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New GMD Kachikwu Begins NNPC Cleanup and Restructuring
The newly appointed Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC), Dr Ibe Kachikwu, has wasted no time in getting on with clean up and restructuring of NNPC. Barely days into the job, the new GMD was hiring and firing in his multi-faceted restructuring approach. He intends to take the three facets to his restructuring agenda in turn.
1. The People Phase
The first stage is what he calls the "People Aspect." The GMD's approach is to purge the top echelon of the Corporation, which has been described as a cesspit of corruption by critics. There is no suggestion that all of those removed were involved in wrong doing but his view is that to get a clean start at NNPC you have to get new people in who know from the start that it is no longer business as usual.
Deciding in this part of the restructuring to let the axe fall where it may, Kachikwu has sacked all the former GEDs of the Corporation. The sacked GEDs of 8 directorates are: Mr. Bernard Otti, GED Finance and Accounts; Dr. Timothy Okon, Acting GED Exploration and Production who also doubles as Coordinator Corporate Planning & Strategy; Engr. Adebayo Ibirogba, Engineering and Technology; Dr. David Ige, Gas and Power; Ms. Aisha Abdurrahman, Commercial and Investment; Dr. Dan Efebo, Corporate Services; Engr. Ian Udoh, Refining & Petrochemicals; and Dr. Attahiru Yusuf, Business Development.
The 8 Directorates have been reduced to 4, with Finance merged with Services, Refining merged with Techonology whilst Business Development as well as Gas and Power done away with altogether.
The new GEDs are:
- Dr. Maikanti Baru, Exploration & Production
- Mr. Isiaka Abdulrazaq, Finance & Services
- Engr. Dennis Nnamdi Ajulu, Refining & Technology
- Dr. Babatunde Victor Adeniran, Commercial & Investment
Other appointees in the culling exercise which the Group General Manager, Group Public Affairs, said in a statement, was intended turn the Corporation into a lean, efficient, business-focused, transparent and accountable national oil company, include the following appointees to head the NNPC subsidiaries:
Mrs. Esther Nnamdi-Ogbue, Managing Director, Pipelines and Products Marketing Company (PPMC); Engr. Chinedu Ezeribe, Managing Director, Warri Refining & Petrochemicals Company (WRPC); Mr. Babatunde Bakare, Managing Director, Nigerian Gas Company (NGC); Mr. Inuwa Ibrahim Waya, Managing Director, Hyson; Mr. Abubakar Mai-Bornu, Managing Director, Nigerian Petroleum Development Company (NPDC); Mr. Ladipo Fagbola, Managing Director, NNPC Retail; Mr. Rowland Ewubare, Managing Director, Integrated Data Services Ltd (IDSL); Mr. Modupe Bammeke, Managing Director, NNPC Properties; Mr. Abdulkadir Saidu, Managing Director, Duke Oil; and Mr. Dafe Sejebor, Group General Manager, Nigerian Petroleum Investment Management Services (NAPIMS).
Chidi Momah has been appointed as Group General Manager, Company Secretary & Legal Adviser, a crucial appointment given the GMD's plans to look at NNPC contracts.
In total, Kachikwu has axed 38 top management staff and reduced numbers from 122 to 83 "to jump-start a new business outlook to enhance the operational environment as a profit-driven business as against the current civil service orientation." Among the top managers relieved of their duties were General Manager (GM) Commercial, GM NNPC Retail, GM Sales and Marketing NNPC Retail, GM Operations NNPC.
2. The Process Phase
Kachikwu is being clinically methodical in his approach to restructuring the Corporation, which has been racked with corruption and scandal over the years. In the next stage of his battle to reform the Corporation will be about processes. In that phase, he intends to get a forensic audit done. He said: "We are going to put processes and controls in place. We are going to do retraining and repositioning and then, we are going to re-engage our majors and minors, all those who are active in the sector, for us to work as a team to take Nigeria forward." Then the man, who has been chosen to wield the axe in the President's laudable ambitions for the State corporation, says, he will be able to say to the nation: "This is the state of the company."
3. The Business Phase
Kachikwu's plans in his three-phase project are to culminate in a thorough review of the existing contracts. He intends to use this stage to look at all the existing contracts, which makes the Corporation's legal adviser, a key appointee in the process. He said: "The final stage will be the business stage, which will be looking at all the existing contracts. Are they good? Are they okay? Do they need to be re-kitted and redone?"
In a move, which many Production Sharing Contract holders will welcome, Kachikwu says he will look at the PSCs. He wants to look at restructuring the contracts to deal with the challenges posed by reduced balance sheets as a result of $40 or $50 per barrel oil. In particular, holders of PSCs are looking to him to reduce the onerous performance bond requirement, which is preventing many awardees from moving forward with the development of their assets. He wants to energise recovery and income growth to increase revenue for the government. Industry watchers are also expecting him to take the scissors to the highly criticized and opaque "Strategic Alliance Agreements" with its subsidiary, NPDC.
Buhari's hatchet man is not sleeping very much. He says: "It is a very intensive work; very calibrated work. A new process of oil administration in the country and obviously, giving fillip to Mr. President's dream of taking the oil industry back to where it should be."
Buhari is expected to delay the appointment of a Minister of Petroleum Resources for at least 18 months, in order to give Kachikwu free reign in his restructuring process. That means that Kachikwu will report directly to the President until a new Minister is appointed. Even then, the President's plans to split NNPC into two, with one regulatory arm and another commercial arm may mean that the Kachikwu, depending on which arm he stays with, may not even have to report to the Minister of Petroleum Resources when appointed.
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Kachikwu Begins Review of NNPC Oil Swap Deals
Following on from the President's mandate to find urgent means of plugging the revenue leakage from the Nigerian National Petroleum Corporation (NNPC), which is currently undergoing an extensive clean up, the new Group Managing Director of NNPC, Dr Ibe Kachikwu, is to invite oil traders in for discussions over oil swap transactions. The highly controversial crude oil swap deals involved oil traders being given allocations of oil in return for the delivery of petroleum products. But this gravy train is about to grind to a screeching halt as Kachikwu continues his attempt to bring some semblance of accountability to NNPC affairs.
The deals were criticised by many, including the Nigerian Extractive Industries Transparency Initiative (NEITI), the Swiss NGO, Berne Declaration (BD) and recently, the New York-based Natural Resource Governance Institute (NRGI), for the heavily loaded landed costs that made the deals extremely uneconomical for the nation. The deals were also said to be heavily tinged with corrupt practices that traders were able to get away with, with some awardees alleged to have under-delivered, and in some cases, even failed to deliver, the products they were contracted to supply. NRGI claims that Nigeria lost over $32 billion oil revenue due to the mismanagement of domestic crude allocations by NNPC, including through the oil swap deals.
Another aspect of the crude swaps, which the traders will be expected to explain, is what has become of what is known in the industry as "retained products" from these deals. Normally when the crude oil allocated to the traders is processed, following the extraction of the more valuable lighter fuels, the heavy oil products, which remain still have some value. The traders are expected to account to the Corporation for these products either through payment or supply of further lighter fuels. Those invited will have to show that they have paid for or delivered further products in exchange for the "retained products."
These crude oil swaps and offshore processing contracts were a creation of the Jonathan administration. Their justification for introducing the crude oil swaps was the failure of the 4 Nigerian refineries to meet Nigeria's refined product needs after years of neglect and mismanagement. The 445,000 barrels per day combined name plate capacity of the refineries, which was allocated to NNPC was given to traders for offshore processing in return for delivery of products. However, the criticism of these deals is not only the alleged failure of NNPC to remit the proceeds to the federal revenue account and the under deliveries, but also the added costs which made these deals uneconomic.
At this stage, the invitation to the traders is part of a reconciliation process begun by the Department of State Services (DSS) into the transactions to ensure that the traders delivered the quantity of products they were contracted to supply.
Kachikwu insists this is not a witch-hunt in which people are to be sent to jail. He said that his interest in the exercise is to make the defaulting traders pay up if it is established that they under-delivered product cargoes. He said that he was willing to accept payment plans from the defaulters to ensure that their companies are not driven under as a result of the process, in order to avoid job losses. It is only where they continued to fail to meet their obligations that they would be handed over to law enforcement agencies for prosecution.
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NNPC Bank Account Shakeup in Buhari's War on Graft
As President Buhari embarks on his "War on Graft" he has ordered the Nigerian National Petroleum Corporation (NNPC) to stop using multiple accounts. The State agency has been plagued by accusations of missing funds that should have been remitted to the revenue account. Some of the funds have mysteriously turned out to be lurking in some obscure NNPC account or other. This will no longer be possible under the Buhari administration, as the President has ordered all federal government ministries, departments and agencies to start paying all receipts only into government approved banks.
This is a bid by the President to drive down corruption and improve transparency. The directive, which also includes the Department of Petroleum Resources, requires that all receipts due to the government or any of its agencies must be paid into accounts maintained by the Central Bank unless specific permission has been granted to do otherwise.
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Implementation of Gas Transport Code Signals Level Playing Field for Gas Distribution
The recently appointed Director of the Department of Petroleum Resources (DPR), Mordecai Danteni Baba Ladan, has revealed that the Department has begun implementing the Nigeria Gas Transportation Network Code (NGTNC). Speaking at the Society of Petroleum Engineers (SPE) 2015 Conference and Exhibition, Ladan said that the DPR had already met with stakeholders to discuss how to implement the code without disrupting supplies.
The NGTNC is a contractual framework devised to facilitate transparent, fair and competitive access to the national gas transportation infrastructure. Under the Code the contract is between the Transportation System Operator (TSO) and the shippers of gas. The framework specifies the terms and guidelines for the operation and use of the gas transportation system. The framework modeled on the Uniformed Network Code (UNC) in the United Kingdom is said to be clear, unambiguous and comprehensive. It is designed to ensure that gas meant for domestic use either for power generation, petrochemicals or industrial uses, will have a single entry and exit point to cut out the sharp practices prevalent in the current supply and distribution system. The Code will also provide a uniform platform in terms of guidelines for agreements between buyers and sellers ensuring transparency and eliminating existing bottlenecks. With the NGTNC, the tariff is expected to reflect the cost of service rendered by the operator of the network code system, while the Department of Petroleum Resources (DPR) is to approve the tariff.
Whilst industry watchers have welcomed the development, they point to the challenges that could mar the implementation of the Code. At the top of those is the lack of infrastructure. Presently, the Escravos Lagos Pipeline System (ELPS) is the only completed network. Others under construction include the Warri-West, Oben-Ajaokuta-Obajana, Alakiri-Obigbo, Obigbo-Calabar, Owaza-Aba and the ELPS-2. Until many of these pipelines are completed, the implementation can only be of limited effect.
Suppliers, transporters, shippers and agents are required to obtain licences from the DPR to access the system. Earlier this year, the DPR had said that the implementation of the network code would start on a Manual basis and that in 2016 the implementation would transit from Manual to Auto with full implementation of the Auto Mode commencing in 2017. The DPR has been training its personnel in the use of the system that is designed to create a transparent system that will give open access to any gas user or buyer desirous of access to Nigerian gas. It will provide a level playing field for all stakeholders.
The existing agreements in the sector are expected to be reviewed once the Code roll out is complete. The implementation Committee comprises representatives from DPR, NNPC corporate and the Nigeria Gas Company. Projected spin-offs following successful implementation of the Code include on-grid power enhancement, improvement in off-grid power for industries and provision of feedstock for industrial use (such as the petrochemicals and fertilizer industries).
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NNPC To Become Sole Petroleum Products Importer as Refineries Begin Operation
Speaking at an interview with the Financial Times of London, the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, has shed some light on how the Federal Government plans to reduce the national reliance on imported petroleum products. With all the refineries now springing into operation, following their Turn Around Maintenance (TAM), the government intends to reduce the amount of petroleum products that will be imported into the country to service the shortfall.
Once the refineries reach optimal operation, according to Emefiele, the plan is for Nigerian National Petroleum Corporation (NNPC) to be solely responsible for the importation of petroleum products. Those currently importing products will no longer be able to do so and traders will be expected to buy their products from NNPC.
"So in that area I would say that we are already moving in the direction of reducing the import of petroleum products. And we will achieve it," Emefiele said.
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Midwestern Struggles to Complete Mart Resources Takeover Before Deadline
As the second deadline for the Midwestern Oil and Gas takeover of its Canadian partner, Mart Resources approaches, it is looking increasingly unlikely that it will be able to meet the conditions to close the deal in time. Midwestern has still not closed the finance it needs to complete the ambitious takeover of its partner, Mart, by the August 19 deadline. Failure will come at a high price as Midwestern is contractually bound to pay Mart a reverse break fee of CAD$5.8 million (about US$4.58) if Midwestern fails to complete the transaction. Midwestern is now trying to schedule a meeting with Mart at which it is hoping to convince its partners, who have so far been accommodating, to extend once again. If they fail then the deal will come to a costly end for Midwestern.
The two partners in Umusadege Marginal Field initially signed a definitive agreement on March 15, 2015 giving Midwestern until July 16 to come up with the finance to pay the agreed $0.80 per share to acquire all the issued and outstanding common shares of the Canadian company, which is listed on the Toronto Stock Exchange (TSX). In June, Mart announced that it had granted Midwestern an extension after Midwestern provided Mart with an updated framework agreement it had with "a significant Middle Eastern group." Mart's Board of Directors said they were satisfied that sufficient progress had been made and it was therefore appropriate to grant the requested extension to 26 July.
As the revised deadline of 26 of July approached, Midwestern requested another extension from Mart and a new deadline of 19 August was set for the completion of the financing of the transaction. NOGintelligence gathers that as the latest deadline approaches, Midwestern has still not completed terms for the financing. A make or break meeting between the parties in the next few days will determine whether Mart will grant Midwestern yet more time for the acquisition or whether it will draw a line under the transaction and insist that Midwestern honors the terms of the agreement and pay the penalty.
Midwestern, which is partially owned by the Delta State government operates the Umusadege Marginal Field - located onshore on Oil Mining Lease (OML) 56 - which it owns with its strategic partners Suntrust Oil and Mart Energy. Mart's share of production from the field was 5,785 barrels of oil per day (bopd) in Q2 of 2015.Last year, all three partners formed a consortium, Eroton, which acquired OML 18 in the last round of Shell divestments. OML 18 contains nine fields and associated infrastructure that includes seven oil flow stations, three associated gas gathering processing plants and one non-associated gas processing plant, and associated gathering facilities. Gross crude oil production before pipeline losses, increased from approximately 14,000 BOPD in March 2015 to approximately 24,000 BOPD in June 2015.
Even with so much production, the acquisition will be an expensive one for Midwestern, given that it will have to assume liability for Mart's outstanding indebtedness of over $200 million. Mart funded its share of the purchase price of OML 18 by increasing its existing secured term loan credit facility with Guaranty Trust Bank from $175 million to $232.5 million. The increased secured loan credit facility has a term of five years and bears interest at 90 days LIBOR plus 4% (floor of 8.25%).
If it can complete the acquisition Midwestern will become one of the largest Nigerian independents. Unfortunately for the company, these are tough times for raising finance with current oil prices steadfastly refusing to climb much above the $50 mark.
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NCDMB sponsors 22 to China for training on Pipe Mill Project
The Nigerian Content Development and Monitoring Board (NCDMB) has concluded arrangements to sponsor 22 young persons for training in China. The trainees are expected to acquire critical skills needed to operate and maintain machines that will be used at the pipe mill being set up at Polaku, Bayelsa State by Mainland Pipe Mill Nigeria with the support of the NCDMB.
The trainees will travel before the end of August to the facilities of Baoji Petroleum Steel Pipe Company Limited (BSG) located at Baoji in Shaanxi Province, China. There, they will undergo 45 days of training.
The programme is part of the Board's efforts to give Nigerians critical skills required in the oil and gas industry. The trainees, who will return with a highly specialised skillset, scarce in Nigeria, will be assessed during and after the programme and the best performers placed in existing pipe mills in Nigeria for further on-the-job training ahead of the start of the Polaku pipe mill. A representative of the Board is expected to accompany them to the trip.
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Bristow Group Helicopter Crash Kills Oil Workers Returning from Rig
Bristow Group, a leading charterer of helicopters to the oil and gas industry in Nigeria has lost one of its helicopters in a crash, which killed four people. Six are said to have survived the crash, which occurred as the helicopter, an American-made Sikorsky S-76C, traveling from an oil rig in the Lagos lagoon. It crashed on approach to Lagos airport.
Days after the tragic event, details still remained sketchy and the names and nationalities of those involved were not released. The helicopter was carrying two crew and eight passengers. The blackbox of the helicopter has been recovered although the authorities have not yet released any information on why the helicopter crashed.
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President Buhari Approves New Governance Framework to Kickstart Ogoni Cleanup
Only months into his presidency, Muhammadu Buhari has shown that he intends to fast-track the implementation of the recommendations of the United Nations Environmental Programme Report (UNEP) report on the devastation that has been wreaked on Ogoniland in the Niger Delta. To kickstart the process, Buhari has approved the amendment of the official gazette establishing the Hydrocarbon Pollution Restoration Project (HYPREP) to reflect a new governance framework comprising. The new framework includes a Governing Council, a Board of Trustees for the HYPREP Trust Fund and a Project Management Team.
The HYPREP Governing Council will be made up of representatives of the Ministry of Petroleum Resources, Federal Ministry of Environment, impacted States, oil companies, Ogoniland, the United Nations and the Nigerian National Petroleum Corporation.
A contribution of $10 million (N2 billion) will be made by stakeholders within 30 days of the appointment of members of the Board of Trustees for the Trust Fund. The Board will be responsible for the collection of and management of funds from donors. The environmental clean-up of Ogoniland is expected to commence in earnest when the President inaugurates the HYPREP Governing Council and the Board of Trustees for the Trust Fund.
The establishment of the trust fund was a key recommendation of the UNEP report although, as human rights watchdog, Amnesty International points out, the promised $10 million is far below the $1 billion that UNEP said should be paid into the fund to cover the first five years of a clean-up job which could take up to 30 years. The UNEP study recommended that the contributions should be made by both the oil industry and the government.
The UNEP study also called for Shell's clean-up methods to be urgently overhauled, including reviewing its methodology and addressing serious delays in responding to spills. Amnesty International has called on Shell to match the Nigerian government's new commitment to tackle oil pollution in the Niger Delta by dramatically improving how its"ineffective clean-up methods." The group also said it had visited multiple sites and found oil pollution lying all around. "From what we are seeing, little has changed."
Shell has already accepted responsibility for cleaning up hundreds of its old spills in the region near Port Harcourt, but a spokesman said the money would only be made available when "we are sure that the structures are in place, are robust and will be overseen correctly." He added that it was very much the responsibility of the Nigerian government.
Earlier this year, Shell began to pay out a £55 million settlement to the Bodo Community after reaching a settlement with them over 2 large spills in 2008 and 2009 that devastated the livelihoods of the communities in the area.
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AGIP - Provision of Coiled Tubing Services
Agip Energy and Natural Resources Limited (AENR) invites interested and registered Nigerian companies to respond to the opportunity for the provision of coiled tubing services. The scope of services involves the provision of well production re-activations by N2 lifting; sand clean out and sand consolidation jobs; waters shut off operations; down-hole zonal isolations and down-hole selective treatments. Only tenderers who are registered with the relevant NJQS product/service category, Coiled Tubing Services (3.04.37), Categories A, -D shall be invited to submit technical bids. The closing date for this opportunity is 18th August 2015.
Total - Provision of HSE Environmental Services
Total Exploration and Production Nigeria Limited (TEPNG) invites interested and registered Nigerian companies to respond to the opportunity for the provision of environmental services. The scope of services involves the provision of waste management services, chemical/oil spill control, and environmental sampling and laboratory analytical services. Only tenderers who are registered in the NJQS products categories shall be invited to submit technical bids. The closing date for this opportunity is 20th August 2015.
Total - Provision of General Maintenance Services OML 100 Field Production Complex
Total Exploration and Production Nigeria Limited (TEPNG) invites interested and registered Nigerian companies to respond to the opportunity for the provision of general maintenance services for the OML100 Field production complex and FSO Unity. The proposed contract is to commence in the first quarter of 2016. The scope of services involves the provision of platforms and floating storage unit associated to the OML100 field production complex. Only tenderers who are registered with 3.05.01 (construction / modification / repair / maintenance / refurbishment services) categories in NipeX joint Qualification system (NJQS) database shall be invited to submit technical bids. The closing date for this opportunity is 20th August 2015.
Total - Provision of General Maintenance Services for OML 99 Field Production Complex
Total Exploration and Production Nigeria Limited (TEPNG) invites interested and registered Nigerian companies to respond to the opportunity for the provision of general maintenance services for the OML99 Field production complex. The proposed contract is to commence in the first quarter of 2016. The scope of services involves the provision of maintenance services for the operation of the OML99 field complex which involves preparing, executing, managing and reporting the maintenance activities (including routine, non-routine, corresponding repair works, hot spare and specific tools management and CMMS data entry) for the whole complex. Only tenderers who are registered with 3.05.01 (construction / modification / repair / maintenance / refurbishment services) categories shall be invited to submit technical bids. The closing date for this opportunity is 20th August 2015.
Total - Provision of General Maintenance Services for OML 102 Field Production Complex
Total Exploration and Production Nigeria Limited (TEPNG) invites interested and registered Nigerian companies to respond to the opportunity for the provision of general maintenance services for the OML102 Field production complex. The proposed contract is to commence in the first quarter of 2016. The scope of services involves preparing, executing, managing and reporting the maintenance activities (including routine, non-routine, corresponding repair works, hot spare and specific tools management and CMMS data entry) for the whole complex. Only tenderers who are registered with 3.05.01 (construction / modification / repair / maintenance / refurbishment services) categories shall be invited to submit technical bids. The closing date for this opportunity is 20th August 2015.
AGIP - Provision of Satellite Communication Services
Agip Energy and Natural Resources Limited (AENR) invites interested and registered Nigerian companies to respond to the opportunity for the provision of leased satellite communication services for her operations onboard ABO FPSO. The scope of services involves the provision of satellite communication (ABO FPSO) leased service contract is to ensure the provision of a reliable, state-of-the art satellite based communication, weather forecasting/monitoring services for ABO FPSO operations. Only tenderers who are registered with the relevant NJQS product/service category shall be invited to submit technical bids. The closing date for this opportunity is 27th August 2015.
SPDC - Provision of Line Pipes & Bends
Shell Nigeria Exploration and Production Company Limited (SNEPCO) invites interested and registered Nigerian companies to respond to the opportunity for the Supply of Bare Line Pipes and Bends on a call off basis. The scope of services involves the Supply of Bare Line Pipes and Bends to SPDC's nominated location (s) in Port Harcourt, Warri or Lagos. Only Tenderers who are registered with NJQS product/category shall be invited to submit technical bids. The closing date for this opportunity is 28th August 2015.
ADDAX - Provision of Operation and Maintenance of Company Vehicles
Addax Petroleum Development (Nigeria) Limited invites interested and registered Nigerian companies to respond to the opportunity for the provision of operation and maintenance of company vehicles. The scope of services involves the provision of all required labour, materials and equipment for the operation and maintenance of company vehicles. Only Tenderers who are registered with NJQS Product/category 3.05.22 vehicle maintenance and repair services and 3.99.10 travel agency, car rental services shall be invited to submit technical bids. The closing date for this opportunity is 3rd September 2015.
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Remi Aiyela
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