NNPC Limited Corporate Strategy -IOR Study Presentation.pdf

IOR Knowledge Sharing Session NNPC Corporate Strategy and CS&S Mandate Yahuza Haruna February 2, 2022 Content Strategic Inputs to the Corporate Strategy Strategic Ambition NNPC Limited’s Mandate Methodology and Strategic Options Critical Enablers 10-year Strategic Roadmap Key Levers – Vision, Mission, Core Values NNPC Corporate Identity CONTEXT Context and Objective Objective 1 The new Petroleum Industry Act 2021 mandates the incorporation of NNPC Ltd within 6 months from commencement of the new law with Ministry of Finance Inc. and Ministry of Petroleum Inc. as shareholders, As part of the PIA, the new NNPC has no recourse to government funds and must operate as a commercially viable company in compliance with CAMA and Laws of the Federation of Nigeria NNPC therefore plans to define a plan to commercialization that will set up NNPC Ltd for success, Define NNPC Corporate Strategy Critical deliverables  Strategic inputs  Brand identity review  Vision, Mission and Core     Values review Strategic options for NNPC Ltd Business model considerations Critical enablers: ‒ Operating model/Highlevel N-1 structure ‒ Funding considerations ‒ Change management framework 10-year strategic roadmap 2 Develop Business Strategies  Business strategies for each vertical: ‒ Quantified strategic ambition ‒ Prioritized set of options ‒ Target portfolio of assets ‒ Key risks and sensitivities ‒ Funding considerations ‒ Implementation plan Ongoing: support of change management plan 3 Evaluate Portfolio and develop TOM*  Performance targets for       new and retained assets Divestment strategies Best-practice org structure and org design principles Capabilities requirements Organizational health valuation Stress-tested mission statement Ongoing: support of change management plan *TOM: Target Operating Model 3 Developing the 10-year strategy for NNPC Limited required a review of 4 critical elements as “strategic inputs” to the Corporate strategy Strategic inputs Objective 1 Review of the mandate of the PIA, MEMART and provisions under CAMA To understand the stipulations of the Acts and Agreement in order to ensure that the strategy is compliant 2 Outlook of the Global energy market with a focus on Africa and the local market To understand the demand and supply landscape as well as review projections for future growth and projected product mix 3 Review of the peer landscape of Global NOCs and IOCs To understand what strategic moves others are making in light of the evolving energy market landscape 4 Analysis of NNPC’s strengths, weaknesses, opportunities and threats (SWOT), including analysis of PESTLE, recent and past performance To understand current strengths and areas for improvement to ensure that the strategy builds on NNPC’s core capabilities The development of NNPC Limited’s Corporate strategy kicked off with a broad review of the context within which the new company is emerging. The review covered external context such as the overarching legislative framework, global energy market trends, as well as internal context such as the strengths, weaknesses, and performance records of the legacy corporation. 4 4 We focus on three key levers for our corporate strategy Vision A compelling picture of what we intend to become. Provides an aspirational long-term goal. Strategy Mission What purpose do we serve to our audience? What? Why? Who? How? Core Values The fundamental beliefs our business and behaviour is based on. The Vision & Mission provide a clear path to realizing our strategic ambition Vision “Reliably” To be the dynamic global energy company of choice Consistent quality, availability and acceptability of our products and services. We invest in people. systems and processes that guarantee reliability of our products and services. “Energy” Mission Reliably delivering energy while continuously creating value for all stakeholders An integrated energy company with operations and investments covering the entire energy value chain and harnessing varied energy sources. We appreciate and serve the diverse energy needs of our various markets. “Value for all stakeholders” Firm commitment to continuous delivery of value to customers, shareholders, business partners, host communities and other stakeholders. VISION, MISSION AND CORE VALUES We have reviewed comparable peers as a point of reference for validating the Vision, Mission and Core Values of NNPC Ltd Preferred option PRELIMINARY Examples Vision Provides a compelling picture of what the company hopes to become Mission Declares the purpose an organization serves to its audience Values Are the fundamental beliefs which your business and behavior is based on “To become one of the best energy companies in the world, with roots in Qatar and a strong international presence…” “One of the world’s leading energy producers…” “Ensuring operational excellence and transparency in each of our actions…” Critical takeaways The vision should be aspirational; Most NOCs position themselves as energy companies at a global scale but also grounded in national economies Peers state specific “what”, “who”, “how” “why” in the mission “…leading producer of the energy and chemicals that drives global commerce and enhances the daily lives…” Safety, Integrity, Excellence, Respect, Collaboration Open, Collaborative, Caring, Courageous Typical value statements tend to be centred around collaboration, respect, caring, working together and excellence Statements To be the dynamic energy company of choice 1 Continuously creating value for all stakeholders while reliably delivering energy to customers 2 Continuously creating value for all shareholders while reliably delivering energy to customers “Integrity” “Respect” “Excellence” 7 Our activities are guided by 3 core values STRATEGIC INPUT 1. Mandate of the PIA, MEMART and provisions under CAMA Evidence to grow portfolio The Petroleum Industry Act (PIA) maintains NNPC Limited’s footprint across the energy value chain with a clear mandate for costeffectiveness, operational efficiency, and sustainable profitability. The Act also vests NNPC Ltd with the responsibility to ensure national energy security through an uninterrupted supply of affordable and acceptable energy for a fee. These mandates are reinforced by the objects in NNPC Limited’s MEMART1 which cover a wide range of energy and non-energy business activities. Upstream Key messages Implications for NNPC Ltd “…carry out petroleum operations on a commercial basis, comparable to private companies…” (64a) Maintain upstream operations as core business but emphasis should be placed on operational efficiency to ensure profitability “...be vested with the rights to natural gas…” (64e) Gas & Power “…promote the domestic use of natural gas through development and operation of large-scale gas utilization industries…” (64i) “…engage in the business of renewables and other energy investments…” (64h) Refineries n/a Downstream “…engage in activities that ensure national energy security in an efficient manner…” (64k) Ventures Evidence to contract portfolio Maintain gas and power operations as core business with focus on the development of gas utilizing capacities as well as power and renewables n/a “…make NNPC Ltd supplier of last resort for security reasons…” (64m) Develop a robust and cost-effective supply chain and retail distribution network to ensure energy security and fuel availability n/a n/a 1 Memorandum and Articles of Association 9 9 STRATEGIC INPUT 2. Overall market outlook Evidence to grow portfolio Upstream Evidence to contract portfolio Key messages Implications for NNPC Ltd While global oil demand is expected to peak in the mid-2020s, oil demand in Africa is expected to continue to grow beyond 2040 Opportunity to monetize oil production within the next 10-15 years, with emphasis needed on significant cost optimization to ensure profitable production High cost of production linked to poor infrastructure, and OPEC production quotas could present a risk to ~50% of new production Gas & Power Natural gas demand in Africa is expected to grow by 21% from 2020 to 2040 with Egypt, Nigeria and Algeria making up ~80% of demand, primarily driven by the power sector, industry and LPG cooking Opportunity to seize the additional shortterm upside that may come from the gas shortage in Europe but decarbonization efforts are needed to remain competitive Refineries ~50% of oil products demand in Africa until 2040 will be fulfilled by imports with refining capacity projected to be flat, caused by the Dangote and other refineries coming online. This will increase competition and drive margins down significantly Opportunity to prioritize cost-efficient operations with high capacity utilisation to meet growing demand Nigeria is expected to see ~2x stable growth in demand for oil products, particularly in LPG 11-17%; however, supply security risks have increased and are expected to persist Opportunity in LPG marketing with a strong need for a robust and cost effective supply chain and retail distribution network Downstream Phasing out the subsidy program for gasoline will continue to challenge retail margins Ventures Different dynamics exist within the market landscapes of the existing NNPC venture operations: from highly saturated markets such as Telecom to markets with significant development growth opportunities such as real estate, education, etc. Need to rationalize existing unprofitable non-energy venture operations and focus only profitable operations to maximize shareholder value The overall market outlook indicates continued growth in local and global energy demand but with a limited window of opportunity to maximize value from hydrocarbon resources due to the global push for decarbonization and energy transition. NNPC Limited’s global competitiveness relies heavily on its ability to optimize production and distribution costs while investing proactively in decarbonization programmes and renewable energy ventures. 10 10 STRATEGIC INPUT 3. Peer landscape Evidence to grow portfolio A review of the peer landscape establishes three 3 significant trends: ▪ NOCs are focused on maximising value from hydrocarbon assets within the limited window of opportunity ▪ Investments in gas and alternative energy sources are being prioritized. ▪ Cost efficiency is an increasingly important competitive advantage as market dynamics continue to shift. Evidence to contract portfolio Key messages Implications for NNPC Ltd Upstream Global NOCs are maximising O&G production leveraging low-cost, low-carbon reserves to monetize pre-peak oil demand, while IOCs are rebalancing their portfolio towards resilient O&G assets, primarily gas Focus on maximizing oil and gas production to monetize demand in the short-term, while prioritizing resilient gas assets Gas & Power O&G companies, both IOCs and NOCs globally, are choosing to invest in gas and alternative energy sources as a key strategic focus Focus on investing on operations in gas and alternative energy sources Refineries The majority of global peers have reduced focus and investments in refinery capacities with the exception of a number of new capacities in the Middle East and North Africa Focus efforts only on operationally efficient operations that are competitive given available spare capacity globally Focus of a number of O&G companies has shifted towards petrochemicals Potentially consider investment in petrochemicals Downstream Given constrained margins in downstream operations, global peers are focusing on cost optimization practices as well as investments in additional revenue streams (e.g. non-fuel) in order to increase overall retail margins Focus on margin improvement opportunities and commercial competences to grow margins Ventures While global IOCs are focusing on investing in energy venture operations to diversify focus away from conventional energy sources with Renewables and Digital as key areas; NOCs are retaining their non-energy ventures under profitability condition or high criticality for business or country Rationalize existing unprofitable nonenergy venture operations and focus only profitable operations to maximize shareholder value 11 11 STRATEGIC INPUT 4. NNPC’s overall recent and past performance Evidence to grow portfolio Evidence to contract portfolio Key messages Implications for NNPC Ltd Upstream Declining levels of production over the last 5 years with associated gas responsible for a significant proportion of production; 4th quartile performance on operational efficiency benchmarked against global peers; 2nd quartile performance on average R/P ratio and capital unit costs Significant reserve volumes can be leveraged for production increase with a focus on improving operational efficiency and profitability Gas & Power Negative cash flow over the past years due to limited asset availability and utilization (15% in 2021), debt recovery issue, delays in infrastructure expansion projects; no progress in renewable projects Gas business requires profitability increase initiatives; clear strategic objectives needed for new energy sources Refineries All three refineries have not been operational since 2018 and at their peak were operating at 15-25% capacity utilization, which is significantly below the commercially viable threshold of ~80% capacity utilization to breakeven and make a profit Rationalize operations to focus only on commercially viable refining operations Downstream Weak supply chain with frequent disruptions and security challenges; current retail network has an 8% market share with 85% DODO retail sites and overall retail margins are significantly less than market average, primarily due to share of DODO sites in the network Focus on margin improvement opportunities and commercial competences to grow margins Ventures RTI1 is the only venture operation that is profitable due to corporate funding; there is growing pressure for all venture operations to be self funding and/or operate at a higher efficiency Rationalize existing unprofitable nonenergy venture operations and focus only profitable operations to maximize shareholder value NNPC’s overall performance over the past five (5) years demonstrates low competitiveness in key metrics ranging from production levels to Unit Operating Cost (UOC) to asset capacity utilization, among others. However, our recent turn to profitability in 2020 and the concerted effort by the Senior Management Team through initiatives such as TAPE, NUCOP, Priority Gas Projects, tracking and monitoring our Cost-toIncome ratio, as well as our Peoples Strategy have laid the foundation to reposition the organization for a future of profitability and performance excellence. 1 Research Technology and Innovation 12 12 NNPC Limited’s strategic ambition is focused on growth NNPC Limited has adopted a growth-focused strategy to: ▪ Leverage significant energy reserves to meet the current and future energy needs of economies, enterprises, and societies. ▪ Position the business to seize opportunities arising from the market push for long-term shifts in the global energy mix. While ensuring that our noncore business will broaden social impact. Grow NNPC interests in the energy sector through: E&P: Increase oil and gas production, optimize costs and decarbonize portfolio Gas and Power: increase gas production, transmission and sales for domestic use and LNG exports New Energy: Invest in large-scale new energy projects across Nigeria and West Africa Ref & Chem: Rehabilitate current assets and grow refinery and petrochemicals portfolio Trading, Marketing and Logistics: Expand supply chain and grow retail network Non-Core Business: Focus on strategic investments that broaden social impact 13 13 NNPC’s growth ambition is driven by 3 mandates – attain ‘profitability’ and ensure ‘energy security’, while ‘future proofing’ the organization Profitability Energy security According to PIA, NNPC must be self-funding, attaining profitability by 2024 and return dividends to shareholders thereafter Support and protect domestic consumption through active participation in strategic priority areas e.g., refining, storage and pipelines The company’s sights are set on deepening its global footprint of value in line with the overarching mandate to create an energy business that is profitable, resilient, and sustainable through the energy transition while ensuring domestic energy security. Future proofing Create a sustainable business that is capable of capturing and delivering value to shareholders through energy and non-energy streams. 14 14 …and laid out a set of recommendations for NNPC Ltd, with final decisions endorsed by Steerco and approved by NNPC Ltd Board Steerco decision Recommended option Upstream Grow Optimize Rationalize Enhance production of both Oil & Gas assets to monetize peak demand in the next 10 years Maintain oil production rebalancing portfolio towards low Decrease oil production keeping only the most efficient and GHG-effective assets Decrease UOC to further increase shareholder value and stay competitive Increase gas production, reduce flaring and venting, and Introduce decarbonization program to maintain longterm investor attractiveness Gas, Power & New Energy Upscale and expand gas processing and transportation services to serve both Nigeria and exports, including LNG; actively drive domestic gas consumption through portfolio investments in gasbased industries and power Invest in large-scale new energy projects across Nigeria and West Africa to create long-term value for stakeholders Refineries Down-stream Non-core Business cost and low carbon oil assets competitively trade and monetize produced gas with focus on the domestic market Maintain current LNG commitments, partner with existing domestic gas consumers and direct efforts to processing and delivering to the domestic market in line with the PIA Optimize gas production for value and GHGintensity Target portfolio investments exclusively on core gas transportation and marketing business Focus on investing in 1-2 targeted renewables projects (e.g., large-scale solar PV, biomass) to test feasibility and profitability at small scale Rehabilitate current assets and further grow the refining portfolio through a greenfield project with chemicals production integration and/or new/grow equity partnership with sufficient capacity to supply local demand & export Optimize existing refineries by only focusing on completing rehabilitation at the most efficient assets and selecting an operating model that will result in improved reliability & profitability before considering rehabilitating least efficient assets Streamline the existing refineries portfolio through divestment of the least performing and highest risk refineries exposed to security of supply Expand supply chain with new pipelines and depots to reach new B2B customers and resellers Invest in resilient supply chain by securing existing Grow retail network increasing share of CODOs and introducing COCOs to optimize for profitability Optimize for profitability of existing customer and retail Reduce number of retail sites, leave only Q1 and Q2 in terms of gross margin and focus on supply chain efficiency for the optimized network and B2B customers Develop new business lines and drive long-term value delivery to stakeholders through portfolio investments in profitable non-energy ventures Streamline existing unprofitable non-energy venture Upscale and expand coverage of existing venture operations to serve both internal and external customers and ensure independent value creation for shareholders pipelines and revamping depots network ensuring LPG sales on retail sites, growing NFR and high-margin product sales; minimizing operating costs operations and focus only profitable operations to maximize shareholder value The strategic options were duly considered, and a growth-focused strategic ambition was approved by the NNPC Limited Board for all core business segments while non-core businesses are to be rationalized to focus on social impact investments. Focus mandate of venture operations towards enhancing opportunities for social impact through strategic investments that broaden economic empowerment opportunities e.g., promoting quality education and world class learning interventions, improving health and wellbeing, etc. 15 15 To successfully deliver the strategic ambitions, critical enablers will need to be developed and implemented The approved corporate strategy is being developed further into: ▪ Business/Operating models for subsidiaries ▪ Organisational structure ▪ 5-year high-level performance targets Enabling frameworks and policies are also being developed for: Governance & Regulatory Compliance Risk Management Sustainability (ESG) Talent Management Performance Management Compensation Management Digital and Analytics OHI1 (culture, practices, etc.) Outcomes will be communicated as they are finalized and approved. Key enabler, deep-dive to follow Critical enablers Descriptions Example considerations Operating model and org design Profound transformation to set the organization for success and dramatically improve efficiency: review of the organizational structure, processes, necessary competences, KPIs and systems  Talent policies to attract and retain the right local & expat Funding Develop funding strategy: define financing need, identify potential investor archetypes and their decision-making factors, optimize the organization and operations to fit investor profile and increase investment attractiveness  Financing policies detailing out key elements like sources of Change management Engage stakeholders and address change management challenges: maintain maximum transparency, high morale and engagement within the organization, tackle broad set of change management challenges (comms, skills, etc.)  Defined change management procedures including Digital, Data & Analytics Define focal areas for digital development: improve cost and reliability across all verticals, increase safety indicators, drive customer insights as the organization grows its presence in enduser segments  Digital project prioritization guidelines; Simplify complex Energy transition Develop energy transition strategy: set transparent emissions baseline, set reduction targets and define a clear path to unlock funding in the mid-term and drive long-term green future for Nigeria  Determine NNPC Ltd.’s carbon footprint baseline  Clearly defined action plan towards achieving set Security of supply Invest and lobby government action on ensuring security: grow GR effort, develop supply chain capability and resilience to supply security projects  Develop perspective and policy around how NNPC Ltd will experience & skillset  Employee training & development policies to ensure high-skill levels capital for an optimum capital structure, principles to ensure only the most viable, profitable projects are funded etc. communication plans to specifically addresses stakeholders' potential concerns and expound on NNPC Ltd’s strategic pathways processes leveraging digital tools for efficiency and scale  IT & Data management framework including data retention& quality mgmt policies, security and protection etc. decarbonization targets balance profitability requirements with energy security and required enablers e.g., FGN funding on critical initiatives/projects Robust policies and procedures for each of these enablers will be developed to guide future changes and ensure compliance 1 Organisational Health Index 16 16 NNPC Limited's transition to being "a dynamic energy company of choice" has been road-mapped into a 4-stage 10-year journey PRELIMINARY – SUBJECT TO REVIEW UPON FINALIZATION OF BUSINESS STRATEGIES 1 Immediate (Jan. 2022 –Jun. 2023) Transition to NNPC Ltd (Rebirth and survival) 2 Short Term (Jul. 2023 – Dec. 2024 ) Consolidation (Consolidate business and skills) 1. Adoption of low carbon 1. Define the perimeter and target portfolio of NNPC Ltd 2. Create profit oriented SBUs 3. Build strong corporate governance framework across the businesses to ensure sustainability 4. Create lean corporate center with targeted HR deployment 5. Develop critical skills and capability and talent management 6. Debottleneck operations and reap short term production gains and minimize operational and logistics cost 7. Conduct GHG inventory and establish baseline emissions for NNPC Ltd 8. Develop ESG Framework/Strategy and Energy Transition Plan 9. Define funding strategies of verticals and conduct negotiations with potential investors. 10.Emplace data governance/IT policy and processes 11.Develop Tax optimization strategy 2. 3. 4. 5. 6. 7. technologies across our business value chain Entrench accountability and performance management Optimize oil asset portfolio and deepen natural gas utilization Increase research and collaboration in new energies and other low carbon solution Roll out essential IT infrastructure Implement ESG Strategy and Energy Transition Plan Attract partners and funding for the gas downstream and power business expansion 3 Medium Term (Jan. 2025 – Dec. 2027) Growth & Expansion (Leverage portfolio and alliances) 1. Launch into international markets 4 Long Term (Jan. 2028 – Dec. 2031) Energy Company (Leverage portfolio and alliances) 1. Grow presence in international markets 2. Deepen investment in energy 2. Create strategic alliances with 3. 4. 5. 6. international partners in renewables business Create advance options for capital market access Expand footprints in gas processing and power market Expand supply capabilities via revamp of existing distribution networks and establishing new lines Roll out essential IT infrastructure 3. 4. 5. 6. 7. derivatives market and the capital market Grow investment and market share in low carbon energy products Expand investment in clean energy technologies across the value chain Deepen research and collaborations in new energies and other low carbon solution Deepen decarbonization to achieve zero gas flaring and 45% reduction in fugitive methane emissions intensity in fully owned businesses Roll out essential IT infrastructure The 10-year road map highlights NNPC Limited’s journey of growth from an emerging commercial enterprise to a fully-fledged integrated energy company built on best practice and ready for capital market access. 17 17 Content Organization structure Support Function Model Alignment of Planning and Budgeting roles 18 NNPC Ltd’s support functions will be largely decentralized with the exceptions for specific activities in a number of functions (2/2) Focus of the document Decentralized 1 Current state Desired end state Centralized 2 3 4 Rationale Risk Mitigants 6 Corporate Comms To ensure coherence in NNPC’s image, crucial activities such as external comms and govt affairs need to be centralized. However to promote agility, areas such as internal comms and CSR to a large extent, should be handled by the BU Communications guidelines and procedures defined and communicated to BUs 7 Finance To leverage scale, basic transactional activities e.g., account payable can be centralized through shared services. However, to ensure P&L accountability, decentralization of most activities is needed Finance policies and processes defined and cascaded to all BUs 8 Legal Potential increase in exposure of the organization to legal, compliance and other business risks. Given that these affect the safeguarding of the entire organization, a more centralized model but with support at the BU level for differing issues e.g., within approved financial thresholds Strict guidelines and policies; clear view of when matters need to be escalated to corporate 10 Strategy & Sustainability Greater need for BUs to define their strategies given growth ambitions and their proximity to operations. Additionally, some degree of centralization needed for sustainability given low maturity of function and potential need for the center to support BUs in planning and prioritizing initiatives Corporate strategy needs to be cascaded to BUs in a clear manner and correct interpretation of strategy needs to be ensured 11 RTI A hybrid model, albeit more centralized given that RTI is focused on both game changing and incremental innovation. For game changing innovations and given the low maturity of the function, a more centralized structure would be appropriate while for shorter term incremental innovation, this could be BU driven. Additionally, there would be a need for constant dialogue between BU and RTI to ensure success Clear policies defined on what areas can be BU driven vs what needs to be fully done at the center 9 GRC Source: Expert Interviews, Working sessions 19 NNPC Limited Brand Identity 20 BRAND IDENTITY REVIEW To ensure uniqueness and fit for purpose, we have subjected the NNPC Ltd brand identity to a set of defined criteria Meets criteria NAME Criteria LOGO Nigerian National Petroleum Company Limited (NNPC Ltd) TAGLINE Does not meet criteria Energy for Today Energy for Tomorrow Simple Legal Advisory Legible, easy to understand and reproduce ▪ The CINDETEMM Logo is not in use in Nigeria or registered at the Nigerian Trademarks Registry. Memorable Easy to recognize / strong brand recall ▪ NNPC Ltd can proceed to launch its Logo in Nigeria but is strongly advised to register its Logo as a trademark in the relevant classes of its operations in Nigeria. Flexible / extendable Versatile, can fit on various backgrounds and media Unique ▪ Trademarks are confined to specific jurisdictions; thus, the Logo needs to be registered in all jurisdictions of business interest. Distinctive, easy to distinguish from other companies’ branding, capable of legal protection and registration Timeless Ages well, aligns with long term business objectives and stays effective through the years Implications Recommendation Strong brand recall but may not serve our long term needs as an Energy Company (energy transition aspirations and ease of attracting funding) Potential Copyright Issues Meets all criteria ▪ Engage a renowned branding agency to review Brand Identity in light of the implications ▪ NNPC Ltd to be used for all communication (written and verbal) 21 BRAND IDENTITY REVIEW Revised NNPC Logo The Hierarchies of Energy Market priorities is the geometrical basis of the revised NNPC Limited logo shown below: ▪ The new logo was designed based on the principles underlying the motivations behind global energy market needs/priorities coined “the Hierarchies of Energy Market priorities”. ▪ The brand name “Meta-Energy Pyramid” describes the new NNPC logo, with pyramid representing different energy market hierarchy of needs and the word “Meta” meaning something occurring in succession, relating to change or Transformation, which clearly captures the vision of the NNPC Limited. 22 BRAND IDENTITY REVIEW Further Review of NNPC Ltd Brand Identity NAME LOGO Does not meet criteria TAGLINE ▪ The brand name “Meta-Energy Pyramid” describes the new NNPC logo with a Pyramid representing different energy market hierarchy of needs and the word “Meta” meaning something occurring in succession, relating to change or Transformation, which clearly captures the vision of the NNPC Limited. ▪ The new logo has passed rigorous originality tests and brand authentication by Intellectual property and brand attorneys locally and internationally including the United States, European Union, the United Kingdom and World Intellectual Property Organization (WIPO). Energy for Today Energy for Tomorrow NNPC Limited Criteria Meets criteria Simple Legible, easy to understand and reproduce Memorable Easy to recognize / strong brand recall Flexible / extendable Versatile, can fit on various backgrounds and media Unique Distinctive, easy to distinguish from other companies’ branding, capable of legal protection and registration Timeless Ages well, aligns with long term business objectives and stays effective through the years Implications Implications Strong brand recall but may not serve our long term needs as an Energy Company (energy transition aspirations and ease of attracting funding) Meets all criteria Meets all criteria 23 24 BACKUP 25 Content Organization structure Support Function Model Alignment of Planning and Budgeting roles 26 Strategy, capital allocation, planning & budgeting , and performance management are critical processes in most large organizations NOT EXHAUSTIVE Critical processes 1 Strategic planning Typical process output What does output look like? Long term strategic plan (5-10 years)  Stress tested and solid strategic plans (including high level metrics and targets) for each vertical approved by appropriate governance  Articulate the vertical momentum case and performance ambition  Identify critical trends and uncertainties  Strategic roadmap with key milestones and decision points with a coherent set of strategic options and initiatives 2 Capital allocation Capital allocation plan  Determine portfolio allocation is sufficient to deliver the ambition and create long-term value  Appropriate plan for reallocation resources to businesses with higher ROI potential 3 Business Planning/ Budgeting/ Forecasting Holistic Business plan and Budget  Detailed execution plans for each strategic initiative/project  Budget aligned to strategic plans  Detailed BU execution plans approved by corporate 4 Performance management Individual and corporate business performance scorecards  Tracking and performance management system  Communication plan and execution  Strategy monitor and alert system providing periodic reporting and projections on KPIs and targets  Plan for action in case of change to plans 27 Critical pain points identified in the current processes will be mitigated with new process flows NOT EXHAUSTIVE Critical processes 1 Strategic planning Key pain points identified in current process   No clear ownership on strategic planning Limited stress testing of high level strategic directive from board/CEO Certain key elements of strategic planning typically not holistically considered e.g., high level metrics and KPIs     No capital allocation framework in place No standardized processes for capital allocation across all BU’s. Lack of capital project performance management or stage gates  Clear capital allocation framework and RACIs in place to define the process, highlight interconnections with other processes and detail out core elements Budgeting typically done independent of strategy Potential overlaps with performance management and strategy setting Limited opportunity to adapt business plans and budgeting in a structured process to address changing business circumstance  Clear process maps and RACIs in place to segregate processes and highlight interconnections Annual allocation of resources with light revisions every 6 months Performance dialogues exists but aren’t robust enough Limited stress testing of targets and goals Constrained integration and synchronization of individual performance management against business performance   2 Capital allocation 3 Business planning/Budgeting/F orecasting   Performance management    4 How pain points have been addressed on the proposed processes     Clear process map and RACI matrix to guide and show development and progression from strategy steer to strategic plan Strategic plan to integrate with other critical processes (capital allocation, business planning, budgeting and performance monitoring) ensuring adequate stress testing and development of a holistic plan Ensure performance dialogues take place in the right format and guarantee a holistic performance view Introduce a goal setting that ensures a) to include both compulsory operational and P&L targets 28 For each process key stakeholders have to be clearly mapped to the new process flows R HIGHLY PRELIMINARY 1 Strategic planning Strategy & Sustainability Finance HCM Central team creates strategic plans and defines KPIs for verticals on scorecards C Central team supports for financial KPI definition C Support role to Corporate level Finance team R Creation of capital allocation plan R Leads aggregation of budget and supports with business plans captured in scorecards with KPIs created by commercial units C Support on budget and business plans captured in scorecards with individual level/people KPIs C Support on budget and business plans captured in scorecards with assurance/safety KPIs Measuring and tracking of financial KPIs and metrics C integration of employee performance management C Participation in performance dialogues on assurance goals Capital allocation 3 Business Planning/Bu dgeting/ Forecasting C Support on budget and leads business plan creation captured in scorecards with KPIs, as strategy feeds the budget 4 Performance management R Aggregates C operational and financial KPIs and metrics at corporate level. Drives overall performance dialogues at corporate C Central team supports for people KPI definition HSE & GSR R 2 A Approve C Consult I Inform Stakeholders at BU level Stakeholders Corporate Center (CHQ) Critical processes Responsible C Central team supports for assurance KPI definition Planning/ Strategy/ commercial Finance C BU strategy team to give business specific insight to corporate team C BU finance team to provide business specific insight and requirements R To provide business plan based on BU level insights and strategic plan to guide budgeting process R Produces budget based on business plan at BU level R Collects overall business level KPIs and drives performance dialogues at BUs C Measuring and tracking of business level financial KPIs 29 Methodology: We reviewed options against the strategic inputs from the PIA, Market outlook, Peer landscape and NNPC performance… Evidence to grow portfolio trategic inputs S PIA/MEMART Market Peer Past NNPC mandate outlook landscape performance In arriving at the corporate strategic ambition, several options were considered for all segments of the value chain along the grow – optimize – rationalize continuum. These options were weighed against the strategic inputs earlier identified to guide decision-making by the Transition Steering Committee and the NNPC Limited Board. Upstream Gas, Power & New Energy Refineries Downstream Non-core Business Strategic options Grow Optimize Evidence to rationalize portfolio Rationalize Increase O&G production to monetize prepeak demand Increase O&G production with a focus on resilient assets Focus only on profitable and resilient gas assets Increase gas production and engage in new energy sources Optimize gas production focused on the domestic market Focus efforts on engaging in new energy sources Grow and rehabilitate refinery portfolio beyond current assets Focus on rehabilitating assets with positive ROCE Reduce current asset portfolio footprint Grow the retail network to include additional revenue streams Enhance current network focused on profitability Reduce current retail portfolio footprint Expand existing ventures and develop new business lines Rationalize existing unprofitable ventures Focus venture operations on social impact opportunities Integrated energy company focused on maximizing shareholder value Integrated energy company maintaining presence across the value chain and adjacent sectors Focused O&G company with a mandate to maximize profitability of core operations 31 31

NNPC Limited Corporate Strategy -IOR Study Presentation.pdf

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