With New Boss, It's Time NNPC Walked the Talk

July 11, 2019

Mele Kolo Kyari is the new group managing director of the the Nigerian National Petroleum Corporation (Photo: NNPC)
Mele Kolo Kyari is the new group managing director of the the Nigerian National Petroleum Corporation (Photo: NNPC)

Nigeria has a new face at the helm of the country’s petroleum industry regulator, and already he has announced ambitious targets for the next five years. Achieving these goals will have to rely partly on how much investment can be attracted to the oil-rich nation’s deep and ultra-deepwater exploration and production operations.

The appointment of Mele Kolo Kyari, a geologist and former Group General Manager, Crude Oil Marketing Division of the Nigerian National Petroleum Corporation (NNPC), comes at a time when the West African nation, currently the largest holder of natural gas reserves in Africa, is grappling with delayed review of the Deep Offshore Amendment Bill by its Senate.

The amendment bill has been lying in the House for a while now with NNPC saying, when passed, it has the potential to generate for Nigeria an estimated $5 billion in revenues annually.

NNPC says the Deep Offshore Act which NNPC provides for a review of fiscal terms “when the price of crude oil had surpassed the $20-barrel mark and production had gone on in those acreages consistently for 15 years.”

“The amendment bill proposes to raise the royalty paid on deep offshore production in order to ensure a higher revenue take for government, adding that no operator could oppose such a move as it was fair going by current market realities,” said Ndu Ughamadu, NNPC’s Group General Manager, Group Public Affairs Division in a statement this week.

Kyari is also aware Nigeria is grappling with the lingering issue of how to effectively proceed with the delayed passage of portions of the delayed Petroleum Industry Bill (PIB), which includes 16 different laws regulating the petroleum sector, and which both the Senate and National Assembly have been seeking to harmonize and update since 2008.

Although a portion of the PIB was passed by both the Senate and National Assembly, it was rejected by President Muhammad Buhari who wants certain clauses in the bill amended such as one that permits the retention of 10% of industry revenues by the proposed Petroleum Regulatory Commission.

A presidential aide said in April that Buhari is concerned the percentage is too high and would likely to be detrimental Nigeria’s drive to ensure more revenue is “available to the federal, states and local governments as well as the Federal Capital Territory".

The National Assembly had previously split the bill into portions including the Petroleum Industry Governance Bill (PIGB), which proposes to change the NNPC into National Petroleum Company (NPC) as a fully commercial integrated entity.

In addition, the PIGB, creates the Nigerian Petroleum Regulatory Commission to replace the Department of Petroleum Resources. The commission will have mandate for petroleum regulation while the Petroleum Products and Pricing Regulatory Agency will now become the National Assets Management Commission.

However, the National Assembly is yet to debate and pass the remaining portions of the PIB, including the Petroleum Industry Fiscal Bill, Host Communities Bill and Administration Bill.

“The failure to pass the PIB has continued to create uncertainties that have delayed billions of dollars in potential investment in this sector,” the US Department of Commerce said in November.

Finding a solution to the delayed PIB is one key issue Kyari is expected give an input alongside other stakeholders and ensure NNPC is not contributing to the return of the back and forth that has characterized the development and passage of the proposed petroleum law in Africa’s largest oil exporter.

Additionally, the new NNPC boss has to weigh in on the unsettled debate in Nigeria on how investors in the country’s deep- and ultra-deepwater oil and gas fields should be better rewarded for their brave decisions of putting their money on harnessing hydrocarbon resources from otherwise challenging, remote and harsh offshore environments.

The oil and gas exploration and production companies, which take the leap of faith to splash their funds not only in the search for the offshore crude oil and natural gas but also in putting up of sustainable offshore production and drilling facilities, expect an investor-friendly PIB with fiscal incentives to entice more exploration and production.

Actually, Kyari has pledged to pursue proposals that would enable Nigeria, known for production of high-value, low-sulfur content crude oil, to increase its daily crude output and reserves to 3 million barrels/day and 40 billion barrels respectively by 2023.

Alongside the planned increasing of daily crude production and reserves is the elusive proposal to cut down in Nigerian petroleum products import bill and revamping the struggling crude oil processing plants.

Categories: Deepwater Africa


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