NNPC’s new helmsman’s 16-point reform agenda

Maikanti-Kacalla-Baru

Dr Maikanti Kachalla Baru, GMD, Nigerian National Petroleum Corporation (NNPC)

Dr Maikanti Kachalla Baru, new Group Managing Director of the Nigerian National Petroleum Corporation, unfolds an ambitious 16-point agenda in his bid to fast-track the transformation of the state-run oil firm, writes Olisemeka Obeche

Dr Maikanti Kachalla Baru, new Group Managing Director of the Nigerian National Petroleum Corporation (NNPC) has pledged a new dawn for the state-run oil company. Baru who took over the mantle of leadership from the Minister of State for Petroleum, Dr Ibe Kachikwu mid-July hit the ground running by unfolding a 16-point agenda to further reposition the NNPC for greater service delivery and meeting its core mandate.
Baru also pledged his commitment to staff welfare and enthronement of professionalism in the system as well as exploiting workers’ experience to maximize output and ensure success of his reforms.

Hurdles before Baru
Baru took over as the GMD of NNPC after a brief spell as adviser to the Minister of State for Petroleum, Dr Ibe Kachikwu on upstream sector of the petroleum ministry after the March 2016 restructuring of the state-owned oil firm. He was considered suitable for the job based on his previous experience as the Group Executive Director for Exploration and Production as well as the Group General Manager at various upstream arms of the corporation.

However, petroleum industry watchers have predicted that the job would be quite challenging for the new NNPC helmsman. Those who spoke to TheEconomy believe that Baru took charge of the NNPC at a difficult time. “Taking over the mantle of NNPC leadership at inauspicious time when the country’s petroleum sector is undergoing multiple challenges, including crashed (low) oil prices, declining investments, delayed projects and militant attacks on oil installations, means the new GMD has an uphill task ahead of him,” says Best Ezeani, a petroleum marketer.

Daniel Adugbo, an energy analyst also believes that Baru’s crucial agenda of scaling up oil and gas productivity could be far-fetched due to recent upsurge in pipeline attacks by Niger Delta militants, which has negatively impacted on the nation’s crude oil production. “Sourcing funds to meet the corporation’s needs and lower its future liabilities as well as fixing its costliest problems, are tough hurdles before Baru. Operational challenges have continued to cost the corporation huge resources. The NNPC recorded 1,166 pipeline breaks in the last four months, with repairs of the breached pipelines denying the Nigerian coffers about N34billion revenue,” Adugbo says.

Beyond the aforementioned challenges, Baru will also be grappling with the issue of sanitizing the NNPC and plugging the revenue leakages which had plagued the corporation for years now. The new helmsman is expected to follow up on the financial controls and transparency measures already initiated by his predecessor and ensure that all the monies accruing to the NNPC and its subsidiaries are effectively harvested and paid into government’s treasury.  Analysts say success of Baru’s reforms could be determined by how he handles the culture of retaining major share of oil sale earnings and spending them at will, which have continued even under President Muhammadu Buhari’s administration.

Tunde Aremu of the ActionAid Nigeria expects the new NNPC boss to tackle issues raised by various audits, especially the Nigeria Extractive Industry Transparency Initiative (NEITI). “There is the issue of under-assessment and under-payment of royalties due to the country by the multinationals operating in Nigeria. The most surprising is the NNPC/Shell JV divestment, where there is an outstanding $1.7billion. There is also the issue of remittance, which has been controversial, such as the unremitted revenue allegations raised by a former governor of the Central Bank, Sanusi Lamido Sanusi. How much has not been remitted? Nigerians need to know,” Aremu says.

Baru is equally expected to mobilize resources to plug NNPC’s huge funding obligations to Joint Venture (JV) International Oil Companies (IOCs) in form of cash call payments. With oil workers already threatening an industrial action over the piling debts to the IOCs now estimated to be above $5 billion, which threatens their careers, the new NNPC boss must quickly find solution to the huge debt. In addition to raising funds to service the bulging cash call payments saga, Baru also needs to source for more money to meet NNPC’s need and out future liabilities.

Analysts believe part of the options the new helmsman should explore include listing of NNPC shares on a stock exchange, or converting the existing JVs to independent joint ventures (IJVs) to raise funds. “Baru should build on the success of a first of its kind NNPC-China road show held in China, where a memorandum of understanding worth over $80 billion, to be spent on investments in oil and gas infrastructure, pipelines and refineries was signed with Chinese companies,” Adugbo adds.

The most important task before the new GMD remains transforming the NNPC into a world-class profitable petroleum firm that can attract new investment in the country’s oil and gas sector. With the NNPC struggling to make profit, albeit posting N255 billion losses from marketing crude and refined petroleum products in 2015, Baru must come up with new tactics to reverse the losses streaks. One of the key steps in turning the tide, says Emeka Duruigbo, a US-based professor of Energy Law, is to run the NNPC as a real commercial enterprise that delivers true value to its stakeholders. “He (Baru) should also concentrate on transforming the NNPC into a veritable exploration and production company that can add appreciable value to its partnerships with IOCs, or undertake meaningful projects on its own at home and abroad. In that sense, the NNPC can follow in the footsteps of Mexico’s PEMEX or Malaysia’s PETRONAS, among others,” he says.

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