Mallam Mele Kyari, GMD NNPC
-By Felix Douglas
The Group Managing Director (GMD) of Nigeria National Petroleum Corporation (NNPC), Mallam Mele Kyari disclosed that investment in the upcoming Dangote refinery will enhance local demand and reverse the trend of supply from Europe. It will also secure national interest in oil and revenue through a joint venture arrangement that would benefit Nigeria.
The GMD was a guest on Tuesday at Channels Television Sunrise programme where he was answering questions on the recent development of the corporation to transform the oil industry especially the midstream sector.
Speaking further on the Dangote refinery, Kyari asserted thus, “the fact is that there is no resource-dependent country that will watch a business of this scale that borders on energy security which also has implication on the physical security of our country and watches and so not have say.
“For us as a strategist, we did not just start today, we started long before Dangote came started his refinery project and we have interest in every significant business that is anchored on oil and gas: ethanol, modular refinery fertilizer plant, and so many other businesses that we are dealing with so that we can expand our portfolio.
“Because we are the national oil company, we have to guarantee energy security of our country and there is nowhere you can have that say except you have a say in the board of this institution.
“That is why anyone that is going to construct a refinery that is in excess of 50 thousand barrels per day, we will talk with them, we will take equity in it as much as we going to have the money for it.
“By the way, even the Dangote Refinery, we are not going to use take government money to buy shares. That is the mistake many people are making.
“We are going to borrow on the back of the cash-flow of this business, we know that this business is viable; it will work, it will return dividend and operates on a cash flow that because refinery business in the short term will continue to be sustainable.
He added that the scale of the business was going to change the face of the oil business in n the entire West African nation, thus, the need for the national oil company to secure the space for the Nigerian people.
“There is no way you can see a business if this scale, of this magnitude of this sensitivity to run without an embodiment of the nation, Kyari said.
He pointed out that the combined sale of the refined products of the government-owned Port Harcourt, Warri and Kaduna refinery and the Dangote refinery will play supportive roles.
He said the NNPC will soon close down Kaduna and Warri refinery to ensure that they work simultaneously to deliver on the mandate as the federal government has begun works on the Port Harcourt refinery to bring it alive.
In his words, “Dangote refinery will come to work in 2022 and what that means is that it is going to deliver over 50 million of gasoline into our markets.
“The net effect is that you are going to have an environment where the Nigeria market will become a hub for Petroleum product supply.
“It is going to change the dynamics globally in the sense that the flow is coming from Europe today. It is going to reverse the direction, we will be the supplier for West Africa legitimately and other parts of the world.
“The meaning of this is that an opportunity is thrown at us. Am not Mr Dangote is ready to sell his equity in his refinery. I can confirm that it was our instance that we started this engagement. He did not want to sell his share in this business, am sure Nigerians will agree with me that many people have shares in Dangote Sugar, which he is doing. Dangote this and all kinds of things.
If he had thrown it open to the market am sure a lot of Nigerians would have rushed to buy that.”
The NNPC helmsman was of the view that Nigeria’s consumption of Petroleum products was established during the Covid-19 period when the continuous nation which is landlocked closed down and the nation had a partial lockdown down.
He maintained that the lockdown which did not allow for smugglers to take the product out revealed consumption of about 42 million barrels a day.
The GMD stated that there is no subsidy anymore but explained the operations of the national oil company that takes out a lot of funds that would have addressed the national concern.
While the NNPC according to him does not pay subsidies, it has a burden of under-recovery because it runs at a loss when managing the import of Petroleum products for national consumption.
He said during the period the consumption went down and evacuation was around 42m barrels per day which reflects reality.
“When you say subsidy, you spend and you are paid back while in under-recovery because I have the resources in my hand I buy it and nobody is paying the NNPC for the subsidy it is the cost of our operation, simply our deduct that cost and make available the balance.
“Our balance sheet cannot carry those losses we are owing to the federation, we have your losses we are not able to recover on your behalf we will put it in your records that we are not able to recover it and we will put it in your record.
“We cannot be able to recover that, there is an expectation in the appropriation ACT where the NNPC is expected to deliver N120bn every month federation account.
“There is a misunderstanding around our operations. When you say oil and gas, you have to produce oil and you have to produce gas.
“Once you do this too you must pay taxes you must pay royalties. These taxes and royalties will not happen until you produce these products.
“So our first job is to produce oil and gas and our partners are responsible for 80 per cent of the production. There is a process for the agreements between us and our partners.
“In the joint venture (JV) arrangement everybody takes his share of the product depending on his share in this business it after you have paid your taxes and royalties that you ensure you pay your dividends to your shareholders, but you have to take out your cost to know the value of left to you.
“Cost of production may appear very high that is what keeps the operation. You see the petroleum profit tax coming from Federal Inland Revenue Service (FIRS), you see the royalties coming from the Department of Petroleum Resources (DPR) the balance of it comes from the NNPC when we take the cost of operation you left with a value that you have to plough back into the federation account.
Kyari noted that on the issue of petroleum pricing, cash cannot be created and the corporation is short of such cash that can plough into the federation account.
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