Oil & Gas Reforms: The Legacy Kachikwu Left Behind – 2

By Desmond Kazim

Dr. Ibe Kachikwu, immediate past Minister of State for Petroleum Resources, worked diligently to reposition Nigeria’s oil and gas sector for stability, efficiency and transparency.

A major landmark of Kachikwu’s tenure was that the lingering problem of cash call which plagued the Nigerian government was frontally tackled. Through his international contacts and global industry exposure, the country was able to raise over $6 billion to settle the arrears. In what appeared an unusual negotiation tactics, substantial deductions were made (from the arrears) resulting in reduced cash call commitment of about $5 billion spread over a five-year period – on incremental production volume base. That’s the first time anyone will pull out that in the industry.

Obviously, Nigerians do not realise how much was gained by virtue of that deal. But once that happened, confidence returned to the sector, people began to invest back, we began to return to the fields. Over 30 per cent reduction in production cost was another major feat. Reports showed that NNPC operates production cost dropped to about $23 per barrel as against $33 that obtained. Kachikwu said he aimed at $15 per barrel target and that some oil companies had achieved that. “My target is to get down to $15 per barrel; in fact one or two oil companies have achieved that. The more margins you are able to create the more profitable it is and the more you can resist the price shocks in the international environments”.

Nigeria’s moribund refineries will become functional again if the government would look the direction Kachikwu had pointed at: the private sector. The lack of political will to transfer management and operation of the refineries to operators in the private sector is responsible for the continued importation of refined petroleum products and huge resources committed to fuel subsidy. Nigeria imported N2.3 trillion fuel and paid N2.9 trillion subsidy in 2018.

Kachikwu in an interview with a Nigerian news publication expressed concern over the sorry state of the refineries and showed how to go about it. According to him, “The key challenge for me was how to fix these plants. Mr. President and I agreed that the country did not have the 2-3 billion dollars to throw into another turn around maintenance (TAM)”, he said. “We had too many TAM in the past that just never ended anywhere. My position is that if we were going to do something that involves the private sector, it will undertake the management and post-TAM repairs so that the facilities are efficiently run.”

He spoke further: “This is one area that I think, obviously, if you ask me ‘what you have not done that you are not happy about?’, it is the refineries. Not because I didn’t do what I was supposed to do; but because, somehow as a manager, you take responsibility that we didn’t finish that. I would like to see us go back and complete that model. For me, it’s not going to be model for looking for government money or NNPC dipping hand into government money to repair refinery. The reality is that private sector financers were there, they held meetings and all kinds of negotiations with them; the issue was the term.”

Taking Nigeria back to the position of respectability in the international community earned the country robust confidence among foreign investors. The key roles played by Kachikwu at the Organisation of Petroleum Exporting Countries (OPEC), Gas Exporting Countries Forum (GECF) and African Petroleum Producers’ Organisation (APPO) leaderships repositioned Nigeria for strategic investments that enhanced her revenue stream and created more job opportunities for indigenous companies under the Nigeria Content Development and Monitoring Board (NCDMB) activities.

The introduction of the Nigeria International Petroleum Summit (NIPS), hosted in Nigeria for the first time in February, 2018, brought wide acclaims from stakeholders at home and in the Diaspora. “In the past, most Nigerian energy and petroleum industry players spent huge foreign exchange to attend the popular Offshore Technology Conference (OTC) in Houston, United States. Kachikwu changed the narrative by conceptualizing and hosting the new Nigeria OTC, which seeks to bring investors and players in the sector to Africa for the first time,” said President, National Association of Nigerian Students (NANS), Chinonso Obasi, after participating in the event in Abjua, February 2018, on Kachikwu’s approval. The next edition of the NIPS will hold in February 2020.

Tackling corruption in Nigeria’s oil and gas sector is not a mean feat. The sector and the nation’s national oil company, NNPC, now operate on the window of transparency never recorded in history, which boosts investors’ confidence. The Automatic Tracking Oil Production has enabled government to monitor crude oil production and conveyance, thereby blocking leakages arising from unaccountable volume of the product produced at a time.

Government recovered N1.2 trillion in royalty arrears from oil companies operating in Nigeria through the Crude Oil Liquefied Natural Gas Tracker (COLT), a facility stakeholders describe as major blow to corruption in the oil and gas sector. “Buhari’s anti-corruption war paid off,” said a leader of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), who spoke on condition of anonymity.

• Kazim, a public affairs analyst, wrote in from Abuja

Leave a Reply

Your email address will not be published. Required fields are marked *

*

%d bloggers like this: