Fellow colleagues, it has been one year since my assumption of office as your Group Managing Director. I want to thank you for the immense support I have received within this period. We have had our highs and lows but your collective support has ensured that our highs overshadow our low moments. Going forward, I enjoin you to double that support as we continue our transformation journey into a commercial and profit-oriented Corporation.
This podcast is principally to appraise the impact of our collective efforts in moving the Corporation forward together, a promise we made at the beginning of my tenure. Specifically, we will review our performance in the implementation of the twelve (12) key Business Focus Areas otherwise known as the “BUFA” initiatives.
1. Staff Welfare
Thus far, in spite of the financial situation of the Corporation, we have consistently paid staff entitlements as and when due. In an era where companies were busy cutting cost through retrenchments, we have not laid off any staff. Instead, we saw the morale of staff increasing by the day which in turn improved our productivity. I must say that I have confidence in NNPC staff to deliver on the mandate of moving the Corporation to greater heights.
Mr. President has magnanimously approved our middle management promotions and very soon the cascade structure will be approved. Once the structure is set, we will call for promotions exercise to fill the vacancies for Deputy Managers (M6) and Managers (M5) accordingly. New recruitments will also be initiated for lower cadre of staff to address the lopsided demographics of the Corporation on the approval of Mr. President.
So far, we have made significant improvement in not only paying the Corporation’s pension contributions regularly, but have also made serious efforts towards closing the inherited pension deficit. Furthermore, Management has approved the monetization of the status car provisions to enable staff to purchase vehicles of their choice.
We know that there are other areas of improvement, especially with respect to provision of a comfortable working environment. I assure you that with the current efforts being advanced by Corporate Services, this issue will soon be a thing of the past.
2. Oil and Gas Infrastructure
▪ We commenced and completed the repair of our critical oil and gas infrastructure which led to the deferment of about 700,000bopd. Specifically, we commenced and completed the repair of the vandalized 36” and 42” QIT Export pipeline leading to restoration of production operations from NNPC/MPN. Current production is about 230kbopd; this is expected to increase to 400kbopd at full ramp-up of production.
▪ Similarly, we completed the repair of the vandalized 48” Forcados Oil Terminal (FOT) Export pipeline leading to resuscitation of about 300kbopd in deferred production.
▪ In terms of gas infrastructure, we also completed repair of the vandalized 20” ELPS-A pipeline thereby ensuring gas supply to our gas-fired power plants and also supply into the West African Gas Pipeline.
3. National Production and Reserve Growth
▪ In 2016, national average daily production stood at 1.83 Million barrels of oil and condensate. Currently, Year-To-Date 2017 average production hovers around 1.88 Million barrels. This is expected to increase and surpass the 2017 national daily target of 2.2 Million barrels of oil and condensate per day with improvement in security and resumption of production operations on the Forcados Oil Terminal (FOT) and Qua Iboe Terminal (QIT) pipelines. In fact, we have attained a record peak production of 2.3 million barrels per day on 28th June, 2017. It is important to note however that, to meet the average 2.2 Million barrels of oil and condensate per day, we need to increase our production levels to 2.4 Million barrels per day of oil and condensate for the rest of the year.
▪ In October 2016, the Owowo Field was discovered in deepwater OML 139 following the sustained exploration efforts of our Contractor - ExxonMobil and other PSC Partners. The current estimated reserve is 1 billion barrels of crude oil added. Fortunately, the Owowo Field is located near the producing ExxonMobil-operated Usan Field which could allow for a tie-back to the Usan FPSO for early production.
▪ For the upstream, cost reduction and efficiency are key features that we will pay attention to. Therefore, focal points for efficiency in each SBU and CSU will be identified to liaise with the Efficiency Unit in Transformation office to ensure that the key performance indicators enshrined in the 2017 budget are realized, especially the attainment of the 6-month contracting cycle.
4. JV Funding
▪ The repayment Agreement for JV cash call arrears has been negotiated and executed for arrears up to end 2015 all the IOC Partners in our JVCs. Repayment will be based on incremental production. For 2016 JV Cashcall shortfall, $400 Million has been paid to JV Partners as a bullet payment in April, 2017 with the balance to be paid in twelve (12) monthly installments. This has rekindled the confidence of our JV partners in pursuing new projects and thus enabling the transition into the self-funding model for Cash-calls with them within the next 12months.
▪ We have equally concluded the novel financing structure with Schlumberger for the NNPC/First E&P JV to fund the Anyala and Madu Field Development Project which is expected to deliver a peak production of 50kbopd and 120MMscfd by 2019.
▪ This closely followed the Financing of the NNPC/CNL JV of Project Cheata that was oversubscribed and won an International Award for innovative financing arrangements in 2016 and the closing of financing of the NNPC/SPDC/Total/NOAC JV as well as another NNPC/CNL JV third party financing.
▪ In our drive to save costs, we have renegotiated Upstream Contracts and obtained discounts of over $2 billion from the various service providers to stem the high production costs.
▪ We have also lowered the operating costs from $27/barrel to $22/barrel.
5. NPDC Growth
▪ During the period, we have ensured the cancellation of all non-performing agreements as well as pursuing all outstanding payments to Government.
▪ Within the last one year, we have also moved NPDC production from a constrained 15,000bopd to the current peak-operated volume of 210,000 bopd in June 2017 due to the return of the FOT.
▪ In addition, the ownership of OML 13 has been restored to NPDC following Presidential intervention and first oil is expected before the end of this year.
▪ NPDC still remains the largest supplier of gas to the domestic market with an average of 550 MMscfd supply. Some key projects completed during the period include:
o Utorogu NAG -2 Plant with 150MMscfd capacity added
o Oredo EPF-2 Gas Plant with 100MMscfd Capacity added
o Odidi Re-entry Project with 40MMscfd Capacity added
6. Gas Sector
▪ We have significantly increased gas supply to power plants and industries in Nigeria with the following accomplishments:
o Completion of the repairs of the vandalized 20” ELPS-A pipeline on 11th August, 2016 thereby ramping up Chevron Escravos Gas plant supply from nil to 250MMscfd. Also, we completed the repairs of the vandalized Chevron offshore gas pipeline on 11th February, 2017 thereby ramping up Chevron gas supply to 430MMscfd.
o The completion of the repairs of the vandalized 48” FOT export gas pipeline on 1st June, 2017 has reactivated all gas plants that were shut down which include; Oredo Gas Plant, Sapele Gas Plant, Ovade Gas Plant, Oben and NGC Gas Compressors. We also addressed the issue of condensate evacuation that had restricted the ramping up of gas supply from Oben, Utorogu and Ughelli gas plants.
o We have commissioned NPDC’s Utorogu NAG 2 and Oredo EPF 2 gas plants.
▪ The result of these efforts is a major growth in domestic gas supply particularly in the last few months. Domestic gas supply has increased from an average of 700MMscfd in July 2016 to an average of 1,220MMscfd currently, with about 75% of the volume supplied to thermal power plants. A lot of GENCOs are rejecting gas due to the inability of TCN to wheel-out the power generated.
▪ We have made significant progress in the Seven (7) Critical Gas Supply Development Projects with approval of the consultants to support the project.
o Gas Supply/Infrastructure developments are critical focus areas in the on-going NNPC’s 12 Key Business Focus Areas to grow the industry. These projects are expected to deliver additional 3.5bscfd of gas to the domestic market by 2020
o Our plan is to expedite the implementation of these projects and commence the projects before the end of this year so as to achieve our objective of bridging the medium term shortfall by 2020.
The successful implementation of these seven (7) identified Critical Gas Supply Development Projects will enable us achieve our aspiration of stimulating unprecedented economic growth through gas with strategic focus on growing gas supply to support the power sector, stimulate gas-based industrialization and selectively expand our export footprint.
7. Frontier Exploration
We have since moved into the Benue Trough and commenced exploration efforts in earnest. Significant seismic data acquisition is ongoing using IDSL and her partners in pursuit of Federal Government’s desire to grow its reserves base with drilling activities expected to commence in Q4, 2017. We are working with the Security Agencies for an early return to the Chad Basin. Drilling activities will be a priority on resumption while continuing with seismic data acquisition with improved parameters.
In the downstream sector, we have stabilized the market with sufficient products availability across the country through our modest refining efforts and the DSDP scheme which has saved the nation about =N=40Billion in 2017. We have also commenced the resuscitation of our products transportation pipelines network, thus enabling us move products to depots at faster rate and cheaper distribution costs to consumers. The Aba, Mosimi, Atlas-Cove and Kano Depots have all been re-commissioned and are currently receiving products, thereby enhancing product availability across the country.
Furthermore, we have made significant efforts in debt recoveries from traders who owed the Corporation large sums through reconciliations, payments or set offs where necessary and have reviewed our credit policies to protect our revenues. Equally, we have applied appropriate sanctions to erring members of staff who colluded with third-parties and or engaged in malpractices as part of our resolve to institutionalize consequence management culture in the conduct of our operations going forward.
9. Refineries and Petrochemicals
We have significantly improved the utilization of our domestic refineries which should primarily supply over 50% of the non-gasoline white products to the nation including Diesel and Kerosene which are critical to the Nigerian Economy. Through the resolute efforts of our Refineries and Petrochemicals Directorate, the Corporation was able to achieve, for the first time in nearly over a decade, a peak monthly capacity utilization of over 37% in January 2017 from a historical average performance of less than 15%. Also, for over seven years of dormancy, the Asphalt Blowing Unit in KRPC has been resuscitated and asphalt is now produced to meet the needs of the road construction industry. Efforts are currently ongoing to secure 3rd party financing to fully revamp the Refineries to their full operational capacities.
Our modest collective efforts have equally not gone unrecognized by the public with quite a number of awards including: The 2016 Phillips Consulting/Webjurists award for the best Website and Social Media Platforms amongst Federal Government Parastatals; PETAN award at the 2017 OTC in recognition of our “aggressive exploration campaign in the Benue Trough and Chad Basin; 2017 PENGASSAN award for our contribution towards labour and industrial harmony, amongst others.
In conclusion, it is imperative for me to once again appreciate your hard work, dedication, commitment loyalty and support and most especially the cooperation from the two in-house Unions (NUPENG and PENGASSAN) in getting us this far. I look forward to your continued cooperation and support as we navigate the Corporation out of its current challenges towards profitability with integrity and transparency.
I thank you all and God Bless.
Dr. Maikanti Kacalla Baru, FNSE
Group Managing Director, Nigerian National Petroleum Corporation
(Abuja: 4th July, 2017)