By Adewole Kehinde
I have been accused by my colleagues that it seems I am on the payroll of the Group Chief Executive Officer of the Nigeria National Petroleum Company Limited, Mallam Mele Kolo Kyari, because of my write-ups on him and the NNPC Limited.
I only had an encounter with him once when he got the Swift Reporters Man of the Year Award, and before then, I had written several articles on him, and I have not stopped writing about him even though I am not on his payroll.
Now straight to business. The Petroleum Industry Act (PIA), the new regulatory framework, appears to have made NNPC realize that it must either improve its performance or face being made to leave.
The Company appears to be aware of the reality that the old methods will not work in the new world.
Being a business-driven organization, it now seems to be bringing down the walls of secrecy surrounding information that tends to paint the corporation in a negative light.
So many people misunderstood the turn-around maintenance of the refinery with the Engineering Procurement and Construction (EPC) Contract. This was a witness with a statement credited to the Governor of Nasarawa State, but I was happy with the response from NNPC Limited: “NNPC Limited wishes to state that the figures stated by the governor were wrong, as the company, which represents the federal government in its efforts to rehabilitate the refineries through an Engineering Procurement and Construction (EPC) Contract with its partners, has spent only its approved counterpart funding, which was clearly stated during the Memorandum of Understanding (MoU) signing for the respective refineries.
“For the records, the cost approved by the federal government for the rehabilitation of the nation’s three refineries is $1.5 billion; $740 million and $548 million for Port Harcourt, Kaduna, and Warri refineries, respectively.
“The two EPC Contractors are Tecnimont (France), which handles the Port Harcourt Refinery rehabilitation, and Daewoo (South Korea), which oversees the quick fix projects at both Kaduna and Warri refineries.
“Under GEJ (Ex-President Goodluck Jonathan), no money was borrowed for Turn-Around Maintenance (TAM), and Under Muhammadu Buhari, only $1 billion was borrowed. Rehabilitation is still ongoing,” it stated.
“Speaking to the context of the accounts under scrutiny (2020 and 2021) before the transition of NNPC to a Limited Liability Company and NAPIMS to NUIMS, NNPC accounts were for NNPC and its subsidiaries, while NAPIMS accounts were in respect of the federation’s interest in the upstream oil and gas industry.
“Thus, the N21.04 trillion assets of NAPIMS were captured from the Audited Financial Statements of NAPIMS, which represent the Federation’s equity share in the 12 JV arrangements in the upstream sector.
“The reported assets of N15.84 trillion in 2020 and N16.2 trillion in 2021 were captured from the then-NNPC AFS and represented NNPC and its subsidiaries-owned assets and excluded the federation’s upstream oil and gas assets managed by NAPIMS and reported in NAPIMS own audited financial statements,” it added.
However, according to NNPC Limited, all federation’s joint venture upstream oil and gas operations previously overseen by the then-NAPIMS have been transferred to NNPC Limited in accordance with the PIA’s terms.
“This means the upstream assets comprising the equities in the JVs are now being managed by NUIMS and will be reported in the books of NNPC Limited, which took effect on July 1, 2022.”
According to the NNPC, it has requested a reconciliation of the finances regarding the allegedly due money to the federation.
“The claims are subject to reconciliation with federal agencies as approved by the presidency. Preliminary investigations show NNPC is owed N4.2 trillion in terms of subsidy and gas-to-power debts. NNPC owes the government N2.8 trillion, thus giving a net figure of N1.3 trillion being owed to NNPC by the federation.”
“Both ongoing projects serve as NNPC’s payment of Company Income Tax (CIT) due from two subsidiaries, and the parent company used them to defray a three-year company income tax liability. Without doing this, most of the federal roads will take 20 years to complete.
“We took advantage of this to make life easy for our tanker drivers. It is not a credit given to us by the FIRS. It’s our tax obligation being used to pay contractors working on the roads. We will keep paying our petroleum profit tax and royalties. This scheme has saved the government variation from contractors owing to the prompt payment within 30 days and saves the federal government funds,” the NOC contended.
NNPC explained that it shut down depots and instituted a build, operate, and transfer system due to ongoing theft on its pipelines, which is why it is working with private depot owners rather than running its own.
It was further stated that the owners of the depots will now construct rival pipelines and take responsibility for their own security. “Any loss recorded will be borne by the private owners. So, in other words, the NNPC is partnering with the private sector to run these depots to reduce government participation.”
“We have recorded profits. In 2020, The company recorded its first profit in 44 years with a profit of N287 billion, up from a loss of N803 billion in 2018 and N1.7 billion in 2019, representing a 12,578.3 percent increase in profit in 2020. Its highest profit level since inception was recorded in 2021 with a N674.1 billion profit, representing a 134.8 percent increase.”
“No dispute has been recorded so far regarding when payments should be made or not. As of today, many of these suppliers are willing to give NNPC products on credit because of our credibility, and with subsidy removal, they are certain NNPC will fulfill its obligation to them.”
Furthermore, it disclosed that N$275 million has been paid and settlement is continuous as the relationship remains that of a willing buyer, willing seller arrangement.
“Reconciliation is carried out, and settlement is paid as and when due,” it stressed.
The Group Chief Executive Officer of the NNPC Ltd., Mele Kyari, had mentioned that the NNPC was liquidating its exposures and rounding off the crude oil swap, apparently owing to the improved production levels.
“This will enable us to buy our gasoline and pay cash to our suppliers. It’s our option to use crude to pay, but the preference is to use cash settlements going forward.
“The current gasoline supply agreement we have has all kinds of flexibilities and options, such as using cash or crude to pay immediately or within and beyond 120 days. They are all willing to engage us as a limited liability company. The NNPC maintained that there were no disputes.
It also dispelled the insinuation that the crude swap is extending. “Petroleum product supply is separate from crude swap. Petroleum product supply is just the importing of products, which can be cash or crude. We will stop that when our refineries start working.
“In crude swap deals, you price your crude and import petrol at a set price, meaning I take product from you, knowing how much my crude is, and I can get the equivalent from you in petrol.
“Crude swap emphasized that there isn’t a price on both sides. But when crude is priced at the correct price and the product is sold to you at the correct price of your product, that isn’t a swap,” the company said in the note.
In response to claims that Chinese contractors abandoned the AKK gas project because the contract amount had increased, NNPC reiterated that the project was initially approved at $2.8 billion.
But it emphasized that after the Chinese declined to fund the project due to the nation’s restrictions on exposure to the outside world, NNPC re-engaged the contractors (OILSERV) to convert the contract from BOT to EPC, leading to a renegotiation of $2.5 billion and saving the nation $300 million.
“Since then, NNPC Limited has been funding contractors with its cash flow to the tune of $1.2 billion. The project and construction work have not stopped for one day. Out of 614 kilometers of pipe to be covered, 460 have been welded so far,” it stressed.
Unlike in the past, when efficiency was compromised by tardiness, Mal Mele Kolo Kyari is focused on delivering his mandate for the NNPC Limited, and the oil and gas industry is no doubt the better for it, while Nigerians are the ultimate beneficiaries.
Adewole Kehinde is an Energy Expert and publisher of Swift Reporters. He can be reached at 08166240846, kennyadewole@gmail.com
