…NNPC Begins Oil Exploration In Gongola Basin
…Baru Opens New Investment Opportunity As NNPC Exits Cash Call Agreement
The Nigerian National Petroleum Corporation (NNPC) on Monday, February 27, 2017 announced that it had successfully reduced its Unit Technical Cost (UTC) of crude oil production from $70 per barrel obtainable in 2014 to about $27 per barrel as at the end of 2016.
According to barrel breakdown graphics by The Wall Street Journal from early 2016, Nigeria had the world’s third highest average cash cost – US$28.99 – to produce a barrel of oil or gas equivalent in 2016 behind the UK and Brazil.
Similarly, the Corporation said it has secured a $416,000 per day reduction, about N126.88 million daily, in its deep offshore rig-rate.
A statement by the NNPC in Abuja quoted its Group Managing Director, Mr. Maikanti Baru, as making the disclosure at the 14th annual Aret Adams Memorial Lecture.
The GMD, who was represented at the event by the chief operating officer, Gas & Power, Mr. Saidu Mohammed, explained that the deep offshore rig-rate was renegotiated from a staggering $580,000 to $164,000 per day.
The action, he stated, resulted in saving the country a 71.7 per cent cost of executing a similar operation in the past, even as he noted that the NNPC had achieved a 35 per cent downward review of rig rates per day for both swamp and land operations in its portfolios.
He pointed out that a rig rate is a major cost element incurred by an Exploration and Production (E&P) company in the course of drilling for oil or gas in deep offshore, shallow offshore, swamp, land areas or basins.
According to him, the various reductions serve as an incentive for investors to grow reserves, increase profitability and improve Return on Investment (ROI), adding that they also boost government revenue, thus improving government’s commitment to developmental projects across the country.
“I am proud to announce that our UTC has significantly dropped from above $70 per barrel in 2014, to about $27 per barrel, as at year end 2016. Indeed, NNPC is committed to further driving down the UTC,” he stated.
This is no mean feat achieved by the NNPC under the leadership of the GMD Baru and by achieving the goal, he is the MDAs Monthly’s Public Officer of the Month.
Similarly, NNPC has expressed commitment to growing the Nigerian Petroleum Development Company’s (NPDC’s) crude oil production to 500,000 barrels per day by 2020, in addition to growing the company’s gas production to 1500mmscf per day within the same period.
NNPC GMD, Dr Baru, stated this at the 2017 Nigeria Oil and Gas (NOG) Conference and International Exhibition.
He said everything was being done to ensure that the nation’s crude production exceeds the 2.2mbpd target budget benchmark for the 2017 financial year.
Baru noted that Nigeria was currently producing 2.1mbpd, attributing the rise in production level to the reduction of pipeline vandalism due to efforts by the federal government to negotiate with the Niger Delta people.
Baru said, “Crude oil production has steadily increased to 2.1mbpd due to some strategic dialogue efforts embarked by the federal government in the Niger Delta.
“Every forecast for Nigeria’s crude oil output looks positive after the efforts of Yemi Osinbajo, acting president, and Ibe Kachikwu, minister of state for petroleum resources, to calm Niger Delta militants began to gain traction”.
He added that NNPC would sustain frontier exploration in the inland basins to meet government’s aspiration to achieve crude oil and gas reserves of 40 billion barrels and 200 trillion cubic feet respectively by 2020.
Baru put the current oil and gas reserves at 37 billion barrels and 192 trillion cubic feet (tcl) respectively.
On efforts to reduce gas flaring, he said, “Efforts are currently ongoing amongst all stakeholders to reduce the level of gas flare by converting most of the flared volumes to ensure commerciality of the gas resources.”
Speaking on gas commercialisation, Baru said efforts were on to raise between $3.6 and $4.5 billion to build the Abuja-Kaduna-Kano (AKK) pipeline to help generate 3.2 gigawatts (GW) of electricity for the country.
“Beyond growing gas for the power sector, there has been a strategic positioning of the sector to support massive gas-based industrialisation. We will incubate and midwife a portfolio of critical and mutually dependent investments (Central Processing Facilities, CPFs, Fertilizer, Petrochemical, Free Trade Zone, FTZ, infrastructure and Ports) which will jumpstart the gas revolution agenda. NNPC intends to develop or take equity in some of these gas-based industries such as fertilizer and others,” he said.
Baru further expressed delight that the NOG Conference which could not hold last year has roared back at a time when hope was rising for the industry, even as he said there were indicators that things were beginning to shakeup for the industry.
The first indicator, according to him, was that cases of pipeline vandalism had reduced with a positive impact on crude oil production.
“We are having a lot of engagements with people in our core area of operations in the Niger Delta and this is bringing a lot of hope. If we go by the number of pipeline vandalism cases, they have dropped to an average of 20 per cent on a monthly basis as against a similar period last year. This is an indicator that calm is returning to the environment,” he said.
Baru: NNPC’s Transformation Agenda On Course
President Muhammadu Buhari’s appointment of Dr. Maikanti Kacalla Baru, as the 17th group managing director of the Nigerian National Petroleum Corporation (NNPC) on July 4, 2016, has been widely described by industry stakeholders as not only timely but putting round pegs in a round hole.
Until March 2016, when he was appointed technical adviser, he had served as the group executive director, Exploration and Production, as well as the group general manager, LNG Division responsible for handling the commercial and administrative aspects of the LNG Investment Businesses. He was also the NNPC’s chief technical negotiator on the West African Gas Pipeline project and chaired the NNPC Anti-Corruption Committee.
As a man prepared for the job, his inaugural speech during the handover ceremony held at the corporate headquarters of the corporation in Abuja revealed that he had a good relationship with his immediate boss, Dr. Ibe Kachikwu as he acknowledged the fact that the minister did not only approve of his appointment but also recommended him to the President for the job.
Baru did not mince words as regards his plan to turnaround the corporation.He committed to continuing with ongoing comprehensive restructuring exercises of the corporation which according to him, had become inevitable. He also assured the staff of their place promising to exploit their immense experience to maximize output in the restructuring process he inherited.
He pointed out that NNPC was in transition for positive reform. He also emphasised that transformation was not only inevitable but imperative in the light of the current business realities, adding that it was incumbent on the NNPC to deliver on its statutory mandate.
The transformation programme under his regime he said, would lead to autonomy, profitability and growth of the corporation.
To ensure that the staff keyed into the vision of his transformation agenda, he encouraged them to see the prospect ahead even in the face of challenges.
He explained the need for a paradigm shift in the corporation’s business culture, stressing that emphasis would be placed on professionalism, service orientation, commitment and sacrifice to achieve higher performance and results.
Speaking on how he intends to implement the transformation,Baru said he has articulated his programme in line with the corporation’s mission statement. He then unfolded his 12-point agenda aimed at driving the actualization of the mission statement.
The agenda is tagged: “Moving NNPC Forward Together,” and covers areas such as security, new business model, JV cash calls, production and reserve growth, NPDC growth, gas development, oil & gas infrastructure, refinery upgrade & expansion, renewable energy and frontier expansion, ventures and common services, professionalism and accountability, staff welfare and security.
Every well-meaning Nigerian would agree that the greatest challenge currently facing the oil and gas industry is the lack of security in the Niger Delta area. Commenting on the issue which would definitely determine how much he succeeds in turning around the fortunes of the NNPC during his era, Baru promised to create an all-inclusive advisory council on security.
The council, according to him would be broad-based with representatives from NNPC, the IOCs, unions of the corporation, and security operatives. They would consider, proffer suggestions, and implement recommendations that would address security and host community agitations.
The activities of the council he said, would complement and provide input to existing government security initiatives.
New Business Models
According to him, this would involve the implementation of new business models and autonomy of the SBUs with ABUs providing appropriate directions and control to ensure their growth and profitability.
JV Cash Calls
Equipped with the knowledge of the lingering crisis created by the government’s inability to meet its counterpart funding to joint venture operations in the upstream sector, Baru promised to continue exploring ways of relieving government the burden of cash calls obligations as well as address and defray the agreed cash call arrears of the IOCs, in addition to making efforts to transit the incorporated joint ventures as soon as possible.
Production and Reserve Growth
Baru said he was targeting the restoration of oil and gas production to the normal projected level in addition to growing reserves and productivity.
“I am aware of the dwindling oil and gas production due to renewed militancy and destruction of our critical infrastructures in the Niger Delta region. Therefore ensuring peace and stability of our local host communities is paramount to me as the GMD,” he said.
He promised to work with the minister of state for petroleum resources and other stakeholders to ensure optimal engagement with all relevant stakeholders with a view to restoring peace and stability necessary for normalizing upstream production operations.
In view of the critical role, the Nigerian Petroleum Development Company (NPDC) would play in the actualization of reserve growth, Baru said his administration would focus on ensuring that NDPC which is the exploration & production arm of the corporation got all the support necessary for the attainment of set production aspiration.
He also proposed to deploy new strategies to enhance the management of the company.
The management of NNPC under Baru would pursue gas processing and pipeline infrastructure development plans to build critical backbone networking that is not only robust and flexible, but also one that seeks to build a supply network for the country and that would enable economic diversification and growth.
According to him, pipeline infrastructure development would be complemented by leveraging on the corporation’s equity to encourage gas development as aggressively as possible while counting on her partners to support the drive.
Oil and Gas Infrastructure
Key among the numerous problems facing the refineries today aside from the facilities rehabilitation and revamp is the crude supply chain, Baru told the audience present at the event.
Proffering solution he said, “We will repair and restore our oil and gas pipeline infrastructures and will work more aggressively with security agencies and other stakeholders to protect the pipelines including the usage of robust technology that will be proactive rather than reactive at a minimum.
“As a collective responsibility we would encourage partnerships from the private sector and also leverage on the success of the recent NNPC investment outing in China to support critical financing and upgrading of our infrastructure, increasing oil and gas production, establishment of gas processing and gas based industries such as petrochemical plants, methanol plants and fertilizer plants among others.”
Refinery Upgrade & Expansion
Having spent time in the corporation, Baru is not a neophyte to the knotty issue of local refineries, he has therefore promised to improve the capacity and efficiency of the four existing refineries and pave the way for future expansion.
As part of efforts to ensure that the corporation’s transformation agenda remained on course, Baru has articulated some of the measures his administration would pursue in reviving the nation’s refineries to include sourcing for external funds and technical partnership arrangement, amongst others.
Renewable Energy and Frontier Exploration
Proper focus would be accorded frontier exploration activities to increase crude oil and gas reserves whilst diversifying the corporation’s business to include the implementation of renewable energy programmes, he stated.
To this end, he promised to decouple the initiatives as stand-alone with each headed by a GGM.
Ventures and Common Services
NNPC under the management of Baru would pursue new business initiatives after thoroughly evaluating them and ensuring value delivery from common services for the corporation.
Professionalism and Accountability
This is one of top most area of concern to Baru as he is confident that without the right kind of human resources who have the appropriate mindset desired progress would not be possible.
Consequently, he has promised to entrench the culture of professionalism in the staff by “doing the right things at all times through transparency, accountability and respect for all. I therefore expect these core values to cascade to all cadres of our corporation.”
Baru assured that he would ensure adequate staff welfare, motivation, training and capacity building within the limit of the corporation’s current financial conditions.
He noted that all the aspirations he had rolled-out could not be possible without the support of all staff of NNPC.
Apart from the 12-point agenda, Baru equally addressed some other very important issues such as restructuring and industrial relation.
On restructuring, he promised to continue the programme that was already underway.
In the same vein, he assured the trade unions (PENGASSAN and NUPENG) operating in the corporation of management’s full support and cooperation in addressing industrial issues for the mutual benefit of all.
Shortly on assumption of office, Baru organized a one-day meeting where he hosted the former GMDs of the corporation including the immediate past GMD and the current minister of state for petroleum resources, Dr. Emmanuel Ibe Kachikwu.
The meeting which held at the Transcorp Hilton Abuja enabled him to review the status of the corporation and the oil & gas industry with them and to present his 12 business focus areas to them.
The GMD and the former GMDs jointly reviewed the current state of Nigeria’s oil & gas industry, deliberated on ways to resolve issues militating against the progress of the sector and recommended measures to move the sector forward.
During the brainstorming session, they expressed serious concerns on the declining production level and its attendant consequences on the environment and the nation’s revenue.
They further agreed that if the current situation remains unchecked, it could lead to the crippling of the corporation and the nation’s oil & gas sector.
Following their deliberations, the former GMDs identified the following key challenges and advised as follows:
Insecurity is threatening production and damaging the Niger Delta environment. There is the urgent need for government and security agencies to refocus as well as engage the various host communities as well as established social and traditional structures to develop an actionable partnership framework toward finding a lasting solution to the present unrest.
NNPC’s Corporate Reputation
The former GMDs were concerned about the increasing negative perception of the corporation by Nigerians especially in terms of accountability. They therefore called on the corporation to educate Nigerians on NNPC’s activities as a commercial entity managing the nation’s assets in trust.
State Of The Refineries:
The former GMDs advised that the refineries be rejuvenated using the Original Equipment Manufacturers (OEMs). Also, the refineries must be restructured to operate as an Incorporated Joint venture (IJV) similar to the Nigerian Liquefied Natural Gas (NLNG) model with credible partners having requisite technical and financial capabilities.
Petroleum Products Supply:
The former GMDs commended NNPC for resolving the fuel supply crisis and urged the corporation to put in place measures that would ensure sustenance of seamless supply of petroleum products nationwide. They however noted that the PMS price cap of N145/litre was not congruent with the liberalization policy especially with the foreign exchange rate and other price determining components such as crude cost, Nigerian Ports Authority (NPA) charges etc.
Funding Of Joint Venture Operations:
The former GMDs advised that funding of JV operations should be the first line charge to oil revenue to ensure sustainable production and reserve growth.
Frontier Exploration Services
The former GMDs commended Mr President for sustaining exploration activities in the frontier basins particularly the ongoing efforts in Chad basin and the Benue trough. They therefore advised the GMD to pay priority attention to the Chad basin where promising prospects were recorded.
National Petroleum Investment & Management Services (NAPIMS)
The former GMDs noted that for effective functioning of any National Oil Company (NOC), the technical components of the country’s exploration & production (E & P) must be integrated as part of the country’s NOC. They therefore posited that NAPIMS being the technical component of Nigeria’s E & P, and not just an investment vehicle, must remain with and managed by NNPC. Taking NAPIMS out would make NNPC an ineffective NOC.
The current Petroleum Industry Bill (PIB) which proposed the incorporation of NAPIMS and taking it out of the NNPC would inhibit the effective functioning of the NNPC as a national oil company (NOC). This would make NNPC to operate at a different level compared to its peers in other OPEC member countries. While the former GMDs have no issues with incorporation, they strongly advised against taking NAPIMS out of NNPC.
Relationship With Stakeholders:
The former GMDs encouraged NNPC to improve its relationship with its key stakeholders such as the federal government, the national assembly, host communities and especially its international joint venture partners.
NNPC Revenue Base:
The former GMDs expressed serious concerns about the continued dwindling of NNPC’s revenue and advised that the Corporation should pay particular attention to its revenue-generating entities such as the Nigerian Petroleum Development Company (NPDC), Retail and the Refineries to return the corporation to high performance, growth and profitability.
The former GMDs were worried about the level of NNPC’s debt profile. They advised that as a matter of urgency, NNPC should establish the true state of its current financial status and immediately decide on the most appropriate capitalization model.
The former GMDs also reviewed the state of NNPC pensions. They advised that NNPC should explore avenues to close the pension funding gap including the restructuring of the current model.
NNPC initiated a renewable energy programme in August 2005, which is in conformity with the Kyoto Protocol agreement to which Nigeria is a signatory.
The primary aim of the programme is to link the agriculture sector with the oil and gas industry. It is also aimed at gradually reducing the nation’s dependence on imported gasoline, reducing environmental pollution as a result of consumption of wholesale fossil fuel as well as creating a commercially viable industry that can boast of sustainable domestic jobs.
A similar programme in Brazil has a thriving biofuels industry providing quantum economic benefits including creation of hundreds of thousands of employment opportunities for nationals of that country.
The quest for the expansion of the hydrocarbon by Baru is not limited to the preview of NNPC as he recently tasked members of the National Association of Petroleum Explorationists (NAPE) to explore the hydrocarbon potentials of green frontier basins in order to increase the depleting reserves in the country.
He gave the charge while receiving the leadership of NAPE led by its national president, Mr Nosa Omorodion, at the NNPC Towers, Abuja.
The GMD described the association as a very important part of the oil and gas industry in promoting policy formulations that have led to the growth of exploration of hydrocarbon resources in the country.
He urged NAPE to play a key role of promoting public private partnership in the exploration of some of the green frontier basins noting that the federal government would be willing to make provisions for incentives for such prospective investors.
Concerned about the activities of pipeline vandals and oil thieves which is taking a toll on the operations of the corporation, Baru hosted the commandant general of the Nigerian Security Civil Defense Corps (NSCDC), Abdullahi Gani Muhammadu, in Abuja.
During the meeting he disclosed that the corporation lost 560,000 barrels of crude to the refineries as feedstock and 109 million litres of petroleum products between January and May 2016, and suffered 1,447 incidents of pipeline breaches in the same period.
One of the first programmes embarked upon by the Baru’s administration on assumption of office is the renewed search for hydrocarbon deposits in the Chad basin.
The GMD disclosed this while hosting the governor of Bauchi State, Mallam Mohammed Abubakar, who paid him a courtesy visit at the NNPC Towers, Abuja, few days after assumption of office.
According to Baru, the search was initiated by instructions from President Buhari, who ordered for deeper inquest into the prospectivity of some hitherto neglected finds in some areas in the north-eastern part of Nigeria. According to him, the programme would entail extensive probing of some allocated and non-allocated oil blocks in the region with a view to establishing the magnitude of the deposits.
Briefing the visiting governor on the intensification of crude oil search in the north, the NNPC GMD noted that the corporation has identified specific oil blocks in the area where some of the finds had been made and would move to re-invigorate exploration based on fresh strategy.
“You know that very close home, we have exploration activities on the frontier basin in the Chad and some areas close to the Kolmani River where Shell had made some indicative discovery of hydrocarbons and Mr President has directed me to go into that area to reprove and further explore the magnitude and prospectivity of those finds.
“We are taking steps to re-strategize and get into those regions. We will re-invigorate the frontier exploration and see how they collaborate with NNDC that is holding oil block 809 where some of the finds have been made and also Department for Petroleum Resources (DPR) for the other blocks that have not been assigned,’’ he said.
In a similar development, when a delegation from the Benue State government visited Baru at the NNPC Towers in Abuja, the GMD revealed that President Buhari has also directed the corporation to commence hydrocarbon exploratory activities in the Benue trough as part of efforts to guarantee energy security of the country.
Consequently, the NNPC and the Benue State government pledged collaboration on deepening the ethanol project geared towards production of biofuels for energy sufficiency pledged to by both parties.
Baru disclosed that ethanol when blended with Premium Motor Spirit (PMS) otherwise known as petrol ensures excellent performance of vehicles, stressing that energy sufficiency and proficiency were part of the cardinal objectives of the NNPC.
According to the GMD, “The 2016 national budget plan was based on 2.2 million barrels per day of crude oil production. However, the budget plan is now grossly impacted due to renewed militancy with 700,000 bpd of oil production curtailed due to pipeline vandalism.”
Baru revealed that natural gas supply to power plants has also been impacted resulting in a drop from 1400 million standard cubic feet of gas per day to below 700 mmscfd and a drop in power generation to 2500 megawatts from 3000 MW owing directly or indirectly to the impact on the pipelines.
He called for a deeper collaboration with the NSCDC for enhanced protection of pipelines, gas stations, mega stations, refineries and other critical oil infrastructure across the country.
Responding, the commandant general said the mandate of the corps was to protect critical national infrastructure including oil installations and assured the NNPC of its readiness to bring pipeline vandalism to an end.
Baru said the NNPC under his watch would pay careful attention to improving the quality of petroleum products by commiting to intensive research and development.
To this end, he said the corporation was committed to improving research & development (R&D) arm of the corporation, describing it as a vital tool for advancement in any organization desirous of re-inventing itself in the ever competitive market place.
Baru stated this during on an official tour of some R&D facilities in Port Harcourt recently.
Speaking on the importance of R&D, the GMD said, “Organizations that grow commit a significant part of their budget to research and development and we are going to do that; if what it takes for you to grow is to make you a limited liability company, we are going to do that.’’
He charged the management and staff of the division to brace up for the challenges that come with operating as a limited liability company.
Earlier, the manager, Collaborative Research of the Research & Development Division, Engr. David Akpan, in a presentation made to the GMD said they commenced work on a scheme to improve the quality of diesel in the Nigerian market for efficient and optimal performance of diesel-powered engines.
Giving details of the research, Akpan said the R&D division was working in collaboration with Petronas, Petrobras, Statoil and Saudi Aramco to achieve significant reduction in sulphur and carbon content as well as other impurities in diesel.
He stated that the project also involved non-conventional upgrading of other refined products including crude oil.
Akpan explained that the mission of the division was to carry out research, develop technology and provide services to the oil and gas industry.
He added that its operation was propelled by the vision to be a world-class petroleum research centre driven by innovation and quality.
He said the division has capabilities to handle sundry industry projects across the upstream, midstream and downstream sub-sectors
In the upstream, he stated that the division has proven capacity to handle seismic studies, geochemical and geophysical studies, drilling/mud studies among others.The R&D
division, he also noted, has developed capacity in handling midstream issues like environmental and air pollution monitoring, environment compliance monitoring, environmental impact assessment studies etc.
To equip himself with firsthand information on the state of the nation’s four refineries, the GMD recently embarked on a working tour of the Kaduna Refining and Petrochemical Company Limited (KRPC) and the Port Harcourt Refining Company (PHRC).
While on the visit he reiterated the corporation’s commitment to the upgrade and expansion of the KRPC in line with the 12 key business focus areas of his administration in order to return it to the path of growth and profitability.
Baru made this commitment during a town hall meeting with the management and staff of KRPC in Kaduna.
As part of efforts aimed at ensuring that the company commenced production despite the crisis in the Niger Delta area, the GMD disclosed that government was exploring the possibilities of piping crude oil from Niger Republic to be refined in KRPC adding that President Buhari was personally committed to the project.
He explained that it was important to explore alternative crude supply to KRPC, which has been affected by vandalism of pipelines assuring that the initiative would reduce downtime of the plant and ensure optimal utilisation.
“Due to challenges with the aged refinery and crude oil pipelines that had been breached severally, the operations of the refinery have been epileptic. This we are determined to resolve through various intervention methods including evaluation of alternative crude oil supply from Niger Republic through building of a pipelines of over 1, 000 kilometers from Agadem to Kaduna. That efforts is being championed by Mr President himself,” he stated
According to him, the corporation has already started engagements with the Nigerien minister of petroleum and the Chinese that were operating the field at Agadem.
The NNPC helmsman promised to drive the energy supply project to power industries in Kaduna by ensuring the completion of the Ajaokuta-Abuja-Kaduna-Kano (AKK) gas pipeline.
Earlier, the managing director of KRPC, Mal. Idi Mukhtar, said the Fluid Cracking Catalytic Unit (FCCU) of the plant was re-streamed in June.
The KRPC was designed to process both imported paraffinic and Nigerian crude oils into fuels and lubes products and was constructed by Chiyoda Chemical Engineering and Construction Company (now Chiyoda Corporation) of Japan.During his visit to the Port Harcourt Refining Company (PHRC), the corporation disclosed that the refinery would soon commence the production of Aviation Turbine Kerosene (ATK) popularly known as aviation fuel.
The managing director of PHRC, Dr. Bafred Enjugu, stated this in the presentation made to Baru, stressing that the refinery had met all the international parameters for the production of aviation fuel.
Enjugu said the refinery had successfully blended ATK and was only waiting for appropriate conditions to commence full-scale production of the product in response to the demand of the aviation sector.
Baru described PHRC as Nigeria’s flagship refining company, and that NNPC would do everything possible to ensure that it was operating profitably and contributing effectively to meeting local demand for petroleum products.
He equally said during his visit to the Nigerian Gas Processing Transportation Company (NGPTC), the Nigerian Gas Marketing Company (NGMC) and the Warri Refining and Petrochemical Company (WRPC) in Warri, that the NNPC would complete all ongoing gas infrastructure projects as part of measures to boost the nation’s economy.
Baru noted the NGPTC and NGMC were particularly important in the aggressive drive to provide gas for power generation and industries to propel the nation’s economic growth.
He explained that the NGPTC was expected to drive gas infrastructure projects such as the Escravos-Lagos Pipeline System II (ELPS II), Obrikom-Obiafu-Oben (OB-3), Abuja-Kaduna-Kano (AKK) and the expansion of the eastern gas network to completion, as well as maintain the operations of the existing network.
He stated that in the coming years, both NGPTC and NGMC would focus more on gas processing activities to enhance their growth opportunities.
The NNPC GMD, Dr Maikanti Baru, has vowed to meaningfully engage the Nigerian Petroleum Development Company (NPDC) in the effort towards improving reserves and production capacity of the corporation.
Baru, who stated this during a working visit to the NPDC, the exploration & production subsidiary of the NNPC, with head office in Benin City, the Edo State capital, office, The GMD described NPDC as showing a conspicuously excellent growth in its proven reserves but emphasized the need to expand the company’s footprints within the nation’s upstream sub-sector of the nation’s oil and gas industry.
To achieve this, the GMD added that the NNPC under his watch would aggressively explore opportunities in other petroleum acreages in Nigeria and with particular interest in the Gulf of Guinea.
The GMD used the opportunity to visit the state governor, Mr Godwin Obaseki, at the government house, and used the forum to express his appreciation to the people of the state for being peaceful host to the corporation.
He describe Edo State as a strategic partner hosting NNPC’s strategic facilities stressing that the state remains relatively peaceful with least incidents of pipeline vandalism and sabotage compared to other areas in the Niger Delta.
On security, the GMD lauded the support of the Edo State government for its collaboration with security agencies towards safeguarding oil and gas facilities that traversed the state.
He then assured the governor of the corporation’s determination to reward the state for the support by redoubling its community engagement.
He promised to champion more corporate social responsibility (CSR) efforts within its host communities in the state.
The GMD also used the visit to the state to pay homage to the Oba of Benin, His Royal Majesty, Omo N’Oba N’Edo Uku Akpolokpolo, Oba Ewuare II, where he sought for the monarch’s support in the area of sensitizing host communities on the advantages of protecting the nation’s oil and gas assets which he said would lead to improving the environment, community and the economy.
* In an attempt to domesticate the nation’s oil and gas industry the GMD,Baru said the Nigerian content policy as a catalyst for the nation’s industrialization, was being tested as a result of the current volatility in oil prices witnessed globally.
He therefore called for a paradigm shift in accordance with a new operating philosophy that would lay emphasis on in-country manufacturing, job creation, skills and technology development, capital retention, research and development as well as fostering sectoral linkages with other critical sectors of the nation’s economy.
Although, not directly accommodated in the 12-point agenda of Baru, the concept of growing local content in the oil and gas industry is paramount to him. This is evident in the corporation’s recent collaboration with Niger Dock Plc where both organisations promised to partner in the areas of engineering, procurement and construction to boost the nation’s economy.
Baru, who was on a working tour of the Niger Dock facility at the Snake Island Integrated Free Trade Zone in Lagos said his visit was part of NNPC’s unflinching commitment to support the development of local content initiatives.
“I am impressed with the span and state-of-the-art technology equipment that I saw. The various lay yards and workshops look good and Niger Dock Plc has promised to execute jobs in the country.
“It is my determination that Niger Dock deserves to be preferentially encouraged to appreciate its contribution to the government’s call for local content. We shall work assiduously towards securing jobs for the company not only to sustain their workforce but also to continue to upgrade their state-of-the-art equipment at all times,” he said.
He commended the foresight of the chairman of the company, Mr Anwar Jarmakani, and the managing director, Manssour Jarmakani, for their vision in acquiring and developing Snake Island assuring of the readiness to always partner with them in contributing to the nation’s economy.
Responding the chairman of the company pledged the preparedness of the company to continue to work with the NNPC and other industry players to grow capacity in the country saying that the company was well equipped to handle all types of engineering, procurement and construction work in the oil and gas Industry.
In another development, Baru reiterated the corporation’s commitment to comply with the nation’s local content laws.
He stated this while speaking at the 2016 Oil Industry Achievement Awards & Dinner organized by the Petroleum Technology Association of Nigeria (PETAN) in Lagos, recently.
Delivering a paper on the theme: “Local Content Compliance in an Extended Low Oil Price Environment,” Baru observed that over the years, NNPC has been at the forefront of championing local content even before the enactment of the Local Act in 2010.
“In our determination to maximize participation of Nigerians in our projects and domicile project activities in-country, we in the NNPC have been implementing the Nigerian Content Policy as enshrined in the Nigerian Oil and Gas Industry Content Development (NOGICD) Act even before the enactment of the act in 2010,” he said.
According to the GMD, as early as 2005, NNPC was deeply concerned with the low level of Nigerian content in-country, despite the nation’s almost fifty (50) years of oil industry experience.
“That was why we called for a fresh approach to domesticating oil and gas industry spend through the establishment of the Nigerian Content Division (NCD) with the aim of implementing key national content initiatives,” he added.
Some of these key local content initiatives, Baru added include the promotion of local manufacturing of steel plates and pipes as well as the development of engineering design expertise among Nigerian engineers.
He thus enjoined NNPC staff to remain focused and ensure efficiency, transparency and excellent service delivery to customers.
On his part the NGA president thanked the NNPC and Baru for the unflinching support they have been giving the association and pledged the readiness of members to work with the NNPC in this regard.
Osunsanya called on government to create incentives which would promote deliberate and well-funded projects in the search for gas as against the practice of accidental gas discoveries.
Baru in a bid to improve relationship with stakeholders in the all important Liquefied Petroleum Gas (LPG) pledged the support of the NNPC to help the Nigerian Gas Association (NGA) achieve its objectives of ensuring that the country derived maximum benefit from its huge gas resource base.
Speaking while receiving the NGA delegation led by its president, Mr Bolaji Osunsanya, at the NNPC Towers Abuja, he noted that as the midwife of the nation’s premier gas association in 1999, the NNPC has a moral and strategic interest in ensuring the continuous existence and sustained growth of the association.
Describing the NGA as a reflection of the development of the gas industry in Nigeria the GMD said the corporation would continue to provide the association with human and material resources.
Potentials in Gas Sector Investment
While delivering a key note address at the Nigerian Gas Association (NGA) 10th International Conference and Exhibition in Abuja, the GMD unveiled the investment potentials in the sector.
He revealed that about $51 billion investment opportunities currently exist in the midstream and downstream gas sector to achieve the growth phase in the Industry in Nigeria.
Speaking while delivering paper titled: “New Growth Phase for Gas Business in Nigeria,” Baru posited that about $35.4 billion investment would be required in the gas exploration and production activities, power plants projects, fertilizer plants, virtual pipelines and flare gas commercialization initiatives.
The GMD added that $16 billion investment would also be needed in the free trade zones (FTZ) infrastructure development and concessioning, port infrastructure, central gas processing facilities, gas transmission, LPG plants, real estate development, pipe milling and local general fabrication yards among others.
He stated that some of the key enablers that would be required for the growth of the gas sector include clear definition of boundaries between upstream, midstream and downstream sectors, appropriate pricing structure and guarantees for payment, host communities engagement and conducive environment for investors.
“Beyond growing gas for power sector, there has been a strategic positioning of the sector to support massive gas based industrialization. The intent is to position Nigeria as a regional hub for gas based industries such as fertilizer, methanol, petrochemicals, central processing facilities, etc. The first of this effort is the planned 30 square kilometer gas based industrial park in Delta State. This will be Africa’s largest purpose built gas park supporting gas based industries,” he said.
According to him, to bridge the huge gas supply gap, some strategic synergy opportunities for gas development were identified amongst the joint ventures (JVs), production sharing contracts (PSCs) and independent operators which when pursued and implemented would not only bridge the unforeseen long-term shortfall in gas supply but would also enable the nation to meet its gas aspiration.
The NNPC helmsman noted that seven key gas development projects had been identified from the strategic synergy opportunities to deliver about 3.4 billion cubic feet of gas per day to bridge the foreseen medium-term supply gap by 2020.
Another bold initiative of Baru’s administration is the appointment and redeployment of top management staff across board in a major exercise said to reflect operational realities and ensure sustained performance and profitability.
According to the GMD, the changes were informed by the desire to consolidate on the restructuring exercise through realigning jobs with requisite competences and experiences in line with international best practices while taking deliberate measures to ensure fairness and equity as well as the capacity to deliver.
NNPC Begins Oil Exploration In Gongola Basin
The Nigerian National Petroleum Corporation (NNPC) said it had commenced exploration activities in the Gongola Basin as part of its efforts to further expand the nation’s oil resource base.
The group managing director of NNPC, Dr. Maikanti Baru, disclosed this on Thursday, January 5, 2017 while hosting the management of Media Trust Ltd which had visited him at the Corporation’s headquarters in Abuja.
Speaking on recent developments since he assumed office in July 2016, Dr Baru said, “Aside increasing the nation’s oil and gas reserves to 37 billion barrels of oil and 192 trillion cubic feet of gas respectively, the Corporation has also commenced exploratory activities in the Gongola Basin with the aim of further growing oil and gas reserves and taking advantage of low oil prices which make inland exploration cost effective.”
Baru further explained that NNPC now runs as a FACTI-based corporation (Focused, Accountable, Competitive and Transparent organisation conducting its business with Integrity).
He said the new wave of openness and transparency attributable to the Corporation’s monthly operational and financial reports, which are always in the public sphere, had earned the NNPC accolades from Nigerians.
“With the consistent release of our monthly financial and operational reports, the Nigerian Extractive Industries and Transparency Initiative (NEITI) recently commended us for embracing openness, subjecting our activities to greater public scrutiny and providing real-time information about the state of the nation’s oil and gas sector,” he said.
In another development, the NNPC boss stated that, as part of efforts to find a lasting solution to the perennial problem of pipeline vandalisation and sundry security challenges bedeviling the oil and gas industry, the NNPC had outlined plans to establish a security advisory council.
According him, the Corporation needed to evolve new measures to bring an end to pipeline vandalisation which, he said, is a major threat to the nation’s economy.
According to him, the proposed security advisory council would involve critical stakeholders including security agencies, Niger Delta leaders and international oil companies, and would address all security and host community agitations.
“We want to passionately appeal to those behind indiscriminate acts of infrastructure vandalism to put an end forthwith to these despicable acts which are a great threat to the economy, the eco-system and energy security of the country,” he said.
Baru Opens New Investment Opportunity As NNPC Exits Cash Call Agreement
By FESTUS OKOROMADU, Abuja
The upstream petroleum sector, which hitherto recorded low investment in recent years, has received a boost with the signing of cash-call exit agreement between the Nigerian National Petroleum Corporation (NNPC) and its Joint Venture partners.
The development, according to experts, is expected bring about upbeat in the operational activities of the sector.
The signing ceremony was graced by the captains of the oil and gas industry including the Minister of State for Petroleum, Dr. Ibe Kachikwu, the Group Managing Director of NNPC, Dr. Maikanti Baru and chief executives of International Oil Companies (IOCs) at the NNPC Towers in Abuja on Thursday, December 16, 2016.
Under the new arrangement, which came into effect following the signing of the agreement between the NNPC and the IOCs Joint Venture Partners, the entire NNPC equity oil and gas revenues are now to be paid directly into the Federation Account.
With the arrangement coming into operation, the federal government will continue to receive royalties, taxies and profit from its equity share of JV oil and gas production while the cost of operation is deducted upfront.
The agreement provides that the outstanding cash call arrears will be repaid within a period of five years through incremental production revenues without impacting the established based production revenue.
Hitherto, competition from other appropriated items of expenditure in the federal government’s budget has always limited the deduction of technical cost required to fund the cash calls on monthly basis.
It is expected that execution of this agreement would end the long standing cash call challenges that have impacted the Nigerian oil and gas industry over the years.
Speaking at the event, Dr. Ibe Kachikwu stated that the consensus in the industry is that with the signing of agreements to exit cash calls, investments would soon flow into the Nigerian oil and gas industry.
The Minister said if the industry focused on key issues that impede the industry and resolve them, Nigerian oil and gas industry would soon be able to compete favourably with its peers across the world.
He said, “This event is significant because it has taken us to a point where we can compete with our colleagues all over world. We have dealt with the downstream, and this is probably the most important item in the upstream and that is obvious we will begin to go into the policy measures and infrastructural development and the rest after the signing ceremony”.
In his remark at the event, the NNPC GMD, Dr. Maikanti Baru, stated that a lot of work went into the signing ceremony of the cash call exit agreement, saying that the Buhari Administration should be commended for mustering the desired political will to resolve the challenge.
Baru also explained that the signing of the exit cash call agreements comprises three components which are: the process of settling the pre-2016 cash call areas; the process of sustaining the cash call payment from 2017; and agreement and settlement over performance in 2016.
The NNPC GMD also commended the contribution of the Hon. Minister of State for Petroleum, Dr. Ibe Kachikwu, for his contribution to exit cash calls in the industry.
Baru added that Kachikwu offered necessary supports to put the framework of the agreement in place as well as energise the process when naughty issues capable of derailing the negotiations aroused.
Also speaking during the signing ceremony, Chairman of Oil Producers Trade Section of the Lagos Chamber of Commerce and Industry, who is also the Chairman and Managing Director of Chevron Nigeria Limited, Mr. Clay Neff, said the signing ceremony represents a milestone in the oil and gas industry in Nigeria.
Neff expressed optimism that the agreement would stabilize and also increase upstream production over time, saying that the repayment of the arrears in a sustainable manner is a key factor to additional investment in the upstream sector in Nigeria.