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| Dr Ibe Kachikwu |
Ibe Kachikwu, minister
of state for petroleum resources and group managing director of the Nigerian
National Petroleum Corporation (NNPC), has made a podcast to the staff of
the corporation on the crippling fuel crisis. Here is the abridged
transcript.
TheCable report continues:
Good
morning. This week, we address the fuel subsidy. It’s not by happenstance
that you see me with my sleeves all rolled up. And I hope you’re visiting
filling stations and helping us work this difficulty.
This
is probably the most challenging issue since I took over as GMD and minister
of (state for) petroleum, and the reality is that a lot of us even
within the company do not know why this is so and so for those who
don’t know, I’ll first go through why you have this situation.
First,
on resumption in August, we had a very major problem on our hands.
Because
subsidies, N500 billion, close to N600 billion, hadn’t been paid over a
one year period, and so the majors, everybody who was importing had begun
to very quietly reduce the levels of importation that they had and
although I struggled very hard and got the (national) assembly approval and the
president’s approval to eventually pay a good portion of that
subsidy somewhere in November, by then it was too late.
Too
late because although they got the money, they didn’t have access to foreign
exchange so the critical reason, main critical reason why you have this
supply gap today is that although NNPC has its own 445,000 barrels
allocation of crude and is meeting its own, who is meant to meet 50% of
your delivery and is more than meeting but is indeed exceeding that, the
individuals who should provide the balance of the 40% component are not
bringing in any product.
And
so, we’ve had to be very creative over the last four, five months, until
we basically ran out of options and the sort of creativity that we put
in the space was forward buying, forward purchase, forward
crude allocations, and also, just to bring in more product, because we saw
NNPC transit from a 45% provider to suddenly 80%, and about this month
really to 100% provider of petroleum products in Nigeria.
That
was not sustainable, we didn’t have the capacity, we didn’t have
the funding, we didn’t have access to the products, we didn’t have
the foreign exchange. So in very many ways, it’s surprising that we’ve
even been able to survive this long.
So
the key element has been, how do we find foreign exchange for those who
eagerly want to participate in the stream, who have been doing
this traditionally, to get into the space, buy their products, come
in, distribute. That’s something we’ve had to work on.
Of
course, the second problem was incessant pipeline disruptions.
Literally,
if you look at the statistics of this year, versus last year, we’ve had
almost two times the number of pipeline interventions and disruptions than
we’ve had over the last two, three years, in this year and that for us is
very disturbing.
Now,
we’ve thrown a couple of ideas on this. The first thing that I have tried
to do is, for the first time in this Country, I have been able to convince
the upstream companies to provide some FX buffer over the next one year
for those who are bringing in products.
And
so I’ve tied, Total Upstream to Total Downstream, Mobil Upstream to Mobil
Downstream, Agip ENI to Oando, Shell to Conoil and things like that. It’s
been very innovative, putting $200 million of FX availability out into the
space. It’s taken a lot of goodwill, it’s taken a lot of work from me.
The
second thing we’ve done is, we’ve had to box our way through the CBN to
get a little of allocation, because we provide the bulk of this foreign
exchange, we should have a bit of it to help stabilise the situation,
because fuel queue, don’t make any mistake about it, it doesn’t matter
what we achieve in our transformation agenda, is the single most difficult
item, which if not solved can bring down the polity and can create a
mayhem here, so it is something that we have focused on.
So
I have been able to get a bit of co-operation from CBN on that.
Now,
I’ve also been able to convince Mr. President to give us access to some,
other than the 445,000 barrels from national production. The difficulty
with that of course, like you and I know is that it goes into the FAC
entity, so once you touch any barrel there, you’re going to have Governors
understandably, quarrel with you on this. But these are some of the
innovative solutions we’ve done.
We’ve
thrown our creative options on the pipelines, by pointing a set of trial,
by contracting contractors to get into the pipelines, and show us that
they can deliver if we give them the contract.
What
that has done is that for the first time in over eight years, we’ve
been able to capture back system 2B all the way to Ilorin. For the first
time in over six years, we were able to pump crude from Escravos into
Warri and we were able to pump oil from Brass into Port Harcourt. And we
were able to pump from Warri right into Kaduna, with a few skirmishes here
and there. This is the first time in over 10 years we’ve been able
to accomplish this. We accomplished this by not spending money, but owing obligations.
Now,
we are going out to the stage of contracting, where we are going
to advertise this and see how we can put this as permanent features into
the system. So a huge amount of work’s been going on in this stream.
Our
depots, we are at the stage right now of looking at policies
geared towards advertising our depots and our pipelines for purposes
of contracting joint ventures that will put in money, refurbish depots
that have been abandoned for upwards of a decade, so that we can have
the distributional network that we need to be able to solve this.
It’s
not enough just to bring in the cargoes which we are beginning to do, but
if you bring the cargoes and they arrive in Lagos, if you have to send
3,000 trucks round the whole Country, it takes an average of four to
seven days to do that, and the very next day, you’re back to the same
place, so the sheer logistical nightmare is not what NNPC was set up to
do, so we need to be able to get those pipelines back, get the depots
functioning, push a lot of the responsibility to the major oil companies
who are basically leaving us to do all the work and picking up the profit
at the end of the tunnel.
So,
it’s been a very difficult work, very challenging, we’re getting to the
solutions, the first few cargoes are beginning to come in and I think by
the second week of April like I said, we should be hopefully out of this
queue situation. But that is not a long-term solution.
The
long-term solution is that we have to throw private initiatives to the
downstream. We’ve got to have a situation where we create enough policy
direction, such that people can get in there and actually do the business.
We can take care of our own filling stations, NNPC stations and perhaps
some of the affiliates that are going to be with us but that is a job
we’ve done and done well but we can do it better. We can go into growing
the affiliate stations even more so that we have a lot more affiliate
stations that we use as response to security situations.
But
ultimately, the business must go back to where it belongs, which is the
private sector, not the public sector and until we do that deal with the
issue of pricing, which our price modulation has helped us manage, but not
quite completely, we’re not going to solve the problem.
Now,
how do you come in? Get out into the filling station, be a proud NNPC
official, help regulate traffic, help push product,
help report scams that are going on in depots, even by our own
officials and help talk about the change, help talk about the
problems and be the spokespeople for your own company,
help create ideas. help suggest ways in which we can find
lasting solutions to this. And if we do that, collectively, every one of
us a piece, at the end of the process, people will remember the
difficulties, but will also remember an NNPC that was united in the
solution to this problem.
At the end of the day, it’s
not all about me, it’s actually about you.
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