce with the right productive value addition to the system.
The rationalization exercise should begin from the top hierarchy of the company. The composition of the Board, which is saddled with the responsibility of managing company’s operations, must be by only competent professionals with the right vision and technical experience to drive the transformation of the company within a reasonable period.
Contrary to what the practice in the old NNPC, the composition of the membership of the Board must be devoid of political colouration to reflect the country’s geo-political representation or government influence.
Wherever competent professionals are found, whether in the private sector, or within the old NNPC system, should trump over every other consideration.
Those familiar with the issue in old NNPC say, at the moment, there are several strategic positions in the top hierarchy of the company that are still either vacant, or their current occupants are almost at the verge of retirement. The expectation is for the new NNPC management to move swiftly to fill such positions and close existing vacuum, either by internal appointments of personnels with the right skill sets, or turn to the private sector.
Do away with old ways
The new NNPC management must move away from the old ways of doing things.
In the pre-PIA era, the NNPC, consciously or unconsciously, saw itself in three conflicting shades, either as industry operator, policy maker or regulatory authority. Often the NNPC was tempted to usurp the functions of different agencies charged with various responsibilities in the upstream and downstream sectors of the petroleum industry.
Experts say the new NNPC must ensure it restricts itself to its assigned roles, by adhering strictly to the provisions of the PIA, which have defined the limits of its powers against those of other agencies in the industry.
The new NNPC is expected to be subject to the regulations of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority in its operations in the upstream and downstream sectors of the industry respectively, in line with the provisions of the PIA, and not the other way round.
Sustain TAPE
Following his appointment on July 8, 2019 to midwife the birth of the new NNPC as its Group Managing Director/CEO, Mele Kyari, said the new organization would be different from the past, in terms of its operational processes.
Kyari followed up with the unveiling of the Transparency, Accountability and Performance Excellence (TAPE) strategic road map to help transform the NNPC, enhance its potential and capacity to compete with other national oil companies around the world towards attaining efficiency and global excellence.
He anchored TAPE agenda on five key objectives, namely to ensure NNPC opened up its systems to public scrutiny; ensure its operational processes are transparent and accountable to the Nigerian people and the government; ensure the new NNPC operates along with well-defined operational processes, benchmarked against established global best practices; set the right operational cost structure, to guarantee value-addition towards NNPC’s sustained profitability, and set achievable goals, priorities and performance standards and criteria, by developing suitable governance structures for its strategic business units, as well as the entrenchment of team-spirit, work ethic and collaboration with all key stakeholders to achieve set corporate goals.
Nigerians expect the new NNPC to sustain the TAPE agenda, by ensuring its operations are transparent and in line with due process and overall efficiency.
Energy today; Energy tomorrow
The new NNPC’s unique selling proposition is “Energy today. Energy tomorrow”. What this means is that the company is determined to leverage on its capacities and the country’s potentials to guarantee the solutions to its energy supply challenges beyond today.
The plan has always been for the old NNPC to focus its business operations beyond its traditional activity of exploration and production of crude oil to other unexplored frontiers, to grow its revenue streams, and cushion the impact associated with the volatility in the international crude oil market.
With proven gas reserves estimated at over 206 trillion standard cubic feet, and unproven potentials of over 600 trillion cubic feet, the old NNPC initiated several gas development infrastructure to harness these resources for export value.
Apart from the ongoing Ajaokuta-Kaduna-Kano (AKK) pipeline designed to convey over eight billion standard cubic feet (scf) of gas from the Niger Delta region for supply to industries in Kano and the adjourning states in the northern part of the country, the NNPC also spearheaded the construction of the Trans-Saharan gas pipeline in collaboration with Niger Republic and Algeria.
The company is also promoting the construction of the West African Gas Pipeline (WAGP) in collaboration with Togo, Benin and Ghana, to deepen gas supplies and utilization within the ECOWAS sub-region, in addition to the Nigeria-Morocco Gas Pipeline (NMGP) designed to transport Nigeria’s gas to European markets.
With the current crisis between Russia and Ukraine, which has worsened the energy supply crisis in Europe, experts expect the new NNPC to sustain the policy to deliberately harness these gas resources, while stepping up the tempo of work on these projects, to ensure their completion on schedule, to enable the country to reap from the windfall from the crisis.
Also, the NNPC, which is a key partner is the construction of the Nigeria LNG project, whose Train 7 will raise the country’s LNG export capacity to 30 metric tons per annum, will be expected to vigorously pursue the completion of this project to enable the country to reap its benefits.
Beyond these projects, the country has witnessed increased effort to encourage domestic utilization of gas among Nigerians as well as the utilization of gas to generate electricity for the country and the industries.
Although the rollout of the national compressed natural gas (CNG) development programme appears to be on the slow lane at the moment, the expectation is that the new NNPC will revitalize it as soon as possible, to give the country a cheaper alternative to premium motor spirit.
End to Fuel Subsidy
Perhaps, the biggest expectations border on how the new NNPC hopes to resolve the intractable crisis in the downstream sector of the petroleum industry, particularly the bottlenecks in the supply of petroleum products as a result of the inability of the government to fulfill its promise to repair the country’s four refineries, to stop the country’s reliance on the importation of petroleum products and save it the headache of fuel subsidy payment. 
At inception, Kyari promised that all the country’s four refineries at Port Harcourt, Warri and Kaduna would be fully rehabilitated latest by the end of 2022, to transform Nigeria from being a net importer of refined petroleum products into a net exporter of the commodity.
He also promised to encourage private investors, like Dangote Group and other mini-refineries developers in the country, to be involved in the construction of private refineries, to supplement the capacity from the four refineries.
As part of his plan, Kyari announced the rehabilitation programme to be undertaken in phases, starting with Port Harcourt. The exercise, he said, would involve NNPC local engineers working in collaboration with the original equipment manufacturers (OEMs), the owners of the technology used in building the refineries.
Repair the refineries
The repair of the refineries was to end the era of importation of refined petroleum products, and by extension ensure the removal of fuel subsidy from the country’s petroleum products pricing template.
In April 2020, when crude oil price at the international crude oil market crashed below $10 per barrel, as a result of the impact of the coronavirus pandemic on the global economy, Kyari announced the end to fuel subsidy forever, or under-recovery by NNPC. The development, he said, signaled the full take off of the deregulation policy in the downstream sector of the petroleum industry. In its place, Kyari said the pricing of petroleum products would henceforth be subject to the interplay of the forces of demand and supply in the marketplace.
For some time the pronouncement held sway, as the retail price of a litre of petrol dropped initially to N125, from N145, later to N123 and N121.50, before rising again to about N140.80, N143.80, N162 and ultimately to the current N165.
Although the price has remained at N165 per litre since then, the NMDPRA has said that the level of under-recovery by the NNPC has been rising so high that the country may be spending as much as N4 trillion this year for fuel subsidy alone.
Experts say the spiraling fuel subsidy bill may be as a result of the volume of petroleum products consumed daily in the country, as the figure keeps rising everyday, from between 80 million litres to more than 110 million litres per day.
With no update on the rehabilitation of the four refineries not forthcoming, either by the old NNPC or the Ministry of Petroleum Resources, few months to the deadline promised by Kyari, expert say the new NNPC must unfold a decisive policy pronouncement about these critical issues.
Meanwhile, petroleum products marketers are still threatening to hike the retail price above the government approved ceiling of N165 per litre.
Last week, after long queues resurfaced at filling stations in Abuja and environs, as well as other major cities in the country, some retail outlets raised their pump price to between N185 and N200 per litre, claiming huge losses as a result of non-payment of outstanding bridging claims by the NMDPRA and related issues in the downstream oil sector.
The unveiling of the new NNPC may hope for the future of the Nigerian economy, by experts see tough decisions that need to be made to fully achieve the objective of the transformation process.
