Shake-up in NNPC: The inside story

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The recent sacking of Engineer Andrew Yakubu as  Group Managing Director of the Nigerian National Petroleum Corporation is a fall-out of  the alleged frosty relationship between him and the Petroleum Minister, Mrs Diezani Alison-Madueke and certain controversial issues which have dented the image of the nation’s cash cow. But sources in the Petroleum Ministry insist that the appointment of Dr Joseph Dawha as the new GMD is meant to further strengthen the corporation towards meeting globally acceptable standards in its operations.

 By Olisemeka Obeche

A change of guard at the Nigerian National Petroleum Corporation (NNPC) on August 1 by President Goodluck Jonathan saw the sacking of Engineer Andrew Yakubu as the Group Managing Director (GMD) of the corporation and the appointment of Dr Joseph Thlama Dawha as the new GMD. Until his appointment as the 16th GMD of the NNPC, Dr Dawha was NNPC’s Group Executive Director in charge of Exploration and Production.

Mr Victor Briggs, Managing Director of the Nigerian Petroleum Development Company (NPDC), was also fired with Mr Anthony Ugonna Muoneke, former Executive Director, Finance & Admin, Niger Delta Power Holding Company Limited (NDPHC), stepping in.  President Jonathan also appointed Ms Aisha Mata Abdurrahman as the NNPC’s Group Executive Director in charge of the commercial and investment portfolios; and Attahiru B. Yusuf as the Group Executive Director in the NNPC, with responsibility for business development.

No reason was given by the Presidency for the shake-up. However, investigations by TheEconomy reveal that the sacking of Yakubu is a fall-out of the frosty relationship between him and the influential Minister of Petroleum Resources, Mrs Diezani Alison-Madueke as well as recent controversial issues that tended to have dented the image of the NNPC such as the oil subsidy scandal, the alleged missing $49.8 billion and the probe into the N10 billion allegedly spent on chartered jets.

Power-play

The picture emanating from the NNPC headquarters depicts Yakubu as a man whose tenure was caught up in a web of power-play.  Insiders told TheEconomy that the irreconcilable differences between Yakubu and Alison-Madueke, who is arguably the president’s closest cabinet member, cost him his job. “Although, he (Yakubu) tried to tag along with the minister on most decisions in the overall interest of the government, he found it difficult to meet all of her (Alison-Madueke’s) demands and that played a key role in his sack as they needed someone that is more amenable to the higher authority,”  a source who spoke under anonymity told TheEconomy.

Another source, however, insists that “Mr Yakubu lacks team spirit”. But Mr Ohi Alegbe, Group General Manager, Group Public Affairs of the NNPC debunked the alleged rift between Alison-Madueke and Yakubu. He said the minister and Yakubu enjoyed a harmonious working relationship hence they had together heeded countless number of summons from the National Assembly in the past few months.

Nevertheless, the ousted GMD of the NNPC reportedly caused nervous glances to be cast in his direction with his stance on issues such as the questionable firing of highly-skilled professionals in the corporation, sharp differences in NNPC-Petroleum Ministry policies affecting the oil and gas industry; alienation of International Oil Companies (IOCs); opposition to the minister’s court action against the House of Representatives to stop the probe into the N10 billion allegedly spent on chartered jets; non-availability of the minister when crucial decisions were required; and pile-up of files on matters affecting the industry.

According to close watchers, Yakubu took exception to the unwarranted sacking of a former GED of the NNPC in charge of exploration, Mr Abiye Membere, after he fought spiritedly to reconcile accounts on the alleged missing oil funds with ex-Central Bank of Nigeria (CBN) Governor Sanusi Lamido Sanusi as well as the minister’s penchant for vetoing his proposals.

However, Yakubu’s survival battle reached its anti-climax in the wake of the recent legislative probe of the N10 billion private jet hire scandal which almost culminated in a political collision between the federal lawmakers and the Minister of Petroleum Resources who snubbed the panelists. The House of Representatives Committee on Public Accounts had written the minister and Yakubu demanding explanation on the controversial Challenger 850 aircraft and other jets allegedly hired by the NNPC for Alison-Madueke’s use, which cost tax payers N10 billion over three years. The committee led by Solomon Olamilekan also requested additional information on the sources of funding for the aircraft as well as relevant sections of the law empowering the minister to fly in chartered jets.

The Senate Committee on Petroleum (Downstream) also made similar requests from the minister. But instead of appearing before the parliamentary committees to clear her name, Mrs Alison-Madueke had engaged the lawmakers in a dramatic power play and legal maneuvering. First, the minister advised the lawmakers to seek and obtain the permission of President Jonathan before investigating the N10 billion chartered aircraft as it had no power to probe her. She later approached an Abuja High Court and got an injunction restraining the lawmakers from probing her. While all these were playing out, Yakubu, it was gathered, was opposed to the minister’s decision to drag the lawmakers to court over the alleged N10billion spent on chartered jets.

Indeed, what led to the sacking of Yakubu was his alleged refusal to approve the renewal of the controversial jets hire contract for the minister. It was learnt that the Minister recently directed Yakubu to renew the jet hire contract but he politely told her he was tired of being summoned by the National Assembly to defend such a controversial contract and so will not do her bidding. Following Yakubu’s action, the minister vowed to ensure he was removed as NNPC’s GMD. She allegedly told the President that as the chairman of NNPC’s board, she could no longer work with Yakubu.  Since Mrs Alison-Madueke is a key member of the President’s kitchen cabinet, he did not hesitate to do her bidding, hence firing Yakubu and appointing Dawha.

Challenges before the new GMD

Following the exit of Yakubu, Dr Dawha has stepped into his shoes as the new helmsman of the NNPC.  Experts in the oil industry are quite expectant that since the new GMD has been widely described as a thoroughbred professional, he would bring positive changes to the sector. Indeed, insiders in the Petroleum Ministry have confirmed that Dr Dawha is well cut out for the job and has the professional and intellectual capacity to navigate the NNPC and the entire oil industry, and take it to the next level.

There is no doubt that having served previously as the Group Executive Director, Exploration and Production of the NNPC, he is well grounded to run the affairs of the corporation.  Already, some players in the oil and gas industry have applauded his appointment. “Definitely, he (Dawha) possesses the necessary credentials to lead the corporation into a new era and that must have been the main reason the president chose him at this critical time the NNPC is undergoing transformation preparatory to the passage of the Petroleum Industry Bill (PIB)”, declares Mr Tunde Adeosun, an industry player.

Gbenga Adesanya, a petroleum economist agrees. “Perhaps, this is the first of a series of changes that is coming; maybe the new GMD is being sourced to lead the reorganization that would come into being with the passage of the Petroleum Industry Bill (PIB) into law”.

Interestingly, the new GMD has not only promised to accord priority to the transformation of the NNPC, but also assured that the NNPC management under him would find lasting solutions to some knotty issues plaguing the petroleum sector. In his speech at the formal handover ceremony in Abuja on August 6, Dr Dawha specifically mentioned the ongoing transformation of the upstream, midstream and downstream sectors of the Nigerian oil and gas industry as areas that would be strengthened. He said he would uphold the principle of transparency and accountability in the day-to-day running of the corporation.

However, some stakeholders in the oil and gas industry believe that to transform NNPC into an integrated oil and gas company, the new GMD should introduce policies and strategies that will improve crude oil production, address the   inefficiencies in the downstream petroleum sector and the controversial oil subsidy.

Barrister Chinedu Akpa,  a Lagos-based petroleum lawyer, expects Dr Dawha to set a clear road map on how to transform the NNPC and fashion out an effective implementation strategy. “On the policy level, there appears to be no clear roadmap on how to transform the NNPC into a globally accepted oil firm. And that was also largely responsible for the lethargic progress of the Petroleum Industry Bill (PIB) at the National Assembly. That bill is supposed to drive the holistic reforms of the sector and I expect the new GMD to work towards that as well as incorporating international best practices in the business and administration of the NNPC,” he said.

He also advised the new GMD to transform the NNPC to the standard of its counterparts in other oil producing countries. Many industry watchers believe that with Nigeria’s position as the sixth largest oil producer in the world, there is no reason the NNPC, established since 1977, has not been transformed into a world-class oil and gas company driven by shared commitment to excellence such as its counterparts in Saudi Arabia, Brazil and Norway which are owned by the government.

For instance, Saudi Arabia’s Aramco which was established in 1933 is being supervised by the Ministry of Petroleum Resources together with the Supreme Council for Petroleum and Minerals. Today, the country boasts four domestic refineries, and six domestic and five international refining ventures. Last year, the oil company made its largest contract award ever to Siemens for power plants component totalling $966.8million. Only this year, Saudi’s Aramco purchased 18 percent shares of Brunei LNG for $639 million. Currently, the company is the largest producer of crude oil in the world, according to the latest survey.

Brazil’s Petrobras, a semi-public multinational energy corporation founded in 1953, is a significant oil producer with output of more than two million barrels (320,000 m3) of oil equivalent per day. The Brazilian government owns 54 percent of Petrobras’ common shares with voting rights, while the Brazilian Development Bank and Brazil’s Sovereign Wealth Fund (Fundo Soberano) each control 5 percent, bringing the State’s direct and indirect ownership to 64 percent. The company owns oil refineries, oil tankers, and is a major distributor of petroleum products. Petrobras is a world leader in development of advanced technology from deep-water and ultra-deep water oil production.

In September 2010, Petrobras conducted the largest shares sale in history, when US$72.8 billion worth of shares in the company were sold on the BM&F Bovespa stock exchange. Upon the sale, Petrobras immediately became the fourth-largest company in the world by market capitalisation. Norway’s state oil company, Statoil, was founded in 1972, four years earlier than the NNPC, but last year it clinched the Forbes’ rating as the world’s 26th largest profitable company.

Thus, Dr Dawha, the new NNPC GMD, is expected to reposition the Corporation to be commercially focused and profit-oriented. He is also expected to implement reforms to address the issues of transparency, accountability and probity. In addition, he is expected to deal with a number of existing and emerging problems affecting the industry. Key among these are the challenge of domestic refining of petroleum products,  the waste inherent in the oil subsidy regime, pipeline vandalism and oil theft, the stalled Liquefied Natural Gas (LNG) development/Brass LNG litigations, the ongoing unremitted fund saga etc.

Nigeria’s abundant oil reserves create favourable conditions for the development of a competitive petroleum downstream sector that would ensure a reliable and cost-effective supply of refined petroleum products for domestic consumers and regional export markets.

Sadly, in spite of Nigeria’s oil wealth, its petroleum downstream sector has been in persistent decline in the past two decades. Currently, Nigeria is the only OPEC nation that depends on importation of refined petroleum products for domestic consumption while its four refineries have become conduit pipes for draining the country’s resources.

Nigeria has over the years spent huge resources to subsidize domestic consumption of petroleum products, inefficiencies  and rent-seeking activities in the downstream petroleum sector. According to records, Nigeria spends about N2 trillion annually on oil subsidy and the process is riddled with corruption. This is why the issue of oil subsidy should be revisited.

Interestingly, there are indications that Dr Dawha intends to address the controversial issue of oil subsidy. At the 38th Nigeria Annual International Conference and Exhibitions organised by the Society of Petroleum Engineers (SPE) Nigeria, Dawha described the N2 trillion expended on fuel subsidy in Nigeria annually as ridiculous. According to him, Nigerians must not only understand the need to get off this inefficient use of resources, but also the country has no excuse to import refined petroleum products such as kerosene, petrol and diesel.

“One of the sad issues with Nigeria is that we export crude oil and then import refined products. Similarly, power supply is not enough and we have enormous amount of gas,” said Timothy Okon, Group Coordinator, Corporate Planning and Strategy, NNPC, who represented the new NNPC GMD at a panel session on The Changing Global Energy Supply Balance and Africa’s Economic Transformation.

Apart from the controversial oil subsidy regime, the recent collapse of the pipeline crude supply contracts among the Pipeline and Products Marketing Company (PPMC), the Port Harcourt Refining and Petrochemical Company, and the Warri Refining and Petrochemical Company remains a major challenge facing the government in its quest to revive the ailing domestic refineries. Since the management of the refineries abandoned the PPMC pipelines crude supply contracts for marine supply contracts due to heightened activities of pipeline vandals, capacity utilisation of the refineries has reportedly decreased to 60 percent, a huge shortfall on government’s target to drastically scale up domestic refining capacity to forestall importation. The abandonment of pipeline crude supplies is a great constraint that must be tackled urgently by the new GMD.

To address the challenge, stakeholders in the industry would like the new GMD to fashion out a new strategy to effectively police the sprawling pipeline networks around the country, which have suffered unprecedented breaches in the last two years. Although, efforts by security agencies have led to remarkable reduction in vandalism, especially on the system 2B pipeline, which transports refined petroleum products from Atlas Cove Jetty in Apapa, Lagos to depots in Mosimi, Ogun State through Ibadan, Oyo State to Kwara State in recent times, experts insist that the solution to the security challenge remains privatization of pipelines.

Energy economist Adesanya reckons that policing the vast network of pipelines around the country requires heavy investment in technology and security apparatus which government alone cannot sufficiently make. “To this end, I am recommending that the pipelines in Nigeria should be privatized to ensure better management and protection. Government should also encourage new investors to come in and build new pipelines for better distribution of petroleum products across the country and beyond,” he says.

Also expected to test Dawha’s managerial acumen is the development of Nigeria’s Liquefied Natural Gas (LNG). Although, government has made some strides in its LNG development, experts say the country is yet to begin to reap required dividends from the sector due to a number of challenges in the system. According to Mr Adesanya, the gas master plan, which is the major policy framework for its development, is chaotic and until the issue of ownership is addressed, the country may not derive maximum benefits from gas. “Incidentally, no oil company will bring in heavy investment to exploit this non-associated gas, because at the moment the Nigerian Gas Company (NGC), a subsidiary of the NNPC, is still regarded as an exclusive property of the federal government. So, the issue of ownership of non-associated gas has to be addressed first before the country can derive maximum benefits from its non-associated gas endowment,” he declares.

An example is the stalled Brass LNG Project. The Federal Government has been heckled from making the Final Investment Decision (FID) on the $20 million Brass LNG project because of fear of litigations. With the FID deferred so many times since December 2006, the country has continued to lose billions.

Analysts believe finding a quick resolution to the Brass LNG investment interregnum and engendering greater utilization as well as boosting export markets for the country’s abundant gas resources remain a top priority for Dawha. “Gas resources are suffering because of too much concentration of attention on oil; and so it would be a huge credit to him if the NNPC under him starts treating gas as an independent resource free from oil and giving it all the attention it deserves to ensure that the country derives maximum benefits from it in the near future,” says Mr Hyde Ude, an energy analyst.

Agenda for Dawha

As Dr Dawha settles down to tackle some of the challenges plaguing the petroleum industry, Engineer Martin Onovo, a seasoned petroleum engineer and former presidential aspirant, expects the new NNPC GMD to bring his integrity to bear. “No system can work effectively without integrity. The ability of the NNPC GMD like that of leaders of other public institutions is constrained by the political leadership. So, think more about the legitimacy and integrity of the political leadership. Once you get that right, you will have the right GMD for the NNPC and the right policies and effective implementation and better profits and national development,” he said.

 

Dawha: NNPC’s new helmsman takes charge

Dr Joseph Thlama Dawha, the new Group Managing Director of the NNPC, is a thoroughbred professional who has made his mark in the oil industry.  Already, he has promised that the Corporation under his watch will sustain the ongoing transformation of the upstream, midstream and downstream sectors of the Nigerian oil and gas industry towards making a positive impact on the economy.
Dr Dawha made the pledge on August 6 while taking over the baton of leadership from the former GMD, Engr. Andrew Yakubu at the NNPC Towers, Abuja. He expressed gratitude to President Goodluck Jonathan on his appointment and affirmed that the management under him will find lasting solutions to some of the knotty issues plaguing the petroleum sector. Dr Dawha solicited for maximum support from the members of staff, stressing that the moment has come for the NNPC to impact more on the Nigerian society.
He began his career in the NNPC began in 1988 after a six-year stint as a lecturer at the Borno State College of Science and Technology (1978-1984) and another one year as Director at Borno State College Basic Studies (in 1985).
Since he joined the NNPC, he has through dint of hard work and dedication to duty risen to the rank of Executive Director, Commercial Services, Eleme Petrochemical Company Limited (now Indorama), Port Harcourt, in 2003, from where he was appointed the Managing Director of Integrated Data Services Limited (IDSL) in 2005.  As the managing director of IDSL, Dr Dawha turned around the fortunes of IDSL which saw it exceed its target between 2007 and 2010.
Until his appointment as NNPC’s GMD, he was the Group Executive Director, Exploration and Production of NNPC where he was responsible for repositioning and setting strategic direction for the corporation’s upstream exploration and production activities.
Born in Biu, Borno State on March 29, 1954, Dr Dawha holds a Bachelor of Science degree in Chemical Engineering from Ahmadu Bello University, Zaria, in 1977, a Master of Science degree obtained in the same discipline in 1985 and a Doctorate degree in Chemical Engineering in 1988. A passionate golfer, he is married with children.

 

NNPC needs stability

By every standard, any organisation that would produce five chief executives within five years certainly needs to re-assess itself and think of how to offer stability of tenure. The problem could be a result of poor recruitment process where cronyism, nepotism and the deliberate search for weaklings who can turn a blind eye to the looting of the nation’s patrimony is high on the agenda.
This scenario appears to be what has been playing out in the Nigerian National Petroleum Corporation (NNPC) where its chief executive officers have been routinely changed in quick succession in the past five years. The list includes Dr Mohammed Barkindo  who  served as GMD from 2009 to 2010;  Alhaji Shehu Ladan,  the GMD from April  to May 2010;  Mr Austen Oniwon who  was NNPC’s helmsman from 2010 to 2012;  and Engr. Andrew Yakubu who superintended over the affairs of the corporation from 2012 to 2014. The Corporation’s fifth Group Managing Director in five years is Dr Joseph Dawha, who was appointed by President Goodluck Jonathan on August 1, 2014.
Experts and stakeholders in the oil industry are worried by the frequent changes in the top management cadre of the NNPC, which have not only undermined the Corporation’s policy focus and direction and by extension, the country’s oil and gas industry, but also shut the doors to any room for innovation given the fear that every serving GMD is on “his way out”. Industry watchers also believe that the seemingly poor policy supervision and implementation in the Nigerian oil sector could largely be attributed to the government’s inability to guarantee security of tenure for the office of the group managing director of the NNPC.
According to Comrade Babatunde Ogun, immediate past President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), the rapid change of NNPC GMDs has always drawn the industry backward. “It does not engender continuity of development policies, as each of the appointed GMDs comes with their governance style and discontinue previous administration’s growth policies”, he says.
These incessant changes in the top management cadre of the corporation will also affect the investment drive in the oil and gas sector because “no investor will want to put money in a sector that the government can wake up in one day and just decide to change the drivers of the reforms and policies that can grow such sector”, he adds.
Comrade Ogun further notes that “in our various engagements with the government, we demanded that the appointment of the GMD should be based on tenure just as we have it in the Central Bank of Nigeria (CBN), the Nigerian Communications Commission (NCC) and the Bureau for Public Enterprises (BPE), among others. It should be put in the Petroleum Industry Bill (PIB)”.
Comrade Ogun believes that while decisions have been taken and new drivers of the Corporation appointed, the government must address the concerns of the stakeholders which will go a long way in helping the growth of the oil and gas industry.
For Comrade Peter Esele, immediate past President of the Trade Union Congress of Nigeria (TUC), there is need for stability in the top management cadre of the NNPC. He wonders why the office of the NNPC’s GMD is not tenured. “From 1999 till date, we have had eight GMDs run the NNPC. No organization as strategic as the NNPC, that wants to be taken seriously, can have such high turnover in its management …If I am a GMD of the NNPC, how can I now begin to address policy, or how to drive the NNPC to be on the same footing with its contemporary national oil companies — Statoil in Norway, Petrobras, etc?” asks Comrade Esele.
He says the problem with the NNPC goes beyond the frequent changes of its management; it is how to institutionalize unfettered structural process to run its operations without political interference. “There must be a fixed tenure for the management of NNPC to allow them consistently drive policy. Successive administrations since Gaius-Obaseki hardly settled down to face the challenge of working to leave any legacy before they are changed,” he notes.
Some oil industry analysts, however, contend that government cannot be blamed for insisting on adherence to the principle of corporate governance, accountability and implementation of policies in line with the Federal Government’s projection, which, according to an insider, largely informs the drastic changes seen in the corporation in recent times.  But they have also cautioned that until there is a degree of stability in the management of NNPC, it may be difficult to run the organisation in a manner that will benefit the economy in the long run.
Peter Ohiozojeh  Akpatason, member House Committee on Petroleum Resources (Downstream) and former President of  the National Union of Petroleum and Natural Gas Workers (NUPENG), says the frequent hiring and firing of NNPC GMDs remains the greatest albatross to sustainable progress and transformation in the industry. He cites the fact that between the period the first Oil and Gas Sector Reform Implementation (OGIC), under the chairmanship of the late Rilwanu Lukman in April 2000 till date, more than six GMDs have  run the NNPC, yet the PIB is yet to become an Act and the industry still bedevilled by widespread unwholesome practices.
“This development does not augur well for the NNPC and the industry because it does not help stability of policies and transformation in the sector; and the Presidency needs to have a rethink on this issue,” he declares.
Akpatason also argues that the frequency of removing GMDs at the NNPC runs counter to government bureaucratic principles and better management of government institutions. “The NNPC GMD supervises a very critical agency of government; a corporation that helps government manage the mainstay of the economy (oil and gas) deserves stability. Besides, the GMD deserves to last long in office because he is actually the expert who understands the system and sector better having been around, managing government’s dealings in the industry over the years,” he says.
The Transition Monitoring Group (TMG) also condemned the incessant removal of executives of the corporation.  According to Ibrahim Zikirullahi, chairman of TMG, the turnover of top management staff of the corporation is “alarming for an industry that needs stability and consistency of policy implementation to deliver the gains of the petroleum industry to the Nigerian people”.
He notes that complaints abound as to how the Nigerian petroleum industry has been unable to take its rightful place in the international oil market, where state-owned oil giants such as Petrobras of Brazil are excelling.
Zikirullahi adds that the NNPC in recent times has been plagued by allegations of monumental corruption. “In this time of crisis, what Nigerians expect is a comprehensive series of reforms aimed at repositioning the organisation, not arbitrary sacks.”
He maintains that it is an anomaly for an organisation as strategic as the NNPC to produce five GMDs in five years and wonders how the corporation would realise its long-term strategic goals with such disruptions and incessant change of leadership.
“For us at the TMG, this reality is surely not good for the development of the petroleum industry, which has been in the doldrums because of the lack of institutional reforms, as well as the effects of corruption,” says Zikirullahi.

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