NNPC saved over $150m monthly from
cancellation of contracts – Kachikwu
Group Managing Director of the Nigerian
National Petroleum Corporation, Dr.
Emmanuel Ibe Kachikwu spoke to journalists
recently in Lagos on his determination to
focus on three elements – people, processes
and performance – to reposition the
corporation on the path of profitability and
transparency. Ejiofor Alike presents the
excerpts:
Impact of past wrong decisions on NNPC
When we want to make a decision in NNPC,
we should consider the implication on the
entire economy of this country and by
extension, the hope and aspirations of the
people; it is not an ordinary day job.
Therefore, what we are bringing to bear is that
for everybody that makes a decision for
NNPC, you must look past yourself; look past
the corporation; sometimes look past the
country and look at what effects whatever
decision you are making have on the general
populace of the world. That is probably what
has been lost overtime by people within the
NNPC. We are beginning to resolve that now
because sometimes you make a quick
decision and you realise that you do not
realise the implications both on the economic
sectoral group and the entire nation at large.
So, we need to begin to take it more serious,
the responsibilities that this country imposes
on us as workers of NNPC. I have never
imagined frankly that I was going to leave the
private sector and end up in public sector.
Over the last 20 to 30 years I have spent a lot
of time working with the NNPC from the outer
shell and my impression of them was largely
positive but for a few issues. But over the last
decade we have seen a gradual backward dip
in performance models; in perception of the
public; in loss of expectations and everything.
So, when His Excellency, Mr. President asked
me to join him in the fairly herculean task of
trying to cleanse the table and redirect this
company, my direct response was one of
fright to be honest with you because I have
been used to a life where processes work,
and you can predetermine decisions to know
where you were headed in everything. There
wasn’t some underneath –the- table type
thing going on in decisions and I wondered
whether the corporation would be ready for the
kind of sanitisation that I would need to do if I
had to join the company. And my first
response likely was to say, may be, not. But
after we talked a bit more, I realised that it
was really an option we had that all of us
would have to leave our comfort zone to
come out and help and give guide every day
in our various fields but if you remain in your
comfort zone, this country is not going to
move forward and you have no right
whatsoever to complain outside. So, I found
myself thrust on this position of immense
responsibility and I am very determined to
make sense out of it.
I say to people that my time in this job is not
how long. I see how a lot of people take
government job and are very worried on how
long they will last but I am not. I am worried
about how well I do with the time that I have
and if it is one day or two days, I will make a
difference. So, if see some of the actions
that are coming out of my table, you will find
that I am moving out with a lot of speed,
almost like I have very limited time to do this
because frankly, I won’t forgive myself if I just
lasted here for one week or two weeks and
didn’t take decisions that need to be taken
because I was expecting that I would be there
for six months. I would never have a reason
to complain after this and that is my attitude.
So, every day, I am looking at every model
of our business and every model of our
economy and to see what needs to be done.
I am grateful to be working with His
Excellency, the President, who has done
everything that you would expect in terms of
giving you the latitude to bring the issues on
the table, discuss with him, reach decisions
that will be fruitful to this industry. So, if you
see the speed with which we are moving, it is
because he has given me the free hand and is
willing to work with me to sanitise the
company.
Contribution of staff to the rot in the system
I have not started my sanitisation process on
the basis that people are bad. It is usually a
wrong model. Sometimes people do the
wrong thing because the operation
environment has enabled them to do it.
There are a lot of good people within the
NNPC, who may have done wrong things at
different stages of their career because they
were propelled by politicians to do that. One
of the things I said in my Town Hall meetings
was that Managers, General Managers and
officers have now lost the authority to ask
anybody to do what is wrong. And even if I
ask you to do what is wrong, you must refuse
to do it and I have handed over that mantle of
authority to my staff.
If I come to you one day and ask you to do
something that you do not agree with because
it is wrong, please, you should not do it and if
I insist you go to the President. That is how
much transparency – because really there
isn’t a meeting line between right and wrong,
frankly. Something is either right or it is wrong
and there shouldn’t really be an
accommodation of what is wrong so that it
becomes right ultimately. So, if you follow
that precept, you are going to do the right
thing all the time. Frankly, I feel better if I
have to do right. I have never been asked to
do wrong thing knowingly for 30 years of
career in the oil and gas industry. That is not
to say that I have not made mistakes. Don’t
get me wrong. I take a decision that turns out
to be wrong. But I will not start on the basis
that making those decisions will
And so my staff will make mistakes; that is
okay; there is nothing wrong with that. What I
will not take is you making those mistakes
knowingly doing that because you have other
aims. I think that if we keep to the concepts
of what is right and what makes sense, we
will get to where we are headed.
Unfortunately, we do not have a lot of time.
So much harm has been done and so much
things need to be changed and so quickly.
Price of oil today the last time I checked was
$48 and the chances from every calculation
we have done is that between now and next
year, if we continue to go at the way we are
going currently, there is not going to be a lot
of improvement on those prices. But there
are few things we need to do at OPEC level
that could help propel those figures above
$50 level. My expectation and my hope is that
hopefully by this time next year, we should
begin to see a trajectory of these prices
getting towards $60s. So, every action that
we must take must gravitate towards how do
we have help that price uplift. That is why
for me to take a decision, you must tell
yourself that it is no longer a decision you are
taking because of your position; you are
taking it because it has almost effects on the
entire world economy. If you decide what you
will do with the refineries, it has an effect; if
you decide what you will do with the pricing, it
has an effect; if you decide what to do with
the management of funds out of NNPC, it has
effects.
Efforts to enthrone transparency
We have begun the processes of weekly
briefing, which is documented to Mr.
President in terms of what we do as part of
our transparency efforts. I am very focused on
transparency because I think that the Nigerian
public has a right to know. It is not a privilege
and I will ask Ohi and his team that we must
start fairly quickly the process of trying to put
out enough data out there so that the
journalists basically don’t have to beg you for
facts. They should be able to find those
facts readily available. Of course, one of the
effects of openness is that you get a lot of
criticisms but that is fine because in the
process, we learn more and we will be able to
do analytical review of what we do. That is
good for the country. It is an entitlement of
the country; it is not a privilege that we give
to them to know how their oil money is
obtained; how the contracts are done; how
their income is spent; it is their entitlements.
So, this not being a private company, we
must be very open. We have started a weekly
briefing. Our first monthly publication, which
is just one month after I started, will be out
next week, I think and it will you that you
have all the data that all the activities for one
month will show you. You will also have all
the data for all our activities from January and
every month, we are going to have such
publications. So, you don’t even have to call
us to get those data. All I implore you as
gentlemen of the press is that if you read and
you have some issues, please don’t go
sensational. You should call us; discuss the
issues and get clarifications because
sometimes what we publish are so critical
that it would lead to results you cannot
imagined. I am sure that is not your intent.
So, rush to publish, please we must keep an
open door to everyone of you who has
legitimate questions on the things that we
publish and the news that you hear, which are
not published. It is not likely that there is
anything we cannot publish. I have not been
given any no-go-areas. That is one.
The other aspect of transparency is, how do
we do with the accounting issues? We are
doing a couple of things in this direction.
First, we are bringing back all the auditors,
who did the partial audit to do a full audit.
The issue was that they did not get all the
data; but we are going to give them all the
data. I need to know what the state of the
finances of the corporation and the treatment
of funds were up to this date. Our account
was last audited in 2010 and it will be audited
and brought currently to date to 2015. I hope
we will achieve that before December. Once
we know that, whether the accounts are good
or bad is secondary but at least, we know
what the state of the finances are and we owe
that to the country. We are doing that and the
President is supportive of that.
Transparency of new contract models
Another aspect of this
transparency is that the
contracts models we run
must be transparent.
Nigerians have an
entitlement to participate in
the contracts; it is also not
a privilege; it is a right and
everybody must have the
same opportunity to be able
to participate. But in doing
that we must choose the
best contractual models that
offer the best value chain
yield for this country. You
saw that the first bullish
effort we have made was to
cancel the contracts.
We cancelled the contracts
when we felt there were
challenges; there were
issues. That is not to say
that the contracting parties
were bad. Again, I place less
emphasis on individuals and
institutions and I place more
emphasis on processes and
outcomes. So, it is not to
say that a company was
bad or was not good. I am
not a judge and I am not
going to be the jury. But if a
contract doesn’t give me a
good financial yield for the
company and for the
country, I am going to cancel it. It is not to
say that the individual who is the operator of
that contract is bad. What it simply calls for is
to open it up and ask others to give you an
alternative yield and if they come up with the
best alternative, so, be it. I think if you look at
some of the contracts we cancelled, we saved
average of over $150 million monthly just by
those contracts being cancelled and being
given new models even for the interim period.
In December, obviously, we are going to have
the crude bid; we are going to have the
coastal bid; we are going to have the Offshore
Processing Agreements (OPAs) bid and all
that and those will turn out to the entire
world. Hopefully, we will end up with a
sequence of results that will not only save
money, improve efficiency and be seen as
transparent. The thing with transparency is
that sometimes you are but the perception is
that you are not; that is the problem with
transparency. So, you have got to deal with
the perception issues. But once you are open
about it, people will see that you are open
about it and it shouldn’t be too difficult to do
it. So, we are very focused, I, personally, am
very focused on transparency issue because if
NNPC must get back its credibility, it is going
to be on the altar of transparency. I hope that
as we through this process, you all work
along with us to achieve those set of results.
The other thing I did introduced is the three
elements we call the 3Ps – which are people,
process and obviously the performance. The
people aspect is very key for me Individuals,
who have aided or abetted the wrong that has
sank the corporation will obviously be left out.
There is no space in any business in the
world for you to keep doing wrong things and
keep progressing. The only way we can do
that obviously is that your performance
modeling and evaluation must be very strong.
Right now, it is poor in the system and I like
to see our HR Group doing a better job of
evaluating people’s performance every year.
Salary increases are going to be based on
those. One of the things I started doing is
weekly briefing; we take an issue every week
from now till December and we deal with all
manners of issues from performance to
behavioral norms to where we are headed to.
The whole idea is first and foremost, to carry
everybody along because it is one thing to
do a restructuring exercise but if you do it
and you do it in such a way that you lose
your staff, you are not going to be a one-man
soldier.
Efforts to improve state of the refineries
Nothing pleases me more than when I go to
the refineries and I see the amount of
enthusiasm that they show with what we are
doing. At the end of the day, you need to
clean but at the end of the day, you also
need to take along those who are there as
parts and parcels so that they can provide the
solutions. One thing I can assure you is that
and I have never been under any illusions
about it. There are a lot of skill people in the
corporation; some of the best engineers in
this country reside in the NNPC. The fact that
they continued to maintain the refineries that
are over 30 years old, some with no spare
parts and no Turn Around Maintenance (TAM)
for over 15 years is a sheer miracle; it is
unbelievable. Every international team you
called would say scrap them but our guys
have continued to maintain them. So, we
must respect their intelligence. Now, what we
need to do to help them is some level of
independence; to be able to shut down and
do TAM when due; be able to fund the
refineries and be able to create contractual
models that make the business profitable.
Right now, we are losing quite a lot. My last
records we were more in the region of N10
billion for each of those refineries and it is
huge loss effect. But that is where you need
to move from the era of emotion to the era of
the business. Sometimes, people say that I
am talking too much of business; that I have
to offer social services. No; not as a
corporation. The day NNPC is called NNPC
Social Services then I wouldn’t have to have
this kind of conversation. But if it is called a
corporation; it means that the country expects
them to make yield, make a profit and
manage the business properly, so that people
can benefit. So, the word ‘Corporation’ was
not put there by accident by the founding
fathers of this company and we need to go
back to that model. I think the other time we
confused our social responsibility and societal
responsibilities with a more important
responsibility, which is to generate much
money. I am very focused on the corporation;
I am very focused on the business aspects.
And in doing that I am sure we will be able to
meet even better, some of the societal
responsibilities that are expected of us. There
are a lot of issues to deal with; refineries
being one of them. How do we get them to
work? My first belief really as somebody who
wants to run a refinery as a businessman is
that if they don’t work, you simply get
somebody who is going to make them work.
The reality is that if you give me 445,000
barrels per day of crude oil allocation, the
model must be very straightforward. It is like I
take the barrel and I pay for it; I go out and
process and I get a better yield. And the
government makes profit out of that yield and
I keep back what is required to run the
refineries. It is a very straightforward deal. But
the model that has been run is that you trade
the barrels; either for reason of pipeline
issues or for reasons of aging facilities in the
refineries; you trade the $40 barrel oil and
you get back to $15 results. Now, you are
dead before you start because you are
already unprofitable. So, the greatest
immediate challenge is how do you: one; limit
the loss factor and on a medium term basis,
address the issues that made the refineries
not to work, for example.
The reality is that the refineries as of now are
not yet working because if you do give me 60
per cent performance one week and the next
week I am down to zero per cent
performance, the average you have done is 30
per cent. The average performance of the
refineries right now is 30 per cent based on
the continuity basis as that is the fact and
that is the reality. Now, is it anybody’s fault?
Not really.
What we need to do is say which of those
refineries can work in the short term? Which
ones do we need to shut down and do proper
maintenance to get them to a position where
they can actually compete. When you want to
do that, you are faced with two issues- do
you have the money do it in the present very
tight fiscal environment. Can it be done if you
go and raise the money somehow, or through
joint venture participation to be able to fund
the repairs. The model we are working it is
that I have given a 90-day programme to the
refineries and any General Manager who is
running a refinery will either keep the refinery
open by December and producing on much
more consistent basis or if it is not, we need
to shut it down and do repairs. It is as
simple as that; I am not going to waste good
crude and money against the perception in
there. I will rather go sell the product out
and bring in imported products, while I am
repairing the refineries. Once they are
working, I will put the products back. They are
all part of very hard decisions and sometimes
you find those decisions very emotional
decisions. But my job is not an emotional
job; it is a practical reality job to get things
working. So, I do crave your indulgence when
you see some of these decisions coming. It is
not for any reason other than to make things
to work better.
State of pipeline network
The pipelines are going to work; there are
absolutely no model under which we are
going to be able do petroleum business in this
country without pipelines working. It is
inconceivable. Militancy; difficulties –
whatever the reasons are, is not enough
explanation why our pipelines should not
work. I am working with security forces to
ensure that we provide – and also the
communities for that matter, to ensure that
we provide enabling environment to have
access to those pipelines and to repair as the
need be. Long-term framework; medium
term framework, we need to do other
pipelines with more sophisticated equipment
in terms of the metals to be able to carry and
resist tampering.
We have got to do patrols; we have got to
monitor real-time online what is happening in
the refineries. If we are able to do that, then
we can at least have products distributed
through the pipelines. That is a model we
must work on fairly quickly because coastal
movement of products; whether it is for crude
or petroleum products, is not the solution. It is
unprofitable; it is not sustainable. It is as
simple as that. Every area you look at in our
operations, you will find difficulties. Now, bear
in mind, however, that if this was a private
company run without any social
responsibilities and emotion, some of these
things are very easy. If you don’t get the
pipelines working, you get out of the business;
it is as simple as that. You go to where you
can make profit but we don’t have that option
because we also have service to give to the
country. So, we must try and give those
services because we are compelled by law to
do that. I think with good efficiency; with good
planning; we will have those results. Some of
the things we are doing in PPMC for example
is unbundling the PPMC to have a pipeline
company, with a Managing Director that
focuses strictly on pipelines; whether it is
pipeline security; whether it is pipeline
expansion. His 24-hour job is basically
working to ensure that the pipelines remain
open. Once we do that we pump for the first
time say from Port Harcourt to Enugu and it
will be massive because for the first time, we
could actually get products.
[ThisDay]
cancellation of contracts – Kachikwu
Group Managing Director of the Nigerian
National Petroleum Corporation, Dr.
Emmanuel Ibe Kachikwu spoke to journalists
recently in Lagos on his determination to
focus on three elements – people, processes
and performance – to reposition the
corporation on the path of profitability and
transparency. Ejiofor Alike presents the
excerpts:
Impact of past wrong decisions on NNPC
When we want to make a decision in NNPC,
we should consider the implication on the
entire economy of this country and by
extension, the hope and aspirations of the
people; it is not an ordinary day job.
Therefore, what we are bringing to bear is that
for everybody that makes a decision for
NNPC, you must look past yourself; look past
the corporation; sometimes look past the
country and look at what effects whatever
decision you are making have on the general
populace of the world. That is probably what
has been lost overtime by people within the
NNPC. We are beginning to resolve that now
because sometimes you make a quick
decision and you realise that you do not
realise the implications both on the economic
sectoral group and the entire nation at large.
So, we need to begin to take it more serious,
the responsibilities that this country imposes
on us as workers of NNPC. I have never
imagined frankly that I was going to leave the
private sector and end up in public sector.
Over the last 20 to 30 years I have spent a lot
of time working with the NNPC from the outer
shell and my impression of them was largely
positive but for a few issues. But over the last
decade we have seen a gradual backward dip
in performance models; in perception of the
public; in loss of expectations and everything.
So, when His Excellency, Mr. President asked
me to join him in the fairly herculean task of
trying to cleanse the table and redirect this
company, my direct response was one of
fright to be honest with you because I have
been used to a life where processes work,
and you can predetermine decisions to know
where you were headed in everything. There
wasn’t some underneath –the- table type
thing going on in decisions and I wondered
whether the corporation would be ready for the
kind of sanitisation that I would need to do if I
had to join the company. And my first
response likely was to say, may be, not. But
after we talked a bit more, I realised that it
was really an option we had that all of us
would have to leave our comfort zone to
come out and help and give guide every day
in our various fields but if you remain in your
comfort zone, this country is not going to
move forward and you have no right
whatsoever to complain outside. So, I found
myself thrust on this position of immense
responsibility and I am very determined to
make sense out of it.
I say to people that my time in this job is not
how long. I see how a lot of people take
government job and are very worried on how
long they will last but I am not. I am worried
about how well I do with the time that I have
and if it is one day or two days, I will make a
difference. So, if see some of the actions
that are coming out of my table, you will find
that I am moving out with a lot of speed,
almost like I have very limited time to do this
because frankly, I won’t forgive myself if I just
lasted here for one week or two weeks and
didn’t take decisions that need to be taken
because I was expecting that I would be there
for six months. I would never have a reason
to complain after this and that is my attitude.
So, every day, I am looking at every model
of our business and every model of our
economy and to see what needs to be done.
I am grateful to be working with His
Excellency, the President, who has done
everything that you would expect in terms of
giving you the latitude to bring the issues on
the table, discuss with him, reach decisions
that will be fruitful to this industry. So, if you
see the speed with which we are moving, it is
because he has given me the free hand and is
willing to work with me to sanitise the
company.
Contribution of staff to the rot in the system
I have not started my sanitisation process on
the basis that people are bad. It is usually a
wrong model. Sometimes people do the
wrong thing because the operation
environment has enabled them to do it.
There are a lot of good people within the
NNPC, who may have done wrong things at
different stages of their career because they
were propelled by politicians to do that. One
of the things I said in my Town Hall meetings
was that Managers, General Managers and
officers have now lost the authority to ask
anybody to do what is wrong. And even if I
ask you to do what is wrong, you must refuse
to do it and I have handed over that mantle of
authority to my staff.
If I come to you one day and ask you to do
something that you do not agree with because
it is wrong, please, you should not do it and if
I insist you go to the President. That is how
much transparency – because really there
isn’t a meeting line between right and wrong,
frankly. Something is either right or it is wrong
and there shouldn’t really be an
accommodation of what is wrong so that it
becomes right ultimately. So, if you follow
that precept, you are going to do the right
thing all the time. Frankly, I feel better if I
have to do right. I have never been asked to
do wrong thing knowingly for 30 years of
career in the oil and gas industry. That is not
to say that I have not made mistakes. Don’t
get me wrong. I take a decision that turns out
to be wrong. But I will not start on the basis
that making those decisions will
And so my staff will make mistakes; that is
okay; there is nothing wrong with that. What I
will not take is you making those mistakes
knowingly doing that because you have other
aims. I think that if we keep to the concepts
of what is right and what makes sense, we
will get to where we are headed.
Unfortunately, we do not have a lot of time.
So much harm has been done and so much
things need to be changed and so quickly.
Price of oil today the last time I checked was
$48 and the chances from every calculation
we have done is that between now and next
year, if we continue to go at the way we are
going currently, there is not going to be a lot
of improvement on those prices. But there
are few things we need to do at OPEC level
that could help propel those figures above
$50 level. My expectation and my hope is that
hopefully by this time next year, we should
begin to see a trajectory of these prices
getting towards $60s. So, every action that
we must take must gravitate towards how do
we have help that price uplift. That is why
for me to take a decision, you must tell
yourself that it is no longer a decision you are
taking because of your position; you are
taking it because it has almost effects on the
entire world economy. If you decide what you
will do with the refineries, it has an effect; if
you decide what you will do with the pricing, it
has an effect; if you decide what to do with
the management of funds out of NNPC, it has
effects.
Efforts to enthrone transparency
We have begun the processes of weekly
briefing, which is documented to Mr.
President in terms of what we do as part of
our transparency efforts. I am very focused on
transparency because I think that the Nigerian
public has a right to know. It is not a privilege
and I will ask Ohi and his team that we must
start fairly quickly the process of trying to put
out enough data out there so that the
journalists basically don’t have to beg you for
facts. They should be able to find those
facts readily available. Of course, one of the
effects of openness is that you get a lot of
criticisms but that is fine because in the
process, we learn more and we will be able to
do analytical review of what we do. That is
good for the country. It is an entitlement of
the country; it is not a privilege that we give
to them to know how their oil money is
obtained; how the contracts are done; how
their income is spent; it is their entitlements.
So, this not being a private company, we
must be very open. We have started a weekly
briefing. Our first monthly publication, which
is just one month after I started, will be out
next week, I think and it will you that you
have all the data that all the activities for one
month will show you. You will also have all
the data for all our activities from January and
every month, we are going to have such
publications. So, you don’t even have to call
us to get those data. All I implore you as
gentlemen of the press is that if you read and
you have some issues, please don’t go
sensational. You should call us; discuss the
issues and get clarifications because
sometimes what we publish are so critical
that it would lead to results you cannot
imagined. I am sure that is not your intent.
So, rush to publish, please we must keep an
open door to everyone of you who has
legitimate questions on the things that we
publish and the news that you hear, which are
not published. It is not likely that there is
anything we cannot publish. I have not been
given any no-go-areas. That is one.
The other aspect of transparency is, how do
we do with the accounting issues? We are
doing a couple of things in this direction.
First, we are bringing back all the auditors,
who did the partial audit to do a full audit.
The issue was that they did not get all the
data; but we are going to give them all the
data. I need to know what the state of the
finances of the corporation and the treatment
of funds were up to this date. Our account
was last audited in 2010 and it will be audited
and brought currently to date to 2015. I hope
we will achieve that before December. Once
we know that, whether the accounts are good
or bad is secondary but at least, we know
what the state of the finances are and we owe
that to the country. We are doing that and the
President is supportive of that.
Transparency of new contract models
Another aspect of this
transparency is that the
contracts models we run
must be transparent.
Nigerians have an
entitlement to participate in
the contracts; it is also not
a privilege; it is a right and
everybody must have the
same opportunity to be able
to participate. But in doing
that we must choose the
best contractual models that
offer the best value chain
yield for this country. You
saw that the first bullish
effort we have made was to
cancel the contracts.
We cancelled the contracts
when we felt there were
challenges; there were
issues. That is not to say
that the contracting parties
were bad. Again, I place less
emphasis on individuals and
institutions and I place more
emphasis on processes and
outcomes. So, it is not to
say that a company was
bad or was not good. I am
not a judge and I am not
going to be the jury. But if a
contract doesn’t give me a
good financial yield for the
company and for the
country, I am going to cancel it. It is not to
say that the individual who is the operator of
that contract is bad. What it simply calls for is
to open it up and ask others to give you an
alternative yield and if they come up with the
best alternative, so, be it. I think if you look at
some of the contracts we cancelled, we saved
average of over $150 million monthly just by
those contracts being cancelled and being
given new models even for the interim period.
In December, obviously, we are going to have
the crude bid; we are going to have the
coastal bid; we are going to have the Offshore
Processing Agreements (OPAs) bid and all
that and those will turn out to the entire
world. Hopefully, we will end up with a
sequence of results that will not only save
money, improve efficiency and be seen as
transparent. The thing with transparency is
that sometimes you are but the perception is
that you are not; that is the problem with
transparency. So, you have got to deal with
the perception issues. But once you are open
about it, people will see that you are open
about it and it shouldn’t be too difficult to do
it. So, we are very focused, I, personally, am
very focused on transparency issue because if
NNPC must get back its credibility, it is going
to be on the altar of transparency. I hope that
as we through this process, you all work
along with us to achieve those set of results.
The other thing I did introduced is the three
elements we call the 3Ps – which are people,
process and obviously the performance. The
people aspect is very key for me Individuals,
who have aided or abetted the wrong that has
sank the corporation will obviously be left out.
There is no space in any business in the
world for you to keep doing wrong things and
keep progressing. The only way we can do
that obviously is that your performance
modeling and evaluation must be very strong.
Right now, it is poor in the system and I like
to see our HR Group doing a better job of
evaluating people’s performance every year.
Salary increases are going to be based on
those. One of the things I started doing is
weekly briefing; we take an issue every week
from now till December and we deal with all
manners of issues from performance to
behavioral norms to where we are headed to.
The whole idea is first and foremost, to carry
everybody along because it is one thing to
do a restructuring exercise but if you do it
and you do it in such a way that you lose
your staff, you are not going to be a one-man
soldier.
Efforts to improve state of the refineries
Nothing pleases me more than when I go to
the refineries and I see the amount of
enthusiasm that they show with what we are
doing. At the end of the day, you need to
clean but at the end of the day, you also
need to take along those who are there as
parts and parcels so that they can provide the
solutions. One thing I can assure you is that
and I have never been under any illusions
about it. There are a lot of skill people in the
corporation; some of the best engineers in
this country reside in the NNPC. The fact that
they continued to maintain the refineries that
are over 30 years old, some with no spare
parts and no Turn Around Maintenance (TAM)
for over 15 years is a sheer miracle; it is
unbelievable. Every international team you
called would say scrap them but our guys
have continued to maintain them. So, we
must respect their intelligence. Now, what we
need to do to help them is some level of
independence; to be able to shut down and
do TAM when due; be able to fund the
refineries and be able to create contractual
models that make the business profitable.
Right now, we are losing quite a lot. My last
records we were more in the region of N10
billion for each of those refineries and it is
huge loss effect. But that is where you need
to move from the era of emotion to the era of
the business. Sometimes, people say that I
am talking too much of business; that I have
to offer social services. No; not as a
corporation. The day NNPC is called NNPC
Social Services then I wouldn’t have to have
this kind of conversation. But if it is called a
corporation; it means that the country expects
them to make yield, make a profit and
manage the business properly, so that people
can benefit. So, the word ‘Corporation’ was
not put there by accident by the founding
fathers of this company and we need to go
back to that model. I think the other time we
confused our social responsibility and societal
responsibilities with a more important
responsibility, which is to generate much
money. I am very focused on the corporation;
I am very focused on the business aspects.
And in doing that I am sure we will be able to
meet even better, some of the societal
responsibilities that are expected of us. There
are a lot of issues to deal with; refineries
being one of them. How do we get them to
work? My first belief really as somebody who
wants to run a refinery as a businessman is
that if they don’t work, you simply get
somebody who is going to make them work.
The reality is that if you give me 445,000
barrels per day of crude oil allocation, the
model must be very straightforward. It is like I
take the barrel and I pay for it; I go out and
process and I get a better yield. And the
government makes profit out of that yield and
I keep back what is required to run the
refineries. It is a very straightforward deal. But
the model that has been run is that you trade
the barrels; either for reason of pipeline
issues or for reasons of aging facilities in the
refineries; you trade the $40 barrel oil and
you get back to $15 results. Now, you are
dead before you start because you are
already unprofitable. So, the greatest
immediate challenge is how do you: one; limit
the loss factor and on a medium term basis,
address the issues that made the refineries
not to work, for example.
The reality is that the refineries as of now are
not yet working because if you do give me 60
per cent performance one week and the next
week I am down to zero per cent
performance, the average you have done is 30
per cent. The average performance of the
refineries right now is 30 per cent based on
the continuity basis as that is the fact and
that is the reality. Now, is it anybody’s fault?
Not really.
What we need to do is say which of those
refineries can work in the short term? Which
ones do we need to shut down and do proper
maintenance to get them to a position where
they can actually compete. When you want to
do that, you are faced with two issues- do
you have the money do it in the present very
tight fiscal environment. Can it be done if you
go and raise the money somehow, or through
joint venture participation to be able to fund
the repairs. The model we are working it is
that I have given a 90-day programme to the
refineries and any General Manager who is
running a refinery will either keep the refinery
open by December and producing on much
more consistent basis or if it is not, we need
to shut it down and do repairs. It is as
simple as that; I am not going to waste good
crude and money against the perception in
there. I will rather go sell the product out
and bring in imported products, while I am
repairing the refineries. Once they are
working, I will put the products back. They are
all part of very hard decisions and sometimes
you find those decisions very emotional
decisions. But my job is not an emotional
job; it is a practical reality job to get things
working. So, I do crave your indulgence when
you see some of these decisions coming. It is
not for any reason other than to make things
to work better.
State of pipeline network
The pipelines are going to work; there are
absolutely no model under which we are
going to be able do petroleum business in this
country without pipelines working. It is
inconceivable. Militancy; difficulties –
whatever the reasons are, is not enough
explanation why our pipelines should not
work. I am working with security forces to
ensure that we provide – and also the
communities for that matter, to ensure that
we provide enabling environment to have
access to those pipelines and to repair as the
need be. Long-term framework; medium
term framework, we need to do other
pipelines with more sophisticated equipment
in terms of the metals to be able to carry and
resist tampering.
We have got to do patrols; we have got to
monitor real-time online what is happening in
the refineries. If we are able to do that, then
we can at least have products distributed
through the pipelines. That is a model we
must work on fairly quickly because coastal
movement of products; whether it is for crude
or petroleum products, is not the solution. It is
unprofitable; it is not sustainable. It is as
simple as that. Every area you look at in our
operations, you will find difficulties. Now, bear
in mind, however, that if this was a private
company run without any social
responsibilities and emotion, some of these
things are very easy. If you don’t get the
pipelines working, you get out of the business;
it is as simple as that. You go to where you
can make profit but we don’t have that option
because we also have service to give to the
country. So, we must try and give those
services because we are compelled by law to
do that. I think with good efficiency; with good
planning; we will have those results. Some of
the things we are doing in PPMC for example
is unbundling the PPMC to have a pipeline
company, with a Managing Director that
focuses strictly on pipelines; whether it is
pipeline security; whether it is pipeline
expansion. His 24-hour job is basically
working to ensure that the pipelines remain
open. Once we do that we pump for the first
time say from Port Harcourt to Enugu and it
will be massive because for the first time, we
could actually get products.
[ThisDay]
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