Following the publication of alleged lack of adherence to
due process in the award of NNPC contracts, the President ordered the Group
Managing Director (GMD) and Management of the Nigerian National Petroleum
Corporation (NNPC) to consider and respond expeditiously to the allegations.
The substance of the allegations made by the Minister of
State for Petroleum Resources, in a letter to the President dated 30th of
August 2017, is that a number of “major contracts were never reviewed or
discussed with me (sic) the NNPC Board.”
It is important to note from the outset that the law and the
rules do not require a review or discussion with the Minister of State or the
NNPC Board on contractual matters. What is required is 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. There are therefore situations where all that is 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. Likewise, in
some instances it is FEC approval that is required.
It should be noted that for both the Crude Term Contract and
the Direct Sale and Direct Purchase (DSDP) agreements, there are no specific
values attached to each transaction to warrant the values of $10billion and
$5billion respectively placed on them in the claim of Dr. Kachikwu. 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.
Furthermore, contrary to the assertion of Dr. Kachikwu that
he was never involved in the 2017/2018 contracting process for the Crude Oil
Term Contracts, Dr. Kachikwu was in fact expressly consulted by the GMD and his
recommendations were taken into account in following through the laid down
procedure. 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 CONTRACTING PROCESS
The contracting process in NNPC is governed by the
following:
i.
Provisions of the NNPC Act
ii.
The Public Procurement Act, 2007 (PPA)
iii.
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.
iv. NNPC
Delegation of Authority Guide
v.
Supply Chain Management Policy & Procedure documents
vi.
NNPC Ethics Guide
Approving Authority for Contracts
The SGF Circular (iii above) on procurement threshold
provided the following authority limits for NNPC transactions as well as the
composition of the NNPC Tenders Board:
Table 1: Financial Authority Threshold (SGF Circular
(iii) above)
Approving Authority/No Objection to Award
|
Special Works (NNPC)
|
BPP issues “No objection to award”/FEC approves
|
N2.70 billion (USD 20M) and above
|
NNPC Tenders Board
|
Up to N2.7 billion (USD20M)
|
Table 2: Composition of Tenders Board (SGF Circular (iii)
above)
Ministry
|
Chairman
|
Permanent Secretary
|
Members
|
Heads of Departments
|
|
Parastatals
|
Chairman
|
Chief Executive
|
Members
|
Heads of Departments
|
NNPC had cause to clarify severally from Bureau of Public
Procurement (BPP) as to the composition of NNPC Tenders Board and the role of
NNPC Board appointed by Government. The following clarifications were made.
a. The BPP expressly clarified that NNPC Tenders
Board (NTB) is NOT the same as NNPC Board. The governing board (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.
b. BPP referred to the SGF circular for the
composition of the NTB to compose of the Accounting Officer (GMD NNPC) as the
Chairman, with Heads of Department (GEDs) 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.
As can be seen, all these clarifications were sought and
obtained prior to August, 2015 and were implemented by Dr. Kachikwu as the GMD
of NNPC. Dr. Kachikwu also constituted the first NNPC Tenders Board on 8thSeptember,
2015 and continued to chair it until his exit in June, 2016.
Typical NNPC Contracting Process
1. Approval of project proposal and contracting
strategy by NTB.
2. Placement of adverts for expression of
interest in electronic and print media.
3. Soliciting for tender (Technical and
Commercial)
4. Tender evaluation
5. Tender approval by NTB for contracts within
its threshold; otherwise
6. Obtain BPP certificate of no objection before
presentation to FEC.
7. Present to FEC for approval.
All Contracts in NNPC follow the above procedure. SPECIFIC
CONTRACTS MENTIONED IN THE HONOURABLE MINISTER OF STATE FOR PETROLEUM
RESOURCES’ (HMSPR) LETTER TO MR. PRESIDENT
1. Crude Oil Term Contract (COTC)-
valued at over $10bn
It is important to state that the COTC is not a contract for
procurement of goods, works or services; rather it is simply a list of approved
off-takers of Nigerian crude oil of all grades. This list does not carry any
value, but simply state the terms and conditions for the lifting. It is
therefore inappropriate to attach a value to it with the aim of classifying it
as contract above Management limit.
In arriving at the off-takers list for 2017/2018 COTC, the
following steps were followed:
a. Adverts were placed in National and International
print media on Monday, 17th October, 2016.
b. The bids were publicly opened in the presence of
all stakeholders (NIETI, DPR, BPP, Civil Society Organisations, NNPC SCM
Division and the press as well as live broadcasts by the NTA and other TV
stations).
c. Detailed evaluation was carried out and the
short list of the successful off-takers was presented to the approving
authority (Mr. President) for consideration and approval.
d. Thereafter, NNPC published the list of the
successful off-takers in newspapers and NNPC’s official website.
This has been the standard procedure and it is the same
process adopted during the 2016/2017 COTC when the HMSPR was the GMD.
In conclusion, due process has been fully followed in the
shortlisting of the off-takers of the Nigerian crude oil for the current term
2017/2018.
2. The Direct Sale Direct Purchase
(DSDP) Contract- valued at over $5bn
Like the COTC, the DSDP is not a contract for any
procurement of goods, works or services, rather it is 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 arriving at the off-takers list for 2017/2018 DSDP, the
following steps were followed:
a. Work plans and execution strategy for the DSDP was
granted by the approving authority (Mr. President).
b. Adverts were placed in National and International
print media and NNPC website on Thursday, 22ndDecember, 2016.
c. The bids were publicly opened in the presence
of all stakeholders (NIETI, DPR, BPP, Civil Society Organisations, NNPC’s SCM
Division and the press as well as live broadcast by the NTA and some TV
stations).
d. Detailed evaluation was carried out and the short
list of the successful off-takers was presented to the approving authority (Mr.
President) for consideration and approval.
This has been the standard procedure and it is the same
process adopted during the 2016/2017 DSDP when the HMSPR was the GMD.
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.
3. The Ajaokuta-Kaduna-Kano (AKK) Gas
Pipeline Contract
The AKK Gas pipeline project is a contractor financed
contract. The process adopted for this contract is as follows:
1. Approval of project proposal and contracting
strategy was given by NTB.
2. Placement of adverts for expression of
interest in some National and International print media and NNPC’s website.
3. Expression of interest for pre-qualification
received and evaluated.
4. Technical and Commercial tenders issued and
evaluated
5. NTB considered and endorsed tender evaluation
result for FEC approval since this contract is above NTB’s threshold subject to
obtaining the following certificates of no objections:
a. BPP certificate of no objection (obtained).
b. Certificate of no objection from Infrastructure
Concession and Regulatory Commission (ICRC) (obtained).
c. Certificate of no objection from Nigerian
Content Monitoring & Development Board (NCMDB) (being awaited)
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.
4. Various Financing Arrangements
Considered with IOCs;
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.
Section 8 sub-sections (1) and (4) of the NNPC Act CAP N123
requires that all NNPC borrowings must be approved by Mr. President.
Specifically, it provides that:
(1) Subject
to the other provisions of this section, the Corporation may, from time to
time, borrow by overdraft or otherwise howsoever such sums as it may require in
the exercise of its functions under this Act.
(4) Where
any sum required aforesaid –
a) Is to be in currency other than Naira;
and
b) Is to be borrowed by the Corporation
otherwise than temporarily,
c) The Corporation shall not borrow the sum
without the prior approval of the President.
Due Process:
1. NAPIMS and JV partner identify bankable
projects that require financing and sends to NNPC Corporate Finance to assist
in procuring financing.
2. Constitution of Joint Financing Team (JFT)
between NNPC and the JV Partner.
3. JFT NNPC invites Request For Proposals (RFPs)
from Financial Institutions.
4. Submitted RFPs are evaluated and beauty
parade conducted to determine most cost-efficient proposal.
5. Negotiated Financing Strategy, Term-sheets,
Structures and pricing are presented for NNPC Management’s (NTB) approvals.
6. NNPC presents the renegotiated terms for
approval of Mr. President.
7. NNPC executes the resultant Agreement.
Financings taken under this Administration: Approx. $3bn
are as follows:
All established due process as enumerated above has been
observed leading to the securing of financing for the following projects in
2016/2017:
· SN
|
· PROJECT
|
· Amount
(US$mn)
|
APPROVALS
|
· LOAN
EXECUTED BY
|
|
NTB
|
PRESIDENTIAL
|
||||
· 1.
|
· NNPC/CNL
JV Project Cheetah
|
1,200.00
|
· 16/04/15
|
· 01/09/15
|
· Dr. E.
I. Kachikwu
|
· 2.
|
· NNPC/CNL
JV Project Falcon
|
780.00
|
· 26/04/17
|
· 31/07/17
|
· Dr. M.
K. Baru
|
· 3.
|
· NNPC/SPDC
JV Project Santolina
|
1,000.00
|
· 26/04/17
|
· 10/07/17
|
· Dr. M.
K. Baru
|
·
|
TOTAL
|
2,980.00
|
·
|
·
|
·
|
These are not procurement projects as described by the PPA,
2007. However, all established due processes as enumerated above were followed.
The NPDC Integrity Upgrade and Development Projects
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. For
the benefit of doubt, it is confirmed that there is no single NPDC contract
that has been approved by the relevant Tenders Board beyond its limit of
financial authority and there is no single contract that is in the $3Bn to $4Bn
range claimed in the write-up.
Conclusions
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.
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