With a testimonial that stands tall in three and a half years as the Minister of State for Petroleum Resources under President Muhammadu Buhari, Dr. Emmanuel Ibe Kachikwu is a desirable reference point from his first day at work, starting with his days as the Group Managing Director at the Nigeria National Petroleum Corporation (NNPC), Dr. Ibe Kachikwu knew what he wanted and did not beat around it. As one who is familiar with the industry, he was a typical example of hitting the ground running.
And landing on a turf that is specialized with varying interest often orchestrated by politics, Dr. Kachikwu’s capacity to balance the many interests without hurting the business of governance in the sector underscored the basis for his avalanche of successes in that sector. ADVERTISING Look at it this way: it is basic knowledge that the nation’s oil and gas as well as her renewable energy reserves have not really translated into meaningful economic growth over the fears.
But do not look any further; the reasons are not far-fetched and it is largely because the efforts devoted to optimising the resources did not often meet their targets. Thus, when you take it from the inadequate electricity supply, infrastructure deficit and widespread poverty, it goes without saying that the proper channeling of the resources has been misplaced over time.
To think Nigeria is a gross importer of petroleum products with its attendant negative impacts on national economy and growth is therefore disturbing. Curiously, those in authority did not feign ignorance about the obnoxious state of affairs in the petroleum sector and how it could contribute in no small measure to revamping the moribund Nigerian economy if properly managed.
Thus, the introduction of an industry roadmap tagged: ‘Short and Medium Term Priorities also known as 7 Big Wins (2015-2019)’ by the Ibe Kachikwu leadership, not only came handy, it served as the much needed interruption for the breakthrough in the all-important sector. The policy programmes, focused on seven thematic areas, were designed to grow the oil and gas industry to enable it serve Nigerians better and it came into effect on October 27, 2016 after it was launched by President Muhammadu Buhari. This covers aspects of 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 was to transform Nigeria from an oil-based economy to gas-based, through the development of robust gas infrastructure, that would ensure improved power availability and drive the establishment of gas-based industries. Under Kachikwu’s highly strategic roadmap, the government proposed to shift the focus from government built infrastructure to investor built infrastructure. Specifically, the government would provide incentives for the building of infrastructure to supply gas from the Eastern parts of Nigeria to commercial demand centers in the Western and Northern parts.
A key short-term objective was to introduce a regulatory framework for commercial pipeline investment with clear tariff methodology. The focus on gas 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 but are yet to be built.
On the upstream side, the roadmap proposed to review 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. The government would also encourage the fulfillment of domestic gas obligations (DSO) by moving from a sanction-based model to an incentive-based model.
This would require the amendment of the National Gas Supply & Pricing Regulations, which impose fines for failure to fulfill 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, which was to ensure stakeholders management and international coordination, communication strategy, stakeholder relationship building and management, international energy relations and bilateral cooperation.
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, 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 this 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. Also, in their thirst for radical reforms in the petroleum sector, the Ministry of Petroleum and its agencies collaborated very closely with the National Assembly on the Petroleum Industry Bill. The Bill currently awaits President Buhari’s assent. The ministry did not also relent its efforts in 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. Some of 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.
Aspects of establishment of mini/modular refineries, prospects for NNPC refineries rehabilitation, establishment of large spectrum greenfield refineries, co-location of refineries (capacity expansion), were all concepts that would ultimately actualise the set goal of moving Nigeria beyond crude oil export and into the realm of adding value. It would 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 that, the series of visits to the region by Vice President (Prof.) Yemi Osinbajo (SAN), which were facilitated by Dr. Kachikwu, went a long way in re-affirming government’s commitment to walk its talk in the region.
These efforts have helped to address militancy, eliminate bunkering and illegal pipeline tapping of crude oil as well as increase government earnings. The above, 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. Again, 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.
Further still, 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 and this resulted in saving about $1bn. Isn’t that commendable? Also worthy of note was the fact 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.
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, the country successfully reconciled its crude oil data with the OPEC and also spearheaded the transformation of African Petroleum Producers Organization (APPO).
Put on a normal scale, it is arguable that three and a half years is not enough to shape a critical sector with humongous challenges and distraction, but Dr. Kachikwu dared to be different and this, he brought closer home with focus, determination and proper planning, which has seen the sector move significantly from where it was years back to stability.
With rich contact, enviable knowledge in the workings of the sector and a resolve to make a difference, it was not difficult to decipher why Dr. Kachikwu’s seven big wins have continued to win and winning big, indeed. Nothing, in the last three and a half years happened by accident in the sector. They were a direct result of Dr. Kachiukwu’s attitude to duties and his determination to make a huge success out of it, more so that he is very hands-on. And this is happening so fast even as he has begun to think a desirable future for the oil and gas sector.