Kachikwu-Baru: In Search Of A Truce

By Nation Newspaper

On Tuesday, Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu and Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr. Maikanti Kacalla Baru met at the 23rd Nigerian Economic Summit in Abuja. The duo plumped hands, smiled together and almost hugged like excited friends who had not seen for some time. Photographers clicked away and it was no surprise that almost all newspapers in the country yesterday had both men on their front pages.

Was that the first time the duo would meet at events and were photographed together? Certainly not! But what made them candidates for the front pages is the row between them over the running of the NNPC. Kachikwu, who is the chairman of the board, feels left out. Baru thinks Kachikwu is being dramatic and showing signs of not understanding the workings of an agency he once oversaw.

In response to six posers raised by Kachikwu’s loyalists, the NNPC yesterday released a fact-sheet claiming that the minister nominated seven firms for contracts, among others.

For stakeholders in the industry, the time to end the feud over allegations of insubordination and lack of adherence to due process by Baru in the execution of activities in the ministry is now.

The stakeholders had divergent views on whether Kachikwu or Baru is right or wrong. Not a few agreed that the conflict calls for speedy passage of the Petroleum Industry Bill (PIB), which, they say, contains solutions to the gaps in the NNPC Act. The NNPC Act, according to them, has several gaps that make actions of Baru right and the grouses right, especially as the President doubles as the substantive Petroleum Resources Minister, making Kachikwu and Baru to report directly to the President.

To them, in absence, the PIB, the NNPC Act should be reviewed with roles, actions, and lines of report properly stated and streamlined.

Nigerian Association of Petroleum Explorationists (NAPE), President Abiodun Adesanya said Kachikwu and Baru have done well in the oil and gas sector with very tangible achievements to show for it and should not allow political issues destroy these good deeds.

He said: “What is happening between the minister and NNPC chief is an administrative issue and as both of them report to the President, it is important that the President call them and resolve the issues amicably. This will make them accomplish ongoing and planned good works in exploration and other areas of the sector.”

“First and foremost, two of them have done very well as human beings. Chemistry of working together between two people sometimes cannot be as expected. But there must be sincerity and alignment with the aspirations and programs of the government of the day regardless of their views. If you are called to serve, you align your thoughts to work with the government’s objective.”

“The cardinal goal of this government is anti-corruption. Therefore, all your dealings must align with this objective. All the accusations are in this case are about not following due process and procedures. Nobody has said someone is corrupt.”

“Kachikwu has made a substantial progress in reducing the Niger Delta issues. The nation’s oil production is stable now with the attendant revenue increase for the government. He has resolved the persistent problem with the Joint Venture cash calls. He has also helped to influence the extension of exemption of Nigeria from the production cap by the Organisation of Petroleum Exporting Countries (OPEC).”

“Baru has also ensured unhindered petroleum products supply. Nigerians don’t queue to buy fuel anymore. There has been stability in the downstream subsector with a positive impact on the economy. Exploration efforts in the frontier basins especially those in the north are now being professionally and purposefully pursued.”

“If we are making progress in all these, and if someone is perceived to jump procedure, it has to be carefully handled. The issues raised in the conflict are administrative issues under the President and he can manage it.”

“There is need to look at the NNPC Act well, so this kind of issue doesn’t arise again. If the Act provides that the NNPC on one hand, reports to the Minister of Petroleum Resources and on the other, the President and a case arises where the President is the Minister of Petroleum Resources, the situation should be reviewed and roles streamlined.”

“Governing Board is part of NNPC, so management and board should be on the same page. This can be amicably resolved. On how the NNPC carries out its duties can also be streamlined. The National Assembly is looking into that, to streamlines roles and lines of reporting.”

“This issue brings to the fore the issue of passage of the Petroleum Industry Bill (PIB). PIB has the solution to this problem and it becomes surprising why the House Representatives is sitting on the Bill while the Senate is giving it speedy treatment.”

“Let us not allow political issues to destroy the good deeds achieved in the sector. The President should call Kachikwu and Baru, resolve the issue amicably and ensure such issues are treated and resolved internally and kept away from public consumption in future.”

For the Lead Director, Centre for Social Justice (CSJ), Mr. Eze Onyekpere, the issue calls for a need to speedily and totally pass the Petroleum Industry Bill (PIB) into law. He said the managers of Nigeria’s oil and gas resources should be more concerned with maximizing value from the resources for the benefits of Nigerians especially as oil and gas are being threatened by the shift to use renewable energies.

Onyekpere said he was yet to see any company law that doesn’t present its activities to the board before implementation, adding that the issue is test case for the reforms for the sector.

“The situation presents a water-tight case for the enactment of the Petroleum Industry Bill (PIB) because the world is not waiting for Nigeria. The nation is currently facing the challenges posed by the increasing production and the choice for renewable energy worldwide.”

“The world is moving away from the use of fossil fuels and we should be concerned as a nation what to do with the hydrocarbon resources we have before it becomes totally useless. The world is leaving Nigeria behind.”

“The allegations against the Nigerian National Petroleum Corporation (NNPC) are critical because they border on lack of transparency and lack of due process and should be taken seriously irrespective of who is involved.”

“I want to look at the company law that says a company doesn’t report its activities to the board. It is nonsensical to classify firms that lift crude oil as off-takers. Also at what point did the NNPC present the report to the Federal Executive Council (FEC), and who presented the report to FEC when the Minister of Petroleum was not aware? Is it the President the presented it to FEC or was it the Vice President when the President was away?”

“What is happening is an aberration and a watertight case for reforms for the oil and gas sector that is the mainstay of the country.”

“On the proposed suspension of the Minister of State for Petroleum Resources and the Group Managing Director of NNPC by the Senate to enable the upper legislative chamber carry out its probe into the allegations against the NNPC without difficulty, Onyekpere said the suspension should be for the person that ran contrary to the law and due process.”

Lonadek Oil and Gas Limited Principal Consultant, Dr. Lola Amao said: “Corruption allegations would continue in Nigeria until anti-corruption systems, processes, and procedures are incorporated into governance. I am yet to see any NNPC leader who has not been implicated, caught or accused of being a suspect.”

“The institution was neither established to benefit the masses nor be transparent. I am not sure that Minister, Minister of State, and the Group Managing Director can discharge their duties as innocently as they would want to without being implicated in one process, incident, agreement, transaction, contract or another, among others.”

“The sooner we make NNPC a public company for the benefit of all Nigerians and have Incorporated Joint Ventures (IJVs) source for funding based on Return on Investment (RoI), the better for Nigeria. I hope this case highlights the need for NNPC to go public (privatized).”

Another stakeholder, who pleaded anonymity, said: “What is happening between the Ministry of Petroleum Resources and the NNPC is political. The battle for the life of Nigeria in 2019 has just started in NNPC Towers.”

“Nigerians should be on the alert and watch events unfold. They will recognize the cabal and characters of the soap opera.”

“NNPC needs to be privatized so the corporation will be subject to Nigerians and not Nigerians subject to NNPC.”

NNPC GMD, Baru Replies Kachikwu, Says Minister’s Claims Were ‘Unfortunate’

The Group Managing Director of the Nigerian National Petroleum Corporation, Maikanti Baru, has finally responded to allegations of corruption and violation of contract laws raised by the Minister of State for Petroleum, Ibeh Kachikwu.

Kachikwu’s letter to President Muhammadu Buhari was leaked last week to media detailing several allegations of Mr. Baru’s insubordination and unilateral award of contracts in NNPC totaling about N9 trillion without following due process.

Mr. Kachikwu met with President Buhari on Friday, but despite the weight of the allegations, no government official reacted publicly until now.

Read Mr. Baru’s statement released on Monday:

PRESS RELEASE

RE: ALLEGATIONS OF LACK OF ADHERENCE TO DUE PROCESS IN NNPC CONTRACT AWARDS

Following the publication of alleged lack of adherence to due process in the award of NNPC contracts, the President ordered the Group Managing Director (GMD) and Management of the Nigerian National Petroleum Corporation (NNPC) to consider and respond expeditiously to the allegations.

The substance of the allegations made by the Minister of State for Petroleum Resources, in a letter to the President dated 30th of August 2017, is that a number of “major contracts were never reviewed or discussed with me (sic) the NNPC Board.”

It is important to note from the outset that the law and the rules do not require a review or discussion with the Minister of State or the NNPC Board on contractual matters. What is required is the processing and approval of contracts by the NNPC Tenders Board, the President in his executive capacity or as Minister of Petroleum, or the Federal Executive Council (FEC), as the case may be. There are therefore situations where all that is required is the approval of the NNPC Tenders Board while, in other cases, based on the threshold, the award must be submitted for presidential approval. Likewise, in some instances it is FEC approval that is required.

It should be noted that for both the Crude Term Contract and the Direct Sale and Direct Purchase (DSDP) agreements, there are no specific values attached to each transaction to warrant the values of $10billion and $5billion respectively placed on them in the claim of Dr. Kachikwu. It is therefore inappropriate to attach arbitrary values to the shortlists with the aim of classifying the transactions as contracts above NNPC Tenders Board limit. They are merely the shortlisting of prospective off-takers of crude oil and suppliers of petroleum products under agreed terms. These transactions were not required to be presented as contracts to the Board of NNPC and, of course, the monetary value of any crude oil eventually lifted by any of the companies goes straight into the federation account and not to the company.

Furthermore, contrary to the assertion of Dr. Kachikwu that he was never involved in the 2017/2018 contracting process for the Crude Oil Term Contracts, Dr. Kachikwu was in fact expressly consulted by the GMD and his recommendations were taken into account in following through the laid down procedure. Thus, for him to turn around and claim that “…these major contracts were never reviewed or discussed with me…” is most unfortunate to say the least.

THE NNPC CONTRACTING PROCESS

The contracting process in NNPC is governed by the following:

  1. Provisions of the NNPC Act
  2. The Public Procurement Act, 2007 (PPA)

iii. Procurement method and thresholds of application and the composition of Tenders Board as
provided by the Secretary to the Government of the Federation (SGF) Circular reference no.
SGF/OP/1/S.3/VIII/57, dated 11th March, 2009.

  1. NNPC Delegation of Authority Guide
  2. Supply Chain Management Policy & Procedure documents
  3. NNPC Ethics Guide

Approving Authority for Contracts

The SGF Circular (iii above) on procurement threshold provided the following authority limits for NNPC transactions as well as the composition of the NNPC Tenders Board:

Table 1: Financial Authority Threshold (SGF Circular (iii) above)

Approving Authority/No Objection to Award Special Works (NNPC)
BPP issues  “No objection to award”/FEC approves N2.70 billion (USD 20M) and above
NNPC Tenders Board Up to N2.7 billion (USD20M)

 

Table 2: Composition of Tenders Board (SGF Circular (iii) above)

Ministry Chairman Permanent Secretary
Members Heads of Departments
Parastatals Chairman Chief Executive
Members Heads of Departments

 

NNPC had cause to clarify severally from Bureau of Public Procurement (BPP) as to the composition of NNPC Tenders Board and the role of NNPC Board appointed by Government. The following clarifications were made.
a. The BPP expressly clarified that NNPC Tenders Board (NTB) is NOT the same as NNPC Board. The governing board (NNPC Board) is responsible for approval of work programmes, corporate plans and budgets, while the NTB is responsible for approval of day-to-day procurement implementation.

  1. BPP referred to the SGF circular for the composition of the NTB to compose of the Accounting Officer (GMD NNPC) as the Chairman, with Heads of Department (GEDs) as members with the Head of procurement (GGM SCM) serving as the Secretary of the NNPC Tenders Board.
    The above clarifications of the provisions of the procurement process show that approvals reside within the NTB and where thresholds are exceeded, the NNPC refers to FEC for approval. Therefore, the NNPC Board has no role in contracts approval process as advised by BPP.

As can be seen, all these clarifications were sought and obtained prior to August, 2015 and were implemented by Dr. Kachikwu as the GMD of NNPC. Dr. Kachikwu also constituted the first NNPC Tenders Board on 8th September, 2015 and continued to chair it until his exit in June, 2016.

Typical NNPC Contracting Process

  1. Approval of project proposal and contracting strategy by NTB.
  2. Placement of adverts for expression of interest in electronic and print media.
  3. Soliciting for tender (Technical and Commercial)
  4. Tender evaluation
  5. Tender approval by NTB for contracts within its threshold; otherwise
  6. Obtain BPP certificate of no objection before presentation to FEC.
  7. Present to FEC for approval.

All Contracts in NNPC follow the above procedure.

SPECIFIC CONTRACTS MENTIONED IN THE HONOURABLE MINISTER OF STATE FOR PETROLEUM RESOURCES’ (HMSPR) LETTER TO MR. PRESIDENT

  1. Crude Oil Term Contract (COTC)- valued at over $10bn

It is important to state that the COTC is not a contract for procurement of goods, works or services; rather it is simply a list of approved off-takers of Nigerian crude oil of all grades. This list does not carry any value, but simply state the terms and conditions for the lifting. It is therefore inappropriate to attach a value to it with the aim of classifying it as contract above Management limit.

In arriving at the off-takers list for 2017/2018 COTC, the following steps were followed:

  1. Adverts were placed in National and International print media on Monday, 17th October, 2016.
  2. The bids were publicly opened in the presence of all stakeholders (NIETI, DPR, BPP, Civil Society Organisations, NNPC SCM Division and the press as well as live broadcasts by the NTA and other TV stations).
  3. Detailed evaluation was carried out and the short list of the successful off-takers was presented to the approving authority (Mr. President) for consideration and approval.
  4. Thereafter, NNPC published the list of the successful off-takers in newspapers and NNPC’s official website.

This has been the standard procedure and it is the same process adopted during the 2016/2017 COTC when the HMSPR was the GMD.

In conclusion, due process has been fully followed in the shortlisting of the off-takers of the Nigerian crude oil for the current term 2017/2018.

  1. The Direct Sale Direct Purchase (DSDP) Contract- valued at over $5bn

Like the COTC, the DSDP is not a contract for any procurement of goods, works or services, rather it is simply a list of off-takers of crude oil and suppliers of petroleum products of equivalent value.

This list does not carry any value, but simply state the terms and conditions for the lifting and supply of petroleum products. It is therefore mischievous to classify it as contract and attach a value to it that is above Management’s limit.

In arriving at the off-takers list for 2017/2018 DSDP, the following steps were followed:

  1. a. Work plans and execution strategy for the DSDP was granted by the approving authority (Mr. President).
    b. Adverts were placed in National and International print media and NNPC website on Thursday, 22nd December, 2016.
    c. The bids were publicly opened in the presence of all stakeholders (NIETI, DPR, BPP, Civil Society Organisations, NNPC’s SCM Division and the press as well as live broadcast by the NTA and some TV stations).
    d. Detailed evaluation was carried out and the short list of the successful off-takers was presented to the approving authority (Mr. President) for consideration and approval.
    This has been the standard procedure and it is the same process adopted during the 2016/2017 DSDP when the HMSPR was the GMD.

In conclusion, it has been confirmed that due process has been followed in arriving at the shortlist of the DSDP partners for the 2017/2018 cycle.

  1. The Ajaokuta-Kaduna-Kano (AKK) Gas Pipeline Contract

The AKK Gas pipeline project is a contractor financed contract. The process adopted for this contract is as follows:

  1. Approval of project proposal and contracting strategy was given by NTB.
  2. Placement of adverts for expression of interest in some National and International print media and NNPC’s website.
  3. Expression of interest for pre-qualification received and evaluated.
  4. Technical and Commercial tenders issued and evaluated
  5. NTB considered and endorsed tender evaluation result for FEC approval since this contract is above NTB’s threshold subject to obtaining the following certificates of no objections:
  6. BPP certificate of no objection (obtained).
  7. Certificate of no objection from Infrastructure Concession and Regulatory Commission (ICRC) (obtained).
  8. Certificate of no objection from Nigerian Content Monitoring & Development Board (NCMDB) (being awaited)

BPP and ICRC certificates have been obtained, while that of NCDMB is being awaited after which the contract will be presented to FEC for consideration and approval.

Thus, due process is being followed in the processing of this contract.

  1. Various Financing Arrangements Considered with IOCs;

The financing arrangements reported as contracts are part of the process of exiting Cash Call approved by the FEC. It entails negotiations with JV Partners on alternative funding of some selected projects through third party financing to bridge the funding gap associated with Federal Government’s inability to meet its cash call contributions.

The third party financing option emanates from the appropriation act provisions that allow sourcing of financing outside regular cash call contributions. Upon approval of the calendar year’s operating budget, the NNPC in conjunction with its JV partners commence the necessary process for accessing financing to bridge the funding gap.

Section 8 sub-sections (1) and (4) of the NNPC Act CAP N123 requires that all NNPC borrowings must be approved by Mr. President. Specifically, it provides that:

(1) Subject to the other provisions of this section, the Corporation may, from time to time, borrow by overdraft or otherwise howsoever such sums as it may require in the exercise of its functions under this Act.

(4) Where any sum required aforesaid –

  1. a) Is to be in currency other than Naira; and
  2. b) Is to be borrowed by the Corporation otherwise than temporarily,
  3. c) The Corporation shall not borrow the sum without the prior approval of the President.

Due Process:

  1. NAPIMS and JV partner identify bankable projects that require financing and sends to NNPC Corporate Finance to assist in procuring financing.
  2. Constitution of Joint Financing Team (JFT) between NNPC and the JV Partner.
  3. JFT NNPC invites Request For Proposals (RFPs) from Financial Institutions.
  4. Submitted RFPs are evaluated and beauty parade conducted to determine most cost-efficient proposal.
  5. Negotiated Financing Strategy, Term-sheets, Structures and pricing are presented for NNPC Management’s (NTB) approvals.
  6. NNPC presents the renegotiated terms for approval of Mr. President.
  7. NNPC executes the resultant Agreement.

Financings taken under this Administration: Approx. $3bn are as follows:

All established due process as enumerated above has been observed leading to the securing of financing for the following projects in 2016/2017:

·    SN ·     PROJECT ·Amount (US$mn) APPROVALS ·LOAN EXECUTED BY
NTB PRESIDENTIAL
·        1. ·         NNPC/CNL JV Project Cheetah 1,200.00 ·        16/04/15 ·         01/09/15 ·         Dr. E. I. Kachikwu
·        2. ·         NNPC/CNL JV Project Falcon 780.00 ·        26/04/17 ·         31/07/17 ·         Dr. M. K. Baru
·        3. ·         NNPC/SPDC JV Project Santolina 1,000.00 ·        26/04/17 ·         10/07/17 ·         Dr. M. K. Baru
· TOTAL 2,980.00 · · ·

 

These are not procurement projects as described by the PPA, 2007. However, all established due processes as enumerated above were followed.

The NPDC Integrity Upgrade and Development Projects

All the NPDC procurement contracts were subjected to the approved procurement procedures as described in respect of the AKK Gas Pipeline project above. There were no breaches of any extant procurement processes.

For the benefit of doubt, it is confirmed that there is no single NPDC contract that has been approved by the relevant Tenders Board beyond its limit of financial authority and there is no single contract that is in the $3Bn to $4Bn range claimed in the write-up.

Conclusions

From the foregoing, the allegations were baseless and due process has been followed in the various activities.

Furthermore, it is established that apart from the AKK project and NPDC production service contracts, all the other transactions mentioned were not procurement contracts. The NPDC production service contracts have undergone due process, while the AKK contract that requires FEC approval has not reached the stage of contract award.

Ndu Ughamadu
Group General Manager
Group Public Affairs Division,
NNPC, Abuja.
October 9, 2017.

Kachikwu’s Letter Confirms ‘A Cycle Of Power’ Within Buhari Govt. – Shehu Sani

Senator representing Kaduna Central, Shehu Sani, has said the letter by the Minister of State for Petroleum, Ibe Kachikwu to President Muhammadu Buhari is an indication that there is a “circle of power within the President’s government”.

The Minister, in the letter had accused the Group Managing Director of the Nigerian National Petroleum Corporation, NNPC, Dr. Maikanti Baru of insubordination and humiliation.

Kachikwu had also expressed disappointment at the fact that he had no express access to the president.

But speaking on Channels Television, on Wednesday, Sani said Kachikwu’s letter showed that there was a system disconnect in the government circle.

According to the lawmaker, the letter had shown that there was a government within Buhari’s government.

Sani said, “The content of that letter and the allegations raised also raise a number of issues, not only about the NNPC but about the whole structure of governance that exists today.

“If a minister of state can outright say it’s been difficult for him to access channels through which he can present his issues, I think there is a system disconnect there.

“And it is simply giving credence to the fact there exists a government within the government. There are individuals that have formed a shield, a cycle. And I think the issue that it raised in every possible way, is pointing to the fact that there is a cycle of powers within powers itself.”

Clarifying his statement, the lawmaker said the “government within the government” he referred has nothing to do with the kitchen cabinet.

“This is about some persons who have surrounded the president and are exercising powers to themselves and to their advantage and also manipulating power for their own personal interest,” he added.

However, Sani said the President might not be aware of the issues raised in the letter.

“I am of the firm belief that if he is aware of this, he would have taken action.

“And if he is not aware of this and this has been brought to the public fore, then he can now take action on it. But if he says he will not take an action on this issue, then it will certainly stain the integrity of the administration,” he said.