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Oil subsidy is emotive issue, one has to tread carefully – Kachikwu

Immediate past Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu recently spoke with a group of editors in Abuja on developments in the…

Immediate past Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu recently spoke with a group of editors in Abuja on developments in the oil and gas industry in the last four years. Excerpts as produced by Daniel Adugbo:

On transparency in crude oil production

If you look at all the transparency ratings, this sector has done phenomenally well between 2015 and now; there are few pockets we have not done well. In terms of volume produced, today I can tell you using the DPR database; I can actually tell you online, on time, what has been produced at the minutes. So, anybody in Nigeria saying they are still doubting that production is being captured, we have passed that; some level of metering is already going on.

Today, I can say we are producing 2.3 million barrels and I can only do that through the DPR data. What I like to do, however, is to interrogate the data. We just launched it about two months ago, fantastic. We’re tracking you when you produce to when you put in your tank, to when you export, to when you deliver, to when it is discharged. So, all along the crude oil chain track we are fine. The refined chain track is what I am asking them to go capture in the same manner. So we can tell we are really consuming 50 to 60 million litres.

On efforts to deregulate the downstream sector

I was probably the first person in history working with the president who has been able to go in and make that massive jump in prices from N85 to N145 per litre. So, it has been done. It is not too difficult, but it is a very emotive issue. We just tried to manage that period because of the amount of attacks, and threats. If something goes wrong, if the labour union doesn’t agree with you and close down the country for one week, you will find your popularity beginning to wane very rapidly. It requires courage, it requires alternatives because we should not downplay the fact that somehow the literature over the years, has convinced the lower economic end of the society that this is not good for them. So, I think we need to work on the refineries, and encourage private refineries. You’ll find that ultimately, once you do this, it becomes easier to manage.

Petroleum products’ subsidy not bad, but…

Subsidy as a concept is not necessarily a bad thing. It is how do you manage subsidy, and can you afford the subsidy and what volume of the subsidy. So, I think the first thing is to audit the numbers. When we did this price removal, we shot down from 55 million litres a day to about 30 million litres. How do we put trackers in every truck that carries PMS and in every station that sells them, and then put joint enforcement in such a way that state governments, border countries take responsibility for this illegal trading and bring down the number to what is legitimate. So, it is not for want of knowledge of what to do or lack of process of how it should be done because we have done it and done it well.

I think quite frankly that information (subsidy cost), you have to get from NNPC; they monitor subsidy, they are the sole importers right now. I do know that the last time that I checked, I can’t remember the numbers. It was a high number but what the specifics are, I don’t know and the reason being that they’re providing 100% of the supply in the country. So, one of the marching orders the president has given us is that we must find a way to finalize this tracking, determine the consumption and tie the NNPC delivery and performance index. It shouldn’t be determined by that, it should be determined by the government who are the owners of the business. So that is work in progress.

Current landing cost of PMS

The last time that I looked, I think it was N180/171 per litre. I know we had a differential of about N40/47 over and above the price we sell today. You know, it sort of differs, when the price of crude goes up, the petroleum product price goes up. When it comes down it comes down.

On whether he deserves reappointment

Let’s put it this way, this is not even a conversation I can have. The president is the owner of the authority and he picks people he wants to work with, I think it will be too assumptive for any minister to begin to say, look, I’ve done so well you must appoint me. There isn’t a dearth of intellectualism or capacity. In Nigeria you can find good people everywhere. So, let’s just be modest about it. The only thing that I think you have going is that I think we have worked so hard and we charted territories that nobody before had touched. So we’ve done a huge amount of work under the leadership of Mr. President. Continuity is important, it will help get us to the finish line. But is it that nobody else can do it? That’s a matter the president settles himself.

Dealing with corruption in issuance of oil bloc licence

First, this government hasn’t given out any oil block in our four years. We didn’t do marginal fields either and the whole idea was that it is the president’s belief that we should first clean the sector before we start dishing out political patronages. So, we are not guilty of allocating any oil bloc. Giving oil blocs to Nigerians is not a bad thing, who else should get it? It has to be Nigerians. Are they the right kind of Nigerians, you are jurists out there. I don’t know, because blocs involve some level of connection, funding and technical skills. What are we doing to ensure the blocs are not reserved for the super-rich? One of the things we did with marginal fields, which we haven’t issued, was to develop for the president, the basic outline of the rules that should apply to marginal fields. Technical skill, financial capability, work programme that is monitored and efficient.

Renewal of Oil blocs

We had an early renewal programme which I put in place and it got close to $1.8bn for the government and most of those have been renewed. The ones that are in the frame up till 2019, 2020 and 2021 have all been captured by the early renewal. The ones after that, we have not dealt with. I think that under the early renewal we probably did close to about 40 renewals. We take them as they come, the essence of the early renewal was that government needed to meet its financial needs.

Buhari and oil bloc

Yes! I said Buhari doesn’t have an oil bloc, I certainly did not award him one and he’s never asked for one and he’s never sent a third party, nothing happened. You are asking what about the past? I wasn’t present to decide what happened in the past.

NNPC and its listing on the stock market

It is not a certificate given to you for free, you have to qualify for listing. I love those trying to get listed on the New York Stock Exchange. Aramco is trying to get listed on the New York Stock Exchange, you can see what they are doing. They’re publishing their reports, showing their 20 year projections, they’re growing up their investments in America, Europe.

So we’re not yet ripe for listing, there’s still a lot more work to be done. One of the things I did in 2016 was to ask the management to adopt a prepare-to-listing management formula not because you are going to get listed. It just says what it takes to get listed? Transparency, audited reports, good internal controls and that was part of my driving efficiency. We’re not there yet. A company that is going to be listed will not sell product at N140 when it is N180 we are not there yet for listing. NNPC has so many assets and if we run it well, it’s going to be good for this country.

FG’s move to sell stakes in JVs

It wasn’t one of my policy initiatives but of budget, planning and finance. And it was from the point of view of addressing fiscal imbalance and need to find money. So, not a bad policy. From a private sector perspective, I won’t be against that. But it wasn’t my policy. But it was a policy suggestion – it hasn’t been approved. It was one of the potential options but it hasn’t been sort of dragged out to put timelines on what to be sold or what percentages or whatever.

I’m usually very conservative when it comes to selling government assets because I haven’t been able to guarantee myself that the returns of those assets will be so well used. I would rather create an enabling environment where you can open up the field for investors to invest; for people to invest with you on a JV business and that sort of stuff.

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