Facts and Myths about NNPC

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Right Of Reply Aliyu Abubakar

In a grossly-opinionated article on the THISDAY Back Page of Tuesday, August 16, 2016, entitled “Baru’s Triumphant Return: Be Afraid! Be Very Afraid!”, the writer, Mr. Toyin Akinosho, succeeded in casting aspersions and mudslinging on the personality, capability and credibility of Dr. Maikanti Kacalla Baru as the Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC).

Sadly, the write-up was not only a deliberate effort at disparaging the GMD’s pedigree to deliver on his recent appointment, but also to mislead the general public on some critical developments in the Nigerian oil and gas industry. However, in order to put the records straight and situate them in a proper perspective, we wish to state the following facts:

The write-up claimed Dr. Baru’s appointment as GMD “spelt victory for the old guard at the corporation”. It is a fact that Dr. Baru’s appointment was at the recommendation of the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, to the president. Thus, the minister must have found Dr. Baru the most fit for the job. Most importantly, Baru’s sterling antecedents that are characterised by his honesty, integrity, transparency and accountability, which are also part of the cardinal principles of the Muhammadu Buhari administration, speak volumes for him. It is on record that he was, for four years (2004-2007), the chairman of the NNPC Anti-Corruption Committee. Therefore, those exemplary traits were part of what earned him the position of GMD of the country’s petroleum conglomerate.

The write-up claimed “NNPC is a political party with a profusion of ranking managers who consider first their personal interests”. We wish to state that Baru does not partake in partisan politics whether internal or external to NNPC. He is an honest and hardworking technocrat who focuses on any assignment he is tasked to do. His proven track record over a very-fulfilled career testifies to this.

On assumption, Baru had stated to the staff and the entire world that he would continue with the good works of the minister. In fact, at a maiden meeting with the staff of the corporation recently, he clarified the issue of NNPC’s achievement in terms of profitability as surplus of cash flow in May 2016 rather than profit as the various obligations of the corporation were not taken into account towards arriving at the figure. This was proven in NNPC’s June 2016 Financial Report that showed a loss of N26 billion which was more in line with the N19 billion loss recorded in April 2016.

The write-up claimed “NNPC could not find a way of solving the Joint Venture cash call challenge”. We wish to state that Baru has expected action from the committee that is negotiating with the JV partners to close out the deal that would not only repay the arrears over the next five years but also put in place a process where the JVs will not be cash calling government and eventually transiting to the Incorporated Joint Venture (IJV) model as is the case with the Nigerian Liquefied Natural Gas (NLNG), where the IJV would be autonomous under the direction of its board and management. It can fund its operations, pay royalty and taxes to government as well as dividends to its shareholders as a Limited Liability Company.

The write-up claimed that “past NNPC management badly managed the Production Sharing Contract (PSC) debacle”. To the contrary, in 2008, NNPC put up a case for the review of the PSC terms and the then Minister of Petroleum Resources, Dr. Odein Ajumogobia, issued a letter putting on notice the PSC contractors to renegotiate the PSC terms.

Actual negotiations were started between a committee consisting of Department of Petroleum Resources (DPR), Federal Inland Revenue Service (FIRS), Ministry of Finance (MoF) and the NNPC with the PSC contractors that year. However, when Ajumogobia was replaced, his successor discontinued the engagement. The re-engagement was restored by the current minister and was continued by the team even after the change in baton as GMD.

It is expected that both efforts towards JV cash calls and PSC dispute settlement will be approved by the appropriate authorities when concluded by NNPC and the teams and they will be implemented under the leadership of Baru.

The write-up claimed that “Dr. Baru is too steeped in NNPC’s intrigues and predilection for stalling investments”. We wish to state here that if contacted, the partners that invested in the divested assets by the international oil companies (IOCs) would have opened up to say that Baru’s actions while serving as Group Executive Director (GED), Exploration & Production (E&P) were laudable and would have given the various assets the latitude to sweat the assets maximally.

His vision, which he shared with them from day one was to transit each oil mining lease (OML) to an Incorporated Joint Venture (IJV) like the NLNG model from that date. The IJV would develop the assets as the operator under the guardianship of its board with a management whose managing director would be from the JV partner rather than NNPC. However, due to the insistence of their bankers, they preferred operatorship which is in conflict with the Joint Operating Agreement (JOA) signed with the divesting IOCs where operatorship automatically reverts to NNPC on relinquishment of IOCs’ shares except if NNPC opts otherwise.

A middle path was charted by Baru for a joint operation of the assets through Assets Management Teams with the partner taking a lead role as a prelude to converting the OMLs to the IJV model. This middle course has been implemented and the partners are happy with the outcome and looking forward to the JV incorporation within the next few years.

It is instructive to note that the militancy in the Niger Delta has largely contributed to the continuous disruptions of smooth operations of the assets. Militancy is worse in the Western Delta where NPDC and its JV partners have assets than the Eastern Delta where Aiteo and Eroton operate. But with the dialogue between government and the militants, we expect the situation to improve and the full value of Baru’s vision greatly realised.

Interestingly, one of Baru’s 12 Key Business Focus Areas, the growth of the Nigerian Petroleum Development Company (NPDC), a subsidiary of NNPC, is geared towards reviewing some of the salient contractual arrangements and terminating all bad ones. It will help a lot if energies are expended on promoting the attainment of such laudable objectives which are premised on moving the corporation forward.

For now, it is too early for one to get too feverish with Baru’s appointment or his performance. He is on course. In fact, he is on the sure path of sustainable growth and development of NNPC and the country’s oil and gas industry at large. The train has already left the station.
• Abubakar, Technical Assistant, Communications to the GMD, writes from Abuja