Baru’s 16-point agenda: How it affects you! – Analysis
The newly appointed Group Managing Director of the Nigerian National Petroleum Corporation, NNPC, Maikanti Baru, took over from former GMD, Dr. Emmanuel Ibe Kachikwu on Friday, 8th July, pledging to work closely with staff of the Corporation to find lasting solutions to the challenges facing the industry.
The pledge was part of a 16-point agenda he unfolded shortly after taking over from his predecessor and Minister of State for Petroleum Resources, Kachikwu.
Mr. Baru said it was Mr. Kachikwu who recommended him to President Muhammadu Buhari for his appointment. He said his management would continue the on-going comprehensive restructuring of the NNPC, describing it as inevitable.
It is common knowledge that NNPC, before Kachikwu took over 11 months ago, was enmeshed in corruption and secrecy, prompting stakeholders to call for an overhauling of the Corporation.
Besides, the change was timely because the Corporation for the past 10 years, posted annual loses however, in Kachikwu’s handover statement, he said within the period he remained at the helm of affairs at the Corporation, some modest achievements were recorded to include the downstream liberalization regime; reducing upstream contracting period to nine months from initial average of two years, and redirection of NNPC on the path of profitability as witnessed in the May 2016 NNPC monthly financial report, which posted a profit of N274 million.
Now that Baru has taken over, there is need to peruse his 16-point agenda to see their viability- are they what NNPC truly needs to chart it on a path of success?
His first agenda- Implement new business models that would grant autonomy required to empower the strategic business units and autonomous business units deliver on their mandates- this is commendable because unlike what most new GMDs who would have discarded the agenda of his predecessor, Baru embraced Kachikwu’s unbundling of the NNPC. The new business units indeed need to be empowered to run as real business companies that can compete with private businesses. With the right business strategies, NNPC will become profit oriented.
Secondly- Provide relevant directions and controls to ensure their growth and profitability- although he did not state how he intends to achieve this goal yet, it is believed that the NNPC needs a dogged direction if it would begin to make any meaningful impact. In the past, NNPC’s activities had been marred with corrupt practices which cumulated into losses. So, it is high time the company started declaring profits, and this can be achieved through providing relevant directions.
Thirdly- Continue exploring ways of relieving government the burden of cash calls obligation as well as address and defray the agreed cash call arrears of the IOCs- since NNPC was not making profit, the burden of cash calls fell on the federal government who would provide investment money ought to be provided by the NNPC. Besides, cash call has become a huge problem in NNPC which will be solved if the Corporation starts running like a full-fledged competitive company. The Federation Account has also been depleted, making it impossible for the government to pay cash calls, leading to the International Oil Companies, IOCs, also refusing to pay theirs. So, the defrayed cash call from the IOCs have to be obtained for capital investments and projects to be made possible in the country.
Fourthly- Restore oil and gas production and grow the national reserve portfolio- yes, Nigeria’s oil and gas production has been affected due to spates of attacks by oil militants in the Niger Delta, vandalism and oil theft, less productive refineries and less number of refineries. This problem has led Nigeria to exporting its crude for refining in other countries and then buying it back at more expensive prices. This problem has also affected the national reserve as Nigeria had stopped growing its reserve for the past 10 years. If this problem is solved, this means more money for the country to take-on capital projects, diversify, and no more fuel scarcity.
Fifthly- Increase crude oil production capacity by the NNPC upstream subsidiary, the Nigerian Petroleum Development Company (NPDC)- NPDC is an arm of NNPC that has been underproductive over the years. So yes, there is need to up the ante of the company to begin to produce at full capacity.
Sixthly- Review all weak contractual agreements and terminating bad ones as appropriate- this is one of the Corporation’s biggest problems. Nigeria has signed loads of contracts with the IOCs especially which was later discovered to be less favourable for the country. The Minister of Petroleum Resources and the Department of Petroleum Resources, DPR which is also an arm of NNPC, have been accused of giving out marginal oil fields licenses to unqualified bidders, cronies, families and allies, discretionary allocations of oil blocs, many of which are not producing today. There is also the oil swap issue- this point needs to be addressed.
Seventhly- Leverage on equity positions to cause the development of key gas assets for both domestic and export- NNPC shares equity in IOCs mostly in the 60 percent (NNPC)/40 percent IOCs, except in Shell where NNPC has 55 percent. NNPC needs to exert its authority as the highest shareholder in these companies and begin to direct the affairs to the benefit of Nigeria unlike what truly obtains where the country is given whatever it likes by the IOCs. Also, it has been proven that Nigeria has more gas deposits than oil. This means that for all the years the country had concentrated on oil, most of the gas reserves have been untapped. And as analysts would say, “gas is the new oil”- this means gas is gradually taking the place of oil even in the international market. By 2020, the number of cars that would run on gas would have increased greatly as the world is now paying more attention on gas than oil. And if Nigeria were serious with its gas reserves, every home including those in the rural areas would be cooking with gas stoves because it would be cheaper as cheap as water. There will not be problem of electricity if our gas reserves as made best use of. However, not everyone supports this point. A school of thought believes NNPC should sell off its equity in the IOCs and take the place of dishing out the policies. According to them, “NNPC has no business in running businesses”. They argued that NNPC’s equities in the IOCs, are behind its inability to curtail the excesses of the IOCs.
Eighthly- Pursue the expansion of gas networks across the country- Yes, there is need for more gas pipelines to be built if Nigeria would take advantage of its gas reserves.
Ninthly- Repair and restore oil and gas pipeline infrastructure and providing robust security system for both detection and deterrent in conjunction with the existing security arrangement- Nigeria has to repair its already vandalised oil and gas pipelines and provide adequate security to stop theft and vandalisation. This point should be part of number eight to avoid repetition.
Tenthly- Improve refining efficiency of the four existing refineries to pave the way for future expansion- this point is long overdue. This point should also be part of number four.
Another point on the agenda include- creating an all-inclusive internal advisory council on security, comprising representatives from NNPC, the international oil companies, the Petroleum and Natural Gas Senior Staff Association and National Union of Petroleum and Natural Gas Workers, and security operatives to brainstorm and address host community agitations to complement government security team’s efforts in the Niger Delta region- Yes, this is needed because all stakeholders must come together to protect oil and gas pipelines which are national properties. If the stakeholders, including the Niger Deltans are carried along in protecting the pipelines, militancy, vandalism and oil thefts would be a thing of the past. The host communities also need to be taken care of as against what obtains at the moment.
This point- pursue diversification of businesses by refocusing on the implementation of renewable energy programmes and frontier exploration services, is necessary. The world is gradually tilting towards gas and renewable energy like solar, coal, wind and even urine as a means of energy providers.
Continue the drive to make the venture businesses profitable and ensure service delivery- This point has been mentioned earlier. Should have been part of either point one or two.
Entrench the culture of professionalism by doing the right things at all times through transparency, accountability, and respect for all- Of course, NNPC needs to do away with bureaucracy, secrecy and corruption. This can only be achieved if the Corporation is ran like the private companies which are profit oriented.
Lastly on the agenda- ensure adequate staff welfare and motivation, training and capacity building. Of course, if NNPC were to be ran like a proper business enterprise, its staff need to be re-trained. The bad part of this point is, NNPC staff should not be complaining of inadequate welfare and motivation because they have been ‘overfed’ for too long. This is not to say one is against their welfare however, the Corporation needs to do away with unrealistic salaries and packages at the expense of the masses.
After all these, there have been recommendations by stakeholders and professional bodies such as the Natural Resource Governance Institute, NRGI, the Petroleum Revenue Special Task Force (PRSTF) otherwise known as the Ribadu Report, NEITI and others. Part of the issues they raised include- tax, signature bonuses and royalty remittances, middlemen issue, discretionary spending, revenue remittances by its subsidiaries, elimination of the Domestic Crude Allocation, DCA, competitiveness of swap deals, NNPC should stop selling oil to unqualified companies both indigenous and foreign, need to rebuild oil savings, NRGI suggests Petroleum Industry Bill (PIB) which requires omnibus legislation should be scrapped however, The Ribadu Report recommends to undertake a strategic review of all NNPC subsidiaries before the PIB passes, with a view to privatizing, repositioning or review of all NNPC subsidiaries before the PIB passes, with a view to privatizing, repositioning or scrapping non-performing, redundant or irrelevant business units.
Other recommendations include, elimination of bureaucracy, Create a special, properly-trained Oil and Gas Sector Financial Crimes Unit for law Enforcement, Conduct an independent process audit of all upstream cost control rules and mechanisms, including the use of cross-country price benchmarking. Amend the 1984 Special Tribunal (Miscellaneous Offenses) Act to strengthen the legal framework for oil theft and other sector crimes. Arrest and prosecute perpetrators and financiers of illegal bunkering rings. Production data for fiscal purposes should be obtained at the flow stations where crude oil is stabilised and not at the terminals as is currently the practice. No deductions should be made from the amounts payable to the Federation Account. Domestic crude oil should be sold at international competitive prices.
They also suggest that the FGN should block leakages in the conversion to finished goods process of NNPC. There should be full compliance by NNPC with prevailing CBN exchange rates for remittance of crude oil proceeds. The Federal Government should revisit the Domestic Crude Oil Business Model. Carry out adequate review of the purchase or lease option for production equipment. FGN should intensify efforts to get the other LNG projects up and running. FGN to carry out a comprehensive review of its NGL/LPG entitlements under the Agip and Shell Joint Ventures, Gas Flare Penalties, The DPR should employ the use of proper IT systems and databases to keep its records and ensure consistency and integrity of information across the organization, among others.
