Diezani Breaks Her Silence and Reveals Her Side of The Story In An Exclusive Interview. Here Is Part 2

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DIEZANI BREAKS HER SILENCE AND REVEALS HER SIDE OF THE STORY IN AN EXCLUSIVE INTERVIEW. HERE IS PART 2
Interview conducted by Arit Essanga, freelance journalist, African Free Press
Honourable Minister has the release of the full PriceWaterhouseCoopers  (PwC) report by Mr. President, put the matter of the alleged missing $20bn to bed?
It is not just about the PwC report. Every panel that has investigated this matter reached the same conclusion that there is no missing funds. I mean the figure kept changing. The former CBN governor alleged $49b; then the figure went to $20b; then $10b; then $11.8b; then he decided to go back to $20b in the international press. My brother please help me here we are talking about the federation account! It is no joke. This is the purse of an entire nation the means by which my brothers and sisters of this country survive and I don’t take it with levity at all.  How can $49b or even $20b be missing from the purse of a nation? It is impossible. Think about it. The mere fact that the figure kept changing was sufficient proof that all that was required was reconciliation between the CBN and key ministries.
An inter-ministerial committee that first tried to unravel the mystery noted a few accounting discrepancies but said no fraud was involved. The Senate committee chaired by Senator Ahmed Makarfi discovered no wrong doings and concluded after exhaustive sessions that money was not stolen. The upper legislative chamber also wholly adopted that report.  So yes, I would certainly say that the report by PwC has put the matter to bed and vindicated the NNPC.
But conspiracy theorists wouldn’t let the matter lie, even though one of the world’s leading auditors, PwC, was brought in to investigate.
So what did the report say? 
Well PwC found that NNPC actually paid more, NOT LESS, than what was due from it into the federation account!
According to the report, there was indeed a shortfall between the amount ($69.34billion) the NNPC received from crude oil lifting and total cash ($50.81 billion) that the NNPC remitted to the Federation Account for the period January 2012 to July 2013.  The report goes on to state clearly that the “NNPC has provided information on the difference leading to potential excess remittance of $0.74billion”.
In other words, according to the NNPC act, the corporation is allowed to run its expenses from the money it receives from crude oil and remit the balance to the Federation Account. This is absolutely permissible in accordance with the law as the corporation does not have any other source of income to run its operations.  PwC found that the expenses NNPC actually incurred were more than it had deducted from crude oil receipts.  So on that ground, it was the Federal Government that owed NNPC money and not vice versa.
Secondly, the PwC audit report found that there is some money that the NNPC has not duly paid to the Federation Account but they clearly state that this is not from the crude oil lifting that sparked the CBN governor’s missive.  Rather it is from two quite unrelated transactions, the signature bonus for divested assets ($1.75 billion) and the unpaid self-assessed taxes and royalties of NPDC ($0.47 billion).  After offsetting the $0.74 billion that NNPC had overpaid on crude oil lifting into the Federation Account, the net balance owed by NNPC to the Federation Account was $1.48 billion.
So did the report say that any money had been misappropriated or anyone corrupt?  No.  Did the report highlight any fraud or monies that could not be accounted for? No.  Even where the report said NNPC was challenged to explain the selling of DPK to bulk DPK marketers at N40.90 rather than the regulated ex-depot price of N34.51, it immediately provided the explanation of the miscellaneous charges (including bridging, transport and administration) that accounted for the difference.
Thirdly, the report also said that given the amount deducted from crude oil lifting to defray NNPC expenses in the audited period and the fall of crude oil prices by over 60% since June 2014, NNPC’s ability to fund its operations was in peril since NNPC has no independent sources of revenue, other than from crude oil lifting receipts, meet its expenses.
Finally, in line with third point above, the report recommends, [which in many ways vindicates all of my reform activities and proposals at the start of my tenure], that the ‘NNPC model of operation must be urgently reviewed and restructured, as the current model which had been in existence since the creation of the Corporation cannot be sustained’. This is precisely what I have been saying since 2010, and backed up with action in the form of the extensive review and the submission of the Petroleum Industry Bill (PIB) to be passed into law – this is bearing in mind that the PIB had been sitting in abeyance for over 12 years!
So what is the approval process like between the NNPC and the Ministry as for everything that happens in the sector, people are always quick to call your name. In other ministries the relevant parastatals take the heat or should I say the responsibility for their decisions?
My brother this is a very good point and good question. Why am I always the “fall-guy” when the parastatal heads are quite capable of taking responsibility! My name is perhaps one of the most searched on the internet why? Yes it’s an important role but there are lines of responsibility.
In the light of this question and the references in the press about “vague headings” in the PwC report, it will be instructive for me to mention the approval process between NNPC and the Ministry. As you know, NNPC is the technical/ operations arm while the Ministry gives policy direction. One of the first few things I did at the ministry was to ensure that there was a clear line of separation between the contract award process and myself. This was to remove any opportunity for bias, create clear walls and ensure contractors adhered to due process. This was not fully entrenched when I got into office and given the pressure that sometimes exists, I had to put layers into the process to ensure a cycle of critical checks across relevant parastatals and in-house technical experts before anything gets to my table for review or approval. This is a very sensitive and most important sector as every single decision has implications for Nigerians and cannot be taken lightly.
As a snapshot, for every operational decision NNPC’s technical team develops a proposal, which is reviewed by in-house technical staff of the appropriate parastatal. Together they check the soundness of the proposal and ensure that it meets the NNPC legal framework. That document then goes to an ad-hoc Executive Board committee who would review and refine. Then it goes the appropriate technical staff within the Ministry to review and comment working with the NNPC before it gets to the office of the Minister. At this point the team of experts presents the proposal to me and an ad-hoc ministerial technical review team (constituted based on subject matter expertise). Depending on the decision reached at this stage the proposal either goes back to the NNPC for further investigation or I place it before the Federal Executive Council for approval. So there is a rigorous process in place.
There are so many senior and technical staff involved in every decision and the ones that come to me are those that fit strict criteria while others are approved by the appropriate heads as specified by the law. So why is there are always so many attempts to spin the story to portray me in a bad light with such vitriol – such hate and anger? Is it because I am a woman? Is it because I am from a minority region in the country? I don’t understand. It always seems that people are so quick to persecute women in office much harsher. It really is quite sad. The thing is these women are someone’s mother, sister, aunty, even grandmother. They are trying to build for posterity. Time will judge and time will wipe out all of the social media nonsense and the truth will prevail. Anyway, despite it all I have soldiered-on channeling my energy into constantly improving and advancing the sector – doing my job for the great people of Nigeria. I always try to keep myself above the noise and not be dragged down by the persecution.
You touched on the Petroleum Industry Bill (PIB) earlier. Why did you feel the need for reform? 
As I mentioned earlier I did 2 things with regards the reform of the petroleum sector during my first 100 days in office. First I created 4 Special Task Forces on the petroleum industry  – The Petroleum Revenues Task Force; Governance and Controls Task Force; the National Refineries Task Force and the PIB Technical Committee. They were set up to investigate the current practices in the industry and look at ways to bring about full transparency to the oil and gas sector. A key part of the terms of reference was to as well as draw a road map for ending corruption and waste in this critical extractive industry to the full benefit of the peoples and governments of the Federal Republic of Nigeria at all levels.
I took the backbench and allowed the groups to work without let or hindrance.
Members of the task forces were allowed full access to the parastatals under the Petroleum Ministry to deal with all elements of their Terms of Reference to the extent members enjoyed full independence of thought and action. Today many of the recommendations of those committees are making a difference to how the sector is run.
Second, was the drafting of the new PIB. Following the submission of the draft Bill from the PIB Technical Committee I set up an inter-paratstatal team to review the recommendations to ensure that it would bring about significant gains for all Nigerians. Most importantly, the number ONE objective of the PIB was to remove the ‘Chinese-walls’ and make the Ministry including its parastatal more open, transparent and accountable to the people of Nigeria. Let us not forget that the industry had been operating under a 50 year old law that did not benefit Nigerians extensively – I wanted to change that. It is Nigeria’s resource and so Nigerians should be able to tap-it and benefit from it economically. This was my goal.
More specifically the PIB, represents the most aggressive review of Nigeria’s oil and gas legislation since the enactment of the Petroleum Act in 1969, and is an amalgamation of 16 previously existent laws.  It is an omnibus regulatory instrument intended to reposition Nigeria’s oil and gas industry to allow Nigerians benefit even more from the output of the sector primarily by unbundling the NNPC and privatisation.  The original law was extremely punitive to Nigerians and favoured the IOCs. The PIB would put the running of the corporation into the hands of Nigerians, making it accountable and more importantly, transparent.
So help us to clearly understand the PIB. How would it change status quo at the NNPC?
The changes, once the PIB is passed into law, would be far-reaching and extensive but it would bring the Nigerian oil & gas sector into the 21st century.
Let me quickly explain how:
(1) It would break up or unbundle the NNPC and make it more accountable and transparent to Nigerians. It would also, for the first time in history, give ordinary Nigerians a chance to participate in the running of the sector through a number of proposed privatisations that would have the effect of diluting the power of the minister in many ways. The Unbundling of NNPC as presented in the new PIB would lead to the creation of a National Oil Company that would focus on promoting indigenous operational capacity development and indigenous production.
(2) It would separate the Nigerian Gas Company (NGC) from NNPC as a partially privatised entity that will cater specifically for domestic gas marketing and domestic gas infrastructure development.  The intention here is to accelerate our national gas infrastructure development for effective gas supply to homes, to electricity generation and to power industrial businesses.  Nigerians would also get a chance to participate in the running of this company as private equity participation of up to 49% is being proposed.
(3) It would create a new National Oil Company (NOC) through the merger of 3 subsidiaries – the PSC assets, would be used to capitalize the National Oil Company, the National Petroleum Development Company (NPDC), the current three domestic refineries (WRPC, KRPC and PHRC) and the Pipelines and Products Marketing Company (PPMC). The new National Oil Company will also be partially privatized by up to 30% giving Nigerians and communities a seat in the operations of the company as is done in other NOCs such as Petrobras, Petronas etc. The partial privatisation would lead to a culture change and create a fully accountable and commercial company.
(4) A Petroleum Host Community Fund is proposed in the PIB to formally recognise host communities as important stakeholders in the oil & gas sector by assigning oil and gas infrastructure security to the Host Communities minimising environmental degradation due to vandalism and crude oil theft.
(5) The PIB will give distinct preference for Nigerian goods and services through a cap on foreign-based capital expenditure, thus creating incentives to increase the amount spent by oil companies for major operations within the country.
(6) The PIB represents the largest overhaul of the government petroleum revenue system in the last four decades. It would simplify the way revenue is collected for the government making it very easy to deliver accounts to Nigerians in a manner that is easily understood with no ambiguities.
So what was the big fuss about passing it to law, as all I can hear is benefits to the Nigerian public?
I think the generality of Nigerians understood the benefits but again the vested interests were at play, confusing the minds of the polity and the legislators about the inherent changes the passing of the PIB would bring. I was pleased that the independent auditor (PwC) echoed the need for a vigorous change to the system. I mean think about it, the sector has been operating under a punitive law for 50 years! More importantly, the sector has been a mystery to Nigerians in the way it operates and gives account so of course there would always be suspicions of foul play – something had to be done or the place would grind to halt from the excesses in the system as there is no other means for the organisation to generate its own income apart from production.
The two allegations that came out were first – “the minister is going to have too much power in the running of the sector”. My brother, I have just explained how there would be an unbundling and privatisations which automatically dilutes the minister’s powers and gives more control to the people of Nigeria! There would be significant changes to status quo. Generational businesses would be created. There would be a credible National Oil Company that would be able to go and raise it own funding to participate competitively in bids rounds within and even outside the country as it would be run as a commercial enterprise. It could even be listed on stock exchanges in the future bringing significant gains to its shareholders and the country.
The second allegation was that of the proposed fiscal terms in the case of onshore/offshore Joint Venture (JV) projects. This was the argument of the International Oil Companies (IOCs). They felt that the terms were too strict. My brother, by strict they meant that it would force them to give more to Nigeria and Nigerians!  How can this be a bad thing given that they had been benefiting from a lax system for 50 years! Even they should have anticipated change. But the most important thing is that Nigeria is not alone in the “tightening” of fiscal terms during successive bid rounds or ad-hoc awards.  In fact Nigeria remains one of the most attractive countries in terms of fiscal regimes (Government Take).
As an indicator of competitiveness, the latest Angola rounds shows Government Take (GT) at the level, which is less favorable to contractors than the current terms proposed in PIB 2012. Interestingly, these terms will also apply to the National Oil Company as it is not intended to be discriminatory.
The goal has always been to achieve a fair balance between government and contractor share.  This is to ensure that Nigeria remains competitive when compared to other countries with similar petroleum resource base.
As we are on the subject of policy promulgation let me bring up the Nigerian Local Content Act. I have heard you speak severally during our conversation about opening the sector up to more Nigerians do you think this has been achieved?
I have indeed been very pleased with the success of the Nigerian Content Act, which I drove extensively until it was instituted and signed into law by Mr. President in April 2010. This is because I strongly believe that Nigerians are fully capable of making the sector work harder for benefit of all Nigerians in a manner that would deliver immediate value. Today we are now beginning to actually feel and realise the full potential of the benefits from the downstream service sector of the oil and gas industry and Nigerians are getting involved in leasing and servicing, various downstream elements of the sector.
Nigerians are moving into the areas of building fabrication plants and pipeline mills, and manufacturing a number of the parts used in this sector – something that had never been seen before. This is giving a completely new slant to the oil and gas sector – it is opening up the sector for job creation and employment generation, which was not the case before, as it is a highly capitalised and technology driven sector.
What makes this Act so special?
The Local Content Act was one of the very first acts of policy reform that was introduced in the infancy of the Jonathan administration. It is the first of its kind in Nigeria and the first in West Africa. Nigeria remains the best case study of enactment and implementation in Africa.
To ensure the continuous development of opportunities for Nigerians and most importantly, monitoring to ensure compliance to the specifications of the Act, a specific agency was created (National Content Development and Monitoring Board – NCDMB) and charged with this responsibility.
Today, the results of the implementation of this Act are plain to see. It has resulted in the creation of more than 300,000 direct and indirect jobs. Peoples individual lives and the lives of communities round about this country has changed completely as a result of their involvement in a sector which hitherto was a great mystery to all.
More than 300 Nigerian oil and gas companies has been established, operating across a wide range of activities from steel pipe manufacturing, to oil reservoir management, to deepwater installation maintenance, to production of wellhead platforms – fields previously the preserve of foreign companies.
The level of participation of Nigerians in upstream contracts for exploration and production of hydrocarbon resources has increased from less than 10% to over 70%. The number of Nigerian companies that own shares in oil blocks onshore, offshore and deep offshore is at levels that have not been seen before.
Over $200b worth of procurements and nearly $10b worth of research and development (R&D) that used to be sourced to international companies as well as technical services valued at nearly $80b and $39b worth of engineering works are now retained in-country.
The list continues…
The Floating Production Storage and Offloading (FPSO) integration capability has been aggressively developed in-country. The Ministry has directed that all future FPSO integration be carried out on home soil.
Indigenous investments have been made for the first time in critical infrastructure such as marine vessels, petroleum depots and jetties. Circa 50% of marine vessels operating in the Nigerian oil and gas industry are now Nigerian-owned and deepwater rigs have also been acquired.
Multinationals and Original Equipment Manufacturers (OEMs), have put in place investments valued at over $5b in Nigeria to establish facilities and infrastructure, to domicile construction, manufacturing and services in the country.
New pipe mill projects are underway and spread across Polaku in Bayelsa State, Calabar in Cross River, Ologbo in Edo State and Onne in Rivers State. These will generate over 25,000 jobs.
The Nigeria Oil and Gas Park Scheme (NOGaPS) is attracting multinationals and (OEMs) to establish manufacturing shop floors close to oilfields. SMEs, youths and community vendors are the beneficiaries of the scheme and wealth is now being created at the grassroots of the oil producing communities.
And this, my brother is just a summarised list, a tip of the iceberg. The NCDMB have published the successes of the law and the benefit to Nigerians.
What is your view on the impact of this Act?
The one key benefit of the law is that it has allowed more women to enter the sector! This is what warms my heart and something I extremely happy about. To see young women working actively in the sector as business people and also on the field as engineers and decision-makers are a joy to me. Every time I would go on inspections and encounter any of these brave women I would always give them absolute recognition to salute them and encourage them to lift up more women. This is something I pushed for – that the sector opens up to women. The glass ceiling for women entering as entrepreneurs used to be very high. For me, as the first woman to be given the opportunity to run this male-dominated sector, I broke that ceiling and opened the door for women.
Look today Nigerians (men and women) are respected around the world and compared to the people of the Middle East as new wealth has flown into the hands of Nigerians. Young businesses are thriving, Nigerians can afford new and better lives, communities are evolving. Bear in mind that we are seeing these benefits at the infancy of this law. We are still cutting-our-teeth as they say. But just imagine what the country would look like in another 3 to 4 years time when the law becomes more embedded and the gains of the law is pushed down further into the fabric of Nigeria – the country will be transformed. All of our social services will improve, as Nigerians will be able to afford more – hospitals, schools, SME businesses…
My brother, changes are occurring in the Oil & Gas sector and changes do not come over night. You are sitting in a sector, which has many times, over the last 25 odd years or so been lambasted for corruption and non- transparency. We have been here for just over 4 years and the change is already in place and it is progressing. I do believe that already a lot of the outputs of these reforms are taking shape and over the next 3 years it would be engrained and enshrined and will be very palpable and very clear but already I can confidently say that we have made good progress and a lot more progress will be made over the next few years.
I want to seize this opportunity to say thank you to all the staff of the Ministry and its parastatals as well as the many people that worked with me during the formulation and institutions of the reforms that have taken place. There were trying times and celebratory times but all in all I can say we delivered for the people of Nigeria in many ways and in this I say also thank you to the people of Nigeria.
Yes this is one legacy – local content – that I hope would trail this administration for many many years to come.
End of PART 2
 In PART 3 the minister talks about how turning Nigeria into a GAS SUPER-POWER has been an important mandate. She shares how the ministry has been working hard to pull gas into the real-sector for the benefit of families and businesses “we are already one of the largest oil producing countries just imagine what we would become once we harness our untapped 167 tcf of gas – an economic super-power”. More importantly she talks about what the future holds for her and some of the more personal accusations that have been leveled against her.
Don’t miss it!

 


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