Business Profiles

Nigerian National Petroleum Corporation: Defend and deliver

Nigeria and the Oil & Gas industry have a long and involved relationship. At times, the relationship has been tumultuous, moving from bountiful ups to shattering downs, but through it all, the two have remained closely bound. This year, the Nigerian National Petroleum Company (NNPC) celebrate their 40th anniversary, representing four decades of this roller-coaster ride. As they celebrate a time of not only stability, but increasing profits, we decided to mark NNPC’s anniversary by taking a closer look at this eventful industry.

Nigeria’s petroleum industry is the largest in Africa. Whilst only contributing to around 9% of the country’s economy, the sector defines Nigeria in the global industrial Who’s Who. Their oil export revenue has totaled $340 billion since the 1970s, and now produces over 2.8 million barrels (450,000 m3) of oil a day. As a profitable and highly sought-after resource, this natural wealth often comes with an unwelcome side-order of political unrest, and Nigeria has been no exception. In response to this, but by no means in conclusion, the petroleum industry was nationalised in 1971; this is where NNPC’s involvement within the sector, and the story of their 40-year anniversary, began.

In May 1971, the Nigerian government was under the military control of General Yakubu Gowon following the recent war with Biafra. In the aftermath of this conflict, the government felt it important to secure Nigeria’s oil industry and to gain more control over its operations, in order to ensure a rebuilding of wealth, resources and stability for the country. As well as guiding the industry back to operating as it should during a chaotic time, the move was also taken to follow the advice of the Organization of the Petroleum Exporting Countries (OPEC) – an organisation Nigeria was eager to join. As a result, the sector was nationalized and the Nigerian National Oil Corporation was created, later becoming the Nigerian National Petroleum Corporation in April 1977.

The NNOC, or NNPC, existed as a body through which the government would enter joint ventures with the oil and petroleum industry. The corporation’s existence made the government’s participation in this sector legally binding. On top of its exploration operations, the purpose of the NNPC was and is to protect the vital Oil and Gas industry, allowing the government a hand in steering its development and intervening when it requires aid. A continued history of political and military turmoil since the ‘70s has repeatedly tested the importance and effectiveness of this involvement; NNPC saw the sector not only survive but expand. Between 1978 and 1989, NNPC constructed refineries in Warri, Kaduna and their second in Port Harcourt, and in 1988, the corporation increased its flexibility by commercialising into 12 strategic business units, covering all areas of the oil industry, including exploration and production, gas development, refining, distribution, petrochemicals, engineering and commercial investments, all of which still operate closely hand-in-hand with the Nigeria government.

In keeping with their safeguarding role, NNPC are currently investing in large-scale restoration efforts of their four refineries. Following a mandate from President Buhari, they have formed eight committees of selected personnel that have been tasked with the responsibility of returning all refineries to their former glory by 2019. This is an ambitious goal. Dr. Maikanti Baru, group Managing Director of the corporation, instructed the committees to use “out of the box solutions” to achieve it; beyond this advice, it seems that these lucky nominees are being entrusted to create the solutions themselves. As Dr Baru said in an address to the committees, “I am convinced that the teams we have selected here today will give the necessary direction towards returning the refineries back to their optimal levels of performance.” The original target for this restoration was 90% capacity, but Dr Baru is shooting for 100%. He also hopes to see efforts directed at restoring the workforce itself, and not the facilities alone, in order to genuinely see this return to form achieved.
The sudden push for this restoration to take place in the immediate future has been credited to the current rare existence of the right political and economic conditions; not only has Nigeria just emerged from a period of recession, and thus has the resources to tackle this work, but it also has a leadership who are motivated to see it done.

Another recent and extremely direct example of NNPC protecting the industry is the organisation’s intensified efforts to safeguard its pipeline from vandals and fire outbreaks. According to recent NNPC reports, 89.5% of their pipeline breaks are due to vandalism – this is a crucial problem that accounts for the vast majority of their repair costs. The corporation is aiming to not only protect itself against this damage and loss, but to keep its pipes safe to ensure a continued, reliable supply of petroleum for the nation.

Some of NNPC’s new security measures include Horizontal Directional Drilling (HDD) technology that allows pipelines to be buried deeper and thus prevents easy accessibility. They have also invested in technology-based pipeline surveillance mechanisms that are able to detect people, deny access to intruders and send alerts. Finally, the corporation are collaborating closely with law enforcement groups who are able to guard the crucial pipelines, including aerial monitoring and marine patrols by Nigeria’s military. They have also attempted to boost safety both for the pipelines and Nigeria’s residents through a clearly marked right-of-way system for their pipelines across all covered locations. This system is designed to keep the public away from the facilities for their own safety, as well as the security of the facilities themselves. As Dr Baru stated publicly, “Safety to one is safety to all – this defines how we handle safety issues.”

The Regional President of OSHA’s Nigeria branch, Dr. Dalhatu Mohammed Ahmed, commented on Dr Baru’s fantastic efforts towards responding to this threat; “I want to commend the efforts of the GMD as far as safety of lives and property is concerned in the corporation. Safety is everybody’s business, as it is a multi-dimensional issue that requires a multi-dimensional approach.”

The tasks they face aren’t easy, and failure is not an option – especially during this ideal time of financial ability and political will to see the sector flourish. In time for their 40-year anniversary, NNPC are preparing for this ambitious period by undergoing a major shake-up to their structure and leadership team, with many executives and directors receiving new titles in a mass re-shuffle. Dr. Baru addressed staff shortly before the announcements were made, saying that the changes were designed to plug gaps and ready the corporation for the challenges that lie ahead. 55 senior employees were affected by the changes.

NNPC’s efforts are not all reactive and restorative – they are also pushing ambitiously forwards, able to boast not an impressive stability in the oil sector, but a remarkable increase in gas supply. The corporation has increased the daily average natural gas supply to the nation’s gas power plants to 730 million standard cubic feet per day (mmscf/d) – that’s an increase of 123% since their formation. Growth is still happening, gradually; in its June 2017 Monthly Financial and Operations Report, the corporation said that gas supply to power plants had increased slightly by 0.13% between May and June 2017. The report also stated that nationwide petroleum supply continued to show stability, reading “The Corporation has maintained seamless nationwide supply and distribution of petroleum products, which guarantees stable products and queue-free filling stations across the nation.”

With battles and challenges on many fronts, the NNPC continues to build Nigeria’s Oil and Gas industry up from strength to strength, protecting its infrastructure and putting the plans and people in place to see it flourish in the years to come. As this sector globally begins to regain its optimism, Nigeria will not be left behind in the upswell, thanks to NNPC’s diligence and ambition. This is an industry to watch, and Endeavour are excited to see what lays ahead for Nigerian oil, as well as its potential evolution into alternative energy sectors.