NNPCL signals capacity to guarantee Nigeria’s energy security

By Innocent Obasi

Three months after it transitioned from a state-owned behemoth to a private company regulated by the provisions of the Companies and Allied Matters Act, the Nigerian National Petroleum Company Limited (NNPCL) seems to be signalling its readiness to utilize its mandate to guarantee Nigeria‘s national energy security.

These signals come by way of the bold moves made by the national oil company since it was unveiled by President Muhammadu Buhari in July.

The new NNPCL, successor to the 45–year–old Nigerian National Petroleum Corporation (NNPC), was unveiled on 19th July, 2022, 18 days after the president authorised the transfer of assets from Nigerian National Petroleum Corporation to NNPCL.

President Buhari, speaking shortly before the unveiling, said “NNPC Limited will operate as a commercial, independent, and viable national oil company at par with its pairs around the world to sustainably deliver value to its over 200 million shareholders and the global energy community”.

The new structure, according to the president, signalled a new era of transparency, accountability, and energy security for the nation. He also noted that the NNPCL would be exempt from government funding and other restrictions like the Treasury Single Account and procurement bureaucracies under the new dispensation.

“We are transforming our petroleum industry, to strengthen its capacity and market relevance for the present and future global energy priorities,“ he said.

Timipre Sylva, minister of state for Petroleum Resources, noted that the change from NNPC Group to NNPC Limited, in accordance with the Petroleum Industry Act (PIA) 2021, would attract more investment opportunities in the oil and gas sector, which would increase the country’s gross domestic product.

Sylva said the PIA has provided Nigeria a golden opportunity to improve its institutions, enhance its physical and legal frameworks, and attract the much-needed investments for the oil and gas sector.

“Some of the golden opportunities presented by the reforms are coming at a time when the global energy convention is moving towards gas as a cleaner fuel,“ he said.

Mele Kyari, group CEO of NNPC Ltd, said with the official unveiling, NNPCL is better positioned to lead Africa in the effort to transition to a more sustainable form of energy.

Kyari explained that the national oil company would take the lead in the gradual transition to renewable energy by using natural gas to develop low-carbon substitutes. This might potentially affect the way people think about energy in their homes and throughout the world, he said.

Since then, the new entity has undertaken actions that appear to demonstrate a clear understanding of its new mandate and its readiness to pursue that mandate to a logical conclusion.

Boost to cooking gas access

The Nigerian National Petroleum Company Limited (NNPCL) is targeting to increase its supply of liquefied petroleum gas (LPG), commonly known as cooking gas, in the country by 194 percent to 5 million metric tonnes, from 1.7mmt it supplied in 2021 and is looking to leverage India’s successful LPG models and advancements in the last 10 years.

At a summit in Abuja in September titled “Energizing the Future: Leveraging the India Experience to Achieve Nigerian National LPG Aspirations”, Kyari disclosed that NNPCL plans to set up a gas-funding company that will facilitate supply of 20 million cylinders of LPG into the Nigerian market in the next five years.

The new unit, known as Gas Funding Company Limited, will be entirely dedicated to LPG business and will commercially drive national cooking gas penetration, Kyari said.

In order to complete the project, Kyari said NNPC Limited will collaborate with other parties, including the Office of the Vice President. He also noted that the company is in a position to set up 740 LPG micro-distribution centres, 37 filling plants, and skids in its 541 stations over the course of the next three years.

The NNPCL group CEO pointed out that Nigeria had identified its abundant gas resources as the key to an energy transition, which guided both her commitment to achieving net zero emissions by the year 2060 and the declaration of 2021 to 2030 as “the Decade of Gas”.

“NNPC Limited is an energy company with new investments in gas, power, and renewables. Key pipeline projects such as ELPS I1, OB3 and AKK to deliver a total of 6.2 billion cubic feet of gas per day to demand nodes across the country are at various stages of completion,” he said.

Acquisition of OVH Energy 

Earlier this month, Kyari announced that NNPCL has acquired OVH Energy Marketing (OVH) Limited, a major downstream player in the Nigerian oil and gas industry, in a landmark deal that is in line with the company’s mandate to guarantee the security of Nigeria’s national energy.

With the acquisition, tagged ‘Acquisition for Growth’ by NNPCL, OVH Energy’s Oando-branded retail service stations will be rebranded to the NNPC brand and merged with NNPC Retail Limited with full integration scheduled to take place by the end of 2023.

Kyari said the strategic move is aimed to create the leading downstream energy company in Nigeria and West Africa, driven by operational efficiency, best-in-class management, and physical infrastructure while offering premium petroleum products and related services to customers, in line with global standards.

He said through the acquisition, NNPC Retail Limited will build on the existing success of OVH Energy and operate model service outlets leveraging OVH’s extensive asset base and commercial capabilities.

He said securing the country against energy poverty would mean access to petroleum products in addition to managing the energy transition, which he said has become a reality.
“There’s no way you can do this except you have a robust system and processes, except you have a network that will work and you have an institution that can deliver value to its shareholders. We have struggled with this for many years, and we saw the opportunity to latch on to the competencies of the OVH Group. We have worked with them. They were our partners and our customers. So, we know their ability,” Kyari said.

Margary Okadigbo, NNPCL Board chairman, said that the acquisition of OVH’s downstream assets would put NNPCL in a position to become Africa’s largest downstream business.

She said the NNPC would now have a reception jetty (ASPM) with a capacity of 240,000MT per month, eight LPG plants, three lubes blending plants, three aviation depots, and 12 warehouses as a result of this partnership.

The national oil company’s goal of having 1,500 retail fuel stations will soon be realized, according to her, and the acquisition would result in the addition of 380 filling stations to what the NNPC already possessed.

“With this partnership, we have the capacity to have eight LPG plants, three blending plants, three aviation depots, and 12 warehouses,” she said.

Profit growth

NNPCL recently reported a profit after tax of N674 billion for the 2021 financial year, an increase of 134.8 percent compared to N287 billion reported for the 2020 financial year.

Data from the report also indicated that the company’s overall assets increased from N15.86 trillion in 2020 to N16.27 trillion in 2021, while its overall liabilities decreased by 8.3 percent to N13.46 trillion in 2021 from N14.68 trillion in 2020. Additionally, the shareholders‘ fund increased to N2.81 trillion, indicating 144 percent from the previous year. Prior to becoming profitable in 2020, NNPC recorded losses of N803 billion in 2018 and N1.7 billion in 2019.

Even though these positive figures were recorded prior to the transition to NNPCL, some analysts say they help to build confidence in the new entity and its capacity to deliver on profitability going forward.