When Former NNPC GMDs Met over Oil Industry

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Recently, former helmsmen of Nigerian National Petroleum Corporation, the state oil firm, met with the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, and incumbent head of the corporation, Dr. Maikanti Baru, in Abuja where their conversation focused on the state of Nigeria’s oil industry. Chineme Okafor, in this report, takes a look at their decisions

After a one-day meeting with the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, and Group Managing Director of NNPC, Dr. Maikanti Baru, 13 former GMDs of the corporation declared that Nigeria’s petroleum industry was losing its competitiveness, and could collapse if nothing urgent was done about it.

They said the industry was going through significant challenges and suggested ways to get it out of the challenges. Identifying the challenges, they made suggestions for recovering the industry’s fortunes.

The former NNPC bosses who attended the meeting, which had Kachikwu represented by his Senior Technical Assistant, Engr. Johnson Awoyomi were HRM (Dr.) Edmund Daukoru, Chief Odoliyi Lolomari, Dr. Thomas John, Engr. Lawrence Amu, Dr. Jackson Gaius-Obaseki, Engr. Funsho Kupolokun, Dr. Abubakar Yar’Adua and Dr. Joseph Dawha.

Chief Festus Marinho, Dr. Chamberlain Oyibo, Dr. Mohammed Sanusi Barkindo, Engr. Austen Oniwon and Engr. Andrew Yakubu were absent but reportedly endorsed the meeting.

The erstwhile bosses made suggestions that eventually raised suspicions amongst Nigerians as to their intents. Expectedly, they got some hard-hitting reactions mainly from their position of fuel pump price.

During the meeting, Baru presented to the meeting, the operational status of the NNPC and the country’s oil and gas industry. He also presented to them the 12 business-focus areas he intends to pursue during his time as the head of NNPC.

These 12 business-focus areas, Baru said will help put the corporation back on the path of growth and profitability, suggesting that the NNPC might have been rudderless.

Together, they reviewed the current state of the country’s oil industry, deliberated on ways to resolve the issues militating against its progress and recommended progressive measures.

During the brainstorming session, they expressed serious concerns on the declining oil production level and its attendant consequences on the country – its environment and revenue.

They agreed that if the current situation remained unchecked, it could lead to the crippling of the NNPC, and Nigeria’s oil industry.

Because the sector is the mainstay of the Nigerian economy, their concerns were not taken lightly, and their meeting was immediately followed with visits on Monday to the president, Muhammadu Buhari by Kachikwu and Baru, as well as another meeting between Kachikwu and key stakeholders in the sector on Wednesday at his office in Abuja.

The GMDs Deliberation

During their meeting, the GMDs deliberated on some obvious challenges to the sector. While these challenges could not be said to be entirely new because they had existed for a while now, getting them solved has however proved to be somewhat knotty to Nigeria, hence, their escalation in most cases.

They talked about insecurity which is by far the most threatening challenge to oil production in the Niger Delta which environment is equally impacted.

According to them, there is the urgent need for government and security agencies in the country to refocus as well as engage the various host communities, established social and traditional structures; and to develop an actionable partnership framework on which a lasting solution to the present unrest in the Niger Delta could be built.

From February 2016, militants in the Delta have confined oil production from facilities in the region to volumes far less than the country’s average daily production at tranquil periods. From about 2.2 million barrels per day (mbpd) of production, the government through Kachikwu said output has dropped to about 1.6mbpd or even less.

Finding a lasting solution to the actions of the militants has also defied the government whose actions to restore normalcy in the region and production have yielded very minimal results.

The GMDs suggested that the government should now begin to think out of the box on the insecurity challenges, having failed with its conventional approaches.

The former GMDs also deliberated on NNPC’s corporate reputation which they said was a huge source of concern to them, in that, a company’s corporate reputation contributes to its competitive edge.

They said they were concerned about the increasing negative perception of the corporation by Nigerians especially in terms of opaqueness and accountability. They therefore called on NNPC to embark on an honest image laundering exercise, which will include educating Nigerians on its activities as a commercial entity managing the nation’s assets in trust.

The NNPC has had a chequered history of accountability, the suggestion of its former heads that it comes clean on its operations with proactive education would perhaps advance the accountability processes that Kachikwu initiated in his one year of managing its affairs.

Kachikwu had during his time at the corporation instituted a monthly publication of the NNPC’s operations. He also pledged to conduct a forensic audit of NNPC’s account, saying a corporation like it should come to the international oil market square squeakily clean to attract the kind of investments it needs for its expansion.

On the state of Nigeria’s refineries in Kaduna, Port Harcourt and Warri, the former GMDs advised that the refineries be rejuvenated using the Original Equipment Manufacturers (OEMs).

They added that when this is done, the refineries should be restructured to operate as an Incorporated Joint venture (IJV) similar to the Nigerian Liquefied Natural Gas (NLNG) model with credible partners having requisite technical and financial capabilities. This position was adopted by the former GMDs adopted.

But what threw up some sort of worries amongst Nigerians was their assertion that the current price modulation policy for petrol practised in the country was uneconomical and as such the pump price of N145 per litre was not sustainable.

In their commendation of NNPC’s efforts at resolving the fuel supply shortage the country experienced in the first and second quarters of the year, the past heads argued that the vital indices used by the government to determine its price modulation on petrol are not at parity with extant realities.

While urging the NNPC to emplace measures that will ensure sustenance of seamless supply of petroleum products nationwide, they noted that the price cap of N145 per litre for petrol was not congruent with the liberalisation policy especially with the foreign exchange rate and other price determining components such as crude cost, and Nigerian Ports Authority (NPA) charges remaining uncapped.

Notwithstanding their position on this, the government through the acting Executive Secretary of the Petroleum Products Pricing Regulatory Agency (PPPRA), Mrs. Sotonye Iyoyo, said it was not contemplating any adjustments in the pump price of petrol. Iyoyo noted that to PPPRA, the role of the one-time NNPC bosses on this was merely advisory.

The former GMDs also advised that funding of joint venture operations by the NNPC should be the first line charge to oil revenue to ensure sustainable production and reserve growth. This is because of the shortfall in joint venture cash call request which the NNPC finds difficult to meet up with.

Kachikwu had initiated measures to pay off arrears of NNPC’s cash call to its joint venture partners, which is reportedly at $7 billion.

Other Issues

Apart from the challenges of insecurity, unprofitable downstream operations, NNPC’s corporate image, and funding for joint venture operations, the former GMDs also threw their weight behind Buhari’s decision to continue the country’s search for oil in other parts of the country, especially the north.

They explained that sustained exploration activities in the frontier basins particularly the on-going efforts in Chad Basin and the Benue Trough where promising prospects had been recorded was the right thing to do as it would add to the country’s reserves if oil is found in commercial volumes there.

They also noted that for effective functioning, the National Petroleum Investments Management Services (NAPIMS) being the technical component of Nigeria’s exploration and production, and not just an investment vehicle, must remain with and managed by the NNPC.

According to them, taking NAPIMS out of the NNPC will make NNPC an ineffective national oil company. They opined that such technical component must be integrated as part of NNPC. The Petroleum Industry Bill (PIB) had proposed the incorporation of NAPIMS and separation from the NNPC.

They said the NNPC also needs to improve on its relationship with its key stakeholders such as the federal government, National Assembly, host communities and its international partners, to get the best in its interactions with them.

On revenue, the former GMDs expressed serious concerns about the continued dwindling of NNPC’s revenue and advised that it should pay particular attention to its revenue-generating entities such as the Nigerian Petroleum Development Company (NPDC), its retail outlets and the refineries to return it to profitability. The refineries have however remained NNPC’s loss-making outlets.

Because the corporation has reportedly maintained a poor revenue profile, the former GMDs said they were worried about its debt profile, and advised that it urgently establish the true state of its financial status and immediately decide on the most appropriate capitalisation model it would adopt for growth.

But Labour is Suspicious

Reacting to the position of the GMDs on petrol pump price, the Trade Union Congress (TUC) said it was suspicious of the group’s intention.

It kicked against the position, in a statement that was signed by its president, Comrade Bobboi Bala Kaigama.

“In case the management of the NNPC has forgotten, the economy is in crisis and life has become very difficult for the common man who now can hardly afford two square meals per day.

“The present minimum wage can longer purchase a bag of rice. Businesses are shutting down leading to millions of job losses, which of course have accentuated increased cases of crime and other vices.

“If all the members of the NNPC team can offer as recipe to contain this scourge of economic downturn is to hike the price of petroleum products, then they are not fit to manage the sector and should throw in the towel.

“If the country had other sources of forex or produces most of what it imports, the economy would not be what it is now. What stops the government from building more refineries and diversifying the economy? The federal government should maintain some stability of forex, taking into cognisance the fact that Nigeria is an import-dependent country,” the statement said.

It stressed that, “The congress will resist further hike in the price of petrol if that is what it will take to get the government into thinking out of the box. We do hope it doesn’t get to that.”