PIB, REFINERIES: KEY CHALLENGES FOR ALISON-MADUEKE, LADAN
The sudden removal of the Group Managing Director, Nigerian National Petroleum Corporation, Mr. Mohammed Barkindo on Tuesday and his replacement with Mr. Shehu Ladan and the appointment of a new Petroleum Minister, Mrs. Diezani Alison-Madueke, apparently signals government's intention to give a new direction to the national oil company and the oil industry. Martin Ayankola, writes about key challenges before the new appointees.
The removal of the former Group Managing Director of the
Nigerian National Petroleum Corporation, Mohammed Barkindo, was long expected after the dissolution of the cabinet by Acting President Goodluck Jonathan, which marked the exit of Dr. Rilwan Lukman from government.
Lukman and Barkindo have a father and son relationship and it was expected that since Lukman had to go, Barkindo's days were also numbered.
While Lukman was the minister and Barkindo the GMD, there were issues of insensitivity to Federal Character principle in most of the appointments made to the top management cadre of the NNPC and there were a lot of complaints about lopsidedness in favour of the North.
However, the chummy relationship between Barkindo and Lukman, also made them to agree on most policy issues including the transformation project that Barkindo was driving before he was shown the door.
Now with the change of guard at the topmost levels on the government side of the business,it is expected that there could be some more changes in the Nigerian National Petroleum Corporation because if precedent is followed, new group executive directors may be appointed by the Presidency to work with the new GMD.
However, the new GMD and the minister, Diezani Alison-Madueke, have their works cut out for them to find answer to the questions of the refineries and the Petroleum Industry Bill. The key issue in the industry now is the PIB, which is still undergoing close scrutiny for eventual passage by the National Assembly.
Nigerians are yet to know what the disposition of Acting President Jonathan is to the proposed law but there seems to be some convergence of opinion in the National Assembly and even at the topmost level of government that the new law should be done in a way that it does not eventual drive out investors.
However, Lukman and Barkindo, were key promoters of the bill and with their exit, analysts are saying that the government may be working toward softening some controversial aspects of the bill.
The international oil companies had mounted a strong opposition against the bill and the strongest public statement against it was made by Shell's former Regional Executive Vice-President, Exploration and Production, Africa, Ann Pickard, who said at the Nigeria Oil and Gas Conference 2010 that the Nigerian oil industry had been performing below expectations because of inability of government to translate all the positives in the industry into coherent policies and actions.
According to her; 'The simple, passionately stated priorities of government have been completely lost in a cumbersome document that lacks insight into the very basics of our industry. When I hear comments like 'we won't fiscalise criminality' and we are better off leaving oil in the ground,' I shudder. The PIB threatens to make the present bad situation worse. If passed in the form currently proposed its mistakes will take years to correct,' Pickard said.
She stressed, ' Nigerians will have to wait longer for the electricity they need to light their homes at night. They will have to wait longer for jobs they need to put food on the family table. The government will have to face difficult choices to balance the budget with less money available for the social services that people need,' she added.
Pickard, however, said that despite everything, she remained optimistic because the International Monetary Fund had been commissioned by government to provide an independent objective analysis of the PIB.
Pickard said it was not too late for Nigeria to put before the President for assent, a simple, efficient legislative framework that delivers national priorities and heralds a new era for Nigeria.
'Nigeria's oil and gas production has not only failed to grow, it has fallen every year since 2005. Its share of global oil production is shrinking with it—it has fallen over 30 per cent since 2005. Investment in the industry has stalled. Final Investment Decisions are not being taken in deepwater and unlike Australia, no new LNG projects have been approved onshore. As a result, other countries are catching up with Nigeria fast.'
She added, 'Angola for example has eclipsed Nigeria in performance over the last decade. It has drilled more exploration wells than Nigeria every year since 1999 except one. In 2009 alone, the industry invested $8bn in Angolan deepwater-double the amount invested here. As a result, by 2020 Angolan offshore production is likely to be at least double that of Nigeria.'
Pickard said, 'New players are entering the market that will increase competition still further. Nigeria's position in global oil and gas markets cannot be taken for granted.'
However, a consultant to the NNPC, Dr. Pedro Van Meurs who incidentally is from Netherlands, the home country of Shell, stated that there was nothing in the proposed law that would scuttle future investment in the industry.
'There is no truth in the allegation that PIB fiscal system is the harshest in the world or that it will halt investment. I have been advising governments all over the world for over 40 years and I know that this is a battle whereby the oil company will try to get out of the parliament the highest possible share. So they make loud noise so maybe somebody out there might be listening to them. But the role of the minister is to make sure that the country's interest is protected by insisting on a fair share. I can tell you that for every one company that is planning to leave, I know of 50 new ones that are planning to come in once the door is open,' he said.
On the allegation that the fiscal system in Angola and other climes are friendlier than what is proposed under PIB, Van Meurs reeled out statistics of comparative government take to buttress his position.
Van Meurs stressed that whereas the PIB allows investors in small fields to start deducting cost of production once production begins so that funds can be available for re-investment in other fields, in Angola you can only do that from future productions, 'So tell me which is more investor friendly?' he quipped.
He described the PIB as an industry friendly legislation which has a fair deal for the companies, the host communities and the government.
The arguements will likely continue until the bill is passed into law.
For a former Group Managing Director of the NNPC,Mr. Chamberlain Oyibo, both Alison-Madueke and Ladan, have the wherewithal to perform well. Oyibo believes that the new minister's long years of service in Shell and Ladan's past experience at Nigeria LNG Limited, would assist them in delivering the goods in their new posts.
However, a top official in the oil industry who pleaded anonymity said that the appointments were not the best for the industry.
He said, 'I am not an exponent of political machinations and arrangements. But it does not require expertise to conclude that the two appointments you referred to were made strictly and entirely for political reasons.
'These two persons have no qualifications whatsoever to carry the enormous responsibility to take decisions on professionally demanding and complex technical issues. Worse still, there are so many competing interests in the oil industry at this time. The PIB is only a political manifestation of this fact. The worse part is the present lull in activities that has hung over the industry for the last two years, for several reasons – Niger Delta, lack of leadership and direction from the petroleum minister, etc. This has resulted in Angola overtaking Nigeria in performance by all criteria of measurements in the industry. This is not a good sign for our country's future in the business.'
Another however, said that they should not be prejudged and should be allowed to prove their mettle in the new assignment.
One thing is however clear; the oil majors are likely to have a better deal under Alison Madueke, beacuse of her relationship with Shell, being a former employee.