Monday, June 28, 2010

Alison-Madueke: Head Reformer In Nigeria’s Oil Department

Diezani Alison-Madueke became the minister of petroleum resources when expectations from the ministry were high. Correspondent, Adeola Yusuf, examines the activities of the first female Nigerian minister petroleum so far and other tasks before her

A long list of seemingly insurmountable challenges were awaiting the yet-to-be-appointed minister of petroleum resources when President Goodluck Jonathan announced Diezani Alison-Madueke as the chief executive of the important ministry. From the reforms of the oil industry through the controversial deregulation policy and the Petroleum Industry Bill (PIB), to the controversial gas-pricing regime, Alison-Madueke’s hands were full of challenges that would need many years to surmount. But the minister appears resolved to prove she is a go-getter.

On May 26, 2010, just few days after her appointment as a member of cabinet, Alison-Madueke threw up a surprise by effecting a major shake-up in the history of the petroleum resources in Nigeria.

Although she, among others, inaugurated, also, a board for the much-awaited Nigerian Content Act two days after this change of leadership of the Nigerian National Petroleum Corporation (NNPC), the shake-up, in which Group Managing Director of the NNPC, Shehu Ladan, was replaced with Austin Oniwona, seen by pundits as a major step that only the brave could take.

This is because, the shake-up came barely one month after the former Group Managing Director of the NNPC, Sanusi Barhindo, was fired by President Goodluck Jonathan, then Acting President, and in his place, Shehu Ladan, was appointed.

She denied reports that the Niger Deltans were favoured in the shake-up, when controversies were triggered by a newspaper report entitled: “Deltans Corner Top Oil Posts.”

A statement by the Group General Manager, Group Public Affairs Division of the NNPC, Dr. Ajuonuma, noted that ordinarily the publication would have been ignored but in order to keep the records straight, the honourable minister of petroleum resources wished to put it in black and white that the recent restructuring carried out by the ministry under her watch was done based on the expediency to move the oil and gas industry forward out of the woods.

He quoted the minister of petroleum resources as saying that all the various appointments and redeployments of officers made were based on professionalism, track record and efficiency of the affected individuals.

Dr. Ajuonuma pointed out that in order not to lose sight of some of the spurious claims of the said publication, the former Group General Manager Human Resources of the NNPC, Auwalu Abubakar, was redeployed to Special Duties contrary to the claim that he was not assigned any duty. Also, the Acting GGM Crude Oil Marketing, Farouk Bello, was redeployed to Gas and Power, while former Managing Director, Hyson, Aisha Abdulrahman, was taken to NIKORMA as managing director.

He said that for the avoidance of doubt, all the six geo-political zones of the country are well represented in the top management cadre of the corporation.

According to him, the recent restructuring has the Group Executive Director Commercial and Investment as Attahiru Yusuf. The GED Special Duties, Aminu Baba-Kusa, while the GED Refining and Petrochemicals is Austen Oniwon – all northerners.

Dr. Ajuonoma observed with dismay that Daily Trust newspaper earlier published that Turai YarAdua’s younger brother, F.B Abudullahi, was sacked from the services of the NNPC, Sunday Independent has reliably confirmed that Abdullahi has been sent for a top management course sponsored by Shell Petroleum Development Company (SPDC). This course would take him to six countries and he is expected to report to the London office of NNPC as group general manager at the end of his course.

The NNPC spokesman stated that President Goodluck Jonathan must be commended for expeditiously assenting to the Nigerian Content Development Act, which seeks primarily to create jobs for the teeming unemployed youths of the Niger Delta and Nigerians as part of measures to ameliorate the unrest in the area.

He also noted that worthy of commendation is Alison-Madueke for establishing the Nigerian Content Development Monitoring Board (NCDMB) and for immediately appointing an executive secretary saddled with the responsibility of enforcing compliance of Nigerian content in the international oil companies doing business in Nigeria.

An earlier statement obtained by Sunday Independent put the record straight on the shake-up: “The Ministry of Petroleum Resources/NNPC has announced the following appointments/changes in the oil and gas industry, to take immediate effect.”

It stated that NNPC GED Engineering and Technical Services, Abbiye Suku, moves to the position of GED Corporate Services, while the Director of Directorate of Petroleum Resources (DPR), Billy Agha, moves to NNPC Headquarters as GED Engineering And Technical Services.

The current GED Corporate Services, A. Yusuf, moves to the position of GED Commercial And Investment (C&I), while the current GED C&I, Aminu Babakusa has been moved to GED Special Services.

The statement added that all the GEDs on acting capacity over the past two years have been confirmed.

At the Ministry of Petroleum Resources, the statement said that Allison-Madueke has approved the following changes: Deputy Director, Directorate of Petroleum Resources (DPR) Andrew Obaje, who becomes substantive director DPR, while the Acting Group General Manger, Ag. GGM, in charge of New Business Development Division, (NBDD) Samuel Okeke, now moves to the Pipelines and Products Marketing Company, (PPMC) as substantive managing director. He swapped position with Reginald Stanley, who moves to head NBDD.

The Federal Government (FG) is dousing tension on 2010 oil licensing rounds.

It has vowed that it is no more business as usual in the next oil licensing rounds, which it declared would start any moment from now.

Minister of Petroleum Resources, Alison-Madueke, who stated this pointed out that the licensing rounds would be done “in strict compliance with due process and transparency.”

The FG, it would be recalled, earned $1.5 billion between 2005 and 2007 in signature bonuses from the oil licensing bid rounds introduced by the administration of former President Olusegun Obasanjo in 2000 to replace the discretionary allocation of oil blocks to companies operating in the petroleum sector.

The $1.5 billion generated from the open and competitive bid process is a huge departure from the less than $600 million earned when the blocks were allocated on a discretionary basis, prior to 1999.

Alison-Madueke, who led the Nigerian delegates to the 41st Offshore Technology Conference (OTC) in Houston Texas, pledged while declaring the Nigerian stand open, to streamline the contracting processes and procedures in the oil industry so as to eliminate time wastage.

The next licensing round, she said, is coming on the heels of the signing of the Nigerian Contend Development Law and the anticipated Petroleum Industry Bill.

She added that the Nigeria’s participation at the OTC 2010 is pertinent and rewarding for the sector.

Less than two weeks of Alison-Madueke in the saddle, gas supplies to Egbin Power facility and other traditional Power Plants (TPP), hit the all-time high of one billion standard cubic feet (scuf).

The minister, who made this known at a meeting with members of the Senate and House of Representatives Joint Committees on Gas Resources, added that her immediate concern was to sustain this level of gas supply and possibly boost supply through repair of gas infrastructure.

The minister reassured Nigerians of her ministry’s commitment to ensuring regular electricity supply across the country.

She said: “In line with the ministry’s commitment, gas supply to the traditional power plants was at an all-time high of one billion standard cubic feet (1bscf).”

The short-term plan was to stabilise power supply to such a level that would enable consumers plan their activities with some level of predictability.

Alison-Madueke disclosed that apart from short-term projects that are currently being pursued to add 325mmcf/d to national gas production level by the end of 2010, the ministry was exploring other means of boosting gas supply.

These, she said, include the review of domestic supply obligation and a new pricing regime for gas to ensure bankability and attract investors into the sector.

Also, Alison-Madueke said the Gas Master Plan so far, is being moved into the operationalisation stage where it would create a basis for sustained growth in the sector.

The FG would henceforth refocus attention on the $7 billion Olokola Liquefied Natural Gas (Ok-LNG) in its new move to position Nigeria as a major player in the global gas market, Minister of Petroleum Resources, declared recently. The government, according to the minister, was also making efforts to secure the Final Investment Decision (FID) of the Brass Liquefied Natural Gas by the end of 2010.

The four-train Olokola development has a total capacity of 22 million tonnes per year. Another major focus of this administration, according to Alison-Madueke, is to ensure expeditious implementation of the Nigerian Gas Master Plan to attain clear-cut short-term and some medium-term objectives.

Also Nigerian Content Monitoring Board (NCMB), at the weekend declared that one per cent of every contract awarded in the Nigerian oil and gas industry would be used to fund the Nigerian Content Act.

Acting Executive Secretary of NCMB, Ernest Nwapa, who said this maintained that one per cent of every contract would henceforth be paid into the NCDF, in accordance with the Nigerian Content Act, assented into law by President Goodluck Jonathan recently.

He disclosed this in Onne, Rivers State after inspecting the pipe threading yard of Botro Marine & Oil Services, pointing out that the fund would be deployed specifically for developing the capacity of Nigerian service providers in the oil and gas sector.

Nwapa said the fund would be managed by the board of NCMB and was different from the $350million Local Content Fund which was put together by the NNPC in 2007 to serve as a working capital for Nigerian companies that got service contracts in the oil and gas industry.

According to him, “In this case, you need to demonstrate the bankability of an investment and the board will begin to talk to you. You are going to show a business plan and prove that the investment will be able to repay the loan.

“The fund will not be managed by engineers or officials of the board, but by a proper fund manager with international best practices. So there is no question of utilising the find for what it is not meant for.”

While explaining that the vision of the NCMB was to grow the funds and use it to attract other financial players who would leverage on it, such that Nigerian service providers would do business knowing that the fund was available for them to use, he added that the Nigerian Content Act was very robust as it was put together by legislators who understand the oil and sector, with inputs from member of the industry.

Nwapa, who called on Nigerian investors to take advantage of the immense opportunities which the Nigerian Content Act had created for them, said “even if Nigerians do not step to take these opportunities, the board would not become manufacturers. The board would only protect the rights of manufacturers, so Nigerians should take advantage of the law.”

Alison-Madueke has also put the record on gas-pricing regime straight during a press briefing recently: “I have outlined a focused two-point agenda for gas. The first is expeditious implementation of the Nigerian gas master-plan to attain used short-term objectives and a few sustained medium term objectives. The second is positioning Nigeria competitively in global gas export by securing the FID of Brass LNGG by the end of the year and refocusing effort on OKLNG and TSGP.”

She maintained specifically that, “with respect to the expeditious implementation of the gas master-plan, the focused short term objectives include;

“1. Achieving sustainability in supply and delivery of gas to the power sector. (2). Implement a sustainable commercial framework for domestic gas, primarily gas pricing, bankable agreements and revenue securitisation

“3. Secure our aspiration of making Nigeria a regional hub for gas-based industries such as petrochemicals, methanol, fertiliser etc., by ensuring that we sign up world-class investors in these sectors before the end of the year.

“Our focused agenda aims to operationalise the master-plan in a manner that is commercially viable and sustainable,” she said.

One of the most critical enablers for sustained gas supply to the power sector, according to Alison-Madueke, is the price of gas. Current price of gas to power, she said, is about $0.2lmmbtu. “A new price regime was introduced last year as part of the pricing policy. That price regime proposed a steady migration of the gas to power price to $1/mmbtu by the end of 2012.

“However, that regime has not been implemented in any of the GSPAs. At the moment, the gas sector consumes about 100mmcfld of gas, however, this is set to increase to about 2500mmcfld by 2014. This is a significant growth requiring a major growth in investment by suppliers over the next few years. The current gas price of clearly cannot support such investments.

“Similarly, whilst the revised price proposed last year enabled growth in supply, that growth was limited to supplies coming from existing sources. To grow supply significantly, brand-new supply sources are required and the investment required for such is more significant hence the need for a new pricing,” she explained.

She continued: “In view of the above, I have secured the President’s approval for the immediate implementation of a new gas to power price in the domestic market. This new pricing arrangement has been very positively received by the industry and should stimulate a major growth in new supplies critical to both our aspirations for power, but also for other gas-based industries.”

She gave a graphical details of the new pricing regime when she said: “By the end of the year, the price of gas to power will increase to $1/mmbtu, by end 2011 to $1.501mmbtu and then $2lmmbtu by end 2013. Beyond 2014, it will increase by inflation.”

The price above will, according to the minister, be capped by export parity, meaning that at no time will PHCN pay more for gas than the export projects are paying for gas.

She maintained that in essence, should export prices (on a netback basis) fall below the prices above, the lower of the two is what will be paid by the power sector

“In addition, the price review is performance based i.e. it is attached to growth in gas supply. In essence, each price change will be triggered only when the gas sector has demonstrated that it has developed sufficient gas to attain a particular threshold of electricity generation,” she stressed.

According to Alison-Madueke, the prescribed thresholds are 4.7GW by end 2010, 6.2GW by end 2011, 8.2 GW by 2012 and 8.2GW by 2013. With this linkage to performance, Nigerians are assured that they are paying for growth in supply.

This change in gas pricing, she added, is a major milestone in the repositioning effort of Nigeria’s gas sector and the effective take-off of the Gas Master-Plan. With the power sector consuming over 75 per cent of the planned domestic supply, it is essential that we get the commercial framework right to ensure sustained supply.

“We are confident that these changes will signal a major boost in gas development for the domestic market,” she assured.

A critical requirement for gas supply development is the need for bankable contractual agreements and the minister pointed out that her ministry has commenced the most elaborate and comprehensive development of gas supply and purchase agreements as well as gas-transmission agreements for the domestic gas market.

This effort, she explained, would move the supply to power sector (and other sectors) from the current loose, best endeavour basis to one anchored on strict commercial agreements. “This – will move the process of gas supply and purchase in Nigeria to world class levels. The template agreements have been finalised and I am reliably informed that negotiations of the fine parts of this agreements are ongoing between Power Holding Company of Nigeria (PHCN) and the supplier companies – I expect that within the next 4-6 weeks, we shall be in apposition to execute these landmark agreements between the power sector and the gas suppliers.

“This is our next milestone and we are making very steady progress towards achieving this. These agreements will reflect the new gas prices mentioned above,” she said.

Finally on commercial framework for domestic gas, Alison-Madueke stated she was pleased to inform Nigerians through the media “we have further progressed efforts with the World Bank on the provision of securitisation arrangement for gas revenues sold to the power sector.”

She noted: “You may recall that one of the major dis-incentives to suppliers in supplying gas to power is lack of comfort that when gas is supplied, they will indeed be paid.

With the World Bank Partial Risk Guarantee that was initiated in the gas master-plan, this problem is now permanently fixed.

“The World Bank mission is currently on ground in Nigeria working with our team on the gas agreements and perfecting all other necessary agreements in respect of the Partial Risk Guarantee.

“Ladies and gentlemen, given the tight time frame under which the administration must deliver, it is inevitable that we progress aggressively and ensure we entrench sustainable reforms. I am convinced that this long-awaited reform of the commercial framework for domestic gas supply will signal a major change in the dynamics of gas supply in Nigeria.”

Meanwhile, Alison-Madueke stressed the need for more work on the gas supply when she maintained that she “cannot conclude without giving you an update on our performance in gas supply to power plants currently.”

She expressed happiness at the level of performance in the gas to power trend.

“I am pleased to inform you that our gas supply performance is now at an all time high. We have completed all critical pipeline repairs that mitigated against our performance last year and all gas plants are operating at or very close to full capacity,” she declared.

Current supply on the western system averages about 700mmcf/d, enough to power virtually all-operational power plants on that axis.

“In fact,” she exclaimed, “there is a situation of slight excess supply capacity,” adding that in the East, “both Afam V1 and Agip’s Okpai IPP are generating about 900MW with a planned addition of about 200MW very shortly.”

She continued: “There is also excess gas available at the Okoloma Gas Plant to fire additional PHCN turbines at Afam V whenever they are ready.

“We are collaborating with our power sector counterparts to ensure that all these – gas ineffectively taken for power generation. I can assure you that this increased supply in gas will be manifest in increased power generation very shortly once residual challenges in the power side are completed.

“Beyond the current supply, we are also looking to bring in an additional 65mmcfld from Pan-Ocean, 65mmcf/d from NPDC and 195mmcf/d from Chevron all within the next four months. With these supplies, we will be on time to supply the new NIPP power plants that are expected to come on stream by the end of the year.”

She however, promised the government’s effort towards gas supply in 2011.

The growth in supply, she promised, “will continue next year,” stressing, “Our focus is to ensure sustainability of this performance and the technical team is working extremely hard now to ensure that appropriate redundancies are put in place and rapid recovery mechanisms installed in the event of interruption.”
Fielding questions from newsmen, the minister maintained: “In conclusion, I want to-re-emphasise that the strategy is to maintain focus and deliver quick high impact results as well as position for the medium term. I believe that our initial focus on getting the commercial framework right is so crucial to ensuring sustainable supply. We shall endeavour to keep you posted on the goings on in the gas sector.”

The new power resources minister has a robust profile manifesting a well-grounded education leading to a B.Sc, Architecture from the Howard University; an MBA from the Cambridge University. Alison-Madueke had a career that spanned Project Engineering, American Interior Builders, Washington; Design Coordination, Furman Construction Management Inc, Rockville, United States; Head, Projects Unit, Shell Petroleum Development Co of Nigeria Ltd, Lagos, 1993-96.

She became the minister of transportation 2007; Minister of mines and steel development, 2008 to 2010, after, which she was appointed minister of petroleum resources, also in 2010.

Although Alison-Madueke has wielded big sticks in efforts to revolutionise the petroleum ministry, Nigeria, like the literary Oliver twist, needs more of her actions for its economic survival. This is simply as a result of the fact that the ministry she heads contributes over 90 per cent of the total revenue for the country.

The minister has, no doubt, contributed to her quota on the local front. She should, as a prominent member of the Oganisation of Petroleum Exporting Countries (OPEC), better the lots of Nigeria on the international scene by getting the OPEC’s nod for Nigeria’s plan to increase the quota for its daily oil output to the international market.

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