*Orders investigation of 103m litres daily fuel evacuation
*You made our day – Reps
By Teddy Nwanunobi
The Nigerian National Petroleum Corporation (NNPC), on Wednesday, explained that it bought 20 per cent into the Dangote Refinery to ensure that the plant sources its crude locally.
This was even as the Corporation has disclosed that it has ordered investigation into the claim that 103 million litres of fuel were evacuated on a daily basis in the month of May.
The NNPC Group Managing Director (GMD), Mallam Mele Kyari, dropped the hints when he appeared before the House of Representatives Committee on Finance.
Valuechain reports that the Committee is currently conducting hearings on the 2022 to 2024 Medium-Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP).
Speaking before the Committee, Kyari, who said that the refinery had no obligation to buy crude from Nigeria prior to that decision, explained that the 20 per cent stake valued at $2.6 billion is tied to the refinery buying crude oil from Nigeria.
He further explained that, without the equity, Dangote Refinery could buy cheap crude from Venezuela and import it to the country.
Kyari disclosed that the country had no strategic storage and this equity stake would ensure that the country had a seat on the board of the company.
He also revealed to the Committee that the billionaire owner of the refinery, Aliko Dangote, was against the 20 per cent equity.
“He (Dangote) has the right to buy oil from anywhere. So, you can’t force him to buy. We structured our equity participation that this refinery must buy at least 300,000 crude from us. This guarantees your market.
“Today, every country is struggling to secure (a) market for their crude oil. This refinery does not owe us any responsibility, if we don’t have this arrangement. That is why we tied our participation to the fact that this refinery must buy from us.
“This refinery is a very complex refinery, complex in our industry because it can crack any crude. So, it can buy any cheap crude from anywhere, and bring it into this country and leave you to your crude.
“We simply saw this opportunity, we said are not going to take any government money to put into this. We are borrowing money from the AfriExim consortium to pay for our initial payment and also tied his subsequent payment to him buying from our production,” he said.
He hailed the decision, describing it as a conscious one.
“Our decision to take equity in the Dangote Refinery was a very calculated and conscious decision. First, there is no resource-dependent country like ours anywhere and a national oil company will have a venture of this size and magnitude with its very clear security implications that is situated in a free trade zone. Literally, this refinery is not in this country.
“Today, we import 100 per cent of our refined products into this country. You now have a venture that will produce close to 50 million litres of petroleum products in this country where energy security is an issue in this country. From my personal knowledge, the U.S. keeps stock on the ground that the government owns it and that government pays for it and keeps it.
“As we speak today, we don’t have any strategic storage or arrangement. So no country will allow any venture of this nature to exist without having a seat on its board.
“Secondly, this company is situated in the free trade zone. The meaning of this is that there are several incentives granted to this business. If you look at our investments, total investment of about $2.7 billion, not $5 billion, the total stake of 20 per cent is $2.7 billion, if you are to build 20 per cent of that capacity, which will be around 130 barrels per day capacity refinery.
“It is simply impossible to build a refinery of that capacity with that amount of money. This is not just a refinery, but a refinery with a petrochemical component. So somebody has done all the ‘jaki work’ (grunt work) for us, and we are taking a stake in it,” he stated.
Kyari said further to the committee that the decision to have a stake at the refinery was at the instance of the NNPC.
“Mr. Dangote may not be excited with it. I can confirm, Mr. Chairman, (that) taking stake was at the instance of the NNPC. I believe up to this moment, (that) Mr. Dangote does not want us to take equity in this plant.
“This is a very informed policy decision that will guarantee security because we will have a seat – we will have (the) right to 20 per cent of the production from this facility,” he added.
Reacting to a question by the Committee to the report of the 103 million litre per day fuel evacuation, Kyari said that the issue will be investigated.
“If there is any date that we evacuated or consumed up to 103 million litres per day, I don’t know. Actually, I flagged this when I saw the figure. It is actually from me in a public fora three days ago and I still remember, I said that, we see evacuation of 103 million litres.
“Evacuation is not consumption, but it is very, very abnormal. Even the average for that month comes back to 62. So, I found it very, very strange that we can have that high number and we are investigating it. And I am sure we are going to get to the bottom of it.
“We looked at the capacities of all the depots in the country to see, is it really practical? We have depots that have no capacity to do this and we see these high numbers.
“I have taken this. I can say it openly here, I have taken this matter to all the agencies of government, like the EFCC and ICPC so that they can follow up on it. So, we looked at it as an abnormal practice that has happened,” he said.
Meanwhile, Kyari received accolades from the Committee for providing detailed explanations on some burning oil industry issues at an interactive session.
Chairman of the House Committee on Finance, Hon. Abiodun James Faleke, commended him for providing an in-depth explanation and insider perspective on some issues surrounding the operations of the NNPC and the oil industry.
“You have made our day. The Committee is better informed based on explanations provided by the GMD,” Faleke said.
Kyari, in his presentation, had provided a base oil price scenario in the medium term as follows: $57 per barrel for 2022, $61 per barrel for 2023 and $62 per barrel for 2024.
He explained that the assumptions were arrived at after a careful appraisal of the three-year historical dated Brent Oil Price average of $59.07 per barrel premised on Platts Spot Prices.
“Price growth is to be moderated by the lingering concerns over COVID-19, increased energy efficiency, switching due to increased utilisation of gas and alternatives for electricity generation. These are reflected in the Medium Term Revenue Framework,” Kyari informed.
On the perennial issue of smuggling of petroleum products, Kyari implored the National Assembly to come to the aid of the Corporation in battling the menace, noting that the Corporation, based on the directive of Mr. President, had mobilised some federal agencies, like the Customs, the Economic and Financial Crimes Commission (EFCC), the Police, Civil Defence Corps, and others, to find workable solutions to the menace.
On the propriety of establishing NNPC Retail stations in neigbouring countries to curb the challenge of illegal haulage of petroleum products across the border, Kyari said that, though the NNPC once considered the option, it had to jettison the idea when it became imperative that the measure would be counterproductive.
He explained that people who are smuggling are not looking for officially priced petroleum products.
He further noted that going ahead to establish NNPC Retail stations would not yield the desired result since the people who take products across the border are not interested in selling at the official prevailing prices at approved stations but are interested in under the counter deals.
The NNPC GMD also took time to provide detailed explanation on the Corporation’s equity shareholding interest in Dangote Refinery, noting that the package which was at the instance of NNPC is designed to guarantee national energy security.
He stated that the equity interest was secured after due consideration of the national interest and best possible options.
“We will have (the) right to 20 per cent of production from this facility. We structured our equity participation on the basis that the refinery must buy at least 300,000 barrels of crude oil per day of our production. This guarantees our market at a period when every country is struggling to find (a) market for their crude oil,” he explained.
Faleke also promised that the National Assembly would consider creating a law to protect Nigeria’s assets.