The Nigerian National Petroleum Corporation (NNPC) published the 2018 audited financial statement in June 2020. It was its first n more than 43 years of its operation as a state-owned national oil company. Last month, the corporation followed up with the second edition of the publication for 2019, which showed its losses dropped by over 91.9 per cent. The global transparency group, Extractive Industries Transparency Initiative (EITI) is excited. But, Minister of State for Petroleum Resources, Timipreye Sylva, told Business & Economy Editor, Bassey Udo, that the government is so proud of the corporation’s achievements under its Group Managing Director, Mele Kyari.
PT: Where are we now with the PIB?
SYLVA: The PIB is well. But, it is out of the Executive’s hand at the moment. The Executive completed its own part by drafting the bill. The ball is now with the National Assembly. The latest information we have is that the draft bill has already passed the second reading in the Senate. They have sent the draft to the committees. The House of Representatives would take up from there and look at it next week. Our expectation is that both chambers of the National Assembly would go through the committee stages by the first quarter of next year and pass it into law, everything being equal.
I am not saying categorically and conclusively that the PIB will be passed then. But, what I am saying is that from the pace of work we can see the National Assembly working, everything being equal, we project that the PIB will be passed latest by the first quarter of 2021. Everything depends on the pace of legislation process by the National Assembly. If the two chambers of the National Assembly pass second readings, and it is just the committees that are left to look at the bill and hold public hearings, which we believe can happen within the first quarter of next year, the actual passage of the bill can happen about the same period. We are very optimistic.
We are engaging the leadership of the National Assembly on it. We are quite happy with the outcome of this engagement. The lawmakers are quite committed to see the law passed as soon as possible. There appears to be a national consensus around the PIB at the moment. Everybody concerned feel this is the best time to get the PIB passed to stimulate progress and restore momentum in the oil and gas industry growth and development. The passage of the PIB will involve a lot. We believe that will actually be a major foundation to move the petroleum industry forward from where it is at the moment.
Since the beginning of the oil industry in Nigeria in the 1950s, this is the first major effort being done in the oil industry to get things right. There is no doubt that the PIB will help resolve some of the knotty issues that constituted the contradictions in the industry all these years. When all these issues are smoothened out, it would have laid a solid foundation for the growth of the petroleum industry.
Over the years, the petroleum industry has grown more towards the upstream exploration and production sector. That means more attention was paid to oil production. Little or no attention was paid to other sectors. With the PIB, the midstream sector of the industry would receive better attention in terms of development.
It is not a hidden secret that the midstream sector of the petroleum industry is where the linkages to the growth of the economy exist, rather than the upstream. The upstream sector, of course, produces the oil that is sold to earn the money for the country to share to the three tiers of government, namely federal, states and local governments, every month during the Federation Accounts Allocation Committee meetings.
But, the midstream sector creates not only the vital linkages but also the jobs for our teeming unemployed population.
For instance, with gas as a foundational commodity, there would be a lot of derivatives that would come from it, including methanol, which helps the growth of the chemical, adhesive and pharmaceutical industries.
It will also help to catalyze the growth of the fertilizer industry, in terms of the production of urea and ammonia. It will also enable the growth of the petrochemical industry, namely the production of polymers and chemicals that would help the growth of the textile industry.
So, one can imagine how much impact the development of the midstream sector of the petroleum industry would bring to the Nigerian economy. There is no doubt that it will bring a lot of value addition, in terms of jobs and the development of the gas value chain.
PT: What would you say was the reason the midstream sector of the industry was neglected
SYLVA: The midstream sector of the petroleum industry has been neglected over the years because the fiscal framework for its development was non-existent. Our expectation is that the PIB will now create the fiscal framework that would encourage the growth and development of the sector.
The time is ripe for the industry to produce the jobs that would mop up all those opportunities and sweep all the unemployed young Nigerians from the streets.
There is no better way of diversifying the country’s economy than through a well-developed oil and gas industry, particularly with the huge gas resources in Nigeria.
So, PIB will be the most credible attempt towards a holistic diversification of the Nigerian economy. That is why it is very important for all stakeholders to see that the PIB is passed as soon as possible.
PT: You have just restated the government’s plan to roll out the gas expansion programme across the county. Where are we on that now?
SYLVA: The National Gas Expansion Programme is set to be rolled out on November 30. This initiative ties into everything the government is planning to ensure the development of the midstream sector of the petroleum industry. This will help the government focus on the development of the abundant gas resources in the country. That is where the linkages I spoke about earlier would happen.
The National Gas Expansion Programme is geared towards expanding the utilization of gas resources to benefit the economy.
The problem has been that gas utilization has been at its lowest level in Nigeria. Indeed, Nigeria has the lowest gas penetration in Africa, despite being one of the destinations in the world with the largest reserves of natural gas.
Domestic gas is not used extensively in Nigeria. It is used mostly in the cities and urban areas, not at the grassroots. That has caused serious environmental problems and affected the government afforestation programme, as the bulk of the firewood used in cooking in the rural areas are sourced from the forests.
From firewood as a source of fuel, we move to household kerosene, which many people consider carcinogenic. So, there is need for the government to move the people to a cleaner fuel, which is natural gas.
The roll out of the National Gas Expansion Programme will involve several things, including the need to deepen the gas penetration in Nigeria, in terms of the household uses of gas in our domestic activities.
We are also considering the use of gas as automobile fuel, to provide alternative to the premium motor spirit (PMS), popularly called petrol, which has now been deregulated, thereby pushing its price almost beyond the reach of most consumers. We are now going to encourage Nigerians to convert their cars to use gas as a cheaper and more reliable fuel alternative.
We plan to demonstrate how Nigerians will benefit from the National Gas Expansion programme. We expect everybody will convert their petrol cars to use gas. We expect that filling stations would also upgrade their infrastructure to ensure that people can drive into their filling stations and fill up the fuel tanks either with liquefied petroleum gas (LPG), compressed natural gas (CNG) or liquefied natural gas (LNG).
We already have examples of gas uses in-country. Companies like Dangote Group have already converted all their trucks to CNG, and they have been running very effectively. From what I have been told, the use of gas as fuel for their trucks has reduced the company’s operational cost by about 50 per cent, in terms of fueling cost.
The advantage of gas is that its usage cannot be adulterated, or the gas cannot be siphoned or stolen, apart from being easier on the vehicle engine. We believe that there are several other benefits which will help to cushion the effects of PMS pricing on consumers, because it will be a cheaper form of fuel than PMS.
PT: Is the minister walking his talk by using gas in his official vehicles?
SYLVA: Yes, absolutely. Of course, I have since converted my official vehicles to CNG. And I must say I am enjoying it.
PT: What about other ministers and members of the Executive Council of the Federation as well as National Assembly?
SYLVA: Yes, we are working on that. We will get the members of the Executive Council of the Federation to convert their cars to gas. Even the Presidential fleet will soon be run on gas. We will also discuss with members of the National Assembly to convert their cars and run on gas. We will kickstart it. Hopefully, with the example we will show, we will persuade Nigerians to see gas as the preferred fuel in Nigeria.
PT: But, why is it so difficult for Nigerians to have the framework for computing fuel prices under the current deregulation policy?
SYLVA: No, No! That framework is already published on the PPPRA (Petroleum Products Pricing Regulatory Agency) website. But, there are some elements of the framework that are not constant. Like the feedstock, or the cost of the product, which is determined by the prevailing cost of crude oil at the international oil market. That cost of crude oil is never constant. What we have done is to publish the framework to allow Nigerians to calculate the fuel price based on the framework. That is part of requirements by the World Bank for granting Nigeria loan.
What the government is not doing any more is to be announcing the fuel price for the month. We have stepped back. We are no longer involved in the business of fixing fuel prices. So, PPPRA cannot announce fuel prices any more. We only make sure that the petroleum products marketers are aware of the price range based on the Platts of the time. And if the Platts is established, the government would state the limit the marketers are allowed to charge as retail price.
It’s like a recommended retail price, which is obtained in most societies, even in advanced economies. With that, the DPR (Department of Petroleum Resources) will ensure that nobody goes beyond that retail price and exploit the consumers. It’s no longer a situation where every month we announce the price.
PT: If you are to talk about some of your achievements you are so proud of in the last one year, what would they be?
SYLVA: There are quite a lot of things we can easily point at that we are very proud about. Even the deregulation policy we have just talked about is one of them.
Remember, previous administration tried on several occasions to do it, but could not succeed. Each time they tried, it would end with Labour protest and the economy would be grounded. But, we have done it, and everyone has come to appreciate that it’s the way to go. That is why Labour is not protesting. We sat down with them and reasoned together that we cannot continue to spend trillions of Naira every year on fuel subsidy.
The other achievement is the Nigeria LNG Train 7 final investment decisions. For a long time, new investments have not come to Nigeria, because of the difficult global economic conditions. For Nigeria to be able to convince the investors in the NLNG to agree to invest in the expansion of the NLNG production capacity even at this difficult time of COVID-19 is, to my mind, a major achievement I am so proud to be associated with.
The other achievement is the takeoff of AKK (Abuja-Kaduna-Kano) gas pipeline project. This is the project designed to take the abundant gas in the Niger Delta to the northern part of the country for industrial purposes.
We are also proud of the launching of the gas network code; the PIB; the oil and gas bid round, which has so far been successful. There are a number of things that constitute milestone for us. We are quite happy over what we have able to achieve in the industry despite the difficulties we face.
The bid round has so far been successful. But, if in the process of doing it, the government has not produced all kinds of insinuations and scandals as is usually the case in the past, then we should proud of our achievement. Because of the way it has been followed, we opened the tenders. After that, the prequalification was done. It was an in-house process. After that, we called for the bids. So, we are on course.
PT: Why did you not include the recent NNPC’s publication of its annual reports for 2018 and 2019 as one of the achievements you are proud of? Is it because they showed huge losses by almost all its subsidiaries?
SYLVA: No! Don’t get it wrong. That is one of many other achievements I did not mention. But, it’s worth talking about. In fact, it makes me feel very happy. This is one organization we have always said has not published its accounts in more than 43 years of its operations as a national oil company. For the first time, it has published its audited accounts. Whether they are losses or not, the NNPC should be commended and encouraged to continue to do so and build on the culture of openness, transparency and accountability cultivated by this administration.
In the 2019 report, we saw that the losses dropped by over 91.9 per cent (NNPC), and over 70.7 per cent (Group) within one year. What that shows is that there must be things we are doing right that must be sustained. One of these things is our resolve to bring down the operating and production costs by the NNPC and its partners. But, there is no doubt that the NNPC of today is way different from the NNPC of yesterday. We should be proud of these achievements, despite challenges.
The fact that we could publish the audited statement is great. This is the first in the history of NNPC, and we believe that we can only be better going forward. That is why we determined to ensure the PIB is passed as quickly as possible so that NNPC will begin to operate as a profit-oriented commercial entity.
Source: Premium Times