NNPC driving change, growth through reforms

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    the Nigerian National Petroleum Corporation (NNPC), prior to today, had built a reputation that is synonymous with opacity, fraud, corruption, inefficiency and everything negative.

    The Nigerian National Petroleum Corporation (NNPC), prior to today, had built a reputation that is synonymous with opacity, fraud, corruption, inefficiency and everything negative.

    The NNPC had been the chief foreign exchange earner for the country and the most lucrative parastatal of the country, accounting for billions of dollars shared by the Federal, State and Local Government on a monthly basis and also financing a substantial portion of the country’s budget.

    NNPC Driving Change

    However, over the years, substantial portion of the funds generated by the NNPC were frittered away by corrupt officials, with only a meager sum declared to the authorities.

    The NNPC was accused of entering into fraudulent agreements that were designed to defraud the country, while it had also been accused severally, of being used to fund elections.

    While past administrations only paid lip service to the reform of the behemoth called the NNPC, the present administration and current leadership of the NNPC had taken it a step further and had really kickstarted a number of initiatives aimed at entrenching transparency, promoting efficiency, eliminating corruption and portray a positive image for the corporation.

    In the area of pushing for cost efficiency and profitability, the NNPC embarked on renegotiation of all existing contracts and achieved between five to 30 per cent discounts consistent with prevailing low oil price regime, which translated to about $1 billion in savings for the corporation.

    It also streamlined the Nigerian Petroleum Development Company’s, NPDC, operations by terminating the Strategic Alliance Agreements (SAAs) with Atlantic Energy on nine oil assets and renegotiated the SAA with Seven Energy on three oil assets.

    The NNPC set up Assets Management Teams (AMT) in some of these Assets with the expectation that they will eventually migrate into Incorporated Joint Ventures (IJVS) in the near future.

    The corporation achieved a 63 per cent reduction in turnaround delivery time in the contracting cycle for upstream operations from an average of 24 months to nine months. It is further targeting achieving a six months contracting cycle.

    The NNPC aggressively re-started frontier exploration activities in the Chad Basin and Benue trough, while it made contributions to the Federal Government’s decision to partially deregulate the downstream petroleum sector.

    The NNPC also made efforts to block leakages in the downstream operations, with the intention of saving an opportunity cost of circa $1 billion per annum. It also cancelled the opaque Offshore Processing Arrangement (OPA) replacing it with the Direct Sales and Direct Purchase (DSDP) scheme, which it entered into with reputable offshore refineries.

    The NNPC undertook the reorganization of its operations, with the restructuring of the Pipeline and Products Marketing Company (PPMC) into the Nigerian Products Marketing Company (NPMC) and the Nigerian Pipeline and Storage Company (NPSC).

    The NNPC itself was restructured into Autonomous Business Units driven by Focus, Accountability, Competitiveness, Transparency and Integrity (FACTI), through the 20 fixes initiative.

    The restructuring of the NNPC was undertaken to tackle key business issues that would reposition the corporation as a commercial entity to deliver value to its shareholder.

    Pursuant to these, the NNPC launched a programme emphasizing 12 business focus areas that were designed to further eliminate waste and achieve a higher profitability.

    The NNPC also began publishing its operational and financial performance on a monthly basis, both in newspapers and on its website, to further improve transparency.

     

    The NNPC also entrenched transparency in its bidding processes for crude oil term contracts, marine contracts, among many others.

    In order to relieve the huge burden of funding the cash call obligations of the NNPC’s Joint Venture operations, the corporation developed a sustainable alternative funding option for its cash call obligations under the Joint Venture Agreement (JVA) on Petroleum Production.

    In this instance, the NNPC engaged the International Oil Companies and secured a discount of 25 per cent with each JV partner on the pre-2016 cash call arrears resulting in a final settlement in the sum of $5.1 billion payable from incremental production from the JV assets over a five-year tenor without any interest charges during the repayment period.

    The corporation also undertook a value for money Audit on all the Joint Venture Arrangements to ensure value is delivered to Federation Account, while it also carried out a review of the existing Production Sharing Contract (PSC) arrangements with a view to improving government share of revenue from the arrangement.

    It created an internal security advisory council, comprising representatives from NNPC, the IOCs, the unions and security operatives to brainstorm and address host community agitations to complement efforts of the Government Security Team.

    In addition, the NNPC commenced an innovative operate and maintain (O&M) pipelines security arrangement to secure the integrity of the infrastructure.

    Head, Energy Research, Ecobank, Mr. Dolapo Oni, stated that such reforms undertaken by the NNPC and the petroleum industry in general, are keys to attracting investments in the oil and gas space.

    Oni said reforms must target increasing flexibility and providing certainty, noting that other reforms yet to be implemented must fit into a two to three year window.

    Continuing with these reforms would endear the NNPC to the hearts of many Nigerians, especially with the critical role played by the NNPC to the development of the Nigerian economy.

     

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