The Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPC), Mallam Mele Kyari yesterday disclosed that working with the Board, management and staff of the company, his target is to make the entity be among the top 50 among the Fortune 500 Companies in three years.
The NNPC Limited on Tuesday officially transitioned into a private entity that is now regulated in line with the provisions of the Companies and Allied Matters Act (CAMA).
Speaking on Arise News Channel, THISDAY’s broadcast arm yesterday, the GCEO explained that with the huge assets available to the company and the new corporate culture of profit orientation, NNPCL would soon become the toast of the entire continent.
Fortune 500 refers to a list of 500 of the largest companies compiled by Fortune magazine, United States, every year wherein companies are ranked by their annual revenues for their respective fiscal years.
The list includes both public and private companies using publicly available revenue data. According to him, the target would be achievable in the near term.
While admitting that because of the mode of operation of the company in the past, Nigerians had lost faith in it, Kyari stated thathenceforth the company has no room for excuses not to deliver on its mandate as a commercial venture.
“We have to deliver together and we are ready to deliver. We know our shareholders, the 200 million Nigerians are doubtful, but we need to surprise them because we know that there is a new expectation and this expectation can be met and this will be led by culture change.
“Before, you could lose money and nothing will happen, government could always pay, but the law now says we have no recourse to public funds, it will be a commercial relationship… and we have no room for excuses,” he assured.
Kyari pointed out that the net assets of the new company remain a major factor working in its favour, stressing that its upstream assets alone could be worth between $80-$90 billion.
“The meaning of this is that the NNPC will clearly not be below 150 (currently) in the Fortune 500 companies and I can tell you this upfront: Our target is that by sheer act of doing things right, we are getting into a business, delivering value and investing appropriately and within three to four years’ time, we should be counting ourselves among the first 50 in the Fortune 500 companies,” he boasted.
He disputed insinuations that the NNPC was presently in a, ‘deep financial hole,’ insisting that no company declares profit when its finances are in trouble like the NNPC did last year.
He added that although Nigerians were losing faith in the NNPC as a corporation, the company would shock doubters by its new mode of adopting global best practices in its operation.
“Things have changed and that change is now being amplified because we have an enabling legislation and we are bound by a new set of rules under the Companies and Allied Matters Act (CAMA),” he noted.
Stating that the oil and gas industry remains a very profitable one and that the company was willing to scale up its value, he lamented that oil firms less than half of NNPCL’s assets were making more profit.
“We are going to be IPO ready by the middle of next year,” he reiterated, insisting that the company’s processes will henceforth be world class, reducing wastes as well as paying more taxes to the government.
Already the largest company in Africa, Kyari noted that Nigerians will be proud of the new NNPC in years to come, with a clear deviation from the way it operated in the past.
In the coming years, he stated that the company would have private equity, explaining that this would mature in the next 11 months, culminating in a mixed ownership of its shares.
“We are not in the rank of companies which will be talking about N287 billion (its profit in 2020). We felt very little doing that last year, but we also know we are coming from a past. It’s a process and it will be scaled up,” he added.
On subsidy, he reiterated that it would no longer be a burden to the NNPC like it was in the last, explaining that it would not affect the company’s bottom line as the oil firm would henceforth charge a fee for providing such service to the government.
He noted that the ministry of petroleum incorporated and the ministry of finance incorporated currently hold the shares of the company on behalf of over 200 million Nigerians.
On the contention that the states and local governments are not currently represented on the board of the NNPCL since it’s a federation asset, Kyari stated that the National Assembly which made the law clearly represents every Nigerian.
NNPC: Why Refineries May Not Operate at 100% Capacity After Rehabilitation
Meanwhile, the NNPC has said it may not be possible for the Port Harcourt, Warrri and Kaduna oil refineries to function at their full capacities when they come back on stream after rehabilitation.
The Group Chief Financial Officer (Group CFO) of NNPC, Umar Ajiya, who also spoke on Arise News Channel, noted however, that they would operate at about 80 to 85 per cent nameplate capacity because they constructed roughly 30 years ago.
Ajiya disclosed that work on the Warri refinery would likely start next week, noting that the newly adopted model would ensure that the right thing was done so that lenders on the project can be paid back as soon as possible.
According to Ajiya, the NNPC decided to repair the assets because it would endanger its objective of ensuring energy security for the nation without some level of operation in the downstream.
“As envisaged in the Petroleum Industry Act (PIA), we have to ensure energy security for the country. To that extent, we cannot run away from the refineries. We have to rehabilitate them.
“But what is changing is that the refineries are going to be rehabilitated with a combination of our own equity and lenders’ money and no lender will lend you money unless they know the money will come out after the rehabilitation.
“But on top of that, the lenders have also insisted that there has to be O&M contractors supervising the operation of the refineries day in day out. So, rehabilitation is ongoing. Port Harcourt is ongoing, Warri is about to commence any moment, probably next week,” he disclosed.
The CFO argued that if the nation were to build new refineries, they would cost too much, maintaining that the rehabilitation undertaken by the NNPC remains the best in the circumstance.
“So, we have that intention to make sure these refineries come back. New refineries are very expensive. You are talking about $3 billion to $5 billion, but the rehabilitation is costing $1 billion and Warri is less than $500 million.
“These refineries will be rehabilitated but they cannot operate at 100 per cent nameplate capacity. They were constructed almost 30 years ago, so you will expect that when they are fully rehabilitated, they will deliver between 80 per cent to 85 per cent capacity.
“However, these same refineries that are being rehabilitated are going to deliver value to not only the shareholders but to lenders who have put money on the table. So, we don’t see any issue because irrespective of whether you rehabilitate or not, you have to do the regular maintenance needed for any plant, whether annual or biannual,” he stated.
He said some other commercialised government businesses failed in the last because in those circumstances, the code of corporate governance was not institutionalised, adding that even after privatisation, government still controlled majority holding.
For him, in the short to mid-term, the NNPCL will require private funding so that all control mechanisms will be fully activated.
“That’s why in the PIA, the law envisages that we should go public. When you bring private equity participants, they will ensure that the code of conduct works and that if the board is not performing, its easy to fire them and if management is not doing its work, it will be fired by the board,” he added.
Meanwhile, the Nigeria Extractive Industries Transparency Initiative (NEITI) has welcomed with high expectation the transition of the NNPC to an independent limited liability company.
NEITI, in a statement released in Abuja, said that the transition was in line with the recommendations of NEITI industry reports for the oil and gas sector covering 1999 to 2019 which equally led to the emergence of the PIA 2021.
“In the NEITI oil and gas reports that covered 1999 – 2019, NEITI has consistently recommended that Nigeria’s national oil company should be privatised to make it competitive like other national oil companies across the globe,” it stated.
NEITI’s Executive Secretary, Dr. Ogbonnaya Orji expressed hope that with the transition to a commercial entity, the NNPC is now in a better position to compete favourably with leading international oil companies around the world.
“Nigeria needs a business oriented NNPC to deliver the country’s energy needs, energy transition, energy security, diversification of its economy and the building of a sustainable energy future for the country”, Orji noted.
He further explained that the immediate challenges that the new NNPC needs to tackle is to free Nigeria from fuel importation.
“The immediate questions that an average Nigerian is asking are: What is likely to change from the NNPC we know and the new NNPC Limited? What will happen to jobs, institutions, profit making, transparency and accountability?” Orji stressed.