I’ll resign, upgrade refineries… five times Kachikwu went back on his words
In the last four years and even as far back as one would want to go, Nigeria’s oil and gas industry has been an unending subject of controversy as it has been the nation’s cash cow for decades.
Issues in the upstream, midstream and downstream sector– ranging from award of oil licences and contracts, loss of oil revenue from non-application of production contracts, petrol scarcity, subsidy, pipeline vandalism, refinery rehabilitation and a lot more– have been put on the pedestal with calls for policies and actions that would kickstart industry-wide reforms.
At the heart of these discourses over the past four years has been Ibe Kachikwu, the minister of state for petroleum resources, who arguably seems to have good intentions for the ailing industry.
A man of many words, the minister is usually at the forefront, mostly representing and speaking on behalf of President Muhammadu Buhari who also doubles as the minister of petroleum resources.
However, it seems that despite his good intentions, some key issues have not been resolved or not gone in the direction that Kachikwu would have hoped they would.
As his tenure — or first term as a minister comes to a close — TheCable outlines five times Kachikwu made promises or statements that have either not seen the light of day or did not last all through his stewardship.
ZERO PETROL IMPORTATION BY 2019
One of the most resounding promises made by Kachikwu in 2017 was that Nigeria will stop importing petrol into the country two years later — by 2019, with the hopes of saving billions of dollars spent on import of the product.
The minister’s promise was pegged two things — first, on the expectation that the 650,000 barrel per day (bpd) capacity refinery by billionaire businessman Aliko Dangote, would come on stream before the end of that year.
Secondly, it was pegged on plans by the Nigerian National Petroleum Corporation (NNPC) to repair the nation’s four refineries within a two-year period, counting from 2017.
He alluded to the latter instance while speaking at a public hearing on the review of petroleum pricing template for Premium Motor Spirit (PMS) or petrol organised by the house of representatives in February of that year.
Restating his promise with stronger conviction three months later, Kachikwu told BBC that he would resign if the nation has not achieved petrol self-sufficiency by 2019.
“Our target is 2019… don’t worry, I put the date, I’ll work it,” he had told Stephen Sackur on BBC HardTalk.
When asked if he would “walk” if the target is not achieved, the minister said: “Yes, of course, that is the reason why you are in government.”
As the days went by, it became clear that of the Dangote refinery would take off at a later time (in 2020). Overhaul of the four government-owned refineries was stalled by financial constraints arising from slow negotiations with potential investors who would sink funds into the repairs.
Kachikwu did not resign.
REFINERY UPGRADE BY 2019
The minister’s assurance that the nation’s ailing refineries would be up and running to at least 90% capacity was said in the same breath as the promise that petrol imports would cease in 2019.
Upon his appointment as minister in 2015, Kachikwu had said if it was left to him alone, the refineries should be sold outright– a move that experts and private sector players in the industry have said is a sure way out of the local refining quagmire that Nigeria has remained in for decades.
“Personally, I will have chosen to sell the refineries, but President Buhari has instructed that they remain. After they are fixed, if they still operate below 60 per cent, then we will know what to do,” he had said at the time.
Although the federal government had argued that fixing the refineries to some extent, before sale, will shore up it’s value, it was revealed by the NNPC last year that $363 million had been spent on turnaround maintenance (TAM) for the refineries in the last 10 years– between 1998 and 2008.
Some industry sources, however, say a huge chunk of the amount was diverted into the pockets of individuals in high places with nothing to show for the maintenance that should have been done on the refineries.
After 19 years in the lurch, the state oil firm announced in March that it had commenced the first phase of rehabilitation of the 210,000 bpd capacity refinery in Port Harcourt, the Rivers state capital.
When the initial phase is completed, the facility is expected to reach just 60% capacity utilization.
But here again, the minister has had to admit his 2019 target for the refineries could not be achieved.
Speaking on Hard Copy, a Channels TV programme, Kachikwu expressed regrets at the current state of the nation’s refineries.
“If there is one area where I feel sad, it’s the refineries because there is a huge gulf between my pronouncements and where I’d like it to be and what we’ve been able to achieve,” he said.
“The reality today is that we are still below 15% of utilisation of those refineries because they need to maintained, reworked, they almost need to be shut down and completely refurbished.
“Neglect of over a decade is forcing us to say are these scraps or how much will it cost to fix them.
“The 2019 plan is off, there is absolutely no way given that no contractual terms have been reached by the NNPC and the potential investors. So there is no way that you can get refineries to 90% capacity template in 2019 and for us to exit complete importation of petroleum products.”
SUBSIDY REMOVAL, CUT IN PETROL PRICES BELOW N145
In December 2015, Kachikwu had revealed government’s plans to end the fuel subsidy regime which he described as a fraud and said would lead to savings of up to one billion dollars and another one billion saved on fuel importation.
Five months later, the federal government through the minister, announced the removal of subsidy, pegging sale of petrol between N135 and N145 per litre from N86.50 — a decision that signalled an end of subsidy payment to private oil marketers.
The move was met by critcicism with Femi Falana, human rights lawyer, pointing to the fact that continued subsidy payment was a huge campaign message propagated by the Buhari-led administration.
In trying to placate Nigerians, the minister again came up with another assurance that removal of subsidy would in the near term benefit Nigerians as petrol prices would drop.
“As it gets better and it gets to a point where we find that the market has stabilised in terms of supply, we will begin to pull back a bit in terms of determinants for pricing,” he said during a Channels TV programme in December 2017.
“You will be amazed at what will happen to your N145 price because it will go downwards. We mean well and Nigerians should please trust us. Give us a chance, you will be surprised what will become of your PMS price over the next six to eight months.”
But then again the subsidy regime returned after government said landing cost of petrol had increased following crude oil price rally, with the NNPC becoming the sole importer of the product, and bearing the burden of subsidy.
In response to advice by the International Monetary Fund (IMF) to remove subsidy once again, Kachikwu said he will advise the president on the way forward.
TRANSPARENCY IN OIL CONTRACT BIDS
In what came as a surprise to many, the NNPC under the leadership of Kachikwu launched a system where annual crude term contracts would be aired on live television.
The first televised bid exercise was witnessed by representatives of the DPR, Bureau of Public Procurement (BPP), Nigerian Extractive Industry Transparency Initiative (NEITI) and Nigerian Content Development and Monitoring Board (NDCMB).
Prior to this, invitations to tender were published in newspapers but the bidding process itself and the contract awards were shrouded in secrecy.
The minister had, however, said the new system was introduced to strengthen the tenets of transparency as the process will be visible to all Nigerians and prevent calls for favours in contract allocation.
“The essence is to ensure that nobody needs to call me personally for him to get crude allocation,” he had said.
“You can imagine the burden the exercise has taken off my shoulders. It means a good amount of my time will now go into other relevant areas of operation where the country needs me most.”
This year, apart from the invitation to tender for the 2019-2020 petrol supply programme on the NNPC website and media reports, not much was seen with regards to the bid process.
Moreso, the state oil firm is yet to produce the list of local and international companies that it awarded contracts, out of the 254 companies that had placed bids in the previous term.
The minister has also been close-lipped about the contract awards in recent times.
KEROSENE TO GAS REVOLUTION
In his early days as minister, and while still the group managing director of the NNPC, Kachikwu had complained that kerosene subsidy was a huge burden on government and vowed to revolutionise domestic cooking fuel or Liquified Petroleum Gas (LPG) by 2016.
Although it seemed like a tall order, Kachikwu’s plan was that by the end of 2016 most of the households in Nigeria would have obtained the free gas cylinders distributed by the NNPC in preparation for the transition from kerosene to gas.
But some three years down the line, kerosene and even the gas that was to replace it as domestic cooking fuel have become more expensive.
When Kachikwu made the promise in September 2015, some fuel retail outlets in the country sold kerosene at the subsidised price of N50 per litre.
Recent data from the National Bureau of Statistics (NBS) show that as at March, the average price per litre of kerosene retails for as high as N327, with Anambra, Ebonyi and Ondo selling at N329.09, 326.83, and 326.67 respectively.
Similarly, the price of cooking gas has almost doubled with some states like Cross River selling for as high as N4,753.57 for a 12.5kg cylinder.
Although missing yet another deadline, the minister is still pushing for a higher LPG penetration in the country.
He says the government has set a target to build at least one gas filling plants across all the 774 local government areas in the country within the next three years.