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POLITICS OF FUEL SUBSIDY –Kachikwu opens up

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Former minister of state for petroleum resources, Dr Emmanuel Ibe Kachikwu has opened up on the vexed issue of oil subsidy, explaining that while removal was inevitable, it was a political and sensitive matter, which only President Muhammadu Buhari could decide.

He also spoke about factors, which must be addressed before Nigerians could be asked to endure higher pump price of petroleum products.

In this exclusive interview with The Nigerian Xpress duo of Steve Nwosu and Akanni Alaka, conducted just before the first term of the Buhari administration ended, Kachikwu spoke about his achievements in the oil and gas sector as minister of state, how he worked with the President as substantive minister and other matters relating to the petroleum industry.

Immediately, you came in as minister, you listed some of the things that the Buhari government will attempt to achieve in the oil sector within four years. You talked about the plan to increase oil and gas production, fighting the corruption in the oil sector, revamping the refineries and so on. How well would you say you were able to go in the pursuit of these goals?

I will leave Nigerians to judge because coming from the private sector, we are not in position to judge ourselves. It is the bosses or the recipients of your services that will be the best people to judge you. But having said that, let’s take some of the ones that you have mentioned. I talked about increasing production. When I assumed office, production had declined to about 800,000 barrels because of Niger Delta militancy. It’s on record that I went round most of these militant areas, spent nights in the creeks and by the time I left office, we were back to production on top of 1.9 million barrels. Today, with Egina in, we are probably at about 2.2 million barrels. So, in that area, one has delivered. But is that good enough? I believe that it is not. With the reserves that we have, we can go up to three million barrels a day and we need to begin to do that, given the over reliance on petroleum sector for almost 89 per cent of government funding and the fact that we have continued to struggle fiscally. So, it is something,  going forward, that we need to really take as a challenge. If you remember very well, in the late 90s and very early 2000, we had this hope of four million barrels per day perspective in the oil which everybody shot for, but you just wonder why Nigeria always shoots for these volumes and comes back to the same old volumes again. Unfortunately, we have too much problems getting back to base. Then, OPEC limits also came in 2017. But the target should be going forward, whether it’s me or somebody else, there is the need to shoot for higher volumes.

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On the issue of transparency, I think my record speaks for itself. I am the first to do monthly publication of NNPC results. I am the first to work towards bringing almost five or six years unaudited results back to full whether we were transparent enough and that created its own problems, but it wasn’t meant to. It was simply meant to draw attention about the President’s belief in transparency and that we needed to drive it as much as we can. I brought in NEITI and EFCC. I work with them. We pursued everybody who has taken some resources out of the system, whether it is Atlantic or whatever to try and recover the resources and ensure justice. So, I will say that on transparency, we have taken it to a level never before seen in the oil industry. But are we there yet? No. We removed subsidy, like you know, and increased price of petroleum products, largely to drive all these issues and eliminate the challenges in that sector. But we are back again to under recovery, ballooning consumption number. We need to work on it. So, it’s work in progress. But the self-consciousness or focus on that sector has never been higher than it has been over the last four years.

You talked of the refineries. That is an area that I will say clearly we failed, bluntly put. Not that I didn’t want to. We got approval from the President to try and use the P to P model to go and repair the refineries. I always believe that the government does not have $2.5billion to go and put in another turnaround maintenance, which, historically, has never worked.  And once I get that approval, I left as the GMD and then, handed over to NNPC. In fairness to them, they have driven the process hard to try and get the negotiations on and they got to a point where they feel the negotiations didn’t give them the right terms. I don’t agree with that. I said that because I don’t believe that there is nothing like wrong or right terms, you need to drive the terms. I still don’t believe that going back to selective maintenance like that is the way to go. I believe that we should get a holistic, true refinery-focused change, using the private sector money. At least, one of the things we have established through those periods we engaged them is to establish that the money is there and there are people willing to do it. So, if the issues are there, we need to go drive those terms out. I so believe in that process. Remember that I even put myself on the chopping block. I said if it doesn’t happen, I would go. But the reality is that if I didn’t drive it, I can’t take responsibility for a wrong drive.  And I am not saying it is wrongly driven…. We want those refineries to work. Why?  It is going to be very difficult to deal with subsidy in a holistic manner unless we get the refineries back. Nigerians are very emotive – not necessarily very correct – about the analysis of subsidy. Because I am from the private sector, I understand the nuance on this. But the truth is I can also understand the political emotions around it. If each time, you come, you say ‘I want to remove subsidy’ and they support you to remove subsidy, so what next? You will perpetually be dealing with subsidies and never ending costs. So, I think the President’s position, and that is the unions’ position, that there is need to first get the refineries working. Then, tell us the refineries’ pure operational numbers and  ‘this is what you want to sell it for’. Then, we will understand because at that time, it becomes a purely private sector issue. But if you have not solved the problem of the refineries, how can we have faith in you that you are not just going to be increasing the numbers? That may not be the best because the government can use the trillions that are being spent on subsidy for other areas. But I can understand the political emotions because if there is something my job has done for me in the past four years, it is going through a school of public tutelage and understanding the nuances between business perfection and political reality. I’m learning and I’m learning fast. But do I want subsidy removed ultimately? Yes, because it has no place in the lexicon, or success, of any business model as serious as refineries. The margins in refineries are so small and so, if you don’t get the best perfect operation environment, there can’t be profit. And nobody is going to put investments where they think the circumstances for the outward sale is not right. So, there is a lot of work to be done. One, to deal with the refineries and two, to address the problems of refineries. And then, when it comes to subsidy, what then do you do in the one or two year interregnum when you are trying to get the refineries to be done? First is to look at the numbers and say why are we ballooning the numbers of supply so that, at least, you can get an efficiency in the application of subsidy if you can’t get an exit of subsidy. So, I am glad that as much as I will say we failed in terms of revival of the refineries, not delivered as much as we should, at least, the policies that we put in place, which we have pushed, and all the supports we have given to Dangote has brought him to a point where he is at the end of his 600,000 barrels per day refinery by 2021. The modular refinery that we are doing is going very well. There are other refineries. There is the Agip one, which was slowed down because of the challenges in Zabazaba, but I am sure it will be delivered ultimately. There is the co-location refinery that a team is looking at putting in Port Harcourt, that is going to deliver 100,000 barrels. There is the Niger (Republic) one. We are going to be working with the Chinese to see how we can finalise the contract terms. So, all in all, there is a renewed focus on the refineries and that’s the way we should go. I have never believed that the direction for Nigeria should be wholesale export of crude in perpetuity – it doesn’t add additive value and the market is disappearing.

You have been able to keep a lid on the pump price of petrol for over three years. How did you achieve that and at what cost and should we expect an increase in price soon?

Certainly not downward review, we are hurting enough even with the price now. Upward review is a very political, sensitive matter and only the President can take a decision on that.  Do I believe that ideally we should have upward review to go with the trend? Yes, I do. But like I said, politically, is that something that you can’t deal with when you have not addressed problems of refineries? So, I don’t believe that there is going to be much change in that, at least, in the immediate future. I think the energy is going to go into greater discipline in the numbers to see that if you can pull down the amount of under recovery and then, obviously getting the refineries back. If you move from the current 50,000 barrels per day refining capacity to about a million barrels, the dynamics change. So, the straight answer is, I don’t think the price increase is what we are going to do first. We should look at the efficiencies first and refining first before we begin to address the issue of price.

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Talking about gas, we are still flaring largely…

From 100 per cent, we are down to 75 per cent gas unflared, so that’s a massive achievement. We have set 2020 for ourselves to try and achieve zero gas flaring or at least, minimum acceptable international standard of flare, so we have 20, 25 per cent to go on that trend. The whole world has set a benchmark for themselves at 2030. So, we are well ahead of the curve.

Why are we still stuck with prospecting for more fossil fuel when in the other parts of the world, they talk about alternative energy, gas powered cars and so on?

The reality is that you make do with what you have. It is not that we have had technology developed in Nigeria that is effusive for electricity cars and electricity applications. Even the countries that are doing it are projecting a period of 20, 25 years for commercial applications. Those dreamlands are fantastic, but we have to deal with our current problems. That’s one. Two, is that even with the arrival of electrical car components or more efficient energy sources, countries are still using coal after all. It is not going to receive application of the resources you have, you just keep cleaning it up to get the most environmentally friendly component of your processing. So, what we have is what we have. We are not doing badly. I agree that we have the challenge of the future, in terms of time, that we need to move quickly. But it is not like we are a technologically savvy nation that we are saying the engineers have found robust alternatives, why are we still wasting time on this? This is what we have. It is how to manage it efficiently and manage the resources to dive in into the future that is important. I gave a speech early this year in South Africa to a panel of oil executives around the world. I said that Africa has been blessed and has its problems. It’s been blessed in the sense that somehow, we have the resources. Take a country like Nigeria, we have oil, gas, coal, tin, minerals. We are suffused with them. But the challenge we have always had is that one, we have never had the capital component to process them the way we want. So, we borrow money and we have to develop it to the point of keeping back some net gains from that. That’s one. Second is that just when we finally arrived there, the world has moved on. When we arrived at burning of firewoods after the world has burnt all the firewood they wanted, they said, ‘haa, it is not environmentally friendly, it is killing people.’ Okay, we have coal. When we arrived at coal, the world has moved on, they said it’s bad fossil. Then, we moved to oil. Now, that we arrived in oil, they said, we have to move on to gas. By the time we arrived in gas, they have moved on to electricity. But what does that mean? We need to be in a hurry. And I think nobody has preached this more than me. Otherwise, we will have a lot of oil and it will be extremely useless for us. Two is that we need to save enough to leapfrog into the future with the rest of the world while we are maintaining the resources that we have. So, issues of electricity cars, we need to be interested in them as we are interested in what we have now so that again, we don’t get there and they’ve all left and we are going to do a catch up for 20 years. Thirdly, we should avoid re-inventing the wheel. Where there have been researches and there are successes, pick up the results of those researches and grow from there. The Arab countries have done that very well.  They buy the technology and they just leapfrog into the future. It requires money. So, again, we just need to save the money. This is a country of 180 million people, with huge amounts of problems. Sometimes, I see the President, I don’t envy him. It’s a lot of luggage for anybody to carry. But am I worried about the future for this country? I am worried only to the extent that we need to move faster, we need to input efficiencies and skill sets with no political bias for it, because there are skills everywhere – up North, East, West. So, we need to let the best people run things for us and give them the power to get those things delivered. We need to play less politics with things that are essential. But the future of this country is robust. We are very gifted by God. Our human resources are the biggest and also our natural resources, which are the additives. There are countries which don’t have such additives, but what they have is human resources. We have all. But we also have our fair share of problems.

Talking about the President who is your de-facto Minister, how was working with him on your projects and vision and how did he key your own vision into his own and vice versa?

I think the President has tried; it was not an easy thing. I didn’t have any public sector politically-based experience before. But he was able to sit back, talk to me most times and get where I am coming from and also gave me the privilege of his huge resume, having worked in the public sector all his life, in terms of things that looked fantastic, but by the time you want to deliver them, the amount of hullabaloo you are going to face will be a problem. That’s why I said I am just going through a school of public policy. We’ve worked well together. Does it mean we agree all the time? Of course, not, we don’t. There are times we disagree. But the President is also a robust evaluator, he may not talk too much, but if you bring something, he has the ability to sift through it and say, this doesn’t quite make it for me for xy reasons. And there are times he has done that and I many have disagreed, but later found out that he is right because nothing beats experience of many years, especially in the public sector of Nigeria. You can’t buy that in a school. We have worked well together. But I am also insistent about the things I believe in, which I push and they are strictly things for public interest – the subsidy, the refineries, the increase in production transparency. In a lot of these areas, we both agree, and he is even a lot more buoyant in his belief that those things should be done and done well. We get along, we worked together well, we disagreed when we should, and we found a solution and went on. When I gave my valedictory speech few days ago, you see what my comments were. First, on transparency, I said this is the first time in this country when you will find a sitting minister of petroleum and minister of state for petroleum or the president finished their four-year term and they can largely declare that I have no interest in any oil block, because he doesn’t. And I don’t. Or that I don’t have interest in any contract that is going on because he doesn’t and I don’t  and he has not asked me for any and I have never asked for. For me, that encapsulates the whole essence of transparency. Transparency is not that you won’t make a mistake here and there on how you call things. But is it with a personal, selfish motive? But that was not there. So, I love him for that. Second, of course, is the mountain of wisdom that he has. You have to say it for him that when you see him carry himself, whether you like him, whether you don’t like him, you get a sense that there is royalty about him. And I mentioned the power of silence when there is nothing better to say, you just keep quiet. You are more likely going to have fewer words from the President when you brief him than a lot of words. But make no mistake about it, he has listened to those things. The power of calm when there is turbulence, I mentioned that, and that is one learning that I have. And without that learning, I would not have survived the four years. I have my own share of turbulence in those four years. I guess his training as a General, having gone through wars and all of that gave him all that. In those areas, he is just massively successful.

You said you have your own share of turbulence. Many will say that turbulence was when a new GMD was appointed for NNPC…

   Positions are not important things. I think we pay too much attention to positions we occupy. When I was in the private sector, we have this concept of being able to exercise influence without power. Your ability to influence things happening by reason of your moral suasion, how people perceive you. You don’t have to have a title. This title thing comes and goes after every four years. It is not important.  So, who is appointed, who is not appointed is the prerogative of the President and things worked together when teams are cohesively working together. The results are better. But over a period of time, I think myself and the GMD went through all that and we begin to work together much better. We respected each other’s terrain much better. I am not going to say everything that happened is his own fault or bla, bla, bla. When there is a problem, it is always a factor of two…. But there is a lot of cooperation in this sector that people don’t see. They see more of the disagreements because they make news headlines. Nigerians don’t want to know news headlines. They want to have delivery. For all the 50 reasons I might give you, as far as you are concerned, the refineries are not working, full stop. I think we should focus on those end results more than focusing on that misunderstandings that never really existed

Are you bothered that the Petroleum Industry Governance Bill passed by the National Assembly was not signed by the President despite the huge anticipation for it by private sector players in the oil sector?

Let’s start from the positives to the negatives. The positive is that after almost 10 years, we finally found a PIB that was approved by the National Assembly. But that has not been easy. The positive is also the fact that, that the private sector is looking forward for it means that they also believe that there is need for change of the laws. And in very many ways, those change of laws will actually benefit the government and the Nigerian citizens. The negative – obviously, the President didn’t sign it, but the President didn’t say I won’t sign it.  He said I won’t sign it because I have some issues. I need to be addressed. And some of those were also advised by us –some of his power were whittled down, there were also issues of transparency and supervision and some of the terms that were put there. We felt that they were too favourable to the private sector. He made those observations and sent the bill back to them. I do hope that they will have the time to be able to clean up and get it back to him to sign. And once they bring it back, typically, he will send it round to his lieutenants to say take a look at it, is it okay? Can I go ahead and sign? The President never refuses to sign any Bill unless he is advised by his team generally because there are gaps. The team may not agree on all the factors, but there must be advice that will say no, there is something to watch out for here. So, it is not quite his fault really. He is just a clearing house at the end of the day. I am one of those hoping that this will be done because it is critical for the industry to be able to attract investments and it is a huge legacy issue for me if we are able to get that through.

•To be concluded next week

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