10 October 2017

Nigeria: NNPC Responds to Kachikwu's Allegations

Abuja and Lagos — The Nigerian National Petroleum Corporation (NNPC) has responded to allegations of impropriety and lack of adherence to due process in the award of contracts worth $25 billion leveled against its Group Managing Director (GMD), Dr. Maikanti Baru, by the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu.

The corporation's response followed a directive by President Muhammadu Buhari that it should respond to the allegations.

In a statement it issued yesterday, the NNPC insisted that due process was followed in the award of all its contracts, even as it faulted the minister's claim on the legal and procedural requirements that contracts above $20 million needed to be reviewed and approved by the board of NNPC.

The statement titled, 'Re: Allegation of Lack of Adherence to Due Process In NNPC Contract Award', which was signed by NNPC's spokesperson, Ndu Ughamadu, noted that the law and the rules of the corporation do not require a review or discussion with the Minister of State or the NNPC Board on contractual matters.

Ughamadu said, "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".

NNPC explained 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 $10billion and $5billion respectively placed on them in the claim of Dr. Kachikwu.

Noting that Kachikwu's figures lack substance, the NNPC's spokesman said, "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 (NTB)".

He said Kachikwu lied on his claim that he was not carried in the controversial contract process.

Ughamadu stated: "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".

According to Baru and the NNPC management, contracting process in NNPC is governed by the 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), among others.

Addressing specific contracts mentioned in Kachikwu's letter, the NNPC management said Crude Oil Term Contracts (COTC) is not a contract for procurement of goods, works or services, adding that rather it is simply a list of approved off-takers of Nigerian crude oil of all grades.

The corporation explained that, while the list does not carry any value, but simply state the terms and conditions for the lifting, it is inappropriate to attach a value to it with the aim of classifying it as contract above management limit.

NNPC said in arriving at the off-takers list for 2017/2018 COTC, the normal procedure of placing adverts in National and International print media was done on Monday, October 17, 2016.

The bids, according to the corporation, were publicly opened in the presence of all stakeholders, including NIETI, DPR, BPP, Civil Society Organisations, NNPC SCM Division and the press as well as live broadcasts by the NTA and other TV stations.

It added that detailed evaluation was carried out and the short list of the successful off-takers was presented to the president, who is the approving authority, for consideration and approval.

It submitted that due process was fully followed in the shortlisting 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 $5billion, NNPC said the DSDP is not a contract for any procurement of goods, works or services, but simply a list of off-takers of crude oil and suppliers of petroleum products of equivalent value.

The corporation's spokesman stated that the 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", Ughamadu stated..

NNPC noted that the process used has been the standard procedure and it is the same process adopted during the 2016/2017 DSDP when Kachikwu was the GMD of NNPC.

According to him, the Ajaokuta-Kaduna-Kano (AKK) Gas Pipeline Contract is a contractor-financed contract.

He explained that the process adopted for this contract includes the approval of project proposal and that contracting strategy was given by NTB for 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, as well as the NTB considering and endorsing tender evaluation result for FEC approval.

On financing arrangements with IOCs, NNPC said, "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."

It noted that the third party financing option emanates from the appropriation act provisions that allow sourcing of financing outside regular cash call contributions.

Ughamadu further said upon approval of the calendar year's operating budget, the NNPC in conjunction with its JV partners, commenced the necessary process for accessing financing to bridge the funding gap.

"Section 8 sub-sections (1) and (4) of the NNPC Act CAP N123 requires that all NNPC borrowings must be approved by Mr. President", he stated.

PENGASSAN Vows To Resist Interference In Corporation's Affairs

Meanwhile, Oil workers under the aegis of Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) yesterday vowed to resist any attempt by officials who are not designated for the administration of the NNPC to meddle in the affairs of the corporation.

They warned that they would stop non-executive officials from using top management positions in the national oil company to settle cronies to the detriment of dedicated staff.

In a statement signed by the secretary of the Group Executive Council (GEC) of PENGASSAN in NNPC, Comrade Sulaiman Sulaiman, the oil workers noted that the recent re-organisation in the NNPC was in good faith and encouraged internal growth.

Sulaiman said, "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".

Noting that good practice in corporate governance requires absolute segregation of oversight role from management day-to-day role, the oil workers wondered why a board chairman should seek to meddle in internal organizational adjustment.

They asked the board chairman to focus on performance appraisal of the board committees and its members rather than wanting to dictate appointments or award contracts in NNPC.

According to the workers, contrary to claim in the said letter to the president, staffs are no longer afraid to talk or express their opinion, especially with the domestication of whistleblowing policy and re-constitution and launching of the anti-corruption committee by the current GMD.

"In terms of workplace harmony, NNPC has enjoyed the best industrial atmosphere under the present Top Management of NNPC. So far there is zero record of industrial crisis or shutdown, which is the first of its kind in the history of struggle in oil and gas in Nigeria. Thanks to the efforts of the current GMD and the GED Corporate Services", they said.

They declared support for the decision of the Senate to thoroughly investigate the weighty allegations by the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, against the NNPC GMD, Dr. Maikanti Baru, on the awards of the $25billion contracts and new appointments in the national oil company, adding that Nigerians will be waiting to hear the outcome of these sensitive investigations.


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