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Weekly UpdatesElected President on April 21, 2007, Yar'Adua on May 29 used his inaugural address to call for an immediate cessation of hostilities in Nigeria's restive southern oil region. Then 56, Yar'Adua was sworn in to succeed Obasanjo. It was Obasanjo who hand-picked him as a presidential candidate of the ruling People's Democratic Party (PDP). That marked the first successful transfer of power from one elected government to another in Africa's most populous country, though Obasanjo remains an influence on Yar'Adua's decision making system.
Visiting Paris, Yar'adua on June 12, 2008, pledged to double Nigeria's crude oil production to 4m b/d by 2010. He made the announcement during talks with French President Nicolas Sarkozy. Yar'adua's spokesman Olusegun Adeniyi then stated: "The Presidenthad assured his French counterpart that Nigeria's preference was for stable, sustainable and predictable oil prices. Unpredictable prices did not help anyone in the long run". But the reality now is different.
In late July 2007, Yar'Adua made former OPEC secretary-general Lukman an "honourary adviser to the President on energy". In reality, Lukman was to act as a buffer between Yar'Adua and Obasanjo and between the ruler and the opposition. On Dec. 28, 2008, Yar'Adua made Lukman a full minister of petroleum and asked him to reform and modernise this sector and turn NNPC into a more profitable NOC.
Lukman began a big clean-up campaign and secured the Jan. 13, 2009, appointment of Muhammad Barkindo as NNPC group managing director - replacing Abubakar Yar'Adua who was made head of the company in August 2007. Until then Barkindo represented Nigeria at OPEC's secretariat in Vienna. In February Barkindo came up with a blueprint for an overhaul of NNPC to transform the company into a commercially focused and better financed firm.
For decades, NNPC served as a gravy train for corrupt regimes which helped themselves from its coffers. President Yar'Adua has ordered Lukman and Barkindo to speed up work on changing NNPC's structure. But in parallel to their determination to effect the changes, there is equally strong opposition from the petroleum sector's powerful labour unions - as well as politicians in the Senate and National Assembly (parliament) - determined to block lay-offs required in the process of streamlining of the company's work forces and management.
There remains a bloc of opposition politicians questioning Yar'Adua's legitimacy and still charging that his 2007 election was rigged. This and other issues, worsened by opposition to the overhauling of NNPC, have weakened Yar'Adua's regime and caused delays affecting the process of reforms and parliamentary passage of the long-awaited Petroleum Industry Bill (PIB). This bill promises the biggest shake-up of the petroleum sector in 50 years.
Before becoming petroleum minister, Lukman as a top adviser had played a key role in the drafting of the PIB, which was approved in August 2008 by Yar'Adua's cabinet. It is now said it may take several more months or even a year for the PIB's provisions to be implemented. This was the main reason for Yar'Adua's promotion of Lukman as a full minister - the most senior member of the federal government. Lukman's presence in the cabinet has added much weight to its credibility due to his long experience both as a petroleum expert and as an OPEC boss, plus his high reputation within Nigeria and internationally.
The advent of Barkindo to the top NNPC job was followed by the dissolution of the Department of Petroleum Resources (DPR), the body which regulated the E&P operations, and the creation of the National Petroleum Inspectorate (NPI). DPR's head Tony Chukwueke was suspended in 2008 over alleged irregularities in the award of E&P blocks. A parliamentary inquiry has been looking into the sale of blocks in 2005, 2006 and 2007, as some concessions were given to front companies.
Days after appointing Barkindo, Yar'Adua put Billy Agha, a geologist and former NNPC executive, at the head of NPI. Shortly after taking office at the end of May 2007, Yar'Adua announced his intention to split NNPC, set up in 1977, into five separate entities (see omt8NigrWhoAug20-07).
The PIB, now awaiting passage by the National Assembly, is a hot issue as it affects the Nigerian work-forces in this sector as well as the IOCs investing in this country. To explain PIB's provisions, Barkindo on July 23 deputised for Dr Lukman in hosting a conference which included US Ambassador Robin Sanders, British High Commissioner Peter West, French Ambassador Machiel Jean and the Dutch ambassador. There were several agitations from the industry on the PIB, especially on the fiscal- related issues.
The IOCs had expressed concern over the PIB which they considered as a threat to their multi-billion dollars investments in the country. Barkindo said Nigeria was at cross-roads. He argued that the current setting of the industry was cumbersome and unattractive.
Noting that the sector now had 16 laws, Barkindo said: "For any operator or investor, he may need a team of lawyers to go through the sets of legislations or regulations in place before he understands the industry". The PIB is to bring into the system one legislation which will guarantee transparency, accountability and fair competition among the players. He said this was part of a reforms programme covering the power and petroleum sectors, describing the PIB as a significant innovation not seen any-where else in the world.
Barkindo noted: "Before we were not allowed to disclose how much oil we produced in Nigeria but now we want to remove all confidentiality clauses and open all contracts for everybody to see [The] PIB is seeking a transparent process in handling the petroleum wealth which your countries are propagating. Mr President has taken unprecedented steps to open up the industry. We took into account our partners especially in the area of taxes".
US Ambassador Sanders said the PIB was a welcome idea and the US government was in full support, especially in the area of transparency and accountability. He said the only grey areas about which the IOCs were concerned was the set of fiscal issues attached to the bill, "but we are happy that the doors for more discussion are still open". The other ambassadors expressed support for the bill and called for more dialogue with the IOCs.
On July 16, Dr Lukman said: "Nigeria will move in one step from one of the most opaque petroleum nations in Africa to one of the most open and transparent in the world. The texts of all licences, leases and contracts and any of the changes to such documents will no longer be confidential".
Speaking on behalf of the IOCs, Chevron's local Managing Director Andrew Fawthrop said: "Some of the provisions in the bill are still open to interpretations. This is not a surprise. This is a very large billbut we need to make sure that the provisions in the bill are clear It is very important that we clarify that before it's codified" (see details in omt6NigrFieldsAug10-09).
At a separate July 16 meeting for the indigenous operators who only account for 3% of the country's crude oil production, the President of the Indigenous Producers Association (IPA) and Chairman of Dubri Oil Co., Imo J. Itsueli, said the country's oil business had been under the dominance of IOCs and the trend could only be reduced if there was an enabling law to that effect. He noted that the first indigenous oil company began operations in Nigeria 22 years ago and since then the growth rate had been very poor. He said some of the challenges faced by the indigenous oil firms included poor sources of financing, lack of manpower, security issues and lack of enabling laws to protects them.
Dr Lukman said the essence of the PIB was to ensure indigenous participation in the sector. He said the PIB was based on the report of the Oil and Gas Reform Implementation Committee set up in 2000 by Abuja to carry out a comprehensive reform of the industry. He said the indigenous firms will be among the top priorities in the reform process and the PIB was to address all the obstacles they faced.
It was on Dr Lukman's recommendation - then as an adviser - that President Yar'Adua in October 2008 ordered a moratorium on gas supplies to NLNG's Train 6, which had raised this JV's LNG production capacity by 4m t/y to 22m t/y. The reason for that was the lack of natural gas for the domestic market which had been hit by frequent power cuts. The gas for Train 6 was then diverted for local use. But Lukman had anticipated a glut in the world LNG business, so the timing of the order mitigated the problem for NLNG (see gmt7NigrGasExpAug17-09).
US natural gas futures on Aug. 21 fell to $2.945/m BTUs at NYMEX for the first time in seven years after an EIA report showed rising supplies of the industrial and power-plant fuel. The EIA said inventories had risen 52 BCF to 3.204 TCF in the week to Aug. 14. The gas stockpiles were 19% higher than the five-year average. By then gas futures prices had dropped 48% this year. Demand from US factories, steel mills and chemical plants had continued to tumble because of the global recession.
Yar'Adua's power to revoke E&P rights was held in check on Aug. 20, when a federal court judge ruled that the president's decision affecting the rights the state-owned Korea National Oil Co. (KNOC) to Blocks 321 and 333 was illegal. The judge said the president did not have the power to revoke or void E&P licences. KNOC, which got the blocks in 2005, was told in January 2009 that its failure to pay signature bonuses had invalidated the award. But KNOC said it had paid the signature bonuses.
Yar'Adua's moves, having offered these two blocks to India's state-owned Oil and Natural Gas Corp (ONGC), had raised investor uncertainty over the sanctity of PSCs in Nigeria.
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