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How Alison-Madueke’s Management Style Is Killing Nigeria’s Oil industry, Threatening Revenue Flow



Delays in taking vital decisions in the oil and gas industry are fuelling concerns about Nigeria’s prospect of meeting her targets of increased daily oil production capacity and enhanced national reserve by 2020. Industry operators blame the Minister of Petroleum, Diezani Alison-Madueke, for an increasingly lethargic style that has slowed major decisions and processes – from board meetings to licence renewals – failings that now threaten the government’s projected expansion of production frontiers and more revenues. One operator particularly accused Mrs. Alison-Madueke of “microIs -managing the entire industry as her personal estate using her personal aides to carry out key policies, rather than designated officials.”

The Federal Government wants to raise daily oil production from the current average of 2.15 million barrels per day, BPD, to four million barrels, and reserves from about 35 billion barrels to 40 billion. In July, the Governor of the Central Bank of Nigeria [CBN], Godwin Emefiele, said at the end of the Monetary Policy Committee that oil industry performance improved marginally from -9.36 per cent in the 4th quarter of 2013 to -6.60 per cent in the first quarter of 2014. Overall, the CBN Economic Report for April 2014 showed slow growth, with oil production increasing from 1.86 million barrels per day or 52.08 million barrels per month in February, to 1.90 million barrels per day, or 57 million barrels in April.
But, the marginal growth has failed to suppress mounting concerns among key operators about the consistent failure of the industry to meet its growth projections in virtually all areas of operation.

Sluggish management??
Most industry operators, particularly major oil companies, who spoke with our reporter on condition of anonymity for fear of victimization, blamed the industry’s woes and its poor turnover on Mrs. Alison-Madueke’s increasingly sluggish style. The operators criticized the minister’s management style, and one operator particularly blamed her for “micro-managing the entire industry as her personal estate using her personal aides to carry out key policies, rather than designated officials.” At the NNPC, where she is the Chairman of its Board, a top official, who would not want his name mention to avoid being victimized, accused the Minister of side-lining the management in most important decisions, preferring to use her “powerful aides”.

According to the official, until recently, one Eric Ufo, one of the Minister’s many Personal Assistants/Special Advisers, was charged with the responsibility of interfacing with key industry players.??After Mr. Ufo, the Minister appointed Kevin Alonzo and Kelvin Okpere as replacements, with wider powers. “These assistants are so powerful that whenever they invoke the name of the Minister, industry players cower in fear,” a senior member of the Nigerian Association of Petroleum Explorationists, NAPE, told our reporter. “They have become the middlemen between the Minister and the industry on all issues, including crude oil lifting.” Consequently, the muddling of the chain of command and the abuse of approval processes through the use of personal aides over key officials has left the industry replete with scores of delayed approvals awaiting the Minister’s attention. “While the Minister wants to see every memo, she is always never there to see it,” said the NNPC official, who also lamented the inability of the Board of the Company to meet regularly. The NNPC Act 1977 demands that the Board meets not less than four times each year. But that schedule is hardly met as meetings are often deferred.

How such delays extend to other policy timelines played out in the government’s plan to open up new oil production areas, called acreages. The minister had in November 2013 announced plans by the Federal Government to hold the second marginal field licensing round to allocate existing marginal oil acreages to new operators.?After several postponements, the exercise was rescheduled for March 2014. While the minister announced that the DPR would publish bid guidelines, no such action has been taken till date. “To date, prospective investors who looked forward to the bid round have been left in limbo,” a distraught official in one of the indigenous oil companies lamented. “Not even the marginal oil blocks to be included in the bid basket for sale have been identified. Nobody can say with certainty what to expect about the exercise,” the source said.

The pall of uncertainty appears to be pervading the operations of the six oil majors. Apart from ExxonMobil, which had its operational lease renewed in 2012 after a protracted disagreement, all the other multinational oil companies, including Shell, Chevron, Total, Agip and PanOcean, all operating Joint ventures with the NNPC, are doing so with expired leases.

Growing frustration??
The Shell Country Chair and Managing Director, Shell Companies in Nigeria, SCiN, Mutiu Sunmonu, recently voiced his frustration with the Nigerian Government for the delay in renewing his company’s 20-year lease more than six years since the document expired. At the presentation of Shell’s 2013 Briefing Notes, Mr. Sunmonu lamented how the delay was making it impossible to finalise some of the company’s operational plans, particularly on divestment from some of its onshore concessions. “The delay (in renewing the lease) is affecting divestment,” Mr. Sunmonu said. “You all know you cannot sell what you don’t have.”

A senior official with Chevron, who spoke with our reporter on Saturday in confidence, confirmed the American oil firm had been pressuring the Federal Government for the past two years to renew its expired oil lease.??The Oando Group, which entered into an agreement with ConocoPhillips in December 2012, for the acquisition of Medal Oil Company Limited, had to wait for the Minister’s signature for more than one and a half years before the $1.65 billion deal was approved. The company announced the completion of the deal on July 17. 2014. Some oil and gas projects have equally suffered, as their final investment decisions, FIDs either had to be postponed indefinitely or cancelled after long delays from the Minister’s office. Some projects affected were said to include the data repository system, petroleum products trucking policy and pipelines surveillance and monitoring system to check oil pipeline vandalism.

The projects have either been delayed or abandoned. Among the world’s leading oil producing countries, Nigeria ranks among those with the longest contract approval cycle of between three to five years. There is also the delay in the passage of the Petroleum Industry Bill, PIB, more than five years since the process began, costing the industry more than $125 billion loss since 2009, reliable sources in the Department of Petroleum Resources told this newspaper.

Marginal growth
Detailed industry activities data obtained from the Nigerian National Petroleum Corporation, NNPC, showed a trend towards near stagnation or slow progress that would make realizing set targets difficult or impossible. Since 2012, total rig count, number of exploratory oil wells and those actually drilled by the six multi-national joint venture operators depicted a general decline in production activities.

Total rig count, which usually shows the intensity of industry activities, grew slightly from 17 in 2012 to only 21 in 2013; while total oil rigs in operation grew to 33 in 2013, slightly higher than 29 in 2012.??Similarly, while exploratory wells declined from 10 in 2012 to only 7 in 2013, the number of development wells recorded a marginal increase from 63 in 2012 to 64 in 2013, while oil wells actually drilled (138) in 2012 dropped to 102 in 2013. A company-by-company statistics showed that Shell Petroleum Development Company, SPDC, which accounts for more than 50 per cent of Nigeria’s total oil production capacity, deployed only 20 development wells, with eight rig counts, and actually drilled only 35 wells in 2013. ExxonMobil, which had the highest number of development wells deployed (24), had only four rig counts and drilled 30 oil wells.

Chevron, which had only one rig count during the year, deployed as many development wells but actually drilled two, while Nigerian Agip Oil Company, NAOC, which actually drilled 18 oil wells during the year, deployed only eight development wells with only five rig counts. Total, with only one rig count, deployed only 10 development wells, and actually drilled 13, while Pan Ocean Oil, which did not deploy any development well, had two rig counts, and actually drilled four.??But experts say Nigeria will need to do more to increase production, and achieve its set goals by 2020. For a start, the 1,300 exploration wells the oil industry has so far drilled must be surpassed, the Director, Department of Petroleum Resources, DPR, George Osahon, said during the 2014 Nigeria Oil and Gas, NOG conference in February.

The NNPC has put the level of new oil production required by the industry to meet the 2020 targets at an average of about 300,000 and 350,000 barrels per day.

Mum is the word
Efforts to get Mrs. Alison-Madueke to respond to the issues raised by the industry operators were unsuccessful. Several telephone calls to her known local and international telephone numbers were neither answered nor returned. When our reporter got in touch with one of the minister’s powerful aides, Mr. Alonso, he asked for a few days to enable him to fix an interview appointment with the minister. On Friday, July 25, the reporter contacted Mr. Alonzo again. This time he said he was busy at a meeting. He did not answer or return our reporter’s calls for days afterwards. On Wednesday, July 30, the reporter called Mr. Alonzo again. He did not answer the calls but he responded with a text message:

“I haven’t seen the minister, as she has been out of town. I’m out of the office, at a meeting.” A similar call on Thursday morning only received a response from another aide who said Mr. Alonzo said that he would get in touch with the reporter once he was through with his meeting. He is yet to do so as at the time of publishing this report. The reporter also got in touch with the General Manager, Group Public Affairs of the NNPC, Ohi Alegbe, to assist in passing our questions to the Minister and getting her to respond. Mr. Alegbe later said on Thursday that he was unable to reach Mrs. Alison-Madueke as she was said to have traveled outside the country.

-Premium Times

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