NNPC Denies Breaching Procurement Process In Contract Award

Yemisi Izuora.

The Group Managing Director, GMD of the Nigerian National Petroleum Corporation (NNPC), Dr. Maikanti Baru, has  insisted that no law was flouted in the award of contracts by the NNPC management.

According to a statement by Group General Manager, Group Public Affairs Division, NNPC, Ndu Ughamadu, 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.”

According to the statement, 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.

On $10billion crude oil contract, it is important to state that the crude oil contract 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.

On Direct Sale Direct Purchase (DSDP), it said 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, it stated thay the AKK Gas pipeline project is a contractor financed contract. The process adopted for this contract includes 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 and  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 ), b  Certificate of no objection from Infrastructure Concession and Regulatory Commission (ICRC) (obtained) and 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.

The statement further noted, Thus, due process is being followed in the processing of this contract.

Various Financing Arrangements Considered with IOCs; On the financing arrangements with IOCS, it said it was 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.

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