Sustaining the Tempo of NNPC Reforms

With the gains recorded by the raft of measures introduced by the Minister of State for Petroleum, Dr. Ibe kachikwu to enthrone a regime of transparency and accountability in the Nigerian National Petroleum Corporation, Ejiofor Alike writes that recent in

Barely one month after President Muhammadu Buhari had in July 2015 promised a raft of measures to improve Nigeria’s oil and gas sector at separate meetings with ExxonMobil and the Nigeria LNG Limited delegations, the now Minister of State for Petroleum, Dr. Ibe Kachikwu was named the new Group Managing Director of the Nigerian National Petroleum Corporation (NNPC).

Prior to his appointment, Kachikwu was the Executive Vice Chairman and General Counsel of ExxonMobil (Africa).

Immediately on assumption of office, Kachikwu had initiated a reform targeted at personnel restructuring to enhance transparency and competitiveness of Nigeria’s operating environment. As a cost-cutting measure, he did also not waste time to commence the restructuring of the corporation in a sweeping move that affected senior executives.

He also ordered a forensic audit of the NNPC, and pledged to split the Pipelines and Products Marketing Company (PPMC) into three portfolio companies that would manage the refineries, pipelines and supply of petroleum products.

In line with the recommendations of President Buhari’s Transition Committee, Kachikwu also cancelled contracts with oil traders and called for fresh tender for oil lifting contracts, saving the NNPC $150 million monthly.

Also in an unprecedented move to restore public confidence in the then corruption-ridden NNPC, Kachikwu further opened up the books of the state-run oil company to public scrutiny with the publication of the monthly financial and operational report of the corporation, thus enthroning a new regime of transparency.

He further unveiled what he called a threepronged process in the restructuring of the corporation. “It is three-pronged process that I am pursuing. There is a people aspect, which we are dealing with now. There is a process aspect. And after placing the people at the right places, you are going to get a forensic audit done; that will be able to say to you, ‘this is the state of the company,” he said.

“We are going to put processes and control in place. We are going to do retraining and repositioning and then, we are going to reengage our majors and minors, all those who are active in the sector, for us to work as a team to take Nigeria forward. It is going to be the process stage.

“The final stage will be the business stage, which will be looking at all the existing contracts. Are they good? Are they okay? Do they need to be re-kitted and redone?

“We will look at the Production Sharing Contracts (PSCs). What should we do, going forward? We will look at the challenges posed by reduced balance sheet as a result of $40 or $50 per barrel oil. What do we do to energise recovery and income growth so that government will have money to work with?

“It is a very intensive work; very calibrated work. A lot of us are not spending time sleeping but over the next five to six months, you will begin to see a new NNPC. A new process of oil administration in the country and obviously, giving fillip to Mr. President’s dream of taking the oil industry back to where it should be.”

Expectedly, the gains of the reform were enormous as public and investor confidence was gradually restored in the NNPC.

This was evident in NNPC’s success in securing a $1.2 billion multi-year drilling financing package for 36 offshore/onshore oil wells under the NNPC/Chevron Nigeria Limited Joint Venture at a brief ceremony in London.

The funding package, which is being financed by a consortium of Nigerian and international lenders, is an integral part of the Accelerated Upstream Financing Programme initiated by NNPC to address the perennial challenge experienced by the federal government in providing its counter-part funding of joint venture upstream activities.

The $1.2 billion is to be channeled into the development of 23 onshore and 13 offshore wells on Oil Mining Leases (OMLs) 49, 90 and 95 in two stages over 2015- 2018.

With the corporate restructuring Kachikwu initiated in the NNPC, the corporation has today reduced its average monthly loss from N40 billion when he took over to N3 billion, while efforts remained on target to achieve profitability before the end of 2016, a feat that had not been recorded in 20years.

In an exclusive interview, Kachikwu had told THISDAY that the reform was only 25 per cent completed, while 75 per cent was yet to be implemented. Labour protest The NNPC reform had progressed successfully until the corporation was reorganised into seven business units, prompting the workers under the auspices of the two major unions - the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the National Union of Petroleum and Natural Gas workers (NUPENG), to go berserk, shutting down the organisation, in protest.

Before the protest, Kachikwu had announced that President Buhari had approved the restructuring of the NNPC into seven new divisions.

Kachikwu explained that under the new structure, NNPC would have five core new divisions comprising the upstream, downstream, refining, gas and power, and the ventures groups.

Two other groups – finance and services – were also created while the number of NNPC’s subsidiaries was expanded from 16 to 20.

Kachikwu had also explained to THISDAY that the restructuring did not amount to the break up or unbundling of the corporation and assured workers that there would be no layoffs from the new corporate engineering.

But dissatisfied with the new corporate structure of the organisation, the corporation’s workers said that they were not carried along in the entire process, hence their decision to down tools.

Though the workers called off the protest in less than 24 hours and expressed support for the reform, their action re-ignited the age-long opposition to changes in Nigeria’s oil and gas sector as the National Assembly and other entrenched interest capitalised on the protest to lay ambush against the reform. Legislative ambush First, the House of Representatives moved against what it called the planned unbundling of the corporation by the federal government without an amendment to the Act which established the corporation, despite Kachikwu’s clarification that the exercise was not unbundling but mere reorganisation.

“We have not unbundled NNPC. We had a press conference yesterday where I explained this. What we have simply done is reorganisation. We have five business entities focused on business: Upstream, Downstream, Refineries, Gas and Power that are there before.

“There is also Ventures that capture all our little companies that were not having proper stewardship. They are run by individuals who report to the GMD. The NNPC is still a whole. There is nothing new that has happened.

“I have tried to explain this and I am sure the NNPC workers are members of the family, they will understand. We are going to have a meeting, and they will be made to understand. Perhaps the engagement has not been good enough.

“NNPC has not been unbundled in the sense of breaking up NNPC into distinct institutions. I am concerned. I don’t want the industry shut down. I am sure we are going to resolve the issues very soon,” Kachikwu had explained.

But citing the NNPC, CAP N123, Laws of the Federation, 2004, the House insisted that the structure of the corporation can only be altered, changed or otherwise amended only by an Act of the National Assembly.

Following a resolution sponsored as a matter of urgent importance by the Hon. Jarigbe Agom Jarigbe (Cross River PDP), the law makers urged Buhari to urgently transmit an executive bill to the National Assembly, if he intends to unbundle NNPC or execute fundamental restructuring or reforms on the oil sector.

Jarigbe had argued that as Petroleum and Natural Gas is included on the Exclusive Legislative List (Item 39), not even a presidential fiat can restructure it.

It was not clear how the National Assembly, which could not pass the Petroleum Industry Bill (PIB) in eight years, could pass such executive bill that required such urgency, without stalling the ongoing NNPC reform for many years to come.

The House had later through the Chairman of the House Committee on Media and Public Affairs, Hon. Abdulrazak Namdas said it supported any action aimed at making the corporation more efficient and making it a profit-making organisation but still insisted that any re-organisation or restructuring, whether internal or otherwise, must be executed through an amendment of the Act establishing the NNPC.

The House also insisted that any amendment has to include the establishment of a Petroleum Inspectorate Directorate as contained in the Act, which is not part of the current reorganisation.

Hon. Namdas confirmed that the House had already reached out to the Presidency on the need to adhere to the constitution.

“The Speaker has put calls to the President on three different occasions, asking Mr. President to at least send an Executive Bill... They had their discussions, but we have not seen the Bill,” he said.

Though Hon. Namdas added that the House would urgently pass any amendment to such bill, due to its importance to the national economy, the PIB, which the House failed to pass for eight years, was equally important to the Nigerian economy.

The House has effectively used the purported non-adherence to the rule of law to stall the NNPC reform, despite the fact that as a visiting Professor of law, Kachikwu knows his limitation in the reorganisation of the corporation.

Since the House has raised the issue of law, President Buhari should use the Office of the Attorney General of the Federation and Minister of Justice to intervene and save the NNPC reform from legislative ambush.