NPDC and enhanced local participation in oil production

Oil drilling rigs17 June 2014, Abuja – It is true that when progress comes, there is propensity by those who are afraid of change to challenge it. For the past four years that the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, has been at the helm of affairs her goal has been to make the oil and gas sector more accessible to local indigenous players. Her work has been plagued with stories which whether real or imagined have not been fully investigated nor do they hold neither facts nor truth.

This is the price she is paying for daring to remain at the helm of the most important sector of the Nigerian economy and threading in an all men industry and still has the guts to stand tall despite the negative publications against her. And who is to blame if not she, for failing to fight back forcefully enough. The good news, however, is that the criticism has never dissuaded her from doing what she believes is right for our country.

We do not always have to criticise government officials simply because we do not understand the workings of government. Alison-Madueke, a holder of the MBA of Cambridge University is not all knowing and never will be, but her record shows that she knows what she is doing at the petroleum ministry and her desire to see that the Nigeria oil sector develops to its maximum capacity is not in any doubt. It is this desire that has driven her to adopt several creative previously utilised ways to bridge the existing funding gap in the industry which hitherto has prevented the NNPC from meeting its cash call obligations when due.

One such financing arrangement is the Strategic Alliance Agreement (SSA), which has made it possible for the Nigerian Petroleum Development Company (NPDC), the exploration and production subsidiary of the Nigerian National Petroleum Corporation (NNPC), to undertake investment in very critical projects in the oil and gas sector.  Similar to Financial and Production Sharing Agreements (FPSA) and Petroleum Sharing contracts (PSC), the SSA has enabled NPDC to develop oil and gas fields which ordinarily it could not have funded from its limited resources or carried all the risks solely. These agreements are based on tested financial models used by international oil companies to help NPDC fund its cash call obligations.

Without the SSA, many oil and gas fields would not have been explored, developed and produced because NPDC would be unable to meet the cash call obligations in these partnerships with its partners, and as such many vital projects of NPDC would have suffered thereby undermining the Nigerian economy. This is definitely what Nigerians who are not conversant with the oil industry do not know. They also do not know that SSA with NPDC has been entered into with indigenous companies to empower the local companies (under the same terms and conditions like that undertaken with the international oil companies and NNPC). This kind of effort should be lauded, as it is the minister’s goal to develop indigenous companies.

The SSA is not new in the petroleum and gas industry, as many countries have used this financing instrument to grow their operations. State oil companies such as Petrobas of Brazil, Petronas of Malaysia and Sonangol of Angola have aggressively used these innovative financing arrangements to the benefit of their countries. NPDC cannot be different if we are to remain competitive in the global market.

The criticism of Alison-Madueke who, in good faith, has made audacious steps to reposition the oil and gas industry through the adoption of innovative financing instruments to the benefit of the nation are uncalled for.  She deserves commendation and not condemnation.

We are all aware that the international oil companies have always complained that NNPC is not able to meet its cash call obligations. Therefore to suggest that the SSA be rolled back is to say the least unwise and unpatriotic. It will amount to throwing away the baby with the bath water when the gains of SSA are about to be consolidated. Agreed that flaws may abound in the agreement, but they cannot and should not be blamed on the executive, which has used these already established instruments to ensure the smooth operation of NPDC. Neither can they be attributed to the minister or the government. These flaws manifest at the operational level and whatever challenges that exist in the execution of those agreements, be they legal, commercial or operational, should be handled at the operational level. It is at that level that issues such as those arising from the commercial agreement entered into by NPDC and Atlantic Energy Concepts Limited should be resolved.

Antagonising Alison-Madueke on the basis of decisions that were made in good faith could only discourage future ministers from making hard decisions where necessary to deal with challenges in the oil and gas sector. Without doubt, Alison-Madueke is a strong character who is not easily distracted but she needs our support so she can remain focused on the restructuring of the oil and gas industry and most especially the passing of the Petroleum Industry Bill (PIB) that will help stimulate investment in the oil and gas sector.

The focus, therefore, should be on the PIB which has been held down by the cabal that is fighting the minister. Just as the FOIA was fought and won and the National Health Bill almost sailing through, pressure should be mounted on the National Assembly to pass the PIB. Or are we all forgetting the expected benefits of the PIB to the common man who we all claim to fight for? Fight for PIB and not fight the minister who may out of fear of criticism stop any fresh innovative ideas being brought to the ministry, an act which has rendered some of the sectors of the economy impotent.

Alison-Madueke has achieved so much for the oil and gas sector and made many bold decisions since she arrived at the ministry. Let us not forget that under the watch of this able woman, Nigeria increased its daily oil production, eliminated petroleum products scarcity in our nation and restored peace to the Niger Delta. A bigger plus is that NPDC which for years under previous administrations boasted a production output of less than 5,000 barrels per day (bpd), today produces well in excess of 50,000bpd all because of the SSA as well as the operatorship of several oil blocks that were transferred to the NNPC subsidiary.

The audacious steps she also took led to the Gas Masterplan revolution implementation of Nigerian Oil and Gas Industry Content Act, as well as implementation of the National Gas Supply and Pricing Policy. That NPDC has grown into a medium scale exploration and production company from its small sized era is her feat, just as under her leadership, there has been an increase in the contribution of Nigerian companies to oil production output. What more can we say?

Rather than join in the bandwagon to pull her down, Nigerians should stick with her and encourage her to continue with the work she is doing for the country.


– This Day

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