Why FG is careful to privatise refineries -Kachikwu

‘What we’re planning to do in Niger Delta’

By Juliana Taiwo-Obalonye

The Minister of state for Petroleum, Ibe Kachikwu, after the launch of the Nigeria Oil and Gas Industry Roadmap tagged “The 7 Big Wins”, a new initiative by the Ministry of Petroleum Resources, by President Muhammadu Buhari, held a press conference to address areas of concerns on the roadmap raised by journalists.

He also spoke on the benefits of the Buhari’s meeting with Niger Delta stakeholders as well as  why the $10 billion infrastructural rebirth investment programme in the Niger Delta region is to be launched.

What’s new on security of the Niger Delta?

The first is to accept that there is a problem because I think we have carried on as if there is no problem. The beginning point is to first acknowledge the fact that there is a problem and is so critical that it can no longer be left to chance. And we have to take very concrete steps.

We are planning to do a couple of things. The first is that on Tuesday, November 1st, we have been able to get the president in his usual kind nature to have a meeting with the Niger Delta stakeholders, about 50 of them are going to be coming for that meeting. It comprises of representatives drawn from the oil producing states, heads of security agencies, all the ministers from the Niger Delta Area. It will be our first attempt to get them one-on-one with Mr. President, for them to understand what his vision is in terms of the Niger Delta.

Second is that we have submitted a roadmap to him which he has approved. I am going to take you through a few of them. First is that the security in the Niger Delta is going to move from the responsibility of the military to that of the oil companies as it is done the world over; which means that they will need to institute processes that work with the local communities to guard and protect their production facilities. While those collaborations might not be armed collaborations, it covers the trust deficit  that has existed in the region and provide the very unique incoming making opportunities for people within that local communities. Because as they are physically engaged, the temptation to get into the sort of destruction we witnessed will be limited.

In any case, all the research we have done has shown that there is a lot of territorialism of the protection of these assets, so if people are protecting the things within their vicinities, they won’t allow any militant to come across it. So that is the first step.

Given the fact that a lot of money is spent on joint venture security and as part of joint venture cash call, we need to refocus and to take very clear responsibilities. One of the things we are asking the oil companies to do is to come up with robust and all inclusive ways to protect their facilities first of all.  There is almost a hands-off policy when there is a problem, when there is a breakage, as if nobody has the responsibility. All over the world, Nigeria is not the highest country with problems of militancy; oil companies take care of their facilities and that is the first step.

The second step is that Mr. President has graciously agreed to setting up a specialized petroleum force that is going to be drawn from the security services and be provided with resources that are amphibious, technology driven to enable them be able to respond to oil companies if they get overwhelmed outside their first line security.

Third is that we have always done engagements, but once the problems disappear, the engagements stop. And one of the things I will be working on is to begin a quarterly engagement process that involved all the members of oil producing communities, the state governors, the leaders of the stakeholders and oil producers. It will be done quarterly and rotated from state to state. And the whole idea is to provide a first hand platform to engage before this problem go out of hand.

Fourthly, at the end of the day, economy is at the heart of militancy. The reason you have a problem is because people feel they are short-changed. And short-change is not necessarily a movement in derivation numbers, it is ensuring that some benefits in the industry goes to the oil communities. And I am going to be working with Dr. Boroh on this, that about 30 per cent of job opportunities will need to begin to be localized. If we do that, you will have a wholesome economic roll out within those platforms.

Finally,  we will be launching about  $10 billion infrastructural rebirth investment programme in the Niger Delta region. Now, this is not money that is going to come necessarily from the Federal Government, it is money that is going to come from oil companies, investors, individuals who are ready to do infrastructural investment for tarriffing, obviously states and the Federal Government as the case may be. We have some international organizations who have shown some interests. What is most important is not the number of the fund; it’s the conceptualization of that funding.

It’s the fact that governors will have to come together as a regional block to begin to look at cross-state investments, whether they be roads, railways, power facilities or specialist hospitals. Right now, there is a sillowing of investments; every state just carter for itself and that is not helping the region. And so we are going to pull in energy and ensure we are looking at cross border investments to strengthen the region.

The president is also reviewing a proviso that will give in to look at how the 13 percent derivation is applied. Right now, it is a budgeting tool for state governments. We are going to be appealing to them to begin to put quite a bit of that into the core areas of the oil producing communities and let us see the budgeting number.

Another thing is that myself and the SA on Amensty Programme, we are looking critically at the amnesty programme  and we are working towards the eventual wind up of the amnesty programme in about one year period. And the whole idea is that within that time frame, we need to find work for the graduates because the greatest problem of the amnesty programme is that people finish through that programme and they begin to see it as a social connection point because they come out and there is nothing to do. So, they are sucked back in into the same system from where you are trying to bring them out.

So, we are going to be looking at things like coastal patrol, Niger Delta paramilitary type organisations, not armed, to suck in some of the trained hands. But more importantly, to provide funding for those who want to set up their own businesses.

There is no A-Z solutions to the Niger Delta problem but what is important is the holistic focus and the best way for me is to set targets, which is why I said today that we are targeting to have zero occurrence of militancy. And that is a very tall order for the security, is a tall order for those of us who are going to be involved in the process and also how the oil companies are going to respond. But we are going to be benchmarking this and I believe that once you do all this, you are going to see a dramatic change in this.

You have set a one year target to get the National Assembly to pass the Petroleum Industry Bill, how possible is that considering the many hiccups it experienced in the past?  

I’m very optimistic that we are going to get through with it. We have already started. We have completed work on the gas policy, the petroleum policy. The Senate has the first version of the Petroleum Industry Governance Bill which we are also looking at. We have almost completed work on the executive version of the Petroleum Industry Governance Bill inclusive of the fiscal aspects of the bill. In a week or two, we are going to be engaging with a team of the industry, basically to take a few look at what our thoughts are on this and its going to go to the federal executive council for review and approval and once that is done, we are going to send it to the Senate.  But beyond that is the collaborative efforts that we are already working with them (the Senate), I think they have announced when they want to look at the bill and we are in a hurry to try and catch up with them. I think there is even a more burning desire in the Assembly to get this done.

What is the guarantee that there is commitment to match words with action with this launch this time around? Are your staff ready to drive this?

My point is not to look down or look in the past. When you look at the trajectory since when this government came on board, we are taking more dramatic decisions than over 10 years of this industry. Whether is in terms of how we try to shoulder NNPC, or how we try to focus on commercialization, in terms of publishing or opening up our books for people to see. We have dramatically taken steps.

If you watched my movements since I came in, I don’t say things I don’t want to do. But whether it will be carried out after I leave, I cannot account for the future. But if you institutionalised those reforms, if you gazette them, if you put them in place through laws, the avenue to go back to the past will be very difficult. I certainly think that going back to the old NNPC is going to be very difficult because a lot has taken place.    One, I think the corruption indexes are over blown, sometimes when people do not understand the technicalities of what is going on, they shut down and say it is corruption. I understand that there were a lot of sleaze stories in the past, but if you look at it in the last one year, the TSA definitely helped. Being able to suck in all our funds in one point, being able to look at long term focus and the fact that being able to sit down here and tell you we will like to get out of importation, I don’t think anybody has ever told you that. At most, they say keep importing. The fact that we have been able to save $1 billion through the JSV Programme  is something that otherwise would have gone into private pockets.

Is it not better to just privatize or concession the refineries considering the money put into them yet they are not working?

The feeling of the members of the Federal Executive Council is to first get the refineries to work, otherwise you will be selling scrap in their present state, and nobody will offer you serious money. We have seen the likes of Eleme Petrochemicals; as soon as you hand it over, you see them go into production and they are making profit.

Secondly, there are union issues, we don’t make decisions not recognizing the fact that people work there; I mean you don’t privatize in a hurry and the next thing the union closes down the place and you don’t work for years. The decision was to find investors who are willing to put money, improve on the technical skills, work on our people. Let’s face it; the fact that the refineries are working on 30, 40 per cent today is because they are local engineers who are able to resuscitate these things. So, there are capacity efficiency there that we are not just tapping enough.

What’s the latest on the bid put in for new refineries?

Yes bids were done and we are almost at the stage of moving in and then we had some issues with BPE in terms of whether or not we are trying to sell to a different corridor. That has been resolved and it was only last week that the president signed for an authorization and set up a committee for us to work collaborating with them and let’s move quickly. We need to identify specific investors because if we are going to give the timeline for 2019, we need to perfect the processes and so are going to see a lot more momentum on that.

Will the investors in new refineries be strictly compelled to sell locally or will they be allowed to export?

I think once we give them license, the focus will be export. In fact, I doubt that government will be able to meet 100 per cent crude oil use for all the refineries that would be set up. But let’s face it; all the refineries in Spain do not have crude oil facilities; they import crude oil and they do their business and they run their profit. So, anybody who is doing that is doing so because one, that is a huge consumption market to start with.  Huge consumption market around the African states but there is potential that you will find crude here. So, as we process more and more, we will begin to compel the companies to sell their crude internally because it is the same price, those will be the incentives.  Dangote refinery is built on the threshold of an export based.

On transparency and efficiency, you spoke on cash calls, how do you intend to achieve that? 

We have done a yeoman’s job. There’s still going to be budgeting process in terms of what should be done, how you now sequence the funding is really where the catch is. The only thing is what progress has been done and those projects are going to save the country over $1.2 billion from day one from cuts, solving the arrears problem where we found some reductions. We also create a situation where there is now a zero cash call requirement at budgeting level but yet, we are still able to sustain what we earn currently.

What is important is that there will be an explosion of investments from day one. What the stability in the structure does for you is that opportunities open up, they can plan ahead, they can invest. When I said we will like to see production go from 2.2 million to 3 million, the only thing that can give me that kind of hope is that you have sorted out the funding.

Will the investors in new refineries be strictly compelled to sell locally or will they be allowed to export?

I think once we give them license, the focus will be export. In fact, I doubt that government will be able to meet 100 per cent crude oil use for all the refineries that would be set up. But let’s face it; all the refineries in Spain do not have crude oil facilities, they import crude oil and they do their business and they run their profit. So, anybody who is doing that is doing so because one, that is a huge consumption market to start with.   Huge consumption market around the African states but there is potential that you will find crude here. So, as we process more and more, we will begin to compel the companies to sell their crude internally because it is the same price; those will be the incentives.  Dangote refinery is built on the threshold of an export base.

We will like you to talk more on the $10 billion investment fund for the Niger Delta

The whole idea is to set up a fund that is not tied to budgeting. Find international organisations or identify those that are willing to invest in Nigeria real time. Negotiate with state governments some percentage they will have to put into this fund, the oil companies input. Is not going to be $10 billion from day one but the whole idea is that it will continue to rise. The whole idea is to launch a funding mechanism that is based on trust and see how we can encourage and target specific investments in roads, social infrastructure, modular refineries and tangible business entities. But you can provide the paraphernalia and there are certain incentives that you give for investment in those localities that will enable the people to be more willing to bring in investment within the $10 billion funding corridor. But we are still working the mechanics

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