As Kachikwu Breathes Life into Oil Sector


Cesspit of corruption, opaque revenue profile, huge running costs and non remittance of revenues to Federation Account; those are just a few of the negative impressions that the mere mention of NNPC evokes in the minds of both Nigerians and the international community. NNPC has become infamous as the “headquarters of corruption” in Nigeria, defined by stupendous graft and massive inefficiency. It was no surprise President Muhammadu Buhari identified turning the corporation around as one self-imposed task he was going to take very seriously indeed. To underscore his commitment to the NNPC project, the President tapped a highly experienced oil industry veteran to be his Man Friday in the petroleum sector.

He appointed Dr. Emmanuel Ibe Kachikwu, the former Executive Vice Chairman and Legal Counsel of Exxon Mobile first as the Managing Director of NNPC and a few months later, the Minister of State, Petroleum to oversee the restructuring and reform of the sector responsible for 90% of the country’s revenues.

To say the obvious, this was no mean assignment. NNPC, prior to Kachikwu’s appointment was largely dysfunctional, a monument to decades of un-structured, un-strategic and wasteful leaderships. Though the corporation has retained a host of highly qualified technical hands, professionalism was practiced in the breach in for the profit of few at the expense of the nation’s interest in comparison with similar state owned oil companies in other parts of the world which in addition to meeting domestic demand for refined petroleum products have evolved into large, profitable hubs dominating the oil sectors in their regions.

However, today, about eight months into this new government, though a lot more work remains to be done, it’s clear that there’s a new spirit of positive efficiency in the NNPC and that some good work has begun. Emerging signals indicate that that the longstanding cynicism nursed by both local and international stakeholders is thawing. There is every indication that as the open and transparent institutional initiatives of Dr. Kachikwu kick in, the NNPC is slowly but surely entering a new era of sustainable profitability, accountability and competitiveness.

One of the first steps that Dr Kachikwu took towards building a new culture of transparency in the NNPC was to open up its books to the public in October 2015. He was quite forthright about his motivations: “I am very focused on transparency because I think that the Nigerian public has a right to know” he said last year in August 2015. Since then, the practice has become a monthly tradition. NNPC’s financial and operational statements are now easily available and accessible online and are no longer classified state secrets and subject of speculation and controversy.

Still on transparency, Kachikwu has taken bold steps that industry stakeholders consider as strong signals that he is committed to making a break from the entrenched tradition of arbitrary and shady allocation of contracts to friends, cronies. For instance in August 2015, he cancelled all contracts for delivery of crude oil to refineries because they were unjustifiably expensive and checks showed that due process was not followed. It is estimated that this action saved the country an average of $150 million monthly.

To set the tone for the way things should be done, he conducted the first recorded public competitive bid for lifting Nigeria’s crude oil by the NNPC. The field was thrown open for competent industry players with track records of integrity and financial strength to bid. From 278 local and international companies that submitted bids, only 21 with the most responsive bids got the contracts in a process that was widely hailed as transparent and world class. The same open bidding process was applied to the coastal bid and the Offshore Processing Agreements (OPAs) bid.

It has always been public knowledge that the NNPC was too large and the processes to wieldy and that the only way to make it efficient was to break it up and make it lean. But despite the knowledge of what needed to be done, the status quo remained unchanged because the chaotic environment was conducive for graft. To fix this, Kachikwu as Minister of State, Petroleum Resources is overseeing a steady re-structuring of the NNPC and its operations.

He has extracted in good time, presidential approval to unbundle the NNPC into four different enterprises namely- the upstream company, the downstream company, Midstream Company, and the refining group holding company. The four units are to run their operations independently. Furthermore, under an agenda named ’20 Fixes’ Kachikwu has identified and is at varying stages of progress on 20 critical issues that when fixed would help strengthen NNPC. Some of these are: to reduce and audit operational cost, restructure corporate centre and staffing, renegotiate existing contracts, streamline subsidy management, boost pipeline security, enhance transparency and accountability, achieve zero tolerance for corruption, rebrand NNPC and unbundle PPMC.

The reforms that Kachikwu has brought to bear on NNPC and the oil industry have received commendations and support from many stakeholders. Recently, Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Comrade Francis Johnson came out publicly to say that “Johnson said he was comfortable with any move that would make it (NNPC) effective in terms of efficiency, performance, growth and job creation”

Also early this year, Reuters, the international newswire service named NNPC as winner of the Thomson Reuters/PFI Magazine “Africa and Middle East Deal of the Year Award for 2015’. The award was in recognition of $1.2 billion multi-year drilling financing package for 36 Offshore/Onshore Oil wells under the NNPC/CNL Joint Venture initiated under the Accelerated Upstream Financing Programme executed at a signing ceremony in London in September, 2015.

The deal is the first proof by Kachikwu that he is committed to bringing to an end the age long issue of underfunding of the sector which compelled earlier governments to use debt to finance essential projects in order to stop production decline and increase producible reserves. The deal is structured as a funding package to be financed by a consortium of Nigerian and international lenders and projected to generate additional $5bn into the Federation Account

Kachikwu has also shown commendable drive towards ensuring that the Petroleum Industry Bill (PIB), a critical bill that will provide the legal framework for the reform of the oil and gas industry, is passed. From providing statistics which indicate that the country is losing an estimated $15billion per annum due to the non-passage of the bill to suggesting that it could be split and passed in phases, and not necessarily as a whole, he has shown innovation, passion and leadership that is deserving of praise. Beyond that, his resort to consensus building, political consultations and consistent engagements with industry stakeholders to see that the PIB is expeditiously passed is giving the bill more feasibility.

His efforts to fix the refineries have also started yielding good results. Early this year, 5th January 2015, announced that the nation’s three refineries in Kaduna, Port Harcourt and Warri have attained a combined daily production of over 6.76 million liters of petrol per day which is projected to increase to over 10 million liters per day by the end of January 2016. This is the best performance of the refineries in decades and will help greatly to reduce the amount of fuel imports and ease pressure on foreign exchange reserves.

The oil and gas industry is a huge competitive global business and Nigeria as a leading regional player in this market cannot continue to operate based on its local standards and expects to thrive and grow. With falling oil prices and the need for collaboration, operational restructuring, seeking external sources of finance to expand operations, that require industry expertise, deep networks and a thorough understanding of best practices, transparency, the Nigerian oil and industry could not have wished for a better leader than Dr. Kachikwu.

His reforms have reforms have received endorsements from the United States Ambassador to Nigeria, Mr. James F. Entwistle, international Investors in the oil and gas industry and industry stakeholders. With greater competition coming into play in the system as against the previous system that encouraged rent seeking and mindless profiteering, it is believed that some of the key challenges that have defied all attempted solutions would hence be effectively tackled. What is therefore expected of Nigerians and other players within the industry is continuously support and encourage the far reaching and visionary reforms coming into the petroleum industry under the guidance of President Buhari and Dr. Ibe Kachikwu for it appears that at last, we have found men with the right mind set and courage to do the right thing with a view to seeing that Nigerian’s abundant oil resources is expended in the service of true national interest and not the greed of a few oligarchs.