Reforming the industry, transforming the benefits

By Kayode Adeoye   |   22 September 2015   |   4:49 pm  

RefineryThere are certain grey areas in the management of Nigeria’s oil and gas industry that has hitherto been overlooked over the years either due to our military mentality, inclement operating environment, fiscal indiscipline, impunity, ignorance or all of the above. With the crash in accruable revenues from the country’s major revenue base and an attendant spiral effect on drilling operations, the way to go is reforming a deformed industry. Let’s look at some gray areas that need the attention of government like yesterday!

The Joint Venture Contract, JV and Production Sharing Contract, PSC with operators of the contracts has the Nigerian National Petroleum Corporation, NNPC as the lead equity shareholder and as it turns out often times, it looks like the NNPC is the tail shareholder! A company seeks to operate a joint venture contract with the NNPC with the latter contributing 60% of the funds and the former making up the balance yet driving the project from spud to total depth, TD through completion and subsequent production. All through the project cycle, there is no visible resident NNPC official in the facilities they are paying so much on a daily basis to hire. The operator keeps his man, who manages operations in those facilities. and who is referred to as “The Companyman” on a 24 hour basis. The Companyman drives the vision of the operator in their facilities.

This column knows that prior to any drilling operation, an approximate financial estimate, otherwise referred to as the “AFE” is submitted to the National Petroleum Investment Management Services, a subsidiary of the NNPC for approval, and this is where it ends. After the approval has been gotten, the operator goes ahead to drive the project without any further input from the NNPC. How then does the NNPC get the best of returns in its investment under this kind of arrangement? Putting it more succinctly, while not categorically submitting that this is what happens, the present contract arrangement between the NNPC and its co-venturers is open to manipulation and abuse such that it’s partners can claim, for instance, to have spent N1,000.00 for a well that cost N100.00 and the NNPC goes ahead to pay N600.00! Who gains and who losses in situations like this?

The only time a participator in the industry who doesn’t want his name in print, saw an NNPC official in an offshore drilling rig in his close to two decades of working there, was when an official of the NNPC visited the drilling rig for about two weeks. Prior to his visit, according to him, everyone from operations to catering and rig management was informed that a VIP from the NNPC was visiting and everybody should be more professional in the operations. Alas, when the big man showed up, it turned out that he knew next to nothing about the operations he came to oversee! In under two days of the big man’s visit, the big man’s schedule became clear to everyone; Eat, walk around the rig, watch cable television and sleep! If the NNPC must pay frequent visits to the operator’s facilities, experienced men and women should be drafted into paying such visits for it helps bring out a better deal from the operators, otherwise, there is no point of it at all. As things are presently structured, a cleaner in the NNPC towers visiting the operator’s facilities are treated like emperors and this speaks volumes.

Contract staffing is another serious issue that is as old in the industry as the first oil well drilled in Nigeria. The international oil company have marginal staff strength and contracts or outsources additional staff. This is because most of their operations are well/time based as well as to avoid labour issues when downsizing. Some of the projects could last for as little as three months to one year and they need a contract staff who they can easily lay off to manage such projects, while maintaining their marginal staff.

There are permanent contract staff in the industry who are directly employed by the operating companies for a renewable period of time usually, one year. These set of people are given benefits almost like the permanent staff and may even be lucky to be converted to a permanent staff. The third party contract staff and casual staff are the very worst in the ladder, in the sense that the operating companies pay them all their entitlements through the contract holder but what they get oftentimes, is a fraction! How does one explain a situation where a contract or casual staff, for instance, is paid $100.00 per day on paper and he/she ends up getting N5,000.00 per day? These are some of the sub-human conditions under which many Nigerians eke out a living in the industry that needs to be thoroughly looked into by the NNPC and perhaps, the ministry of labour and the national assembly.

In conclusion, reforming a structurally and fiscally deformed industry is a most welcome development provided the transformation that is sure to follow will not only be heard but be seen and felt. It is in the light of this that this column supports the efforts of the NNPC group managing director; Dr Ibe Kachikwu to drive the reform to the benefit of Nigeria and it’s people.



  • emmanuel kalu

    Those JV are costing the nation and people a lot of money, yet we are not getting the benefits. i have always said, to get the benefits of NNPC. That whole corporation needs to be broken up into different companies. each company would be publicly traded company, with nigerian’s and it govt owning 95% of it. refineries one company, pipelines one company, NNPC retail one company,

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