Despite the challenges and harsh operating environment in the global oil and gas sector and in particular Nigeria , it was a year of significant millstone in its quest for better efficiency, transparency, accountability and performance excellence for the Nigerian National Petroleum Company (NNPC) Limited,
Since its existence, the nation’s national oil entity has witnessed many changes and transformation through the decades, but the new Petroleum Industry Act (PIA) has better positioned it for improved performance.
Enabling of passage of Petroleum Industry Act (PIA) was undoubtedly the most profound event in the Nigerian and gas space in the last 20 years. As a national oil company, the NNPC was at the forefront and provided the stimulus for the executive and the legislature to successfully midwife the passage of the Petroleum Industry Bill (PIB) into law (Petroleum Industry Act 2021). The passage of this law is envisaged to foster investment in the industry and delineate responsibilities to the various institutions.
The key objectives of the PIA 2021 are: to establish a commercialized National Oil Company (NNPC Ltd.), to entrench accountability and good governance and to promote the exploration and exploitation of the petroleum resources in Nigeria for the benefit of all Nigerians as well as and foster the sustainable development of the host communities.
The feats achieved by NNPC in the outgoing year includes: Incorporation of NNPC limited under CAMA
The tempo created with the passage and eventual presidential assent of the PIA was sustained with the quick activation of Part V of the new law, which requires the incorporation of a commercial and profit-focused National Oil Company (NOC) within six (6) months of the passage into law.
Thus NNPC Management on behalf of the Federal Government Incorporated the Nigerian National Petroleum Corporation (NNPC) Limited under the Companies and Allied Matters Act.
Under the new arrangement, NNPC Ltd will, on behalf of the Federation, take over assets, interests and liabilities of the Nigerian National Petroleum Corporation (NNPC) and the certificate of incorporation was officially received by the President on the 8th of October 2021.
Entrenchment of Transparency, Accountability and Performance Excellence (TAPE) in NNPC
TAPE is widely promoted as a strategic roadmap for NNPC to attain efficiency and global excellence with a view to placing the Corporation on the path of profitability.
TAPE is also envisaged to transform NNPC and enhance its potential and capacity to compete with other National Oil Companies around the world.
This strategy is designed to make NNPC: more operationally transparent and accountable, benchmark NNPC against established global best practices and established the right cost optimization structure among other derivatives.
Within the period under review, the GMD/CEO NNPC and his Top Management Team continuously monitored 2021 Key Performance Indicators of the various directorates, ensuring profitability, practicability, cost optimization and transparency.
It is worthy to mention, that the drive for efficiency, effectiveness, and accountability within the new NNPC Ltd yielded immediate results with the organisation posting profit for the first time in 44 years.
It is on record that NNPC has also partnered with the Nigeria Extractive Industries Transparency Initiative (NEITI) and others to ensure clarity of purpose in communication with it’s primary stakeholder, Nigerians, through transparency and accountability.
In the same vein, the Extractive Industries Transparency Initiatives (EITI), a multi-stakeholder coalition, that promotes extractives transparency and accountability across the world commended the GMD/CEO of NNPC for his commitment to promoting and deepening the culture of transparency and accountability in the Corporation. This resulted to NNPC being declared as an EITI Partner company.
FID on $3.6 billion methanol plant in Bayelsa
In 2021, NNPC and its partners in the Brass Fertilizer and Petrochemical Company Limited (BFPCL) namely DSV Engineering Limited and Nigerian Content Development and Monitoring Board (NCDMB) took the Final Investment Decision (FID) for the construction of first ever methanol plant in Nigeria at the cost of $3.6 billion.
The plant, an integrated methanol and gas project in Odioma, Brass Island, Bayelsa State, which is scheduled to come into operation in 2024, is expected to produce 10,000tons of methanol daily.
Nigeria currently imports all its methanol needs despite the abundance of gas resources in the country. NNPC bought into a $670 million In Brass Methanol Plant stake in collaboration with the NCDMB.
The facility which would be the largest methanol plant in Africa and the first in Nigeria is expected to create 35,000 direct and indirect jobs and additional 5,000 permanent jobs during the operations phase.
$260 million Funding Agreement for ANOH Gas Processing Company Limited (AGPC).
The year under focus also witnessed the execution of a US$260m Funding Agreement for ANOH Gas Processing Company Limited (AGPC) among the NNPC, Seplat and a consortium of seven banks.
It is envisaged that the gas project will significantly contribute to the realisation of the federal government’s initiatives towards increasing natural gas utilization in the domestic market.
The project will deliver 300 million standard cubic feet of gas per day and 1,200 megawatts of electricity to the domestic market. It would also expand gas infrastructure in Nigeria taking FG’s aspirations to make natural gas the future energy for Nigeria one step further.
Launch of Nigerian Upstream Cost Optimization Programme (NUCOP)
The primary goal of NUCOP is to drive down the cost of crude oil production in the country so as to remain competitive in the global market.
NUCOP is meant to optimise Nigeria’s upstream operation expenses through process enhancement and industry collaboration to mitigate current reality dictated by the global energy transition and demand erosion occasioned by the Covid-19 pandemic, making cost optimization imperative.
Award of $1.5 billion contract for Rehabilitation of Port Harcourt refinery
The long quest for the rehabilitation of the nation’s refinery kicked off with the award of the Engineering, Procurement, and Construction (EPC) contract for the Port Harcourt Refinery, after a competitive and transparent bidding process, to Tecnimont spA of Italy.
In executing this assignment, NNPC also carried out due diligence which consists of a governance structure and tender process that included key independent external stakeholders.
Based on the foregoing, a credible lender, African Export-Import Bank (Afreximbank) was required to raise $1billion towards the rehabilitation project while NNPC would adopt the Operate & Maintain (O&M) Model as a strategy in the execution of the rehabilitation project, which is also one of the key requirements by the lender.
The rehabilitation project which has since kicked -off was largely commended by the visiting Federal House of Representatives Committee on Petroleum Downstream.
Commercialization of OML 143 gas
Also in 2021, NNPC signed a gas development deal with Sterling Oil Exploration and Production Company (SEEPCO) to unlock 1.2Trillion Cubic Feet (TCF) of gas in September 2020. The gas commercialization strategy for OML 143 is in line with the Federal Government’s National Gas Expansion Programme (NGEP).
Gas in the block is processed at the Ashtavinayak Hydrocarbon Limited (AHL) 125 million standard cubic feet (mmscf) Gas Processing Facility that is currently in operations and located in Kwale, Delta State.
The Bouquet of agreements also included the first Gas Development Agreement (GDA) to be executed in Nigeria for development and commercialization of non-associated gas.
The gas supply from the project will raise Nigeria’s gas production profile and will provide dry gas available for a proposed 950 megawatts NNPC/SEEPCO Independent Power Plant, boost the in-country supply of Liquefied Petroleum Gas (LPG) and general domestic gas utilization, increase energy security, and create job opportunities for Nigerians.
Execution of OML 118 (Bonga) Agreements between NNPC and partners
NNPC entered into a suite of agreements with partners (Shell, Total, Exxon and Eni) on OML 118 to pave way for the renewal of the PSC for an additional 20 years.
The deal marked an end to about 15 years of long-standing disputes over the interpretation of the fiscal terms of the production-sharing contract between NNPC and its partners.
This also presents a roadmap for other assets to resolve all ending disputes that have plagued the PSCs. The deal is to yield about $780 million in immediate revenue to government.
It is also projected that more than $10bn of investment would be unlocked because of the agreements.
Shareholder Agreement for Brass Petroleum Product Terminal (BPPT)
NNPC, NCMDB and ZED Energy signed a shareholder agreement for the Brass Petroleum Product Terminal. When completed, the BPPT will help close infrastructure gap in the distribution of petroleum products which will consequently stabilize petroleum product price in the riverine communities of the Niger Delta.
The BPPT will also checkmate illegal refining and create over ten thousand jobs. The terminal will also serve as a strategic reserve for the country and is expected to provide a depot for a 50 million litre facility, two- way product jetty, automated storage and automated bay for Automotive Gas Oil (AGO), Premium Motor Spirit (PMS), Dual Purpose Kerosene (DPK) and Aviation Turbine Kerosene (ATK).
EPC Contract to build Maiduguri Emergency Power Project
NNPC partnered China Machinery Engineering Company (CMEC) and General Electric (GE) to execute Engineering, Procurement Construction (EPC) contract for the procurement of equipment for a 50 MW Emergency Power Project in Maiduguri, Borno State. The project is an integral part of NNPC’s efforts to deepen Nigeria’s domestic gas utilization for the nation’s socio-economic growth. NNPC is also determined to boost in-country power generation and supply via increased investment in gas-fired combined cycle power plants to produce at least 5 Giga Watts additional power for the country.
NNPC posts N287 billon profit
Aside the PIB passage, this arguably, is the biggest landmark achievement for the NNPC. The profit after tax of N287bn was realizable due to the following: aggressive cost cutting measures adopted by the Corporation, cost savings through renegotiation of contracts by up to 30%, improved efficiency through business automation, emphasis on commercially focused investment and non- interference in the management of the corporation’s affairs among other factors . Among the highlights of the 2020 AFS is the Corporation’s
group profit which rose from a loss position of N1.7billion in 2019 to a profit of N287bn in 2020, for the first time in 44 years.
Further highlights of the AFS revealed that while the Corporation’s group financial position increased in total current assets by 18.7% compared to that of 2019, its total current liabilities increased by 11.4% within the same period.
The group’s working capital remained below the line at N4.56trillion in 2020 as against N4.44trillion in 2019, the AFS further revealed. Similarly, the Corporation’s group revenue for the 2020 financial year stood at N3.718trillion as against N4.634trillion in 2019, a decrease that could be attributed to the decline in the production and price of crude oil due to the global impact of the Covid-19 pandemic.
This is the third consecutive year that the NNPC is publishing its AFS, having done so for 2018 and 2019.
Construction/Rehabilitation of 21 Roads under FG’s Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme
The Federal Executive Council (FEC) approved N621.2 billion for NNPC to take over the reconstruction of 21 federal roads across the six geopolitical zones of the country.
The construction and rehabilitation of the selected roads are meant as strategic intervention under the Federal Government Road Infrastructure and Refreshment Tax Credit Scheme.
Sustained supply of petroleum product
To guarantee energy security for Nigerians NNPC leveraged on its existing Direct-Sales-Direct-Purchase (DSDP) product supply arrangement to stop the incessant disruptions of petroleum product supply affecting the country.
