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Baru: NNPC restructuring, profitability and other challenges

By Michael Eboh

The newly appointed Group Managing Director of the Nigerian National Petroleum Corporation, Mr. Maikanti Baru, would be facing a number of challenges and would be expected to keep up with the successes and pace of work started by its predecessor, Mr. Ibe Kachikwu, who remains the Minister of State for Petroleum Resources. One major challenge Baru would have to contend with is managing the expectations of majority of Nigerians, who, over the years, cannot differentiate between the job descriptions of the NNPC GMD and the Minister of Petroleum.

Baru NNPC Boss
Baru NNPC Boss

Since 1999, the roles of the Minister of Petroleum and the NNPC GMD have been identical, with many people unable to understand that both offices perform significantly different functions. For instance, Nigerians are quick to accuse the NNPC of failing in its duties if there is a short supply of Premium Motor Spirit, PMS, across the country, or sharp practices in some petrol stations. While actually, NNPC is partially responsible for the supply of PMS, majority of the PMS supply challenges and issues of sharp practices, among others, rest with the Minister of Petroleum.

Another challenge Baru would have to put up with is continuing with the ongoing restructuring started by his predecessor. Kachikwu had announced the restructuring of the NNPC into seven units, with the appointment of seven Chief Operating Officers to head the units. The restructuring had pitted Kachikwu against the workers of the NNPC and its subsidiaries, leading to a series of strike action which almost shut down the Nigeria’s economy during the period it lasted. Baru’s ability to manage and successfully conclude the restructuring process would be a major reference point in his stay at NNPC.

Also, Baru would be confronted with the challenge of ensuring steady supply of PMS across the length and breadth of the country. Though the NNPC is supposed to account for less than 45 per cent of Nigeria’s fuel consumption, the corporation had, in the not too distant past, been called upon to bridge the supply gap, forcing it to supply almost 100 per cent of the country’s fuel needs. Similar to meeting the country’s fuel supply needs, the NNPC is majorly responsible for holding a strategic fuel reserve for the country, which is a critical factor in cases of emergency and for security consideration.

There is also the issue of favourable contractual terms between the NNPC, its Joint Venture (JV) partners, Production Sharing Contracts (PSC) and trading partners among others.Kachikwu, in its first few weeks as NNPC GMD, cancelled a number of the contracts which past administrations of the NNPC signed and entered into new ones through transparent bidding processes. This was mainly in crude oil lifting, sales and petroleum products import.

Kachikwu had also announced that most of the JV contracts and PSCs, as well as other contractual agreements involving the NNPC would be reviewed to reflect current realities. The responsibility of negotiating favourable terms for the country now rests on the shoulders of Baru. A day to Kachikwu’s stepping down from the NNPC, the corporation had released its financial performance for the month of May, where it announced a profit of about N217 million, the first time in almost two decades. Baru would be expected to continue in this trend and ensure that the NNPC continues to remain profitable.

Other challenges include meeting up with the NNPC’s JV cash Call obligations, upgrading and expanding the country’s gas network, ensuring the profitability of the refineries as well as safeguarding and securing the assets of the NNPC, among others. However, Baru appeared prepared for the challenges before him. During his assumption of office, he laid out a 12-point programme, which included addressing and defraying the cash calls arrears owed International Oil Companies, IOC, by the NNPC and also ensuring that the Federal Government is relieved of the burden of cash calls obligations.

Baru promised to sustain the ongoing reforms in the NNPC and would always solicit the support of Kachikwu in driving the growth of the NNPC. He also promised to create an all-inclusive internal advisory console of security, comprising various stakeholders to brainstorm and come up with suggestions that would address security and host communities’ agitations.

Baru vowed to undertake an appraisal of the Nigerian Petroleum Development Company, NPDC, ensuring that all weak contractual agreement will be reviewed and bad ones terminated immediately, while he stated that the NNPC would leverage on its equity position to cause the development of key gas assets for both domestic and export, and also pursue the expansion of gas network across the country.

He further announced that he would implement the new business models of the NNPC and grant the needed autonomy to Strategic Business Units of the NNPC so as to ensure their growth and profitability, while efforts would also be made to grow the NNPC oil and gas reserves portfolio.

 


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