JUST IN: How Dangote, Elumelu back NNPC at NUIMS AVAR workshop

By Eyo Nsima

The Chairman of Dangote Group, Aliko Dangote and the Chairman of Heirs Holding, Tony Elumelu, have given tremendous backing to the Nigerian National Petroleum Company Ltd (NNPCL) in the post-Petroleum Industry Act (PIA) regime.

Speaking at the ongoing 2023 Upstream Investment Management Services Ltd (NUIMS) Annual Value Assurance Review (AVAR) Workshop which has “Consolidating for Growth in PIA Era” as its theme, Dangote, said: “I truly believe that NNPC should be our African Aramco. You have what it takes to take you up there and I am very happy. There is nothing that is impossible. You can make it possible and don’t let anything scare you. It is just the same thing with us.

“If I tell you about our own story, you will be shocked as to how. It wasn’t only the refinery that we started about six years ago. We had 32 projects that we all rolled out at the same time.

“But then, on the way we had lots of hitches here and there where the devaluation of the currency, Covid, and challenges of infrastructure set in. If you want to want to do a real project in Nigeria, you have to look at the infrastructure that we have, because the infrastructure we have is not meant for mega projects.

“We need to look at our infrastructure and see how we can take ourselves to the next level and it has to be driven by NNPC because they are the largest conglomerate and whatever happens to NNPCL their assets, it actually happens to us either directly or indirectly.

“Without you doing well, the country cannot do well. As the investment arm of NNPC, NUIMS plays a critical role in managing the Federal Government’s interest in the oil and gas industry – you are a partner in the Joint Venture (JV) assets and the Concessionaire in the Production Sharing Contract (PSC) arrangements.

“As important as its oversight function is, my expectation in this post-PIA era is that NUIMS should pivot from being overly focused on its role as a ‘watchdog’ to acquiring the mindset of an aggressive Investment Manager.”

He said: “Let me quickly illustrate with a personal experience. My businesses in Nigeria require 635 million SCF of gas per day with further additional demand as we expand capacity. No businessman will leave such an opportunity on the table.

“Unfortunately, I hardly get 300 million standard cubic feet, SCF per day and there is no clarity as to when the required gas will become available.

“Nigeria has one of the highest break-even prices globally for extracting oil and gas which results in a long payback period.

“Let’s begin with delivering strong returns, which of course is a function of price and cost. While price in your industry is determined by the market and so clearly outside your control, the same cannot be said about cost. More aggressive cost targets need to be adopted and NUIMS staff rewarded with juicy bonuses if they meet these targets.

“You need to benchmark costs with producers in similar basins and aim to be the lowest amongst your peers. Some existing government policies, as laudable as they may be, also need to be re-evaluated.

“For instance, we need to strike a delicate balance between encouraging local participation in the oil & gas sector and compromising efficiency and cost.”

Similarly, Elumelu, said: “When I listened to the Group CEO speak today, talking about us moving to 2.5 million barrels we challenge him to do more. I believe that it is achievable. From losing 97 per cent of our 50,000 barrels production, interestingly and it will be bad of me to have this platform and not share this here.

“That day, I got a call from the GCEO and I thought he was going to kill me for speaking up, to my greatest surprise, he said to me Tony we are sorry about what is happening, we are doing something about it, it will be corrected.

“They worked as a team and the Board of the NNPC, the FG, the security agencies, and last month our recovery factor was 96 per cent. So GCEO NNPC, you have delivered.

“I speak from experience, a beneficiary and one who cried out before and today standing up today to say we have improved our production and that is what we need to encourage more investments in the industry.”

However, the NNPC Limited GCEO, Mele Kyari, said the challenges facing the oil and gas industry globally have made it compelling for the NNPC to come up with more ingenious ways of doing things.

He said: “The crux of the industry is to make sure the upstream industry works. If the upstream works, there would be cash in the country. We are in a cash crunch in the country today, we are in a forex crunch today because the upstream has not gotten to a level where we can have a surplus to support the economy.

“And the reason is that we have challenges of security, decarbonization issues, energy transition, and the reluctance of financial institutions to lend.

“The practicality of all these is that there is difficulty in having access to capital today and this is very obvious, the whole world is lamenting today and there is an absolute supply gap in gas in the market in the short term and for a while to come and everyone is taking a step backward on what could be done to arrest the situation.

“As a company, NNPC is leading this process, we are required to ensure that production cost is optimum, we have interest in nearly every business in the upstream sector and even in the midstream and our performance determines what happens in the industry. We are in a position to go back to normalcy.

“Production target that we have kept over the years of 2 million barrels is realizable but has remained on the PowerPoint and this is the time to take them off the PowerPoint and resolve the insecurity, investment and financing issues.”

He also said: “We can solve the problem of energy poverty in the country, we can also support the rest of the world particularly West African countries to resolve the energy crisis that we are facing today. We can also help to resolve the issue of food security and by doing this, we will make more money for the country and businesses make more money.

“We will invest in power and we are doing it and we believe that at the end of the day, we will create sufficient power for the country so that industries will spring up everywhere and create that prosperity that we desire.

“We have the best workforce that we have anywhere in the world and we have seen many things that they have done. This means that our short term is real, our short term is achievable and as a company, we will satisfy the requirements of our partners and shareholders.

“Our performance will speak for us and our country and this is what we are focused on doing, we will work with you, we will work with the industry, we will work with our partners, we will work with our shareholders and ultimately, we will deliver value in a short time of three years and this is sufficient to bring all the value on the table.

“We are getting all the support from the security agencies to make sure this works and we are getting maximum cooperation and we will overcome the security challenges and this company will deliver value for all of us.’’