In the build up to the 2015 presidential election, the president, Muhammadu Buhari as candidate of the All Progressives Congress (APC) promised to sanitise the oil sector, which provides Nigeria with 95 percent of its foreign exchange earnings and which invariably is the lifeline of the country’s economy.
To demonstrate his willingness and commitment to that promise, he brought in a technocrat, Dr. Ibe Kachikwu, first as the Nigerian National Petroleum Corporation (NNPC) helmsman and later as the minister of state for Petroleum Resources. Kachikwu remained the minister until last month when all the ministers were told to leave at the expiration of Buhari’s first term in office.
Four years after, has the government lived up to expectations?
Although, available records show that Nigeria’s enviable oil and gas and renewable energy reserves have not translated into meaningful economic growth, thereby making it difficult to optimise the resources for the benefits of Nigerians, industry players are of the view that Kachikwu’s roadmap tagged “Short and Medium Term Priorities also known as 7 Big Wins (2015-2019)” appear to have in no small measure helped to record some major breakthroughs in the sector.
For instance, one of the ministry staff noted that there has been deployment of new organisational structure corporate wide, emplacement of new and workable business models, initiation and consistent publication of NNPC monthly financial and operation report since September 2015, conduct of NNPC outstanding Annual Audit and so on, and these have blocked leakages and put an end to bad contracts.
“Also, the NNPC management has replaced Offshore Process Agreement (OPA) with the Direct Sales and Direct Purchase (DSDP) scheme with reputable refineries to ensure product availability, a measure reports indicate, resulted in saving about $1bn.
“It is worthy of note to say that, with the implementation committee set up to monitor the implementation of ministerial directives on cost reduction headed by the Permanent Secretary, ministry of Petroleum Resources, the cost of crude oil production has come down from over $32.00 in 2015 to $22.00 in the last quarter of 2018. This was a quantum leap in achievement,” the ministry staff.
Speaking in the same vein, a chieftain of the ruling APC, who also pleaded not to be named, further noted that “on the international scene, Nigeria’s Mohammed Sanusi Barkindo was appointed the Secretary-General, Organisation of Petroleum Exporting Countries (OPEC) in 2016, Nigeria was exempted from oil cuts, and the country successfully reconciled its crude oil data with the OPEC and also spearheaded the transformation of African Petroleum Producers Organization (APPO). These things didn’t just happen by sheer happenstance. They were a direct result of the efforts of Dr. Kachiukwu in making sure that the oil and gas sector retained its pride of place, without however downplaying the need for a future without oil. Certainly, in many ways than one, the former minister has proven to be one in a class without peer in the ways and manners he has continued to discharge his responsibility. His big wins have not ceased to happen and all because the former minister has remained diligent and ensuring that the right messaging were sent out at the right time, without doing a needless mud fight,” he added.
Daily Sun investigations revealed that those in authority too have never feigned ignorance about the state of affairs in the petroleum sector and how it could contribute in no small measure to revamping the country’s economy if properly managed. It was in the light of the above that Kachikwu’s policy programmes, focused on seven thematic areas were embraced.
The programmes initiated by the former minister, it was gathered, were designed to grow the oil and gas industry to enable it serve Nigerians better. It came into effect on October 27, 2016 after it was launched by the president.
Major aspects of the programmes are: Policy and Regulation, national oil policy, national gas policy, downstream policy, fiscal reform policy, petroleum industry reform bill, business environment and investment drive; Accelerated Income Streams, upstream, midstream, downstream; Gas Revolution, gas infrastructure development, gas revolution projects, promotion of domestic ultilisation of LPG and CNG, reduction of gas flaring, gas commercial framework implementation and gas to power.
The objective of the gas revolution agenda, the then minister noted, was to transform Nigeria from an oil-based economy to a gas-based one through the development of robust gas infrastructure that would ensure improved power availability and drive the establishment of gas-based industries.
Under the same strategic policy, the ministry also proposed to shift focus from government built infrastructure to investor built one. Particularly, the government is expected to provide incentives for the building of infrastructure to supply gas from the Eastern parts of Nigeria to commercial demand centres in the Western and Northern parts of the country. A key short-term objective was to introduce a regulatory framework for commercial pipeline investment with clear tariff methodology.
The focus on gas will also involved the development of gas-based industries and the utilisation of gas hubs near central processing facilities (CPF). These CPFs were a key part of the Gas Master plan. They are however yet to be built.
On the upstream side, the roadmap proposed a review of the current legal and regulatory framework on gas flaring and implement stranded gas development projects including floating LNG, as well as establish a framework for the use of modular gas processing and utilisation systems to allow third party off-take from the wellhead. Under this scheme, the government is also expected encourage the fulfilment of domestic gas obligations (DSO) by moving from a sanction-based model to an incentive-based model. This, it is noted, would require the amendment of the National Gas Supply and Pricing Regulations, which impose fines for failure to fulfil DSOs.
Other outlined aspects of the programme were Refineries and Local Production Capacity, which covered comprehensive rehabilitation and revamp of existing refineries and expansion of domestic refining capacity (co-location, greenfield, modular); Niger Delta and Security, environment and security, infrastructure interconnection, capacity building and economic empowerment.
There was also Transparency and Efficiency, transparency, capacity building, institutional strengthening and governance model, ICT and automation and Performance Management, aimed at ensuring stakeholders’ management and international coordination, communication strategy, stakeholder relationship building and management, international energy relations and bilateral cooperation.
Available records also show that working in partnership with several international organisations such as FOSTER, European Union (EU), DFID, the Federal Government through the ministry of Petroleum Resources, recorded commendable successes in actualising most of the policy directions.
For instance, Daily Sun gathered that the key element of National Oil Policy already contained in the gazette, was to move Nigeria beyond crude oil exports into value-adding activities such as refining and petrochemical industries, while the National Gas Policy was designed to address the continued wastage of gas resources and instead maximize the country’s gas resources.
Against this background, Flare Gas (Prevention of Waste and Pollution) Regulation 2018 was approved and gazetted. Another interesting aspect of the policy was that it would reduce the environmental and social impact caused by flaring of natural gas. Commercial issues emanating between consumers of gas from the textile industries and downstream suppliers and Local Distribution Companies (LDCs) were equally resolved through the Gas Pricing Framework for Textile Industries.
In its desire for radical reforms in the petroleum sector, the ministry and its agencies collaborated very closely with the National Assembly on the Petroleum Industry Bill. The Bill has been passed and it is currently awaiting the president’s assent.
The ministry also did not relent in its efforts at working with the federal lawmakers to facilitate the passage of the four bills that constitute the PIB. They are Petroleum Industry Governance Bill, Petroleum Industry Administration Bill, Petroleum Industry Fiscal Bill and the Petroleum Industry Host Communities Bill.
As part of efforts focused on boosting the business environment and improving investment in the oil and gas sector, the shift towards improved governance and transparency, renewed approach to addressing militancy in the Niger Delta region where Nigeria’s oil reserves are situated, deregulation of the of the downstream sector as well as policy, fiscal and regulatory reforms have been encouraging potential investors into the industry with healthy and diversified returns.
Among the outlined initiatives designed to boost the business environment were initiating capital investments into midstream and downstream assets such as pipelines, depots and refineries; review of government equity in Joint Ventures (JVs), conducting early lease renewals, ensuring payments of outstanding royalties by oil companies, re-finance NNPC loans, implement target borrowing, restructure JVs to IJVs and review and update all fiscal type guidelines to bring them in line with best practices.
Also, among the concepts that would ultimately actualise the set goal of moving Nigeria beyond crude oil export and into the realm of adding value are: establishment of mini/modular refineries, prospects for NNPC refineries rehabilitation, establishment of large spectrum greenfield refineries, and co-location of refineries (capacity expansion)
It would therefore not be out of place to underscore the fact that every achievement in the oil sector was predicated on a well-planned development agenda for the Niger Delta, which was encapsulated under the Niger Delta Development Compact (Strategic Implementation Work Plan (SIWP).
Added to the above are the series of visits to the region by Vice President Yemi Osinbajo, all of which were facilitated by the former minister, all visits went a long way in re-affirming President Buhari’s government’s commitment to walk its talk in the region.
These efforts, industry players say, have helped in no small measure to address militancy, eliminate bunkering and illegal pipeline tapping of crude oil as well as increase government earnings in the last four years. The above, the industry players added, coupled with a deliberate effort targeted at re-organising and restructuring the NNPC into a focused accountable and transparent organisation are right steps in the right direction.