Africa’s richest man and President of the Dangote Group, Alhaji Aliko Dangote, yesterday said the Nigerian National Petroleum Company Limited (NNPC) has what it takes to become the African version of Saudi Arabia’s Aramco in the near future.
Dangote, who spoke at the ongoing 2023 Upstream Investment Management Services Ltd (NUIMS) Annual Value Assurance Review (AVAR) Workshop, stressed that the oil giant could generate billions of dollars in revenue if the right decisions were made. The year’s theme was: ‘Consolidating for Growth in PIA Era.’
The event was attended by the Group Chief Executive Officer of the NNPC Mele Kyari; the Executive Vice President (Upstream), NNPC Adokiye Tombomieye; the Chief Upstream Investment Officer, NUIMS, Bala Wunti; the Chairman, Heirs Holding, Tony Elumelu and other top investors in the Nigerian economy.
Dangote recalled that the PIA has now brought the transformation of NNPC from a government establishment to a commercial entity with no recourse to government funding.
He said the NUIMS has a critical role to play in unlocking funding to take advantage of the huge opportunities in the sector as well as to actively manage the investments to repay its loans, generate reasonable returns, and fund investment in new opportunities.
“I truly believe that NNPC should be our African Aramco. You have what it takes to take you up there and I am very happy. There is nothing that is impossible. You can make it possible and don’t let anything scare you.
“It is just the same thing with us. If I tell you about our own story, you will be shocked as to how. It wasn’t only the refinery that we started about six years ago. We had 32 projects that we all rolled out at the same time.
“But then, on the way we had lots of hitches here and there where the devaluation of the currency, Covid, and challenges of infrastructure set in. If you want to do a real project in Nigeria, you have to look at the infrastructure that we have, because the infrastructure we have is not meant for mega projects.
“We need to look at our infrastructure and see how we can take ourselves to the next level and it has to be driven by NNPC because they are the largest conglomerate and whatever happens to NNPC and their assets, it actually happens to us either directly or indirectly.
“Without you doing well, the country cannot do well. As the investment arm of NNPC, NUIMS plays a critical role in managing the federal government’s interest in the oil and gas industry – you are a partner in the Joint Venture (JV) assets and the concessionaire in the Production Sharing Contract (PSC) arrangements.
“As important as its oversight function is, my expectation in this post-PIA era is that NUIMS should pivot from being overly focused on its role as a ‘watchdog’ to acquiring the mind-set of an aggressive investment manager,” the business magnate stated.
The billionaire added that the NNPC needs to roll out massive investments in terms of oil and gas to meet demand, adding that there are many off-takers waiting to invest.
“Let me quickly illustrate with a personal experience. My businesses in Nigeria require 635 million scf of gas per day with further additional demand as we expand capacity.
“No businessman will leave such an opportunity on the table. Unfortunately, I hardly get 300 million scf per day and there is no clarity as to when the required gas will become available,” he lamented.
According to the chairman of Dangote Group, a good investment manager actively seeks out investment opportunities, assesses them and takes an investment decision.
He advised the NNPC to focus on delivering strong returns; growing the investment portfolio and managing portfolio risks, pointing out that the NNPC must first look into the cost component of its production.
Stressing that Nigeria has one of the highest breakeven prices globally for extracting oil and gas which results in a long payback period, the business mogul advised the national oil company to embark on cutting costs.
“Let’s begin with delivering strong returns, which of course is a function of price and cost. While price in your industry is determined by the market and so clearly outside your control, the same cannot be said about cost. More aggressive cost targets need to be adopted and NUIMS staff rewarded with juicy bonuses if they meet these targets.
“You need to benchmark costs with producers in similar basins and aim to be the lowest amongst your peers. Some existing government policies, as laudable as they may be, also need to be re-evaluated. For instance, we need to strike a delicate balance between encouraging local participation in the oil & gas sector and compromising efficiency and cost,” he advised.
Dangote suggested to the NNPC that the next course of action as a manager should be to grow its investment portfolio explaining that it would reduce the influence of International Oil Companies (IOCs).