Group Managing Director of the Nigerian National Petroleum Corporation Dr. Ibe Kachikwu
Shortly before he was assigned the portfolio of Minister of State for Petroleum Resources, Group Managing Director of the Nigerian National Petroleum Corporation Dr. Ibe Kachikwu spoke to journalists on efforts to stem crude oil theft, attract investment, boosting refining capacity, and the enforcement of the treasury single account. Ejiofor Alike who was there, presents the excerpts:
NNPC has no governance board or if there is any, the board is not known to have sat for many years. Now, that this new administration is preaching transparency and due process, what is government doing to set up a board for the NNPC?
On the issue of board governance for the NNPC, I am aware they are putting together a board. But I don’t know what the details are other than that I wouldn’t sit on that board. I think he (President Muhammadu Buhari) is very mindful of keeping a small board and keeping a professional board. The Group Executive Directors (GEDs), who are historically members of the board, will sit on the board to bring in experience and professionalism. So, I am sure, they are constituting a board; that will come.
Crude oil stealing is a major challenge in the oil and gas sector. How is this present government going to tackle this challenge?
Crude stealing is obviously made possible by virtue of the fact that pipeline integrity is an issue. We need to deal with this pipeline issue, especially pipeline that carries crude oil into the Warri axis because that is one of the most breached in the country. We are looking at that including concessioning it out in the interim pending when a new pipeline is developed - somebody who takes responsibility and is paid on to deliver and get paid basis. So, once we do that, crude stealing will stop.
My question is on the illegal refineries in Niger Delta. We are destroying them instead of encouraging a system where they can be modernised and used rather destroying them. Is it not more beneficial if the crude technology they are using to produce what they are producing, (which ordinarily they have market for, because if they do not, they would not be producing), is incorporated into the system instead of destroying them?
On the issue of illegal crude refinery in the Delta, the reality is: should we allow it to proliferate? Probably not, that is not the solution because a lot of them do not have the integrity that protects the environment, anyway and they are stolen crude. But should we encourage the skills sets there? We are looking at modular refineries in some of these areas and we are asking the state governments to come up with a recipes - whoever will work with them collectively and collaboratively to set up modular refineries close to the areas of production, which could serve these communities and obviously invited some of these skill sets that some of them have. These skills they have are not governable. We first need to retrain them; equip them to attain a level where you can even run a business around that model. I agree with you that perhaps, if we start with a couple and we are looking at Rivers, we are looking at Delta; I think we are looking at one in Calabar. If we did that, it creates the environment as a potential solution and other investors would get into those areas. The critical challenge we have is how to supply crude to them because if they are far away from the production areas - they are on land, where you basically have to truck the crude, that could be a challenge but we are working on that. Hopefully, the first model will come out before the end of the year.
When you invests at least N40 million to N50 million in Ghana, they give you tax holidays. But in Nigeria, we don’t have anything like that. What we have here is a situation where the government gives you, may be, a five-year pioneer status, and another government agency or a new regime will suddenly come and say that it is two years. This is approbating and reprobating and also an indication that government agencies are not synchronising in terms of policy decision. What is this new administration doing to encourage indigenous producers, especially in terms of giving them tax holidays?
I know that I did talk as the Group Managing Director of NNPC but I think most of the problems we have in the oil and gas industry, 80 per cent are NNPC and that is the reality. By the time you get into the Petroleum Ministry, obviously you are dealing with policy issues; DPR issues; local content issues – those will not pose a sort of challenge. That do not pose the kind of day-to-day challenge that you have as NNPC. But in terms of indigenous producers, I do understand the need to incentivise indigenous producers. I think it is a natural growth phenomenon that we must encourage. I am also seeing how we can push for relinquishment boundaries. There are a lot of fields that are being held by the majors, where really no activities are going on and there is need to begin to see how – I think this is not a possible thing but it is just the realities that we need to develop those fields and if you can’t develop them, you can give it back to us so that we can begin to develop it. It is either the majors take the bullish attitude that Shell has taken in some areas and I think Chevron is following suit in that of being able to sit down with some of these independents to say we can actually put together, say under our guidance, some level of production diversification that enables those fields to be re-worked. But the answer isn’t to just lock them up; that wouldn’t happen under my watch. But having said that, I will not turn around and grant discretionary tax incentives on brownfields . For me, I have to see a case for it because a field that has been producing, I give you an acreage that I know the reserves in those, you can put together investments and you can see the numbers churn out and I give you tax holidays on top of it. Some of the most prolific marginal fields were handed over with very huge incentives. At the end of the day really, it made money for people; it did not make any money for government. I think fields should be looked at on case-by-case basis. If I send you to Chad Basin, for example, I will give you incentives to go to Chad. If I send you to the Niger Delta, where quite frankly, literally each field there is prolific, I will be looking at how to support you on international funding line and not on tax issues. So, we will have to look holistically at each one that comes and say, how does the government benefits and how do you also encourage local investment.
I am an advocate of Petroleum Industry Bill (PIB) but at the same time, we have to do it in such a way that there should be a win-win between the International Oil Companies (IOCs) and the indigenous companies and not a situation where the IOCs will be negatively affected that they will start divesting because that was what happened in the past few years where they have to divest and go and they are not even going back to their countries but to other West African countries that are now challenging us.
On PIB, I think you have mirrored by thoughts; I think there is need for a healthy conversation on the aspects of the PIB that worried our investors. But not to be too frightened, the proliferation or the virginity of fields in the West African States creates enough challenges more than PIB. It takes a while to locate the opportunities; it takes a while to finance them, to drill them and bring them to production versus the fields that are very proven. But having said that, I think the majors will not go unless we force them out. We do not intend to force them out because we have very good reserves. Where are the good reserves in the world? Let us be honest to ourselves right now. They are in very few countries. In Africa, they are probably in four countries. But what we will have however is that resources may go to those African countries that create better incentives than we do. So, we are not going to compete on incentives for competition sake; we will have a holistic evaluation because basically what we are going to be doing here.
Most of the companies we are going to patronise are already here. They have done healthy works and they are getting very profitable production. So, a lot of the key investments basically have been captured. It is better in that perspective than to start a new business. We will look at that but healthy conversation all the time helps. I was made to understand that one of the things I would be doing as part of my own agenda of raising money is talking not just to the Managing Directors of the International Oil Companies (IOCs) that are here but in their head offices. What is the long term goal of Total for Africa? What is the long term goal of ExxonMobil for Nigeria? So, it is not an issue of how to manage year-to-year budgets. So, if we have a shaking of hands and we understand how that is going to put money on the table, what sort of time we are looking at and what I need to put in place for you to move forward. For example, if you don’t have gas spend, you are not going anywhere. So, one of my tasks is to address the gas spends and put life to the gas infrastructural policies that we have. So, as bad as our situation looks, there is a almost a huge limitless opportunities that exist in our fields, whether it is the gas; whether it is petroleum; whether it is investment in infrastructure; whether it is refining and we need to do more diversification. The majors, for example, have done a whole lot more of ramp around production. We will like to see a bit more of expansion and diversification because in an era where raw crude is no longer fetching money, countries are making money by going up the chain into refining. So, we will like to see how they can support us on that It is a survival time for this country and anybody who does this business must create holistic attitude of how to help us to survive and not just how to make money. So, there are going to be different policies that are geared towards forcing you to do those things because you can make money from them but also encouraging their head offices to look differently on how they analyse Nigeria.
You are now still addressed as the Group Managing Director of NNPC and not the Minister but we are all Nigerians have seen the handwriting on the wall. We have been in this industry for so long to know that the role of the minister mixed with the role of Group Managing Director will be so confusing to us as operator and as regulator. We hope that government has gone through it. For instance, if NNPC infringes on one of the laws, can the DPR, which reports to the Minister sanction the NNPC, which is still the same Minister to whom DPR reports? We know that there is no problem without a solution but we see some conflicts in this arrangement.
On the roles of Minister and Group Managing Director and whether we can combine them, there is nothing illegal, if you look at the law. Does it make sense at the long term? That is for my Principal (President Buhari) to determine but I don’t imagine that it will be a long term thing. There are structural changes that are going on and I think they intend to force those structural things to complete so that they do not terminate them. So, there will be a governance board for the NNPC; there will also be various approval structures for the likes of DPR and local content; local content actually has an independent board. The Minister of Petroleum will do more for policy formulation and direction but those agencies are independent, largely. So, not an immediate issue but yes, will it last for the four-year lifetime? That is not what he intends. But I think; I use the word I think because nobody can say for certainty where the President is headed but it is to his credit that he is his own man and has his own ideas. But I think he probably wants to make sure that the change agenda itself takes enough footholds before he begins to plan some changes.
I also see a problem for NNPC in this Treasury Single Account (TSA). Some of these accounts have been very useful. The Nigeria LNG Limited could not have taken off if the NNPC did not have separate accounts where they kept money. For instance, when Ken Saro-Wiwa was killed and Shell wanted to withdraw from NLNG project, they found out that if they withdrew, they would lose all the money kept in that account. Today, NLNG is the most successful company in Nigeria. So, sometimes, some of these things are useful because they are established to solve certain problems. So, are you not thinking of approaching Mr. President to exempt the NNPC from this TSA so as to protect the operations in the oil industry?
Treasury Single Account (TSA) is a welcome change because that is the only way to track government’s income. Before the TSA was introduced, even getting information on the number of accounts operated by the NNPC was very difficult. When we came in, Mr. President asked me to find out the number of accounts NNPC had, both hidden and exposed. It was really difficult to get information on that because NNPC is a very large organisation.
via ThisDay
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