10 October 2017

Nigeria: Kachikwu vs Baru - Pengassan, NUPENG Vow to Resist Interference

You lied, cooked figures, NNPC replies Kachikwu

It's unfortunate, says Afenifere; Baru talking balderdash -- Osuntokun

LAGOS -- The Nige rian National Petroleum Corporation, NNPC, yesterday, described the allegations of the Minister of State for Petroleum Resources, Mr. Ibe Kachikwu, against its Group Managing Director, Mr. Maikanti Baru, as baseless and accused the minister of exaggerating and concocting figures to give vent to his claims.

NNPC's statement yesterday, however, drew the reaction of stakeholders in the oil and gas sector and the polity.

Among those that reacted were Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, Nigeria Union of Petroleum and Natural Gas Workers, NUPENG, Yoruba socio-cultural organisation, Afenifere, and former Political Adviser to ex-President Olusegun Obasanjo, Akin Osuntokun.

The NNPC response

NNPC in a statement by Mr. Ndu Ughumadu, Group General Manager, Group Public Affairs Division, said: "Following the publication of alleged lack of adherence to due process in the award of NNPC contracts, the President ordered the Group Managing Director (GMD) and Management of the Nigerian National Petroleum Corporation (NNPC) to consider and respond expeditiously to the allegations.

"The substance of the allegations made by the Minister of State for Petroleum Resources, in a letter to the President dated 30th of August 2017, is that a number of "major contracts were never reviewed or discussed with me (sic) the NNPC Board.

"It is important to note from the outset that the law and the rules do not require a review or discussion with the Minister of State or the NNPC Board on contractual matters.

"What is required is the processing and approval of contracts by the NNPC Tenders Board, the President in his executive capacity or as Minister of Petroleum, or the Federal Executive Council (FEC), as the case may be.

"There are, therefore, situations where all that is required is the approval of the NNPC Tenders Board while, in other cases, based on the threshold, the award must be submitted for presidential approval. Likewise, in some instances it is FEC approval that is required.

"It should be noted that for both the Crude Term Contract and the Direct Sale and Direct Purchase (DSDP) agreements, there are no specific values attached to each transaction to warrant the values of $10bn and $5bn respectively placed on them in the claim of Dr. Kachikwu. It is therefore inappropriate to attach arbitrary values to the shortlists with the aim of classifying the transactions as contracts above NNPC Tenders Board limit.They are merely the short listing of prospective off-takers of crude oil and suppliers of petroleum products under agreed terms. These transactions were not required to be presented as contracts to the Board of NNPC and, of course, the monetary value of any crude oil eventually lifted by any of the companies goes straight into the federation account and not to the company.

Our GMD consulted Kachikwu -- NNPC

"Furthermore, contrary to the assertion of Dr. Kachikwu that he was never involved in the 2017/2018 contracting process for the Crude Oil Term Contracts, Dr. Kachikwu was in fact expressly consulted by the GMD and his recommendations were taken into account in following through the laid down procedure. Thus, for him to turn around and claim that '... these major contracts were never reviewed or discussed with me... ' is most unfortunate to say the least."

NNPC's contracting process

On contracting process, he said: "The contracting process in NNPC is governed by the following: Provisions of the NNPC Act, the Public Procurement Act, 2007 (PPA), Procurement method and thresholds of application and the composition of Tenders Board as provided by the Secretary to the Government of the Federation (SGF) Circular reference no. SGF/OP/1/S.3/VIII/57, dated 11th March, 2009, NNPC Delegation of Authority Guide, Supply Chain Management Policy & Procedure documents and NNPC Ethics Guide."

"NNPC had cause to clarify severally from Bureau of Public Procurement (BPP) as to the composition of NNPC Tenders Board and the role of NNPC Board appointed by Government. The following clarifications were made.

"The BPP expressly clarified that NNPC Tenders Board (NTB) is not the same as NNPC Board. The governing board (NNPC Board) is responsible for approval of work programmes, corporate plans and budgets, while the NTB is responsible for approval of day-to-day procurement implementation.

"BPP referred to the SGF circular for the composition of the NTB to comprise of the Accounting Officer (GMD NNPC) as the Chairman, with Heads of Department (GEDs) as members with the Head of procurement (GGM SCM) serving as the Secretary of the NNPC Tenders Board.

The above clarifications of the provisions of the procurement process show that approvals reside within the NTB and where thresholds are exceeded, the NNPC refers to FEC for approval. Therefore, the NNPC Board has no role in contracts approval process as advised by BPP.

"As can be seen, all these clarifications were sought and obtained prior to August, 2015 and were implemented by Dr. Kachikwu as the GMD of NNPC. Dr. Kachikwu also constituted the first NNPC Tenders Board on 8th September, 2015 and continued to chair it until his exit in June, 2016."

He stated that approval of project proposal and contracting strategy by NTB was always followed by placement of adverts for expression of interest in electronic and print media, soliciting for tender (Technical and Commercial), tender evaluation, tender approval by NTB for contracts within its threshold; otherwise, obtain BPP certificate of no objection before presentation to FEC.

The statement continued: "It is important to state that the COTC is not a contract for procurement of goods, works or services; rather it is simply a list of approved off-takers of Nigerian crude oil of all grades. This list does not carry any value, but simply state the terms and conditions for the lifting. It is therefore inappropriate to attach a value to it with the aim of classifying it as contract above Management limit.

"In arriving at the off-takers list for 2017/2018 COTC, the following steps were followed: adverts were placed in National and International print media on Monday, 17th October, 2016. The bids were publicly opened in the presence of all stakeholders (NIETI, DPR, BPP, Civil Society Organisations, NNPC SCM Division and the press as well as live broadcasts by the NTA and other TV stations).

"Detailed evaluation was carried out and the shortlist of the successful off-takers was presented to the approving authority (Mr. President) for consideration and approval.

"Thereafter, NNPC published the list of the successful off-takers in newspapers and NNPC's official website.

"This has been the standard procedure and it is the same process adopted during the 2016/2017 COTC when the HMSPR was the GMD. In conclusion, due process has been fully followed in the short listing of the off-takers of the Nigerian crude oil for the current term 2017/2018."

On the Direct Sale Direct Purchase (DSDP) Contract- valued at over $5bn. The statement stated: "Like the COTC, the DSDP is not a contract for any procurement of goods, works or services; rather it is simply a list of off-takers of crude oil and suppliers of petroleum products of equivalent value.

"This list does not carry any value, but simply state the terms and conditions for the lifting and supply of petroleum products. It is therefore mischievous to classify it as contract and attach a value to it that is above Management's limit. In arriving at the off-takers list for 2017/2018 DSDP, the following steps were followed: Work plans and execution strategy for the DSDP was granted by the approving authority (Mr. President), adverts were placed in National and International print media and NNPC website on Thursday, December 22, 2016, the bids were publicly opened in the presence of all stakeholders (NIETI, DPR, BPP, Civil Society Organisations, NNPC's SCM Division and the press as well as live broadcast by the NTA and some TV stations), detailed evaluation was carried out and the short list of the successful off-takers was presented to the approving authority (Mr. President) for consideration and approval and this has been the standard procedure and it is the same process adopted during the 2016/2017 DSDP when the HMSPR was the GMD. In conclusion, it has been confirmed that due process has been followed in arriving at the shortlist of the DSDP partners for the 2017/2018 cycle."

On the Ajaokuta-Kaduna-Kano (AKK) Gas Pipeline Contract, it stated: "The AKK Gas pipeline project is a contractor-financed contract.

"The process adopted for this contract is as follows: approval of project proposal and contracting strategy was given by NTB, Placement of adverts for expression of interest in some National and International print media and NNPC's website, expression of interest for pre-qualification received and evaluated, technical and commercial tenders issued and evaluated, NTB considered and endorsed tender evaluation result for FEC approval since this contract is above NTB's threshold subject to obtaining the following certificates of no objections, BPP certificate of no objection (obtained). Certificate of no objection from Infrastructure Concession and Regulatory "Commission (ICRC) (obtained). Certificate of no objection from Nigerian Content Monitoring & Development Board (NCMDB)(being awaited. BPP and ICRC certificates have been obtained, while that of NCDMB is being awaited after which the contract will be presented to FEC for consideration and approval. Thus, due process is being followed in the processing of this contract."

On the various financing arrangements considered with IOCs, it stated: "The financing arrangements reported as contracts are part of the process of exiting Cash Call approved by the FEC.

"It entails negotiations with JV Partners on alternative funding of some selected projects through third party financing to bridge the funding gap associated with Federal Government's inability to meet its cash call contributions.

"The third party financing option emanates from the appropriation act provisions that allow sourcing of financing outside regular cash call contributions. Upon approval of the calendar year's operating budget, the NNPC in conjunction with its JV partners commence the necessary process for accessing financing to bridge the funding gap.

"NAPIMS and JV partner identify bankable projects that require financing and sends to NNPC Corporate Finance to assist in procuring financing. Constitution of Joint Financing Team (JFT) between NNPC and the JV Partner. JFT NNPC invites Request For Proposals (RFPs) from Financial Institutions. "Submitted RFPs are evaluated and beauty parade conducted to determine most cost-efficient proposal.

"Negotiated Financing Strategy, Term-sheets, Structures and pricing are presented for NNPC Management's (NTB) approvals. NNPC presents the renegotiated termsfor approval of Mr. President.

"NNPC executes the resultant Agreement. All established due process as enumerated above has been observed leading to the securing of financing for the following projects in 2016/2017:

"All the NPDC procurement contracts were subjected to the approved procurement procedures as described in respect of the AKK Gas Pipeline project above.

"There were no breaches of any extant procurement processes. For the benefit of doubt, it is confirmed that there is no single NPDC contract that has been approved by the relevant Tenders Board beyond its limit of financial authority and there is no single contract that is in the $3Bn to $4Bn range claimed in the write-up.

"From the foregoing, the allegations were baseless and due process has been followed in the various activities. Furthermore, it is established that apart from the AKK project and NPDC production service contracts, all the other transactions mentioned were not procurement contracts.

"The NPDC production service contracts have undergone due process, while the AKK contract that requires FEC approval has not reached the stage of contract award."

However, the statement has generated a lot of reactions from many stakeholders sector wide.

PENGASSAN, NUPENG pledge support for Baru

The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), and the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG), have pledged unalloyed support for the transformation stride of the Group Managing Director of the Nigerian National Petroleum Corporation, Mr. Maikanti Baru.

Speaking during a solidarity visit to Baru, National President of PENGASSAN, Comrade Francis Johnson, said the unions and their members considered it appropriate to rally round the GMD and the NNPC Management to pledge their support.

Comrade Johnson said: "The National body of PENGASSAN and all the NNPC in-house unions are here today to show our support for you. You have brought stability to the NNPC and we are happy today that staff morale is high.

"You were Chairman of NNPC Anti-Corruption Committee for over five years and that was what informed your appointment as GMD of NNPC. Today, all the bullets you are taking are on behalf of members of staff. We will continue to pray for you, God will continue to guide and shield you."

The PENGASSAN President called on Nigerians to be cautious of their comments on the controversy, adding that any wrong information was capable of discouraging investors from the oil and gas industry which is the highest foreign exchange earner.

The unions' visit came on the heels of the recent controversies over a letter the Honourable Minister of State for Petroleum Resources, Dr. Ibe Kachikwu forwarded to the President alleging non-adherence to due process by the Management of NNPC in some contract administration.

The NNPC Group Chairman of PENGASSAN, Comrade Sale Abdullahi, who also spoke during the visit to the GMD, stated: "Today, the GMD and NNPC Management receive inputs from staff and this gesture by Dr. Baru has given members of staff a sense of belonging. Today, our inputs are being implemented and we are highly motivated."

In a statement by the Group Secretary of the Group Executive Council, GEC, of PENGASSAN in NNPC, Sulaiman Sulaiman, noted that the recent re-organisation in the NNPC was in good faith and encouraged internal growth.

"We are convinced that the recent re-organization in NNPC is in good faith and in tandem with our call for allowing internal growth in the system through hard work and positive appraisals. We shall continue to reject and vehemently resist attempts in meddling into day-to-day running of the organization by non-executive officials of the Corporation. We will not, any longer allow our institution to be an avenue to settle friends and cohorts into Management positions of NNPC at the detriment of dedicated staff with all the requisite qualifications within the system.

"Problems will continue to occur as long as the Chairman of the Board will continue to meddle into day-to-day running of the organizations, which is a Management role. Any attempt to allow this to happen will spell doom for the country and create a window for abuse. Good practice in corporate governance requires absolute segregation of oversight role from management day-to-day role. Why should a board chairman seek to meddle in internal organizational adjustment? The Board Chairman should focus on performance appraisal of the Board Committees and its members rather than wanting to dictate appointments or award contracts in NNPC."

It's unfortunate-- Afenifere

However, the Pan-Yoruba socio-political organisation, Afenifere described the statement as unfortunate.

Afenifere's National Publicity Secretary, Mr Yinka Odumakin said: "The NNPC statement is quite unfortunate. Why have an NNPC board that a GMD would treat with disdain? Would that be Baru's attitude if the President has not ceded the chairman of the board to the Minister of state? Kachickwu talked of contracts being awarded but the NNPC is saying that they are going to send the papers to FEC for approval. Who had been approving without FEC? It is becoming clearer why the Chief of Staff is on the board of NNPC, only he could have been representing the board."

Baru talking balderdash -- Osuntokun

For Mr Akin Osuntokun, Political Adviser to former President, Chief Olusegun Obasanjo, the NNPC boss is talking balderdash adding that he is portraying Buhari as mindless.

Osuntokun said: "The GMD is talking balderdash. The Minister of State is also legally, constitutionally and administratively a full cabinet ranked Minister of Petroleum until the appointing authority, namely the President, says otherwise. If the Minister of State, Petroleum, is not Minister of Petroleum, what then is his ministry? And who presents the memo of the Petroleum Ministry at the Federal Executive Council? Is it the President?

"There's this misconception about the Minister of State, it doesn't imply inferiority, otherwise you will be implying that one state is inferior to the other; because they are representing their states on the council. What this Baru man is implying is that the appointment of Kachikwu as Minister of State and board chairman of NNPC is meaningless."

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