PIB and the NNPC: Building Synergies

By

Bello Salihu, PhD

This is the third installment on the topic of how the (hopefully) soon-to-be-passed Petroleum 

Industry Bill (PIB) will, or should, impact on Nigeria’s national oil company the Nigerian National  Petroleum Corporation Corporation, NNPC, as regards human capacity building and job creation.  In the first discourse I presented how history - right from its creation - has burdened NNPC with the task of playing a critical role in building a technical and administrative manpower base for the country’s oil and gas industry. In the second discourse I wrote about the challenges the corporation itself is facing in defining and following a workable recruitment and human capacity building agenda that is in tune with both the aspirations of its core investors, which include all Nigerians, its expected position to be a trend setter and standard bearer to all companies and institutions involved in the energy industry in Nigeria and, finally, its ambition to be a global player in the oil and gas realm.

Today’s contribution aims to define what synergies are there to be built or strengthened in order to have a corporation that can assume its apex position in the scheme of things in the global or, at least African, oil and gas scene not only by virtue of its size or the reserves it lords over but also by virtue of how many Nigerians it has consciously and deliberately aided in securing gainful employment in the industry.

As I have mentioned in one of the earlier write-ups on this topic, there are other areas in which the passing of the PIB will impact on the NNPC, but, for now, the discussions will be restricted to the issue of job creation and human capacity building. 

As it stands today, the NNPC remains the main driver for almost everything that happens in the Nigerian oil and gas industry, including in the area of employment. A Nigerian service company working in the upstream sector that has just employed three more engineers could have done that because it won a contract with a major upstream operator. That contract was likely to have been sanctioned by the NNPC as the main joint venture partner or the reserve owner in the case of production sharing agreements (PSAs). The preference of the Nigerian company over more established foreign contractors in the same field may have been facilitated by the Nigerian Content Development Monitoring Board (NCDMB) while one of the roles of the Petroleum Technology Development Fund (PTDF) remains to ensure that the skill required by the hiring company is available to be found in the teeming employable youth demographics in the country. This is the synergy one hopes to find in the industry today. Statutorily, the government of the land, by enacting the laws and bringing into existence the various agencies involved, has laid the the foundation for the synergy to take place. 

The personnel strength of the NNPC is just over ten thousand and it is common knowledge that most international oil companies operating in Nigeria, as in any similar oil producing country that is not their home country, maintain very limited number of permanent staf on the pay rolls as it is in their business plan to be thin on the ground - executing most of their operations through proxies, contractors, consultants and non-permanent employees. According to a past NNPC GMD, Engr. Funsho Kupolokun, in a talk given a few years ago, it is estimated that the Nigerian oil and gas industry does not directly employ up to one percent of the Nigerian population. Another estimate puts the actual jobs created for Nigerians in Nigeria through actions occasioned by the passing and enforcement of the Nigerian Content Act of 2010 to be about two hundred and fifty thousand. If these estimates reflect current reality this means that, put together, less than half a million people in total draw a salary and earn a livelihood from the Nigerian petroleum industry. There are more farmers in some Nigerian local governments than that number.

As things stand now, the NCDMB actively fights for a generalised concept of Nigerian value 

addition in the upstream and mid-stream sectors of the industry. This concept includes, but is not restricted to, employment and job creation. In other words, value is measured holistically and not singularly. This, in itself, leaves room for the same local companies whose interest the board champions to seek ways to define what value they add strictly in terms of what generates better profit for them and not what benefits the nation through job creation - a benefit that can trickle down in the entire levels of the national economy. If, however, that concept is turned on its head - and value added is now measured by how many Nigerians are employed - and those employed are now expected to perform tasks to a set standard as agreed by the operator and the contractor - with penalties and rewards incorporated in the delivery structure, many more Nigerians will rise to the occasion and deliver, the local companies will attain more measurable competence in the service they deliver and be more profitable while the operator would have helped in establishing a more readily accessible, competent local work force for current and subsequent projects.

In areas where, the local company has to bring in expatriates, it will then be in the interest of that company to ensure that expertise is efectively transferred to Nigerians as that will be the basis on which its adherence to the local content principle should be measured. Unfortunately, thanks to the way things are, the industry still generates more employment outside the country than it does within. 

For this synergy to work, of the three organisations discussed here, the one that requires the most overhaul in its operations - not its guiding principles - is the Petroleum Technology Development Fund (PTDF). The PTDF needs to understand where to get the biggest bang from the money it is investing as long as its remit is concerned.

As far as the industry is concerned, not to mention the social and economic needs of the country, the PTDF needs to concentrate on training more technologists, technicians, operators and other lower skill professionals. This is more advantageous than training post-graduates and researchers. Looking at the number of personnel in each skill level that are required in a typical oil and gas project at the level of actual hands on the job, there is a need for a just a handful of engineers or researchers as against an army of lower skill technicians, technologists and other support staf. Moreover, the lower skill set represents the bottom end of the pyramid for which more people can be entered into productive employment and be lifted out of poverty. In a nutshell, the industry requires more pipe fitters than pipeline engineers.

Continuing the way things are now will generate a case of too many chiefs and too few indians, which is symptomatic of situations where adequate planning is absent in the acquiring and use of human resources. This seems to be pervasive in the industry. In the NNPC, for example, the last major mass employment that took place was in 1991. No structured employment took place for over ten years after that. By then, a massive gulf in experience, skill and knowledge has built up which the new-comers are ill-equipped to fill and the personnel last employed - who are now about to enter into management, could not effectively transfer to them. And today, twenty years after that, very few technical personnel-considering the size of the company-, have been added to its payroll. In the NNPC of today, engineers, that should be involved in higher thinking or trained in non-routine problem solving tasks are deployed in massive numbers to refineries as operators to undertake tasks that mostly require technicians.

The long hiatus in employment in the NNPC can be attributed to the stagnation of the company during that twenty-year period. The same period that saw the growth of Brazil’s Petrobras from a regional product marketer to a deep ofshore exploration giant and saw Russia’s Gazprom transform itself into the pre-eminent gas giant of Europe that it is today. It was a period when NNPC could have been truly transformed through building globally recognised competence in any of the various strands of activities it was, or still is, involved in.

It is also during that time that a Libyan company, Oilibya, built a supply infrastructure and registered its presence in many countries in north, west and central Africa. Its market focus is the provision of petroleum products across the continent and its logo can be seen atop many filling stations in almost all the countries surrounding Nigeria. Twenty years ago, with our geography, a functional refineries and a burgeoning upstream sector, the NNPC would have been in a better stead than Oilibya to build a delivery infrastructure in liquid products that could be more efficient than that of Oilibya. The NNPC could have, by now, used that available infrastructure to deliver not only such products but also gas and petrochemical products all across the entire continent.

Along with Oilibya, after the collapse of apartheid South Africa’s SASOL has been at the game, cornering the greater part of Southern Africa.

Since the beginning of this year, the NNPC, and not the marketers, has singularly been importing products into Nigeria. Those in the employ of companies involved in getting the imported products to the end-user, from depot operators to tanker drivers to filling station forecourt attendants are much more in number than those employed in the upstream and mid-stream sectors of the Nigerian oil and gas industry combined, areas in which NNPC and its JV co-sojourners are operating.

This, in itself, means continuing and expanding further downstream could be worth thinking about by the NNPC. Because more than any other Nigerian company, the NNPC could be more capable in standardising the downstream end of the market and build an exportable business line from its assets.

If, however, the rigours of building and maintaining a products delivery infrastructure is too 

distracting for the company, the corporation can easily achieve the same level of involvement and profitability by building linkages and partnerships with existing Nigerian downstream operators to deliver such services while it concentrates on refining and petrochemical processing as a core business. The strong deregulation element in the PIB will, if the bill delivers its expected gains, ensure that the refineries are run as purely commercial entities involved in buying crude from Nigeria or anywhere in West Africa or farther, refining it and selling the products within and outside Nigeria - all done at the prevailing global market price for both crude and products. NNPC then makes a profit from the added value of refining and delivery.

Now, extending such a scenario even further, more refineries may be required to service the 

greater west and central Africa given other downstream operators in those countries, such as 

Oilibya and France’s Total a run for their money. By the time NNPC adds its gas advantage to the mix, it stands the chance of becoming the largest supplier of energy in Africa. This bright promise can also be consolidated if the corporation decides to use its gas to light up west and central Africa, which, according to all the global energy usage indices, are still in darkness. To achieve this, the NNPC can deliberately invest in independent power plants (or buy up the existing ones), supply them with gas and build a cross-border power delivery infrastructure.

The NNPC can choose any other area in which to concentrate in building distinction and competence and not necessarily the few examples mentioned here. But which ever area(s) that may be - the corporation should endeavour to do so using a systematic and well thought out policy that ties into the job creation synergy we are talking about here. As I have mentioned many times in this column, the success of the corporation needs to be measured not in our reserve strength or production volumes but in how many people earning their livelihood through the actions of the corporation. 

So in both the downstream and upstream ends of the business, the NNPC, the Petroleum Technology Development Fund (PTDF) and the Nigerian Content Development Monitoring Board (NCDMB) can build a synergy in which Nigerian companies wishing to be involved in taking advantage of these and similar opportunities are partnered or encouraged by the NNPC, facilitated by the NCDMB and empowered with knowledge by the PTDF to do so. The Nigerian oil and gas industry is well positioned to achieve this and more. The components required to build the machinery to do that are all there except the will and the well-designed policy, such as the PIB, to tie all the strands together.

This was earlier published in my column 'Oil and Gas Weekly' in Government, 

a publication of Leadership Newspapers, Nigeria - 2012.