Andrew Yakubu, NNPC GMDWith the emergence last Tuesday of Andrew Yakubu as the new Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC) and submission of a reviewed Petroleum Industry Bill to the president at the weekend, stakeholders in the sector said the stake is high for Yakubu and his team to make a difference, writes Chika Amanze-Nwachuku
One sector that has witnessed incessant leadership changes in recent times is the Petroleum Sector. The Nigerian National petroleum
Corporation (NNPC) and its subsidiaries; the Department of Petroleum Resources (DPR); the Petroleum Pricing Regulatory Agency (PPPRA) have had their unit heads replaced for at least thrice since 2010, when President Goodluck Jonathan took over the mantle of leadership from the Late President Umaru Musa Yar’Adua.
Between 2009 and last Tuesday, the NNPC alone has had six Group Managing Directors (GMDs), with the incumbent, Mr. Andrew Yakubu being the fourth since 2010. What is even more worrisome was the manner in which these top government officials were removed from office in quick succession, without the authorities offering some explanations on reasons for their removal.
Industry operators who spoke on the frequent changes in leadership of the corporation at the weekend expressed concern that the development was capable of eroding investors’ confidence in a sector that is regarded as the life wire of Nigerian economy, accounting for more than 40 percent of Nigeria’s Gross Domestic Product (GDP) and about 85 percent of foreign earnings. Besides, they argue that it is contrary to Jonathan’s much talked about continuity and policy stability, the basis for which he returned majority of the ministers during his
second major cabinet reshuffle.
Announcing the new management team for the NNPC last Tuesday, Jonathan said the aim was to “further strengthen the ongoing reforms and transformation of Nigeria’s petroleum sector and in furtherance of efforts to achieve greater transparency and accountability in
government”. A statement issued by the President’s Special Adviser on Media and Publicity, Dr. Reuben Abati listed other member of the team as Messrs. Bernard O.N. Otti, Abiye Membere and Dr. Peter S. Nmadu as group executive directors (GEDs) in charge of Finance and Accounts, Exploration and Production, and Corporate Services, respectively.
Others included Mr. Anthony Ogbuigwe, Dr. Attahir B. Yusuf and Dr. David Ige as GEDs in charge of Refineries & Petrochemicals, Commercial & Investments, and Gas & Power, respectively. Jonathan also approved the appointment of Mr. Victor Briggs as the new Managing Director of the Nigerian Petroleum Development Company (NPDC), the upstream arm of the NNPC.
Stakeholders’ expectations
With the president’s explanation, industry stakeholders have expressed the hope that the new GMD’s tenure would be long enough for him and his team to add value to the system. They have therefore listed critical areas that require urgent attention.
Immediate passage of PIB
Industry stakeholders said with the submission of reviewed Petroleum Industry Bill to President Goodluck Jonathan at the weekend, the coast is getting clearer for the new management team in NNPC to reposition the petroleum industry in Nigeria.
The Oil and Gas sector Reform Implementation Committee (OGIC), headed by former Minister of Petroleum, Rilwanu Lukman, about 13 years ago, came up with the idea of drafting the PIB, which will establish the legal and regulatory framework, institutions and regulatory
authorities for the Nigerian oil and gas industry.
The Federal Government had noted that the objective was to establish a comprehensive legal and regulatory framework for good governance,
transparency and accountability with regard to operational and fiscal terms for revenues management, and removal of confidentiality clauses
in licences, leases and contracts in the nation’s petroleum industry. In doing these, the bill seeks to streamline the functions of the
industry regulatory agencies being performed by the NNPC and its subsidiaries, DPR and PPPRA with a view to eliminating overlaps for
effective operations monitoring. However, four years down the line, the bill, which was first presented to the National Assembly in 2008
by the late Yar’Adua, is yet to become a law.
As a result of this, activities in the oil and gas have been at very low ebb. Industry operators are concerned that new investments are not coming in, while various oil and gas projects have suffered setbacks. “Virtually everything in the oil and gas industry is now at a standstill as we speak, investment, development of new and old projects, all of that, because of the non passage of the PIB,” said an operator.
Chairman, House Committee on Upstream Sector, Hon. Ajibola Muriana recentlyt old THISDAY in Houston, Texas that currently there is lull
in investment activity in the Nigerian Oil and Gas industry due to continued delay in the passage of the PIB.
At a recent meeting with members of House of Representatives Committee on Petroleum Upstream led by its Chairman, Hon Ajibola Muraina, the immediate past GMD, Mr. Austen Oniwon had warned that Nigeria’s petroleum sector risked losing more investments due to continued delay in the passage of PIB. He said if measures were not swiftly taken to address the PIB issue, Nigeria may soon cease being an investment destination for oil and gas.
Specifically, Oniwon said the non-passage of the PIB had continued to create investment uncertainties in Nigeria’s petroleum sector, pointing out that the seeming lacuna created by the non-passage of PIB was equally affecting the aspiration of NNPC to metamorphose into a strong National Oil Company (NOC) in the mould of its contemporaries.
In a broadcast last month Jonathan had promised to liaise with the seventh national assembly to expedite action on passage of the bill in
order to ensure transparency in the oil and gas sector. He had also given the assurance that the latest draft put together by a
presidential task force would be completed in June and sent to the national assembly.
This was corroborated by Oniwon last week, when he gave the assurance that the new draft bill would be submitted to the president before the end of June Given that the much expected transformation in the sector was premised on the PIB, stakeholders have therefore given a mandate to the new GMD to liaise with the petroleum minister and the national assembly to ensure that the bill is passed as soon as possible.
Revamping old refineries and building new ones Despite her being rated among 12 biggest oil producers in the world, Nigeria still depends on fuel importation to meet local demand for refined petroleum products. Currently, the country imports more than 85 percent of her refined products because of her low refining capacity. The Federal Government had since the past seven years, struggled to fix the country’s traditional four refineries to scaled down the rate of products importation and reduce expenditure on subsidy, which claimed about N1.7 trillion in 2011 fiscal year alone.
The traditional refineries with a combined capacity to refine 445,000 barrels per day of crude have been performing abysmally over the years
despite huge sums of money, which successive administrations claimed were expended on their routine Turn Around Maintenance (TAM). Former minister of petroleum had stated that so much money had been spent on the refineries in the past, noting that the refineries were mismanaged by those entrusted with responsibilities of managing them.
“We are not ready to put any money into the refineries again. No more. Our refineries have been well run in the past. They have been mismanaged and the problem was compounded by the regulatory agencies and that is why we want to address the issue. If we have the correct ambience, people will come to build new refineries” Lukman had said.
As at March last year, the Central Bank Monetary Policy Committee revealed that $1.34 billion was spent on importation of refined
petroleum products between January and March 2011 alone, which it noted, has adverse implications both for the reserves position and
government finances as a result of the huge subsidy implications. Stakeholders reason that the surest way to scale down the rate of
importation was to facilitate the building of three Greenfield Refineries in Lagos, Kogi and Bayelsa and then fix the existing refineries to function at optimum capacity.
It is not worthy that the new GMD had served as the Managing Director of Warri Refining and Petrochemicals Company and Group Executive Director (GED) in charge of Exploration and Production. Although the plant performed abysmally during his tenure, stakeholders believe that as the GMD, Yakubu is duty bound to ensure that the Greenfield refinery project takes off and the traditional refineries brought to full capacity.
The Greenfield refinery project had been envisaged to add 750,000 barrels per day of extra refining capacity to Nigeria’s current 445,000 barrel per day refining capacity and stem the flood of importation of refined products into the country. Stakeholders therefore expect the GMD to ensure that issues hampering the take off of the project are trashed out, as according to them, the delay in the take-off of the project, will stall Nigeria’s plan to increase local refining to 95 per cent.
Gas for Power/ gas flaring
Nigeria, a country that is endowed with natural gas suffers from the perennial shortage of gas for domestic power supply. Despite repeated
assurances by petroleum minister that the problem of inadequate gas for power supply was being addressed, fact emerged last week that
major new gas supply projects may not come on stream as scheduled due to lack of funds. It was learnt that most projects originally
scheduled to come on stream between 2012 and 2016, have not even taken off owing to funding issues. The Domestic Supply Obligation (GSO) plan comprises existing and many ongoing gas projects as well as a few major new gas development projects, which had been planned to meet Nigeria’s electricity generation needs.
The proposals for the funding of the various gas- to- power projects submitted to the Budget office by past NNPC management were never
included in the budget, it feared that the omission might stall government’s plans to boost power generation, given that about 70 percent of the short/medium term plan had been targeted at the Power Sector. The new NNPC management team, headed by the GMD is expected to
liaise with the petroleum minister to ensure that funds are released for these critical projects.
Another major issue that needed be addressed by the NNPC team is gas flaring. It is believed Nigeria remains the world’s second biggest
burner of gas associated with crude oil production after Russia.
Reuters reported recently that Nigeria flared some 30 billion standard cubic feet of gas in January alone, an equivalent to a third of the
annual consumption of an industrialised country like the United Kingdom. The House of Representatives had set December 31, 2012 as the
new deadline to end all forms of gas flaring in the country. The new date was fixed after the House considered the report of its committees
on Gas Resources and Justice on a Bill for an Act to amend the Associated Gas re-injection Act, No.99 of 1979 Cap.A25 laws of the
Federation of Nigeria, 2004.
Due to low domestic industrial capacity and a relatively weak gas evacuation infrastructure, produced gas is under-utilised resulting in the gas flare. The DPR director stated last week that efforts to get oil majors to comply with the government’s rules on gas flaring have not yielded results. However, the newly-drafted PIB, if passed by the national assembly, will mandate oil companies operating in Nigeria to stop flaring gas by the end of this year or risk paying fines. It is for this reason that the new GMD should strive to ensure the PIB is passed without further delay.
Crude Theft
Activities of oil thieves have not only caused pollution of rivers and lands in the oil-rich region, but resulted in outbreak of diseases and deaths in some communities. But beyond environmental issues, this heinous problem has continued to take a toll on the economy of Nigeria. An estimated 180,000 barrels of oil per day, approximately $7 billion yearly is lost to oil theft, according to recent information from the Petroleum Ministry. Stakeholders say the new GMD and his team should fight this menace with vigour as it remains a major threat to the economy of Nigeria.
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