There appears to be no going back on the push by the new Nigerian National Petroleum Company (NNPC) Limited to contend fiercely for oil and gas assets in the country as it evolves into a commercial entity in about two weeks from now.
The Chief Executive of the national oil firm, Mallam Mele Kyari, pointedly told heads of private oil companies yesterday that like them, the NNPC would henceforth go for the best and juiciest assets in the industry.
Speaking on the occasion of the ongoing 21st Nigeria Oil and Gas (NOG) Conference and Exhibition with the theme: “Funding the Nigerian Energy Mix for Sustainable Economic Growth,” Kyari maintained that the mode of operation of the national oil firm would be no different from the private firms.
The NNPC recently blocked the attempt by Seplat Energy to acquire oil assets belonging to Mobil Producing Nigeria Unlimited (MPNU) in a Sale and Purchase Agreement for $1.283 billion, in addition to about $300 million contingent consideration. The transaction encompassed the acquisition of the entire offshore shallow water business of ExxonMobil in Nigeria and was supposed to create one of the largest independent energy companies on both the Nigerian and London Stock Exchanges.
The deal, THISDAY had exclusively reported, among others, was expected to deliver 186 per cent increase in production from 51,000 bpd to 146,000 bpd or 170 per cent increase in 2P liquids reserves, from 241 MMbbl to 650 MMbbl.
It assets included the Qua Iboe Terminal, one of Nigeria’s largest export facilities as well as a 51 per cent interest in Bonny River Terminal and Natural Gas Liquids Recovery Plants at EAP and Oso.
But the federal government turned down the application for ministerial consent necessary to seal the planned $1.3 billion planned deal, citing overriding national interest as one of the reasons for rejecting the deal.
But confirming the new ambitious business-like attitude of the NNPC during the programme, Kyari stated that the NNPC would be very frontal in its moves to acquire as many oil and gas assets as possible with the mind-set to become one of the biggest oil firms in the world.
“What is very fundamental is that the NNPC is set to be the partner of choice. We will be the biggest capitalised company in Africa. We will be the partner that will be focused on the commercial value of every engagement that we do.
“We will be the biggest oil and gas company and therefore there will be no distinction between the NNPC and the rest of the partners that we have in this business.
“And as you (private oil companies) are also acquiring assets, and without mincing words, I am being very frontal, we will acquire the best of assets that is possible in order to build our assets base and also those that we can’t manage for our scale, we will give it to you,” he stated pointedly.
He reiterated that President Muhammadu Buhari would be unveiling the new NNPC Limited on July 19, which according to him meant that the firm would adopt best global practices in its operations.
Currently, the firm is not able to meet its projections, whether in terms of statutory funding for the federation account, oil production quota, petrol supply adequacy or even basic refining capacity.
However, Kyari at the event, boasted that with the evolution into a Companies and Allied Matters Act (CAMA) entity, all the challenges it is currently facing would become a thing of the past.
He said the transition of the NNPC into an entity that would be regulated in line with the provisions of the CAMA would position it as a partner of choice to all oil and gas companies globally.
Kyari added, “On 1st of July, we crossed over to the NNPC Limited both technically and financially on every aspect. Not only that, on the 19th of July, I’m inviting all of you to be present. Mr. president will unveil the NNPC Limited to all of us on the 19th of July, and I’m inviting you.
“The meaning of this to our industry is that you’re going to have the partner of choice, the partner that will support you, the partner that will be the largest capitalised company in Africa. Not only that, a partner that will be born of best practice, of everything that you can think of because we’re going to be a CAMA company. We are going to be another Shell, decision making would be easy, finances will also be easy.
“We are just going to be another Shell or another Waltersmith. And that means, decision-making will be easy. Then, coming back to the theme of this conference, financing will also be easy,” he added.
Furthermore, he said while the energy transition reality was unfolding, there had been a lot of resistance across the globe on the funding of fossil fuels, until the ongoing Ukrainian-Russia war.
Kyari also said with the huge gas reserves in Nigeria, the NNPC Ltd would continue to deepen natural gas utilisation to reduce energy poverty, and boost investment in clean energy technology and products.
“Yes, we are the number three gas producer. We shouldn’t be number three, we should be number one because the number one in asset and reserves should also be number one producer. But you can’t do this except you have the right financing to put in place and all the technology you need to produce the gas,” he added.
He admitted that there had been a decline in the oil industry.
“No one is drilling today except NNPC and a few of our other partners.
“So if you don’t drill and decline continues, you are not only going to see the effect of theft and other challenges we are seeing today, you are also going to see collateral effect of lack of investments.
“And it’s very understandable that no one wants to put their money to produce for somebody to pick it up along the path. That’s very obvious. But more than anything else, the complication actually came before the security challenges,” he argued.
Kyari added: “And therefore, this is the time to reset our financing strategies to make sure that companies and multilateral institutions speak to each other in a manner that ultimately, we are able to put money where it is needed.”
Also speaking, Minister of State, Petroleum Resources, Mr. Timipre Sylva, noted that the PIA was set to provide the necessary reforms designed to strengthen institutions, solidify regulatory and fiscal frameworks, and attract much needed investment in Nigeria.
He posited that the only way to ensure attraction of foreign capital was to have stable laws and a friendly business environment that will guarantee cost recovery as well as a decent return on investment for investors.
“Globally, the oil rich countries are currently having conversations around moving away from fossil fuels to an energy mix dominated by low carbon sources of energy – renewables.
“For us in Nigeria, fossil fuel will always have a share in our energy mix for the foreseeable future, and we will not at this time abandon our fossil fuels. We have however, adopted our vast gas resources across the country as transition fuel,” he said.
Also, the Secretary General of the Organisation of Petroleum Exporting Countries (OPEC), in his speech, opined that for national oil firms to continue to innovate and flourish, it was of utmost importance that they have predictable and unfettered access to investment capital.
“Regular Investment at adequate levels is the lifeblood of our industry,” he contended.
According to him, the industry now faces huge challenges along multiple fronts which threaten investment potential now and in the longer term. “To put it bluntly the oil and gas industry is under siege!” he stated.
He added that the industry was still reeling from the enormous investment losses of recent years, recalling that in a very short time span, the industry had been hit by two major cycles – the severe market downturn in 2015 and 2016, and the even more far-reaching impact of the COVID-19 pandemic.
“Looking further down the road, OPEC’s most recent World Oil Outlook give us some perspective on what is to come. It shows the global oil sector will need cumulative investments of $11.8 trillion in the upstream, midstream and downstream through to 2045 to meet expectations for significant growth in energy demand.
“With regard to demand, there is only one direction, and that is up. In fact, OPEC projects that total primary energy demand will expand by a robust 28 per cent in the period to 2045,” he said.
Earlier, the Minister of Industry, Trade and Investment, Niyi Adebayo, said the government was ready to collaborate with investors to accelerate the diversification of Nigeria’s economy.
He also complained that the recent increase in petrol, diesel and aviation fuel prices had adversely affected businesses in Nigeria.
The minister said the impact of the COVID-19 pandemic and the global energy transition to cleaner energy sources had made it imperative for stakeholders to develop new strategies to aid the sustainable growth of the oil and gas industry.
In his remarks, Chairman Oil Producers Trade Section (OPTS) and Managing Director of Chevron Nigeria Limited, Mr. Rick Kennedy, urged the federal government to improve the ease of doing business in the Nigerian oil and gas industry.
He also advised the government to strive to boost Nigeria’s global competitiveness and ensure that investments in the nation’s oil and gas industry remained attractive.
Kennedy, however, stated that despite the negative impact of the energy transition, it also presents new opportunities for Nigeria to develop its natural resources, particularly the hydrocarbon resources.
Chairman of Independent Petroleum Producers Group (IPPG), Mr. Abdulrasaq Isa, said indigenous oil producers had demonstrated a proven track record of performance and remain best placed to guarantee a steady flow of investments in adding value to the assets divested by the IOCs.
Isa said an aggregate sum of over $20 billion had been spent by IPPG member companies on acquisition and capital expenditures in the last 10 years to grow the assets.
Also, Group Chief Executive Officer of Oando Plc, Mr. Wale Tinubu, in his presentation entitled: “The Dawn of a New Era: Positioning for Success,” said despite the challenges facing the oil and gas industry, particularly in Nigeria, the current landscape of the country provides opportunities for indigenous oil companies.
He said that Nigerian independent oil producers had recorded significant success since their entrance into the upstream sector, saying they have risen from three per cent share of the country’s oil production in 2010 to 15 per cent in 2019 and 30 per cent in 2022.
Tinubu, however, estimated that Nigeria was losing about 20 per cent of its crude oil production to oil thieves and pipeline vandals daily. The News Agency of Nigeria (NAN) reported that Nigeria’s oil production had declined recently at an alarming rate due to the activities of the oil thieves and pipeline vandals.
“We lose almost 20 per cent of our daily crude production to oil thieves and pipeline vandals and 20,000 barrels a day of oil is lost to oil theft.
“Basically some three million barrels on average yearly is lost to oil theft and pipeline vandalism,” he explained.
He said the development had led to reduction in the country’s Gross Domestic Product and degradation of the environment.
He, therefore, called for a collaborative effort between the government and all industry stakeholders to tackle the challenge.
Tinubu said there was a need to deploy sabotage detection technology, on-ground and aerial surveillance as well as community policing which would help to bring the situation under control.