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NNPC To Kachikwu: You Lied, Ministry, Board Not Needed For Contract Review |RN

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NNPC GMD, Dr Maikanti Baru and Minister Of State Petroleum, Dr Ibe E. Kachikwu

From Uche Usim, Abuja

The Nigerian National Petroleum Corporation (NNPC) has faulted the weighty allegations of the Minister of State, Petroleum Resources, Dr Ibe Kachikwu against the Group Managing Director, Maikanti Baru.

The reaction was a direct response to a directive by President Muhammadu Buhari to Baru to reply the allegations of shoddy practices and insubordination

NNPC gave the response Monday morning in a press meeting.

It insisted it had not erred in any way with regards to procedures in awarding its multi-million dollar contracts.

A statement signed by its Spokesman, Ndu Ughamadu said the input of the NNPC Board or the Ministry is not required before certain contracts are awarded and executed.

“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 continued: “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”, the statement read.

Furthermore, the NNPC management said contrary to the assertion of Kachikwu that he was never involved in the 2017/2018 contracting process for the Crude Oil Term Contracts, “Kachikwu was, in fact, expressly consulted by the GMD and his recommendations were taken into account in following 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”, it added.

Reacting the specific allegations of Kachikwu beginning with the Crude Oil Term Contract (COTC)- valued at over $10bn, the NNPC management said 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: adverts were placed in national and international print media on Monday, 17th October 2016, 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) and 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”.

On the Direct Sale Direct Purchase (DSDP) contract valued at over $5bn, the corporation said:

“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.

On the Ajaokuta-Kaduna-Kano (AKK) Gas Pipeline Contract, the NNPC said the AKK Gas pipeline project remains a contractor financed contract.

“The process adopted for this contract is as follows: Approval of project proposal and contracting strategy was given by NTB; placement of adverts for expression of interest in some National and International print media and NNPC’s website; expression of interest for pre-qualification received and evaluated. Technical and Commercial tenders issued and evaluated. 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: BPP certificate of no objection (obtained). Certificate of no objection from Infrastructure Concession and Regulatory Commission (ICRC) (obtained). 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”, it said.

The NNPC said its contracting process is governed by provisions of the NNPC Act, the Public Procurement Act, 2007 (PPA), 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; NNPC Delegation of Authority Guide; Supply Chain Management Policy & Procedure documents and the NNPC Ethics Guide.

With regards, to the approving authority for contracts, the Corporation quoted 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.

The statement further disclosed it secured the nod of the approving authority of the Bureau for Public Procurement, secured the “No objection award” certificate and FEC for any of its special works which are N2.7 billion or $20 million.

“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 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.

“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 8th September 2015 and continued to chair it until his exit in June 2016”, the statement added.

Ughamadu said the typical NNPC contracting process Involves approval of project proposal and contracting strategy by NTB, placement of adverts for expression of interest in electronic and print media, soliciting for tender (Technical and Commercial), Tender evaluation,, Tender approval by NTB for contracts within its threshold; otherwise obtain BPP certificate of no objection before presentation to FEC and present to FEC for approval.

Recall that Kachikwu in a leaked memo to Buhari accused Baru of insubordination and non-transparent dealings with regards to contract award.

Key allegations of Kachikwu include the award of $10billion crude term contracts; $5billion direct sales direct purchase contracts; $3billion AKK pipeline contract; financing allocation funding contracts worth $3billion and NPDC production service contract of $4billion.

In all, these contracts worth $25billion were awarded in breach of legal and procurement requirements and the NNPC Board was never involved.

Again, key management positions were filled without the input of the NNPC Board. If the “legal and procedural requirement is that all contracts above $20m would need to be reviewed and approved by the board of NNPC and in over one year of Mr Baru’s tenure, no contract has been run through the board,” Kachikwu said in his petition to Buhari. (The Sun)

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