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Three percent to host communities higher than 30% of profit oil and gas for frontier exploration – Mele Kyari

Mallam Mele Kyari, NNPC GMD
Mallam Mele Kyari, NNPC GMD

Mele Kyari, group managing director of the Nigerian National Petroleum Corporation (NNPC), says allocation of three percent oil companies operating expense to host communities is higher than 30 percent of profit oil and gas for frontier exploration.

Kyari disclosed this when he appeared on an NTA interview programme on Tuesday.

President Muhammadu Buhari had appointed Timipre Sylva, minister of state for petroleum resources, as head of the Petroleum Industry Act implementation committee.

This followed the signing of the Petroleum Industry Bill (PIB) into law by the president on August 16.

While many described the assent by Buhari as a right step, some leaders in the Niger Delta have criticised the 3 percent annual allocation to host communities from the operator’s operating expenditure.

They described it as a “meagre portion” compared to the level of environmental degradation and development in the region – some even frowned at 30 percent allocation for the search of oil and its discovery.

But speaking during the interview, Kyari said the allocation for host communities has a low percentage but a bigger value.

He said the three percent from operating expense is bigger than 30 percent allocation from profit oil and gas.

“For instance, when you say 30 percent profit oil and gas from NNPC shares or from PSC, it is a very small number. The percentages appear very outrageous but 30 percent of what? Nobody has sat down to look at it. When you say profit oil 30 percent, it probably comes down to less than $400 million per annum,” he said.

“But when you come to the host communities, you have three percent of our operating expense. We spent about $16 billion in fiscal 2020 in our operating expense across the industry. So when you take three percent of that number it comes above $500 million far above the budget of NDDC.

“You can see that those percentages don’t reflect the realities that we are trying to achieve by this. And for profit oil, there are lots of uncertainties around it because if you don’t make profit it is zero but you must spend money to do operating expense.

“We are very sure that provisions that are meant for host communities will be implemented and delivered.”

The NNPC GMD said the PIA will “proffer lots of prosperity for our country” in both short and long terms.

He said there will not be difficulties implementing the new law, adding that concerns from stakeholders have been taken into consideration by the implementation committee.

Kyari said the concept of host communities in the PIB originated from the executives.

He added that the host community fund is completely within the control of the host communities. “It is not a fund that will be managed by oil companies,” he said.

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