Nigerian National Petroleum Corporation has said that the allegations levelled against it by the oil minister that the conduct of its group managing director lacked transparency were baseless. NNPC in a statement signed by its Group General Manager, Group Public Affairs Division, Mr. Ndu Ughamadu, described the allegations of the Minister of State for Petroleum Resources, Mr. Ibe Kachikwu, against its Group Managing Director, Mr. Maikanti Baru, as baseless and accused the minister of exaggerating and concocting figures to give vent to his claims.

The NNPC, in a response to the letter of Kachikwu, said that due process was followed in the various activities, while it described Kachikwu’s claims and accusations as baseless and inappropriate. Ughamadu said that from the outset, the law and the rules guiding the NNPC did not require a review or discussion with the Minister of State or the NNPC Board on contractual matters, insisting that what was required was the processing and approval of contracts by the NNPC Tenders Board, the President in his executive capacity or as Minister of Petroleum, or the Federal Executive Council (FEC), as the case may be. He also stated that in some situations, all that was required is the approval of the NNPC Tenders Board while, in other cases, based on the threshold, the award must be submitted for presidential approval; while in other instances, the approval of the Federal Executive Council was required.

The NNPC accused Kachikwu of concocting figures for the various contracts, stating that for both the Crude Term Contract and the Direct Sale and Direct Purchase (DSDP) agreements, there were no specific values attached to each transaction to warrant the values of $10 billion and $5 billion respectively placed on them in the claim of Dr. Kachikwu. He said, “It is therefore inappropriate to attach arbitrary values to the shortlists with the aim of classifying the transactions as contracts above NNPC Tenders Board limit. They are merely the shortlisting of prospective off-takers of crude oil and suppliers of petroleum products under agreed terms. These transactions were not required to be presented as contracts to the Board of NNPC and, of course, the monetary value of any crude oil eventually lifted by any of the companies goes straight into the federation account and not to the company.”
The NNPC also said that Kachikwu was expressly consulted by the Group Managing Director of the NNPC, while his recommendations were taken into account in following through the laid down procedure, this he said, was contrary to Kachikwu’s assertion that he was never involved in the 2017/2018 contracting process for the Crude Oil Term Contracts. “Thus, for him to turn around and claim that ‘…these major contracts were never reviewed or discussed with me…’ is most unfortunate to say the least,” the NNPC added. The NNPC said its contracting process is governed by the provisions of the NNPC Act; The Public Procurement Act, 2007 (PPA); procurement method and thresholds of application and the composition of Tenders Board as provided by the Secretary to the Government of the Federation (SGF) Circular reference no. SGF/OP/1/S.3/VIII/57, dated 11th March, 2009. Others, it said, are the NNPC Delegation of Authority Guide; Supply Chain Management Policy & Procedure documents; and the NNPC Ethics Guide.

Ughamadu also explained that the NNPC had had cause to clarify severally from the Bureau of Public Procurement, BPP, as to the composition of the NNPC Tenders Board and the role of NNPC Board appointed by Government. He said in its response, the BPP clarified that the NNPC Tenders Board (NTB) was not the same as the NNPC Board, noting that the governing board, which is the NNPC Board, is responsible for approval of work programmes, corporate plans and budgets, while the NTB is responsible for approval of day-to-day procurement implementation. He further stated that the BPP referred to the SGF circular for the composition of the NTB to compose of the Accounting Officer, which is the NNPC GMD as the Chairman, with Heads of Department, which are Group Executive Directors, GED, as members with the Head of Procurement (GGM SCM) serving as the Secretary of the NNPC Tenders Board. “The above clarifications of the provisions of the procurement process show that approvals reside within the NTB and where thresholds are exceeded, the NNPC refers to FEC for approval. Therefore, the NNPC Board has no role in contracts approval process as advised by BPP,” he said

Ughamadu averred that from all these, clarifications were sought and obtained prior to August 2015 and were implemented by Kachikwu as the GMD of NNPC, adding that Kachikwu also constituted the first NNPC Tenders Board on 8th September, 2015 and continued to chair it until his exit in June, 2016. He highlighted the NNPC contracting process to include: approval of project proposal and contracting strategy by NTB; placement of adverts for expression of interest in electronic and print media; soliciting for tender, technical and commercial; tender evaluation; tender approval by NTB for contracts within its threshold; otherwise, it would obtain BPP certificate of no objection before presentation to FEC; and present to FEC for approval.

Clarifying the various issues raised by Kachikwu, as regards the contracts, Ughamadu said the Crude Oil Term Contract (COTC), which Kachikwu put at over $10 billion, was not a contract for procurement of goods, works or services; stating that rather, it is simply a list of approved off-takers of Nigerian crude oil of all grades. He said the list of off-takers did not carry any value, but simply state the terms and conditions for the lifting, while it argued that due process had been fully followed in the shortlisting of the off-takers of the Nigerian crude oil for the current term 2017/2018.

For the DSDP, the NNPC spokesperson noted that like the COTC, it was contract for any procurement of goods, works or services, adding that rather, it was simply a list of off-takers of crude oil and suppliers of petroleum products of equivalent value. “This list does not carry any value, but simply state the terms and conditions for the lifting and supply of petroleum products. It is therefore mischievous to classify it as contract and attach a value to it that is above
Management’s limit. In conclusion, it has been confirmed that due process has been followed in arriving at the shortlist of the DSDP partners for the 2017/2018 cycle,” he argued.For the AKK gas pipeline contract and various financing arrangements considered with IOCs, Ughamadu said, “The AKK Gas pipeline project is a contractor financed contract. BPP and ICRC certificates have been obtained, while that of NCDMB is being awaited after which the contract will be presented to FEC for consideration and approval. Thus, due process is being followed in the processing of this contract.
“The financing arrangements reported as contracts are part of the process of exiting Cash Call approved by the FEC. It entails negotiations with JV Partners on alternative funding of some selected projects through third party financing to bridge the funding gap associated with Federal Government’s inability to meet its cash call contributions. “The third party financing option emanates from the appropriation act provisions that allow sourcing of financing outside regular cash call contributions. Upon approval of the calendar year’s operating budget, the NNPC in conjunction with its JV partners commence the necessary process for accessing financing to bridge the funding gap.”

He said all the NPDC procurement contracts were subjected to the approved procurement procedures as described in respect of the AKK Gas Pipeline project above. There were no breaches of any extant procurement processes. He added that there was no single NPDC contract that hs been approved by the relevant Tenders Board beyond its limit of financial authority and that there was no single contract that is in the $3 billion to $4 billion range claimed in Kachikwu’s write-up. To this end, he said, “From the foregoing, the allegations were baseless and due process has been followed in the various activities.  Furthermore, it is established that apart from the AKK project and NPDC production service contracts, all the other transactions mentioned were not procurement contracts.
“The NPDC production service contracts have undergone due process, while the AKK contract that requires FEC approval has not reached the stage of contract award.”