Sunday, November 4, 2012

The political intrigues in Nigeria’s oil sector probes

Ribadu's choice to head the Presidential Task force on Petroleum Revenue was controversial as some members of the civil society felt an unpopular President was trying to win popular support on the credibility of the well-respected former anti-corruption fighter.  Ribadu has lived up to his  profile with the controversy his report has generated, first with the way to report was leaked to the media ahead of its release and the open disagreement among his  committee members on Friday when the report was submitted to the President.
President Goodluck Jonathan. 

The leakage of the Ribadu report was actually what forced President Goodluck Jonathan to personally request that the Ribadu committee report and two other committees that have had their report ready but have been unable to submit to the Minister of Petroleum Resources who set up the committees, hand in their reports to him personally.

The three different committees besides The Ribadu Special Task Force on Petroleum Revenue are the Dotun Sulaiman Committee on good governance and global best practices in the NNPC and the Kalu Idika Kalu committee on the nation’s refineries.

The report of the three committees have been hanging in the Minister’s office for several  months after the committees finished their reports without any clear idea of when they will be able to submit to her officially.
The Minister was apparently reluctant to receive the reports of the three different committees set up to probe and make recommendations on various aspects of the Nigerian petroleum industry.

But the leakage of the Ribadu Task Force report to the media triggered the President into damage control mode forcing him to accept the report of the committees which high level intrigues were in process to undermine their recommendations.
Diezani Allison Madueke, Nigeria's Minister of Petroleum Resources

The expectation is that the recommendations of the committees if implemented by the President will significantly change the current power structure in the oil and gas industry forcing out entrenched interests that have fed fat on the current anomalies in the sector. It is these entrenched interests in the Ministry and the Nigerian National Petroleum Corporation (NNPC) that are doing everything in their powers to ensure that the committees report do not see the light of the day or are discredited.

Though the current uncertainty in the oil and gas sector is holding back billions of dollars of new investments, entrenched interests in the sector are basically not bothered since the uncertainty favours their continuous rape of the sector.

  The current challenges in the sector revolve mainly around the desire of the Petroleum Minister and top executives of the NNPC to remain the power brokers in the sector despite clear signals that the best way to go for the oil sector is less of government interference, proper regulation of the oil sector and a clear business plan for running the Nigerian National Petroleum Corporation (NNPC) and its various subsidiaries.

The power play has not only  stalled the outcome of the various committees set up by the President and Minister in response to last January’s protest and call of the reform of the Nigerian oil sector but also the Petroleum Industry Bill (PIB) currently before the National Assembly may have fallen victim of these intrigues. The current PIB before the National Assembly is not the same as that prepared by the Udo Udoma committee set up by the President to draft PIB, sources familiar with the original recommendations of the committee say. The final report got to the national assembly without the knowledge of the committee, sources say.

Critical recommendations of the committee, like a more independent Department of Petroleum Resources (DPR), which would have seen the emergence of a strong autonomous regulatory body for the oil industry was watered down resulting in the recommendation of two weak regulatory bodies, one for upstream and another for the downstream and stronger control by the Minister of Petroleum Resources in the draft bill before the National Assembly.

“The boards of the two regulatory bodies have just been reduced to that of budget proposal and implementation. They have no real powers” said an oil industry source.

Also recommendations that removed most of the discretionary powers of the Minister in the Oil and Gas sector were ignored for more discretionary powers by the Minister.  The implication is the PIB which would have seen the emergence of a more business oriented NNPC has not materialized in the current PIB.
The second committee, the Kalu  Idika Kalu committee has also seen the Minister acting contrary to its recommendations concerning the refineries. The committee had recommended that the way forward was for the nation’s refineries to be sold and that if any Turnaround Maintenance (TAM) were to be done at all before the sale, it should not cost more than $500 million, sources say. The Minister of Petroleum Resources has however moved to repair the refineries at a cost of $1.6 billion well above the committee’s recommendation. It is also understood that the Minister may have delayed receiving the report of the committee.

Sources also say the Ribadu Committee was leaked to the media after several efforts to officially present the report to the Minister failed. Even after the report was leaked in the media, the Minister came out questioning sections of the report stating that the government is still studying the report.

A look through the Ribadu report however shows that the NNPC and the Ministry were actively contacted throughout the process of preparing the reports and their reaction to all the issues raised incorporated into the report.

A third committee, the Dotun Sulaiman Committee charged with designing a new corporate governance codes for ensuring full transparency, good governance and global best practices in the NNPC and other oil industry agencies  was completed months ago but the committee was unable to officially present it to the Minister. The committee’s recommendation will essentially see a more independent NNPC with less control from the Minister’s office; say sources that have seen a copy of the report.

A common thread running through the reports of all the committees’  set up to probe the power sector is the needed for transparency and less government interference in the sector, say sources that have seen the reports. This will significantly reduce the influence of the Minister and ensure a more properly regulated oil industry.

“What we envisaged with the current reform in the oil industry is a more independent regulatory role for the DPR like the National Communication Commission (NCC) in the Telecoms sector and the Nigeria Electricity Regulation Commission (NERC) in the electricity sector. Unfortunately, that is not what we are getting” a second source in the oil industry said.

The challenge with the current oil industry reforms is that NNPC and the Ministry has been left to lead the reforms. It is like asking the Power Holding Company of Nigeria (PHCN) to lead the reforms in the electricity sector or asking NITEL to lead the reforms of the telecommunications sector. They would have just used the process to entrench themselves in the sector rather than pursuing meaningful reforms that will lead to growth of the sector. That is what the NNPC is doing, said an operator in the oil industry.

Apparently, the reports were meant to die in the process flow but that has failed. Now that the recommendations are in the public, hopefully the President will be bold enough to implement the recommendations. 

 A slightly different version of this article was published in BusinessDay

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