$25b contracts: NNPC, Baru tackle Kachikwu

Is the controversy over the $25 billion contracts a storm in a tea cup? So believes the management of the Nigerian National Petroleum Corporation (NNPC).

A source has stated the details of the contracts, following allegations by Minister of State Dr Ibe Kachikwu, who said Group Managing Director (GMD) Maikanti Baru:

• awarded $25b contracts unilaterally;
• ran a “bravado management”, sidelining the board and the minister; and
• made appointments without consultations.

Neither the Federal Government nor the NNPC is committing any cash into the $25billion transactions involving more than six International Oil Companies (IOCs).

Some of the international competitive biddings on the transactions were witnessed by Non-Governmental Organisations (NGOs) for transparency, the source said.

Both the NNPC and its Group Managing Director, Dr. Maikanti Baru, have insisted that the transactions validly conducted within the expenditure limits of the agency.

They claimed that the board of NNPC cannot approve contracts but they can review and give advice.

President Muhammadu Buhari is said to be keeping mum to hear from all sides and let the facts and figures speak for themselves. He is said to be unruffled by the allegations in an August 30 memo to him by Minister of State for Petroleum Resources Dr. Ibe Kachikwu.

To avoid any ethnic backlash, there is pressure on the President to spare Kachikwu and Baru if any infractions are noticed at the end of ongoing investigation.

The Federal Government and the NNPC will not commit any money to the five projects in question, it was learnt.

It was gathered that prospective investors were expected to source for funds as may be applicable.

It was also learnt that as for crude transactions and Direct Sales, Direct Purchase(DSDP), the buyers were expected to pay directly into dedicated account (s) of the Federal Government.

These facts are contained in the presentations of NNPC and GMD to the Presidency and some board members on the allegations raised by Kachikwu on five transactions.

The projects are:

• Over $10b Crude Term Contracts
• Over $5b DSDP contracts
• The $3b AKK pipeline contract
• Various financing allocation funding contracts with the NOCs valued at over $3bn
• Various NPDC production service contracts valued at over $3bn – $4bn

A source in NNPC management, who spoke in confidence with a document, said: “Our position is that there is so much ignorance on the $25billion transactions. First, there is nothing like a Contract Award in the real sense of the word where money is paid out by NNPC to Contractors.

“The NNPC was actually in the red as at the time the Minister took over as the GMD. Kachikwu tried his best to exit the debts especially the over $7billion JV cash calls in which he was able to secure 25% relief/rebate. Now, with Kachikwu’s efforts, all the JV partners are back.

“Baru came around to turn things around and make NNPC and its subsidiaries viable or profit-oriented. There was no money to spend on projects in NNPC and we had to look for alternative sources of funding. So, NNPC is not committing any Kobo to the five transactions. Instead, the oil buyers and investors are to look for money in return for some products or other returns as peculiar to every agreement.

“And all the transactions have clauses that returns from the investments be paid directly to the government’s account(s), not NNPC’s.

“Therefore, NNPC selling crude oil to a customer is not a Contract Award; it is a commercial transaction.”

The document also clarified a few things as follows: “It is the GMD of NNPC that has ever been signing Crude Oil Sales Term Contract at NNPC from the beginning of that corporation as NNOC. From Lawrence Amu, to Chief Morinho, Aret Adams until even when Kachikwu was GMD.

“When a Customer signs a Term-Contract to buy Nigerian Crude Oil; it is covered by the customer’s bank opening in favor of NNPC either a Standby Letter(s) of Credit (SBLC) or a Documentary Letter(s) of Credit (DLC). Such banks are only amongst the top 50 international banks that are acceptable.

“It is after lifting any crude oil under the Sales Contract that the L/C is negotiated and the proceeds go to the accounts of the Federal Republic of Nigeria, in the name of NNPC. These accounts are held in New York, mostly. There is no cash that changes hands between individuals for and on behalf of NNPC.

“Dr. Kachikwu as GMD it was that signed these same contracts in his capacity in 2015/16.

“There is no law violated here by the NNPC. NNPC Handbook (January 2017) and Public Procurement Act are explicit on the financial limits.

“The Board of NNPC cannot approve transactions or contracts; it can only review and advise because most members are technical experts who have paid their dues in their careers. All these issues will come forth during Senate investigative hearing.”

Responding to a question, the source added: “The AKK Pipeline Project was inherited and almost 80 per cent completed. We have investors coming in with funds to complete it and we reached an agreement on how to recoup the invested funds.

“The Direct Sales, Direct Purchase (DSDP) policy was an alternative to the Crude Oil Swap of the administration of ex-President Goodluck Jonathan. It was formulated by a staff, tabled before the Board and implemented. In fact, some members of the Board recommended the promotion of the affected staff.”

Regarding the transactions, the NNPC source said there were documents to show that the transactions went through international competitive biddings.

“Some of those involved are International Oil Companies (IOCs). We will release their names. Even the $10billion crude terms transactions; about 10 companies were involved. At the appropriate time, we will release the details on those with links with two of these firms.

“The bidding process was internationally competitive and witnessed by some Non-Governmental Organisations. The standards set by the Minister were strictly followed and everything was reported to the Board of NNPC.”

President Buhari is said to be planning to hear from all sides and let the facts and figures speak for themselves.

Buhari was allegedly unruffled by the allegations in Kachikwu’s August 30 memo.

To avoid any ethnic backlash, there is pressure on the President to spare Kachikwu and Baru if any infractions are noticed at the end of the investigation.

A government source said: “The President has decided to be quiet because he is hearing from all sides. He does not want to be seen as interfering in the case at hand. At the end of the day, the presidency will release the facts and figures to Nigerians.

“The President has not personally benefited from the transactions and there is no trace of any money missing. The good thing is that some IOCs were involved in these transactions and Nigerians will soon know them.

“The only thing the leakage of the memo has caused the administration of President Buhari is embarrassment on some issues which were distorted.”

Another government source added: “Baru may have to respond to the allegation of insubordination. The Minister may be asked to account for the leakage of the memo. Being once a journalist or writer, no one gives him any benefit of doubt. Yet, Kachikwu has denied any knowledge of the leakage.”

“But there is pressure on the President to avoid any ethnic backlash by cautioning the two leaders after clearing the Augean Stable,” the source said.

What NNPC handbook says

The Handbook reads in part: “Due process involves the award and execution of contracts, projects and other activities by organizations openly, economically and transparently in accordance with the provisions of the law and without any regard for self-interest.

“NNPC as an organization has established a Tenders Board in all its subsidiaries as well as the Corporate Headquarters.

“By the provisions of the Public Procurement Act 2007, the NNPC Tenders Board is the final approving body for NNPC awarded contracts.

“Any contracts for a value beyond the financial limits of the NNPC Tenders Board will go via the Board to the Federal Executive Council (FEC) for approval.

“The limits of financial authority for expenditure as approved by the Federal Government are as follows:

• Federal Executive Council (FEC)—( From N2.70billion or from $20million)
• NNPC Tenders Board—( From N1.40million up to N2.70billion and $410million up to $20million
• Group Executive Committee (GEC)——( From N540 million up to N1.40 billion and from US$4 million up to US$10 million)
• Directorate Executive Committee (DEXCOM)—( From N270 million up to N540 million and from $2 million up to $4 million