NNPC Downstream – By Popular Demand
We take another look at NNPC Downstream to find out about the progress they’ve made over the last year.
“When we last spoke with NNPC Downstream we learned about the high demand and serious underinvestment they’d fought to overcome, doing fantastic work for Nigeria and Africa’s petroleum products industry.
NNPC’s refineries are at the core of Nigeria’s well-established downstream petroleum industry. Based in three locations – two in Port Harcourt, one in Kaduna and one in Warri – NNPC boasts a refining capacity of 445,000 barrels per stream day (bpsd), supported by a backbone of pipelines and depots strategically located across the country.
NNPC distributes these products through a vast network of pipelines and depots spanning the whole of Nigeria, with the Petroleum Products Marketing Company (PPMC), one of NNPC’s subsidiaries, executing bulk sales to offtakers who, in turn, meet the huge and growing demand for petroleum products from Nigeria’s millions of customers across Nigeria. NNPC is responsible for meeting the demand for gasoline, diesel, fuel oil or liquefied petroleum gas. Another subsidiary, NNPC Retail Limited also purchases petroleum products from the refineries to service its retail outlets across the country.
Despite the infrastructure NNPC had in place, however, the company has faced issues of dire underinvestment and demand that has often outstripped supply.
“I think the biggest challenge is the fact is that chronic under-investment has led to the position we are now in, which has resulted in not being able to deliver the level of production required to meet petroleum products demand in the country,” explained Mr. Anibor O. Kragha, Chief Operations Officer for NNPC’s Refineries and Petrochemicals business last year.
Since then, however NNPC has hit a number of major milestones in the downstream sector of the company in working to meet that demand.
Henry ikem Obih, the COO for NNPC Downstream tells us, “The major milestones have been that we’ve been able to sustain fuel supplies to eliminate fuel queues and keep supply and distribution up. We’ve reached the point now where most of our business is profit making and contributing to the value of the whole enterprise. Our PTMC is profitable, our energy retail business is profitable, our pipeline direct company is profitable. We’ve cut back on the losses we were making in previous years as part of our transformation. At the end of December 2015 we reported a loss of 65 billion naira, so turning a profit is a big achievement for us. A lot of the losses we used to have in the system, the holes we had in the system, are at much lower levels today.”
NNPC has managed this through a combination of waste reduction, heightened security and collaboration and cooperation with local communities.
“What we’ve done is lowered the rate of waste and stolen products, which was our main supply problem and a national problem,” Obih tells us. “We have implemented a lot more controls, leveraging our relationships and being more disciplined in implementing our latest plans while also expanding our distribution network. We’ve also had a number of outfits where we’re changing our relationship with the marketplace, we’ve worked to combat smuggling, one of the key challenges that puts pressure on our supply arrangements.”
NNPC’s solutions also involve building up on the extensive infrastructure they already have in place.
“We’ve got much better deals on the supply side, mitigating losses and building inland infrastructure, which is a buffer that enables us to respond rapidly no matter where there is a breach in the supply,” Obih says. “We’re also working very closely with government to step illegal activity.”
Cutting Queues, Not Corners
Moving forward, it’s clear talking to Obih that he believes NNPC’s job is to build on their ability to meet the needs of Nigeria’s petroleum customers. At the moment, this means building greater collaboration with the private sector.
“In terms of the work we have going forward for this year we want to ensure we maintain the ability to meet demand with fuel supply,” he says. “We’re being a lot of more of a public-private-partnership. We’re working with private entities in the renewal and replacement of the aging facilities.”
As well as working to build their own capacity and ability to deliver for customers, NNPC is also working to cut down Nigeria’s reliance on fuel from other countries.
“We have taken to the refineries to make sure we’re stopping imported fuel,” Obih says. “We’re working to become self-sufficient in our refinement capacity. In March this year we commissioned the people for a programme for a new refinery with 10,000 barrels a day capacity, and that programme is progressing. We’re hoping by 2020 we’ll have the refinery back in operation and go on to work on our other refineries and eliminate importation of fuel. We’re going to build four condensed refineries around the country, to show that Nigeria can end importation of fuel in the next couple of years.”
To achieve this mission, NNPC needs all its people behind them. Fortunately, that’s not an issue as far as Obih is concerned.
“They have worked at NNPC efforts as a national oil company with a people-first philosophy on two fronts,” he explains. “One, that they’re able to go to a service station and buy fuel. Two, that there are people around the company who see the refineries, and believe it helps our national pride. So for us as employees it’s important these two things are recognised and it’s time we’re effective in eliminating shortages at service stations.”
However, Obih still believes that in many ways NNPC are the unsung heroes of their country.
“A lot of our work cannot be seen by people and they don’t appreciate how much we do, the activities we’re engaged in,” he admits. “The key defining operation for the Nigerian people is getting fuel to service stations, and employees find it a key priority.”
But moving forward Obih can see NNPC growing beyond petroleum to serve all Nigeria’s energy needs.
“Our longer term vision that we’ve talked about is the whole effort to move from being an oil and gas company to an energy company that’s working on all fronts in the industry and beyond,” Obih says. “We’re making a lot of the investments today are in the power sector. We’re expanding into other areas such as making sure people are converting from firewood or household kerosene, working with cleaner fuels. We’re looking at biofuels, windmills, enabling cleaner fuel very quickly. We’re looking to the future to enable the Nigerian people.”