23 August 2016, Sweetcrude, Abuja – The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr. Maikanti Baru, has taken steps to end Joint Venture (JV) cash call challenges by making the JVs autonomous.
In a statement from the Corporation obtained by our correspondent in Abuja, the NNPC management noted that contrary to speculations, the new management was repositioning the agency to make it more profitable.
The NNPC also remarked that contrary to the claims that the Corporation could not meet up to its JV funding challenges, action from the committee negotiating with the JV partners to close out the deal that would not only repay the arrears over the next five years, but also put in place a process where the JVs will not be cash calling government and eventually transit to the Incorporated Joint Venture (IJV) model as is the case with the Nigerian Liquefied Natural Gas (NLNG), where the IJV would be autonomous under the direction of its Board and Management, was presently being expected.
“It can fund its operations, pay royalty and taxes to government as well as dividends to its shareholders as a Limited Liability Company,” the NNPC management stated.
One of the NNPC chief executive’s 12 key business focus areas, the growth of the Nigerian Petroleum Development Company (NPDC), a subsidiary of NNPC, is also geared towards reviewing some of the salient contractual rrangements and terminating all bad ones, the NNPC said.
The management further noted in the statement that the clarification became necessary in view of an article where the writer succeeded in casting aspersions on Baru’s personality, capability and credibility.
The NNPC said that, on assumption of office, Baru had expressed his intention to continue with the good works of his predecessor, Dr Emmanuel Ibe Kachikwu.
Describing speculations in the media as an attempt to mislead the general public on some critical developments in the Nigerian Oil and Gas Industry and also disparage the GMD’s pedigree to deliver on his recent appointment, the Corporation explained that contrary to what had been published, that Baru’s appointment as GMD “spelt victory for the old guard at the Corporation,” his appointment was based on the recommendation of the Minister of State for Petroleum Resources.
“Thus, the honourable Minister of State for Petroleum Resources must have found Dr Baru the most fit for the job. Most importantly, Dr Baru’s sterling antecedents that are characterised by his honesty, integrity, transparency and accountability – which are also part of the cardinal principles of the Muhammadu Buhari administration – speak volumes for him. It is on record that he was, for four years (2004-2007), the chairman of the NNPC Anti-Corruption Committee. Therefore, those exemplary traits were part of what earned him the position of GMD of the country’s apex petroleum conglomerate.”
It stated that it would be profitable if energies are expended on promoting the attainment of such laudable objectives which are premised on moving the Corporation forward.
“The write-up claimed that ‘past NNPC Managements badly managed the Production Sharing Contract (PSC) debacle.’ To the contrary, in 2008, NNPC put up a case for the review of the PSC terms and the then HMSPR, Dr Odein Ajumogobia, issued out a letter putting on notice the PSC contractors to renegotiate the PSC terms.”
It noted that actual negotiations were started between a committee consisting of officials from the Department of Petroleum Resources (DPR), Federal Inland Revenue Service (FIRS), Ministry of Finance (MoF) and the NNPC with the PSC Contractors that year, but that when Dr Ajumogobia was replaced, his successor discontinued the engagement.
“The re-engagement was restored by the current Minister of State for Petroleum Resources and was continued by the team even after the change in baton as GMD. It is expected that both efforts towards JV cash calls and PSC dispute settlements will be approved by the appropriate authorities when concluded by NNPC and the teams, and they will be implemented under the leadership of Dr. Baru,” the management said.
Also reacting to insinuation that ‘Dr Baru is too steeped in NNPC’s intrigues and predilection for stalling investments,’ the management pointed out that, if contacted, the partners that invested in the divested assets by the international oil companies (IOCs) would have opened up to say that Dr Baru’s actions, while serving as GED, Exploration & Production (E&P), were laudable and would have given the various assets the latitude to sweat the assets maximally.
“His vision, which he shared with them from day one, was to transit each Oil Mining Lease (OML) to an Incorporated Joint Venture (IJV) – like the NLNG model from that date. The IJV would develop the assets as the operator under the guardianship of its Board with a Management whose managing director would be from the JV partner rather than NNPC.
“However, due to the insistence of their bankers, they preferred operatorship which is in conflict with the Joint Operating Agreement (JOA) signed with the divesting IOCs where operatorship automatically reverts to NNPC on relinquishment of IOCs’ shares except if NNPC opts otherwise.
“A middle path was charted by Dr. Baru for a joint operation of the assets through Assets Management Teams with the partner taking a lead role as a prelude to converting the OMLs to the IJV model. This middle course has been implemented and the partners are happy with the outcome and looking forward to the JV incorporation within the next few years.”
The Corporation noted that the militancy in the Niger Delta had largely contributed to the continuous disruptions of smooth operations of the assets, adding that militancy is worse in the western Delta where NPDC and its JV partners have assets than the eastern Delta where Aiteo and Eroton operate, and expressed the hope that, with the dialogue between government and the militants, the situation would improve “and the full value of the Baru’s vision greatly realised.”