NNPC admits to failed financial health, plans to invest N21bn on hospitals
By Dapo Falade
The Nigerian National Petroleum Corporation (NNPC) may have finally dumped its core responsibility of ensuring regular supply of petroleum products and maintenance of the country’s oil refineries.
Rather than focusing on its areas of mandate, the corporation has veered off into an ‘unknown’ territory as it, on Tuesday, announced plans to build health institutions in 12 states across the country at the cost of N21 billion ($54 million).
The decision by the oil corporation to embrace the idea to embark upon the hospital project may be a veiled admittance of its failing financial health, spanning more than 25 years.
As contained in a report by Bloomberg, “Oil Company That Can’t Fix Refineries Wants To Build Hospitals”, dated June 11, 2020, part of the new non-oil investments include housing and power, even as the corporation stated that the hospital project was a response to the dearth of health facilities in the country, caused by the COVID-19 pandemic.
NNPC was founded in 1977, subsequent upon the merger of the defunct Nigerian National Oil Corporation (NNOC) with the Federal Ministry of Mines and Steel and it was the corporation through which the Federal Government of Nigeria regulates and participates in the country’s petroleum industry.
It has the sole responsibility for upstream and downstream developments and is also charged with regulating and supervising the oil industry on behalf of the Federal Government.
The NNPC business operations are managed through Strategic Business and Corporate Services Units (SBUs/CSUs) in diverse locations across the country.
However, the corporation has, over the last three decades, failed to maintain the three refineries meant to ensure domestic fuel supply and thus forced Nigeria, the African biggest producer of oil to rely on imports.
The three national oil refineries were located in Warri (Delta State), Port Harcourt (Rivers State) and Kaduna (Kaduna States).
The NNPC management indicated intention to shift its core focus and rather build hospitals to attend to the health needs of the country’s population which has been estimated to be about 200 million.
According to a statement from the NNPC, the decision to build hospitals was part of the “measures to cope with the boom and bust cycle in the global crude-oil market and to sustain revenue generation.”
It apparently admitted to have learned the hard lessons taught by the collapse of crude prices caused by loss of demand and the subsequent price war between Saudi Arabia and Russia.
“With the state overly dependent on oil, for more than 50 per cent of revenue and 90 per cent of export earnings, President Muhammadu Buhari found his budget plans in tatters as oil fell to a 21-year record low in April.
“NNPC, which manages Nigeria’s oil interests with international energy companies, has on its own struggled with financial health for more than 25 years.
“Apart from frequently missing its capital obligations in joint ventures, it has among the highest oil production costs globally and has been saddled with cash-guzzling, dilapidated refineries for years.
“At the moment, the state producer is struggling to find buyers for its crude despite huge price discounts, with most of Europe, its primary market, only starting to reopen after three months of lockdown to combat the coronavirus. A situation that perhaps spurred more creative thinking at the Nigerian oil behemoth,” the report stated.
“We do have a lot of non-core business that would be expanded through effective collaboration and partnerships with the private sector,” Roland Ewubare, NNPC’s Chief Operating Officer for Ventures and Business Development., was reported to have said.
As announced by the NNPC Group Managing Director (GMD), Mele Kyari, among the new pathways to healthy recovery was a plan to trim production cost to $10 per barrel, revamp the refineries for restart in 2023 and seek opportunities in power and housing, and, of course, build the hospitals.
Earlier, in a report, dated April 8, 2020, April 8, 2020, Kyari announced the decision of the Federal Government to continue with the process of shutting down the three oil refineries.
In what has come to be seen as a never-ending exercise, he said the government also decided to get private managers for the refineries as part of the ongoing efforts to reposition them.
He said the corporation had decided to shut down the refineries, which have rarely functioned well for decades, in spite of huge public funding, in order to develop a model to upgrade them and secure enough funding for them.
“We made a very conscious decision to shut down our refineries. Today, after proper scoping, which was done in the past, we know exactly what to do to get them back on stream. We have also secured financing to make sure they work optimally.
“Aside from proper scoping, we are also going to have an Operation and Maintenance (O&M) contract, a different model of getting the refineries to work.
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