NNPC: One Year of Yar’Adua as GMD
By Maureen Chigbo
Sunday, August 24, 2008
Nigerians from within and outside the oil and gas industry praise the leadership style of Abubakar Yar’Adua
Abubakar Yar’Adua, acting group managing director of Nigerian National Petroleum Corporation, NNPC, is a man, who has an eye on history. He is more concerned about the kind of legacy he will leave in the corporation after his tenure.
His headache now is not about using his position to acquire wealth as most public officers are wont to do but how to put the corporation on a pedestal as the most effective and efficient oil enterprise nationally and globally. He has told any one who cares to listen that he has a mission in NNPC. "My task is to help frame the case for a fully commercialised Nigeria Oil Company with profit driven objectives," he said at a press briefing to mark his one year in office in Abuja. "This singular objective has shaped my actions, activities and programmes since assuming office a year ago."
Yar’Adua’s has resuscitated the Kaduna Refining and Petrochemical Company, KRPC, and the Warri Refining and Petrochemical Company, WRPC, which were comatose for two years. The refineries were not producing due to vandalised pipeline in Chanomi creek in Delta State that ferries crude to them. Previous management could not repair the pipelines because of security threat posed by Niger Delta militants who attacked and kidnapped workers, especially expatriates.
Because the refineries were not working, the administration of Olusegun Obasanjo decided to sell them to Aliko Dangote-led Bluestar Consortium at a paltry $721 million. But President Umaru Yar’Adua reversed the sale after severe criticism of the sale by Nigerians and the group managing director argued against it promising to get the refineries working in a record time. Yar’ Adua engaged Fenog Nigeria Ltd which is based in Warri to repair the refineries with about $57 million. The WRPC refinery achieved an average capacity utilisation of 80 percent in the first half of the 2008 and currently processing 100 percent capacity. The KRPC fuel plant is now running at 68 percent capacity.
The Lube section of the Kaduna Refining and Petrochemical Company Limited, which was shut down 10 years ago as a result of some constraints ranging from inadequate electricity, nitrogen and steam has also resumed production. Designed to refine only foreign crude, the Lube section, which processes asphalt, waxes amongst other products, came on stream August 10. The plant is now running at 60 percent capacity due to crude constraints.
The Port Harcourt Refinery faced peculiar challenges which culminated in the destruction of the Port Harcourt Jetty by fire in December 2007. This incident drastically impacted on the import and product evacuation capabilities. There was also a fire incident at the refinery’s cooling tower in April 2008 but efforts are ongoing to repair the damage. Despite these challenges the Port Harcourt refinery operated at 60 percent capacity utilisation until last week when it was shut down due to fuel oil haulage constraints.
Since the management of NNPC assumed office August in 2007, measures were put in place to ensure that all parts of the country receive adequate supply of petroleum products. Occasional hiccups in the supply were often caused by factors external to the operation of NNPC such as strike action by tanker drivers across the country. Even in such circumstances, NNPC interventions through dialogue usually resulted in quick resolution of knotty issues in the industrial disputes. The disputes between Petroleum and Natural Gas Senior Staff Association, PENGASSAN, and management of Chevron, PENGASSAN and management of Exxon-Mobil and National Union of Petroleum and Natural Gas Workers, NUPENG, PTD and the Independent Marketers and the federal government are some of those in which NNPC intervened.
It is not just the refineries and the downstream sector that Yar’Adua has turned around. In all the sectors that NNPC is involved, especially in the upstream, he is leaving his strides in the sands of time. In the past one year, crude oil production has remained at an average of two million barrels per day with a reserve base of 33.6 billion barrels for both the joint venture, JV, and production sharing contract, PSC. This was achieved despite the community obstruction and incidences that militate against realisation of full potentials of the country in terms of crude oil production. The operators have successfully re-entered the western swamp operation and secured more than 100,000 barrels per day production from Shell and Pan Ocean JV fields out of about 400,000 barrels hitherto locked-in due to pipeline attacks.
On July 24, the Agbami Floating Production Storage and Offloading, FPSO vessel, produced its first oil at an initial production level of 65,000 barrels per day to peak at 232,000 barrels per day. The Akpo FPSO vessel, which sailed away in June 2008 from South Korea is expected to arrive Nigeria by the end of August. It will be installed and commissioned immediately and its peak production is expected to be 175,000 barrels per day.
The National Petroleum Investment Management Services, a subsidiary of NNPC is currently directing its efforts at resuming direct exploration operations in the Chad Basin and other inland basins in the country, where activities were temporarily suspended.
The group managing director is also resolving the funding constraints in JV operations through the modified carry arrangement, MCA, which is expected to start in September. With the MCA, the joint venture cash call arrangement will be discarded. It means that any international oil company, IOC, that has work for the JV will go ahead and source money to do it and later bill NNPC. This is different from the joint venture cash call arrangement where the IOC has to wait for the federal government to bring its share of funding before work can start. The federal government delays in paying its share of the cash call thereby stalling the joint venture partners from commencing work.
In the past one year, the NNPC introduced measures to assist in optimising government earnings from crude oil sales, through improved pricing mechanism as a new premise for calculating petroleum profit tax, PPT. In this respect, rigorous analytical measures are being taken in the preparation of the monthly official selling price, OSP, of the various Nigerian crude oil grades as well as calculation of realisable prices, RP.
Yar’Adua, through Nigerian Petroleum Development Company, NPDC, has successfully been operating the Okpono-Okpoho field and some Shell Petroleum Development Company, SPDC and Chevron Nigeria Limited, CNL, JV fields. The average NPDC direct production now stands at 80,000 barrels per day from OMLs 111, 119, 65 and 20. This is a phenomenal achievement when this figure is compared to 10,000 barrels per day it was producing before Yar’Adua took over. Then the NPDC could not produce much because of problems of militancy attacks, lack of funds and lucrative oil blocks that were taken away from the NPDC by government and re-awarded to other companies. Also the FPSO Mystras has successfully resumed production after the recent attack on the facility. NPDC is aggressively drilling in Oredo fields, targeting five wells to boost production. The NNPC is also to start exploration of oil in the North along the Benue, Bauchi and Chad basin.
As part of the efforts to internationalise operations of NNPC, the NPDC is in the process of acquiring oil blocks in Equatorial Guinea. Indeed, a major landmark achievement of the NNPC management is the effort made in reversing the sale of OML 65 to a Chinese company. This block is currently producing about 6,000 barrels per day.
The Yar’Adua-led management of NNPC is ensuring the growth of other subsidiaries such as the Integrated Data Services Limited, IDSL, and Nigerian Gas Company Limited, NGC. The IDSL has acquired a total of 577sq. km of 3D seismic data in the year 2007 and has successfully utilised two crews in JV with United Geophysical (Nigeria) Limited to execute SPDC and CNL projects. IDSL has processed 98 percent of 900 sq. km of seismic data for British Gas in alliance with Western Geco. It has also carried out 15 CNL field study projects in alliance with Schlumberger. With current NNPC management directives that all land seismic activities must be done in Nigeria, IDSL is now placed in the path of sustainable growth.
The NGC is equally moving on the growth path with the careful guidance of the NNPC management team despite the frequent vandalisation of the Escravos-Lagos Pipeline System. NGC has been aggressive in the repairs of the pipeline system and has been delivering gas to its customers. The Gas Supply Projects to new PHCN Power Plants (GOPA Projects) are in progress. Other opportunities open to NGC are in the implementation of gas master plan infrastructure blueprint where its experience will play a dominant role in maintenance and operation of the pipeline systems.
NNPC’s pioneering efforts in coordinating the development of Nigeria’s first Gas Master Plan, GMP, has started yielding results. The GMP has been endorsed by President Umaru Yar’Adua and approved by the federal executive council in February. The GMP is a strategic plan with overarching objective of using gas for national economic growth and development through effective linkages with key sectors of the economy such as power supply, agriculture and manufacturing.
The National Engineering and Technical Company Limited, NETCO, is another NNPC subsidiary that is thriving under the tutelage of Yar’Adua. When he became the group managing director, he appealed to industry operators on the need to support NETCO. "I am pleased to inform you that… NETCO has enjoyed increased patronage by JV partners and NNPC subsidiaries. These include the ESA II and Total E&P FRAME Agreements as well as the NPDC Global Engineering Services agreement; and KPRC TAM, PHRC Tanker park Design."
Yar’Adua is mindful of the local content initiative which is to empower indigenous companies to participate actively in the oil and gas sector. The major achievement of the NNPC Nigerian content initiative is the attainment of 35 percent local content level in the first quarter of 2008. Engineering man-hours in-country have gone up from 25,000 in 2005 to 3.5 million in early 2008 and industry fabrication increased from 25 tonnes to 125,000 tonnes. Also the number of engineering companies operating in-country has increased from five to 36.
The management of NNPC is also improving the commercial status of the corporation. Since a major plank of the Oil and Gas Sector Reforms Implementation Committee, OGIC, report as it relates to NNPC envisages a future NOC that is commercially self-sustaining, management, in the past one year, was involved in preparing a fertile ground on which to grow a commercially viable NNPC by refocusing its systems and processes towards minimising losses and maximising profits.
The Commercial and Investment Directorate, C&I, is charged with the responsibility of working out strategies by which NNPC can improve on its commercial status in line with the corporation’s desire to become a world class integrated oil and gas company. The division now comprises investment, retail marketing, hyson and new businesses division including two new shipping companies – NIKORMA and NIDAS. The new business division and the Group Public Affairs Division are collaborating with commercial departments of foreign embassies in the country as a platform for reaching out to potential investors in oil and gas and other non-oil businesses in their respective countries.
The commercial and investment department is not resting on its oars. It will continue to organise retreats that would assist in developing strategic direction for NNPC; identify projects that are productive, develop strategies that will transform NNPC into an integrated national oil and gas company comparable to its peers globally and identify reputable banks with which the corporation can partner to execute projects through joint venture arrangements and special purpose vehicles.
The NNPC has made strategic inroads into petroleum products distribution business commencing with the commissioning of two mega stations in August and December 2002 in Lagos and Abuja, respectively through its retail marketing division. These outlets were parts of NNPC deliberate effort to present a brand of mega stations that are always wet with accurate dispensing and at the most competitive price. "It is gratifying to note that in the last one year, its mega stations have increased from 22 to 36." The group managing director said all the states of the federation including the federal capital territory have been covered except Bayelsa which is scheduled for commissioning before the end of this year. The volume of products sold daily increased from 1.1 million litres to the present level of two million litres which translates to more than 80 percent increase.
The NNPC has extended the retailing of petroleum products to the riverine areas of the Niger Delta. It deployed a floating mega station each to Delta, Bayelsa, Rivers, Akwa Ibom and Cross Rivers states. The other states in the Niger Delta are slated to have theirs before the end of this year.
The NNPC is also addressing the issue of ageing workforce and declining productivity through the ongoing recruitment campaign. About 150 graduate/technologist trainees and 50 experienced staff are to be engaged to close capacity gaps in vital areas of its operations such as exploration and production, refining operations and finance. The current management is committed to local and foreign training for NNPC workforce to bring them up to date to acquire current technology and world class operations capability.
The NNPC is also making steady progress with its renewable energy programme. It has obtained Department of Petroleum Resources certification for use of green-dye as colorant in E10. E10 sometimes called gasohol is a fuel mixture of 10 percent ethanol and 90 percent gasoline that can be used in the internal combustion engines of most modern automobiles.
It also paid to procure retail outlets quality assurance, QA, equipment billed for distribution to retail outlets. QA equipment have been supplied and installed at Mosimi depot E10 laboratory. It has also done the third round of retail outlets integrity assessment with 40 outlets qualified for sale of E10 as well as identifying and quantifying the maintenance/upgrade requirements of NNPC Ikoyi Mega Station.
On the supply chain management, NNPC has advanced its public awareness campaign as well as developing and verifying with Petroleum Products Pricing Regulatory Agency, PPPRA. According to the group managing director, the discussion to finalise E10 pricing is ongoing.
On Biodiesel, the corporation has completed two bankable feasibility studies for oil palm – biodiesel projects in two sites in Calaro-Iwuru and Nkum-Agbaragba in Cross River State. It has also identified potential investors. NNPC is also partnering with NRCI on the development of cassava.
Transforming NNPC has not come on a platter of gold. The management has been confronted with myriads of problems ranging from funding, vandalisation of pipelines to militancy in the Niger Delta region. Some instances will suffice.
The federal government is owing the corporation N48 billion and it lost 12 million litres of petrol within hours of pumping through the Aba–Port Harcourt pipelines which were vandalised. This experience, no doubt, made the group managing director to say that ensuring peace in the Niger Delta is a major challenge facing the industry today and that NNPC will continue to employ dialogue as a means of resolving the problems in the region.
The NNPC is also fully engaged in the Gulf of Guinea Energy Security Council, which is a global coalition of stakeholders committed to ensuring that lasting peace reigns in the region. The council is billed to reconvene in September to further deliberate on how to bring peace and development to the region. "It is our hope that parties involved in the crisis, would see reasons why peace must reign in the region in order to facilitate its rapid development," he said.
The NNPC is also set to improve on its ICT Division. "The area that needs improvement is IT. It is a tool you cannot do without today. I know the management is setting up the department. We are taking steps towards it but we need to move faster so that the corporation will be fully integrated. What I am saying, in effect, is that the corporation is not fully IT compliant," said Williams Ibiba Inko, group chairman NUPENG, NNPC. He said the union was aware of the commitment in the past one year. "Only recently we have had to discuss with group general manager, GGM, ICT and we know the steps he has taken now. We also know it is the mandate from the leadership. We are moving in the right direction. But we want it expeditiously followed so that we can be that compliant and the rest will be a thing of the past," he said.
Yar’Adua acknowledged that he could not have achieved the much he did without active support of the management team and entire staff of the NNPC. Some members of the management team and staff affirmed that he carries them along in his programmes hence their willingness to give him maximum support.
Shehu Ladan, group executive director, Commercial and Investment, described Yar’Adua’s leadership style as vibrant, open and protective of staff interest. "He is very much interested in the welfare of staff. Infact, anywhere he goes they call him comrade. And he doesn’t mince words in expressing his solidarity with the workers," Ladan said, adding that the welfare of the staff is paramount and uppermost in his mind. He pointed out that the industry has recorded no strike, either by NNPC or even the wider PENGASSAN AND NUPENG because Yar’Adua has been able to hold them in check due to his kind of leadership.
Levi Ajuonuma, group general manager, public affairs division, NNPC described the past one year of Yar’Adua as very challenging, saying that management worked as a team to achieve all it did. "NNPC has never had it so good to have the group managing director at the helm of affair at NNPC," he said, adding that the GMD takes the issue of accountability very serious hence the press conference to reflect on what he has done so far in the past one year. "GMD takes his stewardship very seriously," he said.
Union officials support Ladan view. The group chairman NUPENG, NNPC, expressed satisfaction with the leadership of NNPC. "We are delighted. We are motivated by the group managing director. This is the day to crown his efforts over the past 365 days. He has been a motivator." According to him, NNPC staff like Yar’Adua because he is a core refiner and he has the interest of the workforce at heart. "You can see the milestone we have achieved with the refineries which people had written of as scraps. "We have seen the future with his leadership and it is very bright. So we, as leaders of the workforce, have no other option than to talk to our members. We are already fired up so that we can achieve total optimal capacity for all the refineries."
For John Elibe, group chairman PENGASSAN, NNPC branch, the past one year has been fantastic. "It’s fantastic in the sense we can all see where we were coming from and where we are today. The man has done a lot for the Nigerian people, for NNPC itself. Because when he took over he said he was going to make sure he runs NNPC transparently. And, of course, from what he has done so far he has done well."
He explained that the GMD’s strategy has been to carry the entire workforce along. "When you have something to hide, you begin to get a low input from your workforce. But when you are open, I have seen you as an open person and, of course, I have no other reason than to support you fully to prove that since you are carrying me along we have to work together to be able to achieve our target. I think that he has done well," the union official said.
He appealed to the federal government to confirm the appointment of Yar’Adua as the substantive group managing director since he has done well in an acting capacity in one year.
Perhaps, Emmanuel Odusina, minister of state for gas, who was briefly at the press conference, summed up the feelings of Nigerians who have followed developments in the NNPC in the past one year when he acknowledged that a lot of improvement has take place in the oil and gas industry and the refineries adding that it is a thing of joy forever.
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