Alleged $20B Missing Oil Money: Sanusi evasive, got his facts wrong— Allison-Madueke

*‘Pitfalls in the N10billion jet hire story’
*Says audit cleared NNPC
*On corruption in subsidy system: I removed 92 firms with one stroke of the pen

Minister of Petroleum Resources, Mrs. Diezani Allison-Madueke, in this interview, speaks on issues in the oil and gas sector including the subsidy regime, local content, the alleged billions missing oil revenues, and the controversial N10billion allegedly spent by her to hire planes.

On Kerosene Subsidy

There was a presidential directive to withdraw subsidy on kerosene. It is possible that the Minister of Petroleum at that time went to discuss with the President and may have been able to convince him on the need to stay action on the directive. but he (Minister) overlooked regularizing in terms of getting the President to rescind the order.

So, if anybody flouted the presidential order, it must have been the Minister of Petroleum at that time. But since the directive was not gazetted and was not announced it was not a law; it was mainly a directive on paper because there are procedures that a directive must follow to become a law and become implementable. I don’t know why people keep referring to this. Anyway, another president came and appointed his own cabinet and moved on.

Now, because of the confusion created by this situation, marketers who, prior to that time were bringing in kerosene, pulled back. The reason was that if they brought in kerosene at the international landing cost and sold at our subsidized rate and didn’t get paid the difference, they will go bankrupt. So, there was immense confusion and, I think, it was at that time that the NNPC had to step in and started supplying.

That was before I became Minister of Petroleum. This was where the problem of deduction of subsidy claims at source started. The issue of deduction at source has also been severally argued as to whether NNPC has the right to cover all those particular expenses from crude oil sales proceeds. That was the situation with subsidy at that time. When we came out in January 2012 to try to regularize the system by removing subsidy on petroleum products, of course we all knew what happened.

Efforts to Rid the Subsidy System of Corruption

Allison-Madueke

So, based on all that, subsidy on petroleum products continued up to this point. It is a sore point because, in all honesty, just like PMS, it is a very difficult issue to handle. It becomes even more difficult when revenues are falling because of the price of the crude. It is very difficult to pay vast amounts on subsidy which we don’t believe is getting to the bottom line users of the PMS, but which is instead making middlemen fat.

But we wanted to remove the subsidy.We wanted to deregulate too because we discovered that there was corruption in the subsidy system which had gone so bad that we were not able to move products seamlessly from one point to another. There was arbitrary price increase in some areas and products were selling above the regulated price thereby making nonsense of the subsidy scheme.

Then there was round tripping, terrible incidence of round tripping. It got to the point that I even had to get the permission of Mr. President to invite the EFCC to come and look at the books and help us figure out what was happening because the level of PMS import we were getting clearly showed that something was wrong. That was in 2011.

At some point, the round tripping was extended to kerosene which was being diverted and sold as aviation fuel. Marketers would take their allotment of kerosene and sell it as aviation fuel which is more expensive. You know the kerosene that is imported into Nigeria is of the same specification as aviation fuel. That is why it is called Dual Purpose Kerosene (DPK). It was not profitable to import what is really the base level of normal Household Kerosene (HHK). These were some of the problems we had.

As I said earlier, we had written to the EFCC and didn’t get any response, that meant no solution. In November 2011, even before we tried deregulating, I removed 92 marketers with one stroke of the pen from the PPPRA books, these were throughput marketers who didn’t have tank farms, who didn’t have any real investment in the sector.

We took this action because the level of investment into tank farm is so huge that if you can do it, you won’t want to get involved in any shady deal. Besides, such investment entitles you to carry out throughput for other marketers and they will pay you to do that. By law, that is acceptable. That law wasn’t made in our time, it was there before we came in. So it was clear to us that the problem of round tripping was coming from those who didn’t have hard investments in the sector. And there were 92 of them in our books which we flushed out.

That was when I brought in Reginald Stanley to head the PPPRA. The fellow I brought in before didn’t seem to have helped in sorting out the issue because it looked like it was getting worse. I asked Stanley to try and reform the petrol importation and subsidy system to bring the subsidy bill down. I told him that after stabilizing things, we could bring some of the throughput marketers back, those who pass certain expectations, because it is in our laws, it is not as if throughput marketing in itself is illegal. So I signed them off, 92 marketers in one day. It was after I dropped them that the level of subsidy dropped significantly.

Strides in Local Content

We have been able to domicile some of the jobs in the sector that used to be carried out overseas within the country thereby creating jobs for many Nigeria youth. Manufacturing of small parts for the oil and gas sector is now being done in-country which was not the case before now. It is not just the manufacturing but the quality of the goods is such that we now have prospects of producing for other multinationals outside the country. This has helped to create a lot of direct jobs over this period of time and hundreds of thousands of indirect jobs.

It was a thing of joy for me when I visited places like the burnt down Okrika Jetty a couple of years ago to commission the products loading arm that was rebuilt only to discover that companies like Lee Engineering, which did the construction of the project from A to Z, was 100% Nigerian, all the engineers are Nigerians. We are very proud that this sort of thing could happen at this point in time.

Now, these are major steps in the oil and gas sector because it is highly capital intensive, highly technological. We have been able to achieve this because we understand that, until you get the industry down so that it can touch what I consider the real economy, until you begin to commercialize it, oil & gas always seem to be up there, a sort of mysterious sector for the very wealthy, extremely wealthy.

The multinationals have access to billions and billions of dollars, but we are beginning to pull it down so that ordinary people who can gather together the financial wherewithal can also be players in the sector. Like I said, not all of these are highly capital-intensive, there are many other areas that are quie minor in terms of capital outlay. Many people are coming in now. And this was the intent from the onset: to demystify this sector. On the Nigerian content side, I think we have done very well and we will continue to try to do even better.

Gas Infrastructure Development

During this period too, we started looking at what we could do to develop our gas resources. We have to pull out gas issues from the PIB and specific gas projects from the Gas Master Plan to implement to fast track gas to power, gas to industry and, of course, to ensure that value is added to the economy.

On Alleged N10bn Expenditure on Jet Hire

Since NNPC came into being, it has always owned corporate jets. The reason it has to acquire jets is simple: if you have trillions of Naira worth of assets across the country that you oversee, and you have oversight over major multinationals who are in joint venture operations with you and all those multinationals that you oversee have their own jets, how are supposed to oversight these assets and those partnerships and responsibilities? As a regulator, are you supposed to borrow jets from the companies you are supposed to oversight for trips to inspect their facilities? As we speak, NNPC should actually own at least two major long distance helicopters for offshore activities. I’m ashamed to say that if I have to go on an inspection of Floating Production Storage and Offloading (FPSO) facility, I have to borrow a ride from ExxonMobil or Total or Agip. I don’t think that kind of thing happens anywhere in the world, not even in small Angola!

Now, when I came in as Minister of Petroleum Resources, NNPC did not have any jet on ground because the one it had was about 30 years old and I recall that Ajumogobia, when he was going, had advised that I should not, for my life, enter that jet and that he almost died in it when the thing dropped out of the air one day. So, when I came in, I was informed that they had just acquired another jet which, for some reasons was parked somewhere abroad.

Former CBN Gov, Sanusi and Minister of Petroleum Resources, Alison-Madueke

When they eventually brought it back to Nigeria, it ended up in Kaduna in Kasim Shetima’s airline hanger. I didn’t even know him at that time. But, one day, Shetima came to meet me and suggested very strongly that I should ask NNPC to sell that jet because it had been idle for too long and may had developed problems. He also raised issues about that particular model of aircraft and that it has been known to have certain issues. So, I called in the GMD and reiterated the issues and suggested to him to sell off the jet.

NNPC later came back with reasons why they wouldn’t sell. I said well, its their property and I didn’t bother about it again. But in truth, there were problems with the plane in terms of maintenance. That was how we came about leasing this other jet. We had looked at our books and done our own homework, we discovered that Shell had sold all their own planes. Shell actually had a fleet when I was there, they even built a private terminal in Lagos airport and rebuilt the entire terminal in Port-Harcourt Airforce Base which they were also using. But they sold all their planes because they saw that, in this age and time, unless you are in the business of aviation, it was actually cheaper and more cost effective to lease.

So, I said let us just lease first because I couldn’t just even go to the Federal Executive Council for them to approve $30m to go and buy a jet. So based on what we consider as the tradition in the industry now all over the world, we went for a lease arrangement with the same company that Shell and other multinationals were using.

But out of the blues, some people came up with the allegation and made it look like I was the first person in the history of petroleum industry in Nigeria or NNPC who started using jet for operations. I don’t even know how the N10bn came about! For N10bn, one can buy two brand new Challenger jets and add a third one (second class). I don’t know how they came about such outrageous figures! But like I said before, it is all calculated to make me look bad.

Actually, when the issue came up, I didn’t talk; lawyers advised that I shouldn’t talk at that particular point in time; it was only after the case had been heard by the court, which was not too long ago, that I could actually say something and address the issue.

Pipeline Vandalism, Sabotage and Protection

There was actually a pipeline protection contract for some militants. When the contract ended, which was almost two years ago, we did not renew it. Even the militants abused me for refusing to renew it. And I did that because they did not live up to expectation, they did not meet up with the terms of the contract. We have to review it; in fact, we have extended it to include Ondo and Lagos because the pipelines run through the two states and they were not involved in the beginning.

But it has taken sometime because the people we are dealing with are people you have to handle with care. I believe that the groups that we have put on the table are groups that will actually deliver. But we are still having a look at it because we cannot afford to get it wrong, we want to be sure that we are engaging with the right groups in the various communities.

So, we are still on it, I have not renewed the pipeline protection contract with any group. But, apart from that, the NSA is working on an electronic pipeline surveillance project. It has not been discussed in much details with us because it is a security issue, but I was fully aware at the time it was being put together. It is my expectation that they will be deploying those things anytime from now.

Allegations of Missing Oil Revenues and PwC Audit Report

When the former CBN governor came up with the allegation that about $49.8bn of crude oil sales proceeds were not remitted by NNPC, we swung into action with all the relevant agencies to reconcile the figures. When we reconciled the figures down to $10.8bn and some agencies were having a different figure of $12bn, we insisted that the reconciliation must continue because there was still an anomaly; we said we must get down to the bottom of the matter to find out what is really amiss.

I called the former CBN governor on a particular day, I was abroad for a meeting and we met there and I said, “Governor, I think you and I really need to sit down and thrash out this matter, let us drill down to find out if there was really a gap and what could be the source of the gap”. He said he was very upset and that NNPC wants to finish his reputation and that all sorts of things were being written about him at home and abroad.

I said, “Well, I don’t think you can blame NNPC but whatever you feel, let us finish the reconciliation and get to the bottom of things”. He said “ok, ok, ok. We had arranged to meet after my return to Nigeria which was in two days’ time. I came back only to hear that earlier on that day he had submitted another report to the National Assembly saying $20bn was the actual amount missing. At that point I said to my people, “We have a problem here, there is clearly a hostile situation in place”.

A few days later, we appeared before the Senator Makarfi Commttee to defend ourselves over the fresh allegation of unremitted $20bn. We put our papers forward, the Makarfi Committee then went through all the evidence supplied by all the relevant agencies and found that there was no missing $20bn. Despite the fact that the Makarfi Committee declared that no money was missing, the opposition kept insisting that $20bn was missing and they were calling us names.

That was how the external auditors were called in to look into the whole issue, a situation, I believe, was a very sad indictment on the distinguished Senate of the Federal Republic of Nigeria. Because, I don’t think that if a Senate Committee in America makes a finding, it will be disparaged in that manner.  What PwC has come out with is that NPDC should remit the balance of the book value of the assets transferred to it which stands at $1.48bn to the Federation Account.

Under normal circumstances, when you transfer oil blocks to NNPC or its subsidiary as a government-owned corporation, they are not supposed to pay you, what they are supposed to do is to send all revenues above operating cost to the Federation Account. But, in this case, DPR wanted to apply a different method and it quoted what it considered the book value of those assets for NPDC to pay. The implication is that if NNPC pays the book value for the assets, the assets will become its own, and then they can run it competitively just like independent multinationals do.

There was now reconciliation problem between NNPC and DPR because DPR quoted a certain amount for the assets value while NNPC said that was not actually the book value of the assets. But they still paid the first two tranches when the reconciliation was transacted in 2012.

Then the audit came into play at that point in time. What PwC has recommended is that to follow due process, that book value is to be paid to the Federation Account as DPR mandated. But the truth is that as far as NNPC is concerned, the book value of the assets, as quoted by the DPR, is still under contention. That is why NNPC insists that it was not indicted in the PwC audit report. Whatever the case, however they do it, NNPC will pay the amount, but that does not mean that it was indicted.

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