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The submission of reports on oil and gas sector by the task forces constituted earlier in the year has rekindled hopes that the Federal Government’s efforts to reform the sector and rid the industry of corruption and inefficiency will now enter the next level: implementation stage, reports Festus Akanbi
The robust bailout strategy in the oil and gas sector unveiled by the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, got a boost last week with the submission of the reports by the various special task forces set up by the government in February to probe operations in the sector after a sudden announcement of oil subsidy removal in early January sparked widespread protests in some parts of the country.
The three task forces included the Petroleum Revenues Task Force, Governance and Controls Task Force and the National Refineries Task Force. The presentation of the reports to President Goodluck Jonathan last Friday has been described as a positive step, which may restore sanity to the oil and gas sector of the economy. Though the report submitted by the Petroleum Revenues Task Force headed by former EFCC Chairman Mallam Nuhu Ribadu was preceded by controversy after it reportedly leaked to the media and was greeted also by controversy after the deputy chairman of the committee and former head of service Steve Oronsaye questioned the process that produced the report, the Petroleum Resources minister had, however, maintained that government did not in any way influence the outcome of the committees’ assignments.
Dismissing insinuations that the reports could have been doctored to favour certain forces in the system, Alison-Madueke said; “Once the task forces were inaugurated, I let them do their work without let or interference.
“I never for once called in members to seek to influence them one way or another and I gave them full access to the parastatals, to deal with all elements of their terms of reference to the extent that some members have even said I was too aloof from their work.
The Reports
“I never for once called in members to seek to influence them one way or another and I gave them full access to the parastatals, to deal with all elements of their terms of reference to the extent that some members have even said I was too aloof from their work.
The Reports
As expected, some far-reaching recommendations were made in the three reports following months of in-depth analyses of the situations in the nation’s oil and gas sector. Chief among the recommendations are the followings-
Dismantling of NNPC
In its report, the Dotun Suleiman-led Special Task Force on Corporate Governance and Controls in Nigerian National Petroleum Corporation and other parastatals within Petroleum Resources Ministry called for the creation of six new institutions to succeed the NNPC. The proposed institutions are the National Petroleum Directorate (NPD), Nigerian Petroleum Inspectorate (NPI), Petroleum Assets Management Company (PAMCO), National Oil Company (NOC), Nigeria Content and Capacity Development Agency (NCCDA) and National Frontier Exploration Services (NFES). The task force explained that the recommendations were based on a number of guiding principles, wider consultations with stakeholders and peer review of the global best practices. The committee recommended that the NPD would be the fulcrum upon which the Minister of Petroleum Resources will conduct the affairs of the industry.
Dismantling of NNPC
In its report, the Dotun Suleiman-led Special Task Force on Corporate Governance and Controls in Nigerian National Petroleum Corporation and other parastatals within Petroleum Resources Ministry called for the creation of six new institutions to succeed the NNPC. The proposed institutions are the National Petroleum Directorate (NPD), Nigerian Petroleum Inspectorate (NPI), Petroleum Assets Management Company (PAMCO), National Oil Company (NOC), Nigeria Content and Capacity Development Agency (NCCDA) and National Frontier Exploration Services (NFES). The task force explained that the recommendations were based on a number of guiding principles, wider consultations with stakeholders and peer review of the global best practices. The committee recommended that the NPD would be the fulcrum upon which the Minister of Petroleum Resources will conduct the affairs of the industry.
In addition to other functions, the NPD would "serve as the secretariat and technical bureau to the Honourable Minister of Petroleum Resources whose primary responsibility will be to assist the minister to formulate policies and strategies for the industry."
The task force also recommended that the NPD should be structured as a commission with the Minister of Petroleum Resources as its chairman. The committee wants the NPI to serve the function of being the sole regulator for the upstream, midstream and downstream sectors. In the case of PAMCO, the committee said it should be an investment management company that will oversee government’s share of the nation’s hydrocarbon resources and investments in upstream oil and gas joint ventures and its production sharing contracts.
On the proposed NOC, the committee said it would be an integrated, commercially-focused and profit-driven oil company.
On the proposed NOC, the committee said it would be an integrated, commercially-focused and profit-driven oil company.
As for NCCDA and NFES, the committee submitted that the former would “serve as an integrated vehicle for driving the industry’s local capacity development agenda" while the latter "will promote efficient, sustainable exploration of hydrocarbons in the frontier basins of Nigeria. "
Additional Refineries
In another report presented by Special Task Force on National Refineries submitted by its Alternate Chairman and defunct All Peoples Party Chairman, Alhaji Yusuf Ali, the committee recommended the immediate construction of three additional refineries to be sited in Lagos, Bayelsa and Kogi states in order to boost fuel supply. Ali, who presented the report on behalf of the Chairman, Kalu Idika Kalu, said, “We have developed a plan for self sufficiency in petroleum products in Nigeria within the shortest possible time. Existing refineries should be privatised within 18 months. We need full deregulation of prices but before then, there should be palliatives.”
Additional Refineries
In another report presented by Special Task Force on National Refineries submitted by its Alternate Chairman and defunct All Peoples Party Chairman, Alhaji Yusuf Ali, the committee recommended the immediate construction of three additional refineries to be sited in Lagos, Bayelsa and Kogi states in order to boost fuel supply. Ali, who presented the report on behalf of the Chairman, Kalu Idika Kalu, said, “We have developed a plan for self sufficiency in petroleum products in Nigeria within the shortest possible time. Existing refineries should be privatised within 18 months. We need full deregulation of prices but before then, there should be palliatives.”
He said government must also encourage energy conservation by patronising CMG vehicles. The committee also recommended the deregulation of the petroleum sector while recommending that palliative measures be put in place to cushion the effects of deregulation on the people.
Revenue Review
The Ribadu-led task force raised issues over the collection and management of revenue from oil and gas sector over a period of time. The task force had conducted activities to determine and verify all petroleum upstream and downstream revenues due and payable to Nigeria. The committee’s finding showed that the main petroleum revenues due to the national treasury in respect of oil and gas activities in Nigeria are domestic crude oil sales, equity crude oil sales, gas sales, refined petroleum products sales, profits from NNPC subsidiaries, petroleum profits tax, company income tax, signature bonus, concession rentals, royalties from oil and gas, gas flare penalties, and miscellaneous oil revenues.
The Ribadu-led task force raised issues over the collection and management of revenue from oil and gas sector over a period of time. The task force had conducted activities to determine and verify all petroleum upstream and downstream revenues due and payable to Nigeria. The committee’s finding showed that the main petroleum revenues due to the national treasury in respect of oil and gas activities in Nigeria are domestic crude oil sales, equity crude oil sales, gas sales, refined petroleum products sales, profits from NNPC subsidiaries, petroleum profits tax, company income tax, signature bonus, concession rentals, royalties from oil and gas, gas flare penalties, and miscellaneous oil revenues.
In one of its findings, the task force raised questions over proceeds from the sale of domestic crude oil. The committee said: “Our review of the records received for 2002 to 2011 showed an inconsistent pattern in the implementation of the policy to allocate 445,000bpd allocation to NNPC, with variances found for the ten years reviewed.
“The task force also compared the average price per barrel payable by NNPC for Domestic Crude with the average weekly prices for Nigeria Bonny Light, Forcados, obtained from the Energy Information Administration (EIA). The review revealed that over a 10-year period (2002 2011), the state might have been short paid by an estimated sum of US$ 5 billion, although it was understood from discussions with NNPC officials that the pricing of domestic crude oil was based on international prices. Enquiries from NNPC revealed that up until October 2003, NNPC was granted fixed price regimes which explain the wide disparity in prices in the earlier years”.
Raising an allegation of underpayment, the task force said the potential underpayment of amounts payable to the Federation Account over the 10- year period is estimated at N86.6 billion. Also, the task force’s review of the domestic crude utilisation showed that the percentage not refined in- country ranged from between 50% to 88% over the 10-year period.
The task force observed that there is no single point accountability for the income and expenditure streams of upstream petroleum operations, compounded by the current structure of NNPC such as multiple roles executed through NAPIMS and its COMD.
A decline was also observed in national investments that would increase the nation’s proven reserves. For instance, the committee discovered that despite the increase in crude oil production in Nigeria over the years, the nation’s entitlement has decreased as a result of various alternate funding arrangements for its upstream investments.
The task force found that legislation governing the industry and agreements with third parties were outdated, did not reflect current economic or legal realities; or included ambiguous clauses. Also, the committee noted that there were some provisions within the legislation that could significantly improve government’s revenue that the government is yet to take advantage of. Examples include a provision to ensure that the share of the government of the federation in the additional revenue shall be adjusted under the Production Sharing Contracts if the price of crude oil at any time exceeds $20 per barrel; and the requirement for a periodic review of provisions in specified time frames.
It was also observed that some traders lifted crude oil although they were not listed on the approved master list of customers who had a valid contract and were selected through an annual bidding process. The task force’s investigation also discovered that quite a number of traders did not demonstrate renowned expertise in the business of crude oil trading.
On gas flaring, the task force found out that the DPR is currently unable to independently track and measure gas volumes produced and flared and depends largely on the information provided by the operators.
And on the issue of royalties (crude oil and gas), the task force found that $3.027 billion was outstanding from the operators for crude oil royalties as at 31 December 2011 per the DPR s records. Of this amount, the DPR had stipulated that ADDAX is liable to pay $1.5billion royalties under the 2003 fiscal regime and there is currently a dispute between Addax and NNPC on the one hand, and the DPR on the other.
The task force found that discretionary decision-making in the award of oil blocks can result in revenue losses for Nigeria. Our review also showed that the management of past bid rounds has resulted in lower demand and fewer qualified bidders, uncompleted deals weakened government returns, and lower development of acreage.
Cracks on the Wall
However, there appeared to be cracks within the Ribadu committee owing to the disagreements between Ribadu and two members of the committee, Oronsaye and Mr. Bon Otti, who alleged that agreed processes were not followed.
While Ribadu alleged that Oronsaye plotted to scuttle the submission of the report, the latter claimed he had no hidden agenda over his insistence that the report should follow a due process.
President’s Remarks
In his remarks, President Jonathan regretted that the country had continued the importation of petroleum products several years after it started oil production. “We discovered crude oil in 1956 and we have been exporting since 1958 but we are still importing finished products. We must give ourselves time frame to end importation, we wanted to do it but we were waiting for this report.
Cracks on the Wall
However, there appeared to be cracks within the Ribadu committee owing to the disagreements between Ribadu and two members of the committee, Oronsaye and Mr. Bon Otti, who alleged that agreed processes were not followed.
While Ribadu alleged that Oronsaye plotted to scuttle the submission of the report, the latter claimed he had no hidden agenda over his insistence that the report should follow a due process.
President’s Remarks
In his remarks, President Jonathan regretted that the country had continued the importation of petroleum products several years after it started oil production. “We discovered crude oil in 1956 and we have been exporting since 1958 but we are still importing finished products. We must give ourselves time frame to end importation, we wanted to do it but we were waiting for this report.
”It is disgraceful that we still import petroleum products, if in the next 10 years we are still importing petroleum products, those of us that have had opportunity to lead should be all be held responsible because it means we did not lead well.”
Jonathan promised to soon give a definite date as to when the country would stop the importation of petroleum products.
On the disagreement within the Ribadu committee, the President said it was not unusual for committee members to have divergent opinions on the assignment they are handling. He, however, advised Nigerians not to allow the disagreement to overshadow the real essence of the committee’s work, which is to sanitise the oil and gas sector in a way that benefits Nigerians.
On the disagreement within the Ribadu committee, the President said it was not unusual for committee members to have divergent opinions on the assignment they are handling. He, however, advised Nigerians not to allow the disagreement to overshadow the real essence of the committee’s work, which is to sanitise the oil and gas sector in a way that benefits Nigerians.
With regards to the disagreement, he explained that any member of the Ribadu committee who had a contrary opinion from those expressed in the report should submit such opinion to him through his chief of staff or the minister of petroleum resources.
Alison-Madueke: We Are Determined to Reform Oil, Gas Sector
It gives me great pleasure and a sense of fulfilment to welcome you all today to this historic occasion of the presentation of the Reports of three special Task Forces; The Petroleum Revenues Task Force, Governance and Controls Task Force and the National Refineries Task Force to President Goodluck Jonathan.
Alison-Madueke: We Are Determined to Reform Oil, Gas Sector
It gives me great pleasure and a sense of fulfilment to welcome you all today to this historic occasion of the presentation of the Reports of three special Task Forces; The Petroleum Revenues Task Force, Governance and Controls Task Force and the National Refineries Task Force to President Goodluck Jonathan.
That of the PIB Technical Committee was presented to Mr. President in June.
We set up these Task Forces under the leadership of President Goodluck Jonathan to bring sanity, probity, efficiency and reform to all parastatals of The Federal Ministry of Petroleum Resources ahead of the passage of the new Petroleum Industry Bill currently being considered by the National Assembly;
We set up these Task Forces under the leadership of President Goodluck Jonathan to bring sanity, probity, efficiency and reform to all parastatals of The Federal Ministry of Petroleum Resources ahead of the passage of the new Petroleum Industry Bill currently being considered by the National Assembly;
We set up these Task Forces to bring about change and full transparency to the oil and gas sector and draw a road map for ending corruption and waste in this critical extractive industry to the full benefit of the peoples and governments of the Federal Republic of Nigeria at all levels;
In setting up these Task Forces, we went beyond partisanship in appointing the members, we invited time and tested professionals and technocrats, and we invited labour and civil society and put them all together to design a way forward for the greater good of the people of Nigeria. When I took the shortlist of Task Force members to the President for his consideration, he did not hesitate to approve them all even though the list contained those who were known critics of his administration and members of opposition political parties. The President gave the necessary backing to ensure that all were carried along in our reform of an industry not too known for transparency over the last few decades. We salute the President for such uncommon courage and leadership;
Once the Task Forces were inaugurated, I let them do their work without let or interference
I never for once called in members to seek to influence them one way or another and I gave them full access to the parastatals, to deal with all elements of their Terms of Reference to the extent that some members have even said I was too aloof from their work. This was deliberate as we wanted full independence of thought and action for the Task Forces. Indeed, it has already been agreed with the Task Forces that within two weeks we will hold working meetings to review what we have done and what needs to be done going forward.
I never for once called in members to seek to influence them one way or another and I gave them full access to the parastatals, to deal with all elements of their Terms of Reference to the extent that some members have even said I was too aloof from their work. This was deliberate as we wanted full independence of thought and action for the Task Forces. Indeed, it has already been agreed with the Task Forces that within two weeks we will hold working meetings to review what we have done and what needs to be done going forward.
Mr. President, whatever the skeptics and critics may say, we are determined, under your able and steady leadership, to reform the oil and gas industry to root out waste, inefficiency and corruption and to transition NNPC and other parastatals to a post PIB world;
Once considered and approved by Mr President and the Federal Executive Council, it is my determination to ensure the full implementation of the White Paper from the Reports of these Task Forces. Mr. President, once approved, the road to implementation will begin. To this end, we are already setting up a unit at the Ministry of Petroleum Resources to ensure full compliance with the letters and spirit of these reports. Mr. President, this is a new moment for the Oil and Gas industry: this is a new beginning. To ensure we keep the momentum for reform, we urge our fellow compatriots in the National Assembly to pass the new PIB into law as quickly as possible, to give some of the necessary legislative backing for our transformation efforts within the Oil and Gas Industry for the benefit of all Nigeria people.
Let me at this juncture, thank you Mr. President for giving your authorisation for the setting up of these very critical Task Forces.
Let me also thank robustly the chairmen, alternative chairmen, deputy chairmen and the distinguished members of these Task Forces who put a lot of time and effort into these very critical assignments which has made history for us.
Let me also thank robustly the chairmen, alternative chairmen, deputy chairmen and the distinguished members of these Task Forces who put a lot of time and effort into these very critical assignments which has made history for us.
For me it has been a most privileged and humbling experience. I thank you Mr. President for this opportunity.
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