Is NNPC beginning to think like business?

Going by the soundbites coming from the state oil company, the Nigerian National Petroleum Corporation, it seems that they are finally moving towards where other renowned state oil firms have since moved – think like a business entity. And they are doing so from every facets.

There may be reason for some to believe that these latest pronouncements may not be too different from mantras branded in the past but for benefit of doubt, they are worth a second look.

First, they are thinking of reserve additions and increased production output. Maikanti Baru, Group Managing Director of NNPC, in his keynote address, “NNPC’s Commercial Strategy and Priorities” at the recently held 2017 edition of the Nigeria Oil and Gas Conference and Exhibition in Abuja, said everything was being done to achieve the target reserve growth as well as increase national crude oil production to 3million barrels per day from the current 2.2 million barrels per day.

To achieve the reserves addition, the corporation is hoping to 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 the production output, the NNPC wants to grow the output of its subsidiary, the Nigerian Petroleum Development Company (NPDC), by 500,000 barrels per day by 2020 and its gas production to 1500mmscf per day within the same period.

Gas resource optimization

Part of the GMD’s presentation dwelt on plans to ensure optimal utilization of the country’s gas resources within the next couple of years beginning with engaging all stakeholders on the need to reduce the level of gas flare by converting most of the flared volumes to ensure commerciality of the gas resources.

Baru said there were ongoing efforts 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 industrialization. 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.

3-year target to transit to IJV

Going by the corporation’s recent activity update, it has initiated processes for its existing oil production joint ventures (JV) to transit into the Incorporated Joint Venture (IJV) within three years.

Part of the processes it had initiated processes include the restructuring of its Exploration and Production (E&P) arm, the Nigerian Petroleum Development Company (NPDC) and payment of outstanding cash call debts to joint venture partners in preparation for the transition of the JVs into IJV.

The Federal Government in December 2016 announced its exit of joint venture cash calls arrangements it had with international oil companies operating in Nigeria, thus allowing the NNPC and operators raise money for their operations outside of the government’s budgets and controls.

Meanwhile, Mohammed Barkindo, Secretary-General of OPEC, Mohammed Barkindo, during his visit to Nigeria lauded the Federal Government for exiting the joint venture cash call agreement it had with international oil companies. According to him, successive governments had tried to end the cash call regime but could not despite the financial burden that it had on Nigeria as well as the country’s inability to meet up with the demands of the agreement.

By FRANK UZUEGBUNAM