How Kyari Laid The Foundation For Transparency And Accountability In NNPC

 

By Adewole Kehinde

I was on Twitter this evening when my attention caught #NNPCAudit trending in Nigeria.

Even though the Hash Tag did not take up to an hour when it disappeared and stopped trending in Nigeria.

I will like to set the record straight as a journalist who has been covering the activities of the Nigerian National Petroleum Corporation.

Oil is the major mineral resource for Nigeria and it remains the major economic driver and mainstay of the country.

The unsustainable management of Nigeria’s oil wealth, rather than the availability of oil itself, remains the real cause of the challenges of the Corporation until Mal Mele Kolo Kyari came on board.

The Nigerian National Petroleum Corporation (NNPC) under the Management Mallam Mele Kolo Kyari made history on Friday, June 12, 2020 with the publication of its first audited financial statements after 44 years of its operation.

The annual reports and financial statements for the year ended December 31, 2018, were for 20 of the state-owned national oil company’s subsidiary companies operating within and outside the country

The companies covered in the reports published in corporation’s website on Friday, June 12, 2020 included the Nigerian Petroleum Development Company (NPDC), Warri Refining & Petrochemical Company Limited (WRPC), Port Harcourt Refining Company Limited (PHRC), Kaduna Refining & Petrochemical Company (KRPC), and Integrated Data Services Limited (IDSL), Nigerian Products and Marketing Company Limited (NPMC), Nigerian Pipelines and Storage Company (NPSC).

The others include the National Engineering & Technical Company Limited (NETCO), Nigerian Gas and Marketing Company Limited (NGMC), Duke Oil Services (UK) Limited, Duke Global Energy Investment Limited, Duke Oil Incorporated, NNPC Retail Limited, National Petroleum Investments Management Services (NAPIMS), The Wheel Insurance, NIDAS Shipping Services, NIDAS UK Agency, and NIDAS Marine.

Barely five months after publishing its 2018 Audited Financial Statement, the Nigerian National Petroleum Corporation (NNPC) also released its 2019 Audited Financial Statement with a 99.7% reduction in its loss profile from ₦803bn in 2018 to ₦1.7bn in 2019.

According to a statement by the Corporation's spokesman, Dr. Kennie Obateru, he quoted the NNPC Chief Financial Officer (CFO), Mr. Umar Ajiya, as saying that the 2019 Audited Financial Statement, which was concluded five months after the release of the 2018 Audited Financial Statement, will be published on the Corporation's website for all to see in keeping with Management's commitment to transparency and accountability and in consonance with the principles of the Extractive Industries Transparency Initiative (EITI) of which it is a partner.

Giving further insight into the 2019 AFS, the CFO disclosed that general administrative expenses also witnessed a 22% dip from ₦894bn in 2018 to ₦696bn in 2019.

According to Ajiya, majority of the subsidiaries posted improved performance namely, the Nigerian Petroleum Development Company Limited (NPDC) which recorded ₦479Billion profit in 2019 compared to ₦179Billion in 2018 representing 167% increase; the Integrated Data Services Limited (IDSL) recorded ₦23Billion profit in 2019 compared to ₦154Million in 2018 representing 14966% increase; the Petroleum Products Marketing Company (PPMC) recorded ₦14.2Billion profit in 2019 compared to ₦9.3Billion in 2018 representing 52% increase; while the Refineries have maintained the same level of losses as in 2018 but which will reduce significantly in 2020 due to cost optimization drive.

The CFO explained that the improved performance in the 2019 financial year was driven mainly by cost optimization, contracts renegotiation and operational efficiency. He said “the 2019 Audited Financial Statement goes further to demonstrate NNPC’s unwavering commitment to the principle of Transparency, Accountability and Performance Excellence (TAPE) while the outlook for 2020 looks promising in view of the Management’s strong drive to prune down running cost and grow revenues.”

It would be recalled that the Group Managing Director of NNPC, Mallam Mele Kyari, had promised to sustain the publication of the Corporation's Audited Financial Statement as part of efforts to deepen transparency and accountability and keep stakeholders abreast of NNPC operations.

The Transparency, Accountability and Performance Excellence (TAPE) initiative of the Group Managing Director of the NNPC earned Mallam Mele Kolo Kyari commendation from the former Executive Secretary, Nigeria Extractive Industries Transparency Initiative (NEITI), Waziri Adio, for keeping his promise to publish the audited reports.

Waziri Adio through a tweet with his personal twitter handle, @Waziriadio said, “Having such disclosures is good for transparency and accountability. I congratulate Mele Kyari and his team and urge them to make this a regular practice and in open data format.”

We may recall that Nigeria Extractive Industries Transparency Initiative has been in the vanguard of the sustained demand for the NNPC to make public the financial statement of its operations and those of its subsidiaries.

On assumption of office, Mallam Mele Kyari pledged to open the NNPC financial books to the public as part of his management’s commitment to openness, transparency, and accountability in line with the global EITI principles.

Since 2019, the NNPC has always published the monthly financial and operational reports, including its upstream, downstream and oil and gas export activities.

The NNPC's Financial and Operations reports constitute the following and more: NNPC Audited Financial Statements; NNPC Monthly FAAC Reports; National Crude Oil & Natural Gas Production, Lifting and Utilization; Refinery Operations; Petroleum Product Supply & Distribution; Budget Performance Report and Federation Crude Oil & Gas Revenue.

Mele Kyari is determined to change the narrative; to re-write the story; to make a new garment for the corporation. He came to the job armed with a Presidential briefing: Clean up the mess, make the books open; engender transparency.

The 2018 audited account shows a loss of N803billion. This got the management adopting smarter strategies to run lean and mean; to cut cost and turn the corner. It worked. By the time it released the 2019 audited financial statement, it had achieved 99.7% reduction in its loss status, cutting loss from N803bn in 2018 to N1.7bn in 2019.

This would never have been possible if Mallam Mele Kyari had not summoned the courage to go public with the 2018 financial statement.

The huge loss in 2018 made them to stop leakages, improve on forethought and introduce cost-saving measures.

It is on record that Nigerian National Petroleum Corporation under the management of Mal Mele Kolo Kyari has the highest number of award received for transparency and accountability.

For those who are trending #NNPCAudit, please do me a favour of clicking the link to view the 2019 Audited Financial Statements https://nnpcgroup.com/Pages/afs.aspx

Kyari’s insistence to depart from the path of past GMD's of the Corporation who kept the books sealed has already set him apart from the crowd.

And it sure would take him to places none of his predecessors has ever seen or been before.

Kyari’s insistence to open the books to Nigerians is itself a constitutional fulfillment.

It takes courage to do this. I commend him and his entire Management Team.

Adewole Kehinde is the Publisher of Swift Reporters and can be reached via 08166240846, 08123608662

Nine Reasons Why Refineries’ Rehabilitation Is Justified

By Adewole Kehinde

It is no longer news that the Federal Executive Council on Wednesday, 17^th March, 2021 approved the sum of $1.5 billion for the rehabilitation of the Port Harcourt Refinery Company Ltd.

Unfortunately, some personalities like Former Vice President Atiku Abubakar, Gov Nyesom Wike, Activist Aisha Yesufu, Senator Dino Melaye, and Former Gov Peter Obi among others are opposing the rehabilitation/contract award. 

 Below are the nine reasons why refineries’ rehabilitation is justified

1, AFTER YEARS OF NEGLECT, THE PLANTS NEED TO BE BACK

Nigeria’s three refineries in Warri, Kaduna and Port Harcourt with a combined capacity of 445,000b/d capacity were established to ensure energy security for the country. Unfortunately, these refineries have suffered years of neglect due to delays in conducting mandatory Turn Around Maintenance (TAM) that has resulted in performance decline over the past two decades and they have all been shut down to allow proper diagnosis and rehabilitation.

Of these refineries, the most strategic is the Port-Harcourt Refining Company (PHRC) with a capacity of 210,000 b/d and can produce 10.4 million liters of Premium Motor Spirit (PMS) per day. This refinery had its last TAM in the year 2000 (21 years ago).

It is gladdening therefore to see that there is finally a move on the part of government to rehabilitate the Port Harcourt refinery and restore all the numerous advantages that operating the refinery will bring to the Country. This rehabilitation, unlike TAM (which should normally be carried out every two years but was neglected for many years), will involve comprehensive repairs of the plant with significant replacement of critical equipment to ensure the plant integrity is maintained for a minimum of ten years.

2.    REHABILITATION VS BUILDING NEW REFINERIES: WHAT ECONOMICS?

Some critics have said that it is more economical to build a new refinery than “just waste US$1.5bn” to rehabilitate the PHRC, which holds 210,000bpd out of Nigeria’s 445,000bpd refining capacity. On the contrary, a cursory look at brand new refineries built across the world will reveal the following:

US$10bn was budgeted for building Aramco Oil Refinery (250,000-300,000 bpd) in Pakistan

US$12bn was budgeted for building Abrue Lima Project (230,000) in Brazil

US$27bn was budgeted for building Pengerang Refinery and Petrochemical Integrated Development, RAPID (300,000 b/d + 3 mtpa) naptha steam cracker) in Indonesia.

Closer home, US$19bn was budgeted for building Dangote Refinery (650,000bpd) in Nigeria.

3.   THE LENDER IS SMART, THE CONTRACTOR REPUTABLE

African Export-Import Bank (Afreximbank) is the reliable lender that has agreed to raise up to $1billion towards the rehabilitation project. In the same vein, Government will raise the sum of US$550m. A credible and capable lender like Afreximbank would never agree to put such huge amount of money where there will be no value.

Similarly, Tecnimont SpA, representative of the Original Refinery Builder (ORB) which is one of the top ten global Engineering, Procurement, Construction, Installation and Commissioning (EPCIC) Contractor in refineries, is globally reputable and capable, with requisite experience of similar jobs across the globe.

4. STRATEGIC ASSETS ARE NEVER FOR SALE

Despite the abundance of hydrocarbon resources, Nigeria is, sadly, the only oil gas producer in the world that does not refine petroleum products. Instead, the country relies heavily on importation for most of its PMS needs locally. This is not a good record to be proud of.

Armchair critics also come up with a shallow argument that it is better to sell off these refineries since they can no longer meet up the nation’s refining needs. Which country sells off its strategic national assets, such as the refineries, to the highest bidder? Who sells off their refinery when even countries who don’t produce a drop of hydrocarbon still go ahead and build refineries?

5.   THE END OF ‘BUSINESS AS USUAL’

Armchair critics usually think a mere mention of rehabilitation means another round of “business as usual”, where resources are drained with nothing to show for it at the end of the day. While some of these arguments are justifiable, it is instructive to note that this rehabilitation is different because interested parties who benefit from the age-long importation largesse (and who fleece the nation dry) will potentially be out of business by the time the rehabilitation is completed.

This is the same for critics who see nothing good in President Muhammadu Buhari’s administration. These detractors probably forgot that this was an administration which, from its inception, made clear its intention to bring back the refineries to their optimal capacities. The Buhari Presidency also threw its full weight and support behind the NNPC and gave the Corporation a free hand to execute the project without any interference in the contracting processes.

6. THE BENEFITS ARE ENORMOUS…AND ENDLESS

There are quite a number of benefits in bringing the nation’s refineries back on stream. From satisfying local energy demand, growing the nation’s GDP, to strengthening the Naira by reducing the demand for Forex to creating thousands of jobs across the value chain (crude supply, operating and maintaining the refinery, product supply etc) including several third-party contractors that will supply outsourced services or goods, the advantages are huge.

The refined products also serve as feedstock for small scale local manufacturing. The most significant and visible benefit is energy security for the country. Imagine if COVID-19 lockdown became global and Nigeria couldn’t import, it would have been a disaster as there was no capacity to refine crude in-country and as such, there would have been no products at all. That will be a true definition of disaster!

7. IT’S OPERATE & MAINTAIN (O&M) MODEL.

Having learnt from the experiences of previous models, NNPC is now adopting the Operate & Maintain (O&M) Model as a strategy in the execution of the rehabilitation project, which is also one of the key lender requirements. With the O&M Strategy, the Contractor is expected to:

• Be a single point of responsibility for managing operations, maintenance and technical services within the refinery’s battery limit

• Be a credible, proven refinery operator with preferably FCC experience

• Operate and maintain the refinery efficiently to generate sufficient margins to pay back the debt

• Be Able to manage local and specialized sub-contractors

• Retain current NNPC staff, and actively support employee development to prepare for the transfer of the refinery management back to NNPC (timeline to be defined)

• NNPC will retain 100% of refinery ownership (e.g. no JV structure etc.)

• NNPC does not expect significant capital projects (e.g. upgrades, de-bottlenecking etc) during the O&M contract phase.

• NNPC’s structure and mandates outside of the refinery’s battery limits will not be impacted by the O&M strategy (e.g. PPMC).

8. THE CURIOUS CASE OF SHELL’S MARTINEZ REFINERY ‘SALE’

It is strange to hear people come up with the curious case of Shell’s sale of its Martinez Refinery in California to PBF Holding for $1.2bn “while NNPC is only rehabilitating PHRC for $1.5bn.” Perhaps, what people failed to understand is that Martinez Refinery is 105years old (built in 1916). The refinery had a major fire incident in September 1989 and it is having regulatory challenge with the Californian authorities. The relatively high cost of doing business in California, coupled with challenges with adherence to the State’s environmental regulations were factors in Shell’s decision to sell (https://www.ktvu.com/news/after-105-years-martinez-refinery-no-longer-owned-by-shell).

Also, as part of the condition of the sale agreement, Shell and PBF previously entered into a market-based crude oil supply and product off-take agreements to continue supplying Shell-branded businesses and ensuring that Shell customers continue having access to Shell-branded fields (See https://www.ogj.com/refining-processing/article/14092900/shell-finalizes-sale-of-martinez-refinery).

In a nutshell therefore, what happened between Shell and PBF was just a Management agreement packaged as a sale to manage and protect Shell’s image, hence, it can never be a fair comparison with the cost of rehabilitating an NNPC refinery or even building a new one. Putting up such argument as a defence looks like a well-choreographed attempt by groups who feel that the refineries coming on stream will not only throw them out of business, but will also threaten their long-term interests.

9.  FINALLY, AN ENTIRELY DIFFERENT APPROACH THIS TIME AROUND 

Unlike what is obtained in the past, the current refineries rehabilitation project is different for the following reasons:

a. It consists of a governance structure that includes key independent external stakeholders: Ministry of Finance, NEITI, ICRC, PENGASSAN and NUPENG. 

b.  Unlike the regular TAM, this rehabilitation will involve comprehensive repairs of the plant with significant replacement of critical equipment to ensure that the plant’s integrity is maintained for a minimum of ten years.

c. It is funded through part-loan and part-government, with the financiers actively monitoring the execution of the project.

d. KBR and NETCO are acting as NNPC Engineers who will be supervising the EPC contract to ensure that the project is delivered on schedule, within budget and at the right quality.

Adewole Kehinde is the publisher of Swift Reporters and can be reached via 08166240846, 08123608662

Supreme Court Did Not Nullify The Certificate Of Return Issued To Sen. Odey - Centre

 

The Centre for Credible Leadership & Citizens Awareness has corrected the wrong speculations in the media space that the Supreme Court nullified the election of Senator Steve Odey.

Speaking to journalists on Monday in Abuja, the Director General of Centre for Credible Leadership & Citizens Awareness, Dr. Nwambu Gabriel, said that the Supreme Court did not rule on the substantive appeal of the matter, instead, it ruled on preliminary objection about improper service by substituted means, whereas, the same Supreme Court granted an order that the parties be served via substituted mean and all the parties were in court.

“The Supreme Court did not nullify the certificate of return of the serving senator, Dr. Odey, neither was the seat declared vacant. In other words, it is pertinent to also state clearly that the Supreme Court did not sack Dr. Odey. Of course such powers do not reside with the Supreme Court. It is the election Tribunal which can rule on such matters before it currently, Dr. Nwambu said.

The coalition said it has pondered on the entire matter and even wondered if the Judiciary is really the hope of the common man consequent to some observations in the Supreme Court on the 25th of February, 2021.

The statement read “The situation here is very clear. Section 285 (13) of the 1999 constitution as amended clearly state “that no tribunal or court shall declare any person winner of an election when he has not participated in all the stages of that election”.

"Two fellows are involved here. One contested an election, the other did not, but wants to truncate justice, lie on oath, deceive Judges and fraudulently obtain judgment in his favour. A situation where an individual run from one court in Port Harcourt to another in Calabar and then to the FCT High Court, all in a bid to fraudulently obtain Judgement. This is further worsened by the fact that all these courts have no Jurisdiction over the matter.

"We would then wish to ask if the Judiciary is for buying and selling. If the judiciary is for the money bags. If the judiciary is for the highest bidder? This further explains why President Mohammadu Buhari had made a genuine and concerted efforts towards reforming the Nigeria Judiciary as a formidable arm of government. Little wonder the Judiciary still tops the chat as one of the most corrupt government institutions in Nigeria.

"For us in the Civil Society, this kind of incidence where a man who did not contest election coming to contest the seat of a Senator who has been sworn-in is completely absurd. It is worse than book-haram, banditry and kidnapping put together.

"We also wondered the interest of the Governor of a state in the politics of another state. Why the gang-up? His offence; he contested and won an election…This trend definitely is not healthy for our democracy.

"By this medium we wish to commend the Principal Officers of the 9th Senate ably led by the Senate President, Senator Ahmed Lawan, as a man of impeccable character who has demonstrated unrelenting support for our democracy for standing firm in the defence of justice in spite of so much pressure by some clandestine groups to indulge in injustice, thereby truncating the height already attained as true democrat he is. The legal department is hereby commended for insisting on legal and legitimate due process as far as the Senate is concerned. Nigerians are indeed watching with keen interest the desperate disposition of some politicians who should not be found in the corridors of power.

"Lastly, we wish to re- emphasize that Senator Dr. Steve Odey is still the Senator representing Cross River North Senatorial District as his seat was not declared vacant neither was his certificate of return nullified by any court of competent jurisdiction in Nigeria, Dr. Nwambu concluded.