The Minister of Petroleum Resources, Mrs Diezani Alison-Madueke, recently fielded questions from a select group of editors to clarify a number of issues in the oil and gas sector ranging from the allegation of $10bn expenditure on jet private hire to the report of the forensic audit of NNPC. Excerpts.
Cont. from last week
On Alleged N10bn Expenditure on Jet Hire
Alison MaduekeSince NNPC came into being it has always owned corporate jets. The reason it has to acquire jet is simple: if you have trillions of naira worth of assets across the country that you oversee, and you have oversight over major multinationals who are in joint venture operations with you and all those multinationals that you oversee have their own jets, how are supposed to oversight these assets and those partnerships and responsibilities, how are you supposed to do it?
As a regulator, are you supposed to borrow jets from the companies that you are supposed to oversight for trips to inspect their facilities? As we speak NNPC should actually own at least two major long distance helicopters for offshore activities. I’m ashamed to say that if I have to go on an inspection of Floating Production Storage and Offloading (FPSO) facility I have to borrow a ride from ExxonMobil or Total or Agip. I don’t think that kind of thing happens anywhere in the world, not even in small Angola!
Now when I came in as Minister of Petroleum Resources NNPC did not have any jet on ground because the one it had was about 30yrs old and I recall that Ajumogobia, when he was going had advised that I should not for my life enter that jet and that he almost died in it when the thing dropped out of the air one day.
So, when I came in I was informed that they have just acquired another jet which for some reasons was parked somewhere abroad. When they eventually brought it back to Nigeria, it ended up in Kaduna in Kasim Shetima’s airline hanger. I didn’t even know him at that time. But one day Shetima came to meet me and suggested very strongly that I should ask NNPC to sell that jet because it had been idle for too long and it may have developed a lot of problems.
He also raised issues about that particular model of aircraft and that it has been known to have certain issues. So, I called in the GMD and reiterated the issues and suggested to him to sell off the jet. NNPC later came back with lots of reasons why they wouldn’t sell. I said well, its their property and I didn’t bother about it again.
But in truth, there were problems with the plane in terms of maintenance. That was how we came about leasing this other jet. We had looked at our books and done our own homework, we discovered that Shell had sold all their own planes.
Shell actually had a fleet when I was there, they even built a private terminal in Lagos airport and rebuilt the entire terminal in Port-Harcourt Airforce Base which they were also using. But they sold all their planes because they saw that in this age and time, unless you are in the business of aviation, it was actually cheaper and more cost effective to lease.
So, I said let us just lease first because I couldn’t just even go to the Federal Executive Council for them to approve $30m to go and buy a jet. So based on what we consider as the tradition in the industry now all over the world, we went for a lease arrangement with the same company that Shell and other multinationals were using.
But out of the blues, some people came up with the allegation and made it look like I was the first person in the history of petroleum industry in Nigeria or NNPC who started using jet for operations. I don’t even know how the N10bn came about! For N10bn one can buy two brand new Challenger jets and add a third one (second class). I don’t know how they came about such outrageous figures! But like I said before, it is all calculated to make me look bad.
Actually, when the issue came up I didn’t talk, the lawyers advised that I shouldn’t talk. I couldn’t talk at that particular point in time, it was only after the case had been heard by the court, which was not too long ago, that I could actually say something and address the issue.
Pipeline Vandalism, Sabotage and Protection
There was actually a pipeline protection contract for some militants. When the contract ended, which was almost two years ago, we did not renew it. Even the militants abused me for refusing to renew it. And I did that because they did not live up to expectation, they did not meet up with the terms of the contract.
We have to review it, in fact we have even extended it to include Ondo and Lagos because the pipelines run through that area and they were not involved at the beginning. But it has taken sometime because the people we are dealing with are people you have to handle with care. I believe that the groups that we have put on the table are groups that will actually be able to deliver. But we are still having a look at it because we cannot afford to get it wrong, we want to be sure that we are engaging with the right groups at the various communities.
So, we are still on it, I have not renewed the pipeline protection contract with any group. But apart from that, the NSA is working on an electronic pipeline surveillance project. It has not been discussed in much details with us because it is a security issue, but I was fully aware at the time it was being put together. It is my expectation that they will be deploying those things anytime from now.
Allegations of Missing Oil Revenues and PwC Audit Report
When the former CBN Governor came up with the allegation that about $49.8bn of crude oil sales proceeds was not remitted by NNPC we all swung into action with all the relevant agencies to reconcile the figures. When we reconciled the figures down to $10.8bn and some agencies were having a different figure of $12bn, we insisted that the reconciliation must continue because there was still an anomaly; we said we must get down to the bottom of the matter to find out what is really amiss.
I recall that I called the former CBN governor on a particular day, I was abroad for a meeting and we met there and I said, “Governor, I think you and I really need to sit down and thrash out this matter, let us drill down to find out if there was really a gap and what could be the source of the gap”. He said he was very upset and that NNPC wants to finish his reputation and that all sorts of things are being written about him at home and abroad.
I said well, I don’t think you can blame NNPC but whatever you feel, let us finish the reconciliation and get to the bottom of things. He said ok, ok, ok. We had arranged to meet after my return to Nigeria which was in two days’ time. I came back only to hear that earlier on that day he had submitted another report to the National Assembly saying $20bn was the actual amount missing. At that point I said to my people, “We have a problem here, there is clearly a hostile situation in place”.
A few days later, we appeared before the Senator Makarfi Commttee to defend ourselves over the fresh allegation of unremitted $20bn. We put our papers forward, the Makarfi Committee then went through all the evidence supplied by all the relevant agencies and found that there was no missing $20bn. Despite the fact that the Makarfi Committee declared that no money was missing, the opposition kept insisting that $20bn was missing and they were calling us names.
That was how the external auditors were called in to look into the whole issue, a situation I believe was a very sad indictment on the distinguished Senate of the Federal Republic of Nigeria. Because, I don’t think that if a Senate Committee in America makes a finding it will be disparaged in that manner. What PwC has come out with is that NPDC should remit the balance of the book value of the assets transferred to it which stands at $1.48bn to the Federation Account.
Under normal circumstances when you transfer oil blocks to NNPC or its subsidiary as a government-owned corporation, they are not supposed to pay you, what they are supposed to do is to send all revenues above operating cost to the Federation Account. But in this case, DPR wanted to apply a different method and it quoted what it considered the book value of those assets for NPDC to pay. The implication is that if NNPC pays the book value for this assets, the assets will become its own, and then they can run it competitively just like independent multinationals do, that was the idea.
There was now reconciliation problem between NNPC and DPR because DPR quoted a certain amount for the assets value while NNPC said that was not actually the book value of the assets. But they still paid the first two tranches when the reconciliation was transacted in 2012. Then the audit came into play at that point in time. What PwC has recommended is that to follow due process that book value is to be paid to the Federation Account as DPR mandated. But the truth is that as far as NNPC is concerned, the book value of the assets as quoted by the DPR is still under contention.
That is why NNPC insists that it was not indicted in the PwC audit report. Whatever the case, however they do it, NNPC will pay the amount, but that does not mean that it was indicted.
