President Obasanjo Write Senate on Petroleum, Technology and Development Funds (PDTF) Report
March 16, 2007
Dear Chairman Senator Tsauri:
I write to acknowledge your letter of invitation on the above named subject availing me of the op portunity to respond and clarify some of the issues therein, and I thank your Committee for such an opportunity.
Let me hasten to express my understanding, as I had operated the law in the 70s and today, that the three key words to guide the operation of the law are found in the title of the legislation: Petroleum, Technology and Development. In today’s situation, I will put it this understanding to capacity building and local content development – two great issues on which the Administration has endeavoured to make significant change and impact.
Technology Capacity Building and the PTDF Act
In the wake of the Arab Oil Embargo and subsequent quadrupling of oil prices by OPEC, the Petroleum Technology Development Fund (PTDF) Act was promulgated by the Yakubu Gowon Administration in 1973 with the purpose of building the capacity of Nigerians to be active participants in the then emerging oil and gas (petroleum) industry.
The objects of the Act were clearly to take whatever actions necessary to ensure that Nigerians are educated, trained, and developed to be experts and key players in petroleum technology. But what constitutes ‘petroleum technology’ in 1973, and what is it today? These are key issues for reflection as we attempt to derive the intentions of the government that enacted the PTDF law for general application and utility not only for 1973, but for the 21st century. I was privileged to have served that government as a Minister.
Petroleum Technology in 1973, Today and Tomorrow
Up until the 1990s when a few universities outside Nigeria began offering degrees in Petroleum Engineering, petroleum technology as a field of academic, professional or vocational study did not exist. The roadmap to a career in petroleum technology is to acquire degrees or diplomas in any of the following fields of study:
• Chemical Engineering and Industrial Chemistry
• Geology and Geophysics
• Basic Engineering – civil, electrical, mechanical, electronic, etc.
• Computer Science and Electronics,
• Physics and Engineering Physics, and
• Surveying and Remote Sensing
In those days, computer science and electronics were at their infancy. Indeed, then ‘computers’ were huge mainframes that filled up constantly air-conditioned rooms that were not accessible to anyone but ‘operators’ to feed punch cards and magnetic tapes. Telephones were analogue devices that were fixed in one place, and often required manual operators to connect calls over copper wires and huge microwave towers, from town-to-town, and country-to-country. The word “Internet” did not exist, optical fibre had not been invented.
Those who enacted the PTDF Act could not have foreseen a tip of what was to happen in the Petroleum Technology field since the information revolution that began in the mid-1980s. The invention of IBM Personal Computer, the development of optical fibre, digital microwave and cellular technologies, deployment of low earth orbit satellite technology and the Internet – all in quick succession, have had a profound impact on not only oil and gas education, training and capacity building, but on the way governments and businesses conduct their affairs.
Today, a lot of changes in the scope and content of the fields of study leading to a career in petroleum technology have occurred with the rapid development of miniaturization and digital technologies that have brought down the cost of these telecommunication, computer and television technologies.
Role of ICT in Capacity Building, Education and Government
Information and Communications Technologies (ICT) can contribute to economic and human development. Nations around the world are eager to take advantage of this potential. A nation without these basic ICT facilities cannot develop or compete or compare to one with proper ICT facilities in the 21st century. Hence, the PTDF funding of ICT generally can be justified to enhance development of the petroleum industry in Nigeria as well as other industries.
The convergence of voice, video and data – the telephone (now mobile or fixed), the television and digital information – carried over the same line – whether wireless or via optical fibre has led to the emergence of ICT as the real foundation of all knowledge, all business, all competitive advantage, whether in reference to education, healthcare, industries and nations. No business, industry or government can compete in the increasingly integrating global economy without a robust, ubiquitous and accessible ICT infrastructure, tools and continuous training for its people.
Today, ICT has become so pervasive in every sector, every industry and economy that to imagine that it is possible to educate, train and build capacity in petroleum technology or indeed any other field of the sciences and the humanities without investing in its infrastructure and tools would be foolhardy, even absurd. ICT investment today is akin to the investments in electric power, roads, railways, airports, and seaports which facilitated domestic and international trade, industrialization and growth of market economies in the 19th and 20th centuries. ICT is today very much the pencil, pen and paper around which the analogue workplace was built upon. It is impossible in the world of today to realise the objects of the PTDF Act without substantial investment in information and communications technologies, infrastructure, and tools.
African Institute of Science and Technology (AIST), Abuja
The Nelson Mandela Institution (NMI) is a not-for-profit foundation established by African Academics teaching in Europe, America and Asia with the sole objective of establishing four world-class universities of technology like the famed MIT and the Indian Institute of Technology. Three prominent Nigerian professors – Wole Soboyejo (Princeton), Tayo Akinwande (MIT) and Barth Nnaji (Cornell) worked with the likes of the former President of Mozambique, Joachim Chissano, Cyril Ramaphosa and Ngozi Okonjo-Iweala to promote the noble objective and secure the backing of the World Bank, the Africa Development Bank, the European Union and Blair Commission for Africa for the project.
The goal of the group of professors, technocrats and politicians is to establish a technological university in each of East, West, South and North Africa, in that order and each will be called the African Institute of Science and Technology (AIST), but incorporated in each country of location as a stand-alone, national and sub-regional, private university.
The first AIST was to be established in Tanzania, but with my intervention and involvement of Dr. Ngozi Okonjo-Iweala, NMI was persuaded to agree to locate the first AIST in the Abuja Technology Village.
The Federal Government of Nigeria through the FCT Administration committed to providing 240 Hectares of land, infrastructure and financial support to enable the early take off of the University by 2008. The AIST is to be co-financed by World Bank grants and credits, grants from the EU and the British Government, and the African Development Bank. This provides Nigeria a unique opportunity to have a world class technological university started on a clean slate largely with subsidized funding from bilateral and multilateral development partners. The FCT Administration requested and the NMI agreed to relocate its head office from Washington, DC to Abuja in 2005.
Within the AIST is the Gulf of Guinea Institute – G2i. This is intended to be the premier faculty of oil and gas technology to serve as center for excellence for education, training and capacity building in petroleum technology for the Gulf of Guinea region and indeed the African Continent. The Business and Implementation Plan for the G2i are provided herewith as Annex I. It is on the basis of the foregoing that PTDF was approached to intervene in the development of the G2i of the AIST. The intervention of USD 25 million was approved out of the USD 40 million requested.
The AIST is not a government-owned university and therefore does not require an Act of the National Assembly to exist. It needs only to be incorporated in Nigeria, and be licensed by the NUC to commence operation as a University. AIST has already been incorporated as African University of Science and Technology – Limited by Guarantee and its application to the NUC in process. See Annex II for CAC Certificate of Incorporation. The Certificate of Occupancy for AIST’s land has been issued, and architectural and engineering designs completed. On 27th of February, 2007 I performed the groundbreaking ceremony for the construction of the Gulf of Guinea Institute of AIST Abuja. Contracts for the infrastructure are about to be awarded by the FCT Administration. In July 2007, the first set of participants in Executive Programmes in Oil and Gas will be admitted to the AIST and degree programs are scheduled to start in 2008.
The Abuja Institute of Science & Technology (AIST) with its affiliate center, the Gulf of Guinea Institute, will offer academic programmes and services in five different areas;
i) Didactic and Training Services – which will offer postgraduate programmes in academic disciplines that apply to the oil and gas sector,
ii) Economic Services – which would focus on the design, development and publication of techno-economic indices on the costs of Oil and Gas resource development in the Gulf of Guinea region,
iii) Engineering Research – which will offer research programmes specifically on the construction and exploration problems on offshore drilling, production and storage in the Gulf of Guinea,
iv) Socio-Ethical studies – which will concentrate on research on the impact of oil and gas industry in the Gulf of Guinea region and other communities, and
v) Technical Publication to publish journals of international scholarly interest in the oil and gas sector.
Being one of the largest oil producing countries in the world, this would create a world class oil and gas industry training institution in Nigeria. Also it will provide an alternative to training institutions outside Nigeria which currently trains most of the public and private sector industry workers.
The intervention of the PTDF is to build the G2i “for the purposes of training Nigerians to qualify as graduates, professionals, … in the fields of engineering, geology, science and management in the petroleum industry in Nigeria” in the express words of Section 2 of the Act, and more particularly section 2(b) – ‘subsidies for training’, and section 2(c) – ‘endowments to faculties in Nigerian universities or institutions approved by the Minister’ . It will be indeed a surprising interpretation of the Act to say that the intervention of PTDF in G2i is outside its mandate, in the light of the foregoing and clear express provisions of the statute. I attach as Annex III the process leading to the ultimate approval when I became satisfied that the mandate of PTDF accommodates it.
Computer for All Nigerians Initiative (CANI)
The interpretation and application of any law related to any field of science or technology, passed in 1973, without taking cognizance of developments in ICT and impact on the education, training and capacity building will lead to absurd results. In interpreting this law, looking at the narrow meaning of the literal words of the Act are unhelpful. Interpretation must begin with deriving the intention of the legislature.
The Federal Executive Council debated this extensively and concluded that, and we accordingly submit here that the mischief the PTDF Act sought to cure is the very low level of participation of Nigerians in the petroleum industry in 1973. It is impossible today for Nigerians in the Petroleum Industry in particular and the Public Service in general to even communicate with the multinational oil companies without ICT infrastructure, tools and training. The CANI was introduced by the FGN to accelerate the bridging of the digital divide between the public and private sectors of Nigeria on the one hand, and with the likes of Shell, ExxonMobil and Chevron that are operating within our oil and gas industry and communicating with civil servants in the cause of their daily operations. CANI was conceived in furtherance of the government’s march towards e-government for efficiency and global competitiveness.
The program enables public servants generally, including those in the petroleum industry to acquire personal computers with Internet access and pay over a long period. It is about building capacity in the public service in an affordable manner for the greater good of the nation. These computers could be used for accessing the World Wide Web (www) via the internet as explained earlier. Public servants are encouraged to be computer literate by owning their own computers including workers in the petroleum sector and students.
The chips from Intel and software from Microsoft are subsidized due to volume commitments, and the computers are sourced exclusively from Nigerian manufacturers, thereby contributing to local capacity building and utilization. CANI is a form of subsidy to facilitate training and education for Nigerians (section 2(b) of the Act). It is this interpretation of the PTDF Act that guided the Federal Executive Council to approve the intervention of the PTDF in CANI, and not any sinister insinuations.
Galaxy Backbone Plc
The clear need for a national ICT superhighway, similar to what other nations have developed has already been made above as such infrastructure is as basic to economic development and international competitiveness of Nigeria today as the railways, power plants and roadways were to the industrial revolutions in Europe and America. This Administration observed that Nigeria did not have such an ICT backbone, but virtually every Ministry, Department and Agency had completed, planned or ongoing ICT investment project. The News Agency of Nigeria, NNPC, NEPA, Railways, NUC and others all had networks based on satellite, optical fibre and digital microwave, alongside networks of NITEL, – Tel and other private operators. Some state governments like Jigawa State also had their own VSAT-based networks.
I observed that this duplication and waste needed to be curtailed, all our ICT infrastructure development projects harmonized and streamlined. This enabled standardization, consolidation and learning of experiences in ICT to save money and reduce implementation costs. The Cabinet and Inter-Agency Committees that studied the several projects recommended the establishment of a public-private partnership with majority equity participation by the Federal Government to create a National ICT Infrastructure Backbone (NICTIB) that all governments, companies and individuals will tap into as our nation’s information superhighway. This company is Galaxy Backbone Plc.
The network would be a shared resource for all arms of government including all academic institutions such as: Petroleum Training Institutes, all universities and colleges where potential oil industry manpower are being trained. The availability of this backbone allows Nigerians access to information on any subject of which the oil and gas is one of the most important.
Without such a national backbone, the basic foundation enabling rapid education and training of Nigerians in petroleum technologies and indeed all other sectors is non-existent. This has seriously hampered sector and national development and the results are self-evident. This is the justification for the intervention of the PTDF in the equity and debt stock of Galaxy Backbone Plc. It is an investment which will not only help the nation achieve desired greatness, the PTDF to fulfill its capacity building mandate, but provide reasonable returns which section 1 of the Act alludes to, and Part III, sections 9 and 10 of the Finance (Control and Management) Act 1958 allows. It is a very restrictive interpretation of the PTDF Act that will lead to the conclusion that this intervention is outside the mandate of the Fund.
In conclusion, technology development in modern times cannot be done in isolation for one particular industry or sector alone. For example, the cost of providing ICT infrastructure for say a geology department in a university would be more or less the same for the whole university. Computer skills are readily transferable in all industries, and therefore have multiplier effects in national development. The development of the oil and gas industry through the PTDF would therefore positively develop other sectors of the economy.
The desirability for the establishment and incorporation of Galaxy Backbone Plc has been explained above. As for the cost of legal and advisory services, the Attorney-General of the Federation as the chief law officer of the Government is the one that handles and advises on all matters pertaining to legal, judicial or documentation matters. When I received the bill for these services from the Executive Secretary of the PTDF, I sought the Attorney-General’s view. He considered that the cost was reasonable at N300 million consistent with the scope of the advisory services, the professional charges involving work of this nature, and the level of expertise required as well as the standing of Counsel. In spite of that advice, I still reduced the charges by N50 million.
With my understanding stated and the explanations above, I will expect the Review Committee not to regard the approvals as irregular but fully within the mandate of the PTDF.
PTDF Approved Specific Projects
As stated in the memo from the Executive Secretary of the PTDF (Annex IV), I approved the sum of N20 billion for various projects listed therein. Disbursement is handled by the Accountant General of the Federation. I have now confirmed that only N10 billion was released to the PTDF. And out of the amount released, only about N4.6 billion have been paid to various contractors for the projects as detailed in Annex IV. There is therefore no iota of truth in the wild allegation that the funds released were diverted to any purpose other than the specific projects approved for. I hope the Review Committee will be able to physically verify these projects and payments to debunk this irresponsible and false allegation.
DICON Rehabilitation Account
As to the issue of the release of N1 billion in the name of the DICON Rehabilitation Account, I believe that the best way to react to the allegation “using it for Mr. President’s vanity project” is to attach unabridged and unedited the latest report of the Technical Committee on DICON which is quite self-explanatory for the Review Committee. See Annex V attached.
It is important to stress that the one billion Naira (N1 billion) was released not only fabricate and produce replacement parts for the oil and gas industry but to make Nigeria self-sufficient in small arms ammunition production by September 2007, and in small arms production by September 2008. The total amount expended so far is out of N1 billion released is N364,106,201.00.
Since the development of the indigenous assault rifle code-named OBJ-006 was started in February 2006, months before my September 2006 visit and the subsequent intervention of the PTDF, only N50,000 (Fifty Thousand Naira) from DICON’s overhead cost was spent on the development of the rifle and eleven prototypes. Code-name apart, DICON should be commended for the initiative to produce a Nigerian assault rifle from local materials and expertise.
The Managing Director of DICON has suggested a visit by the Review Committee or any other Committee of the Senate for that matter to DICON in Kaduna. I will support the acceptance of the invitation for I was marvelously informed and enlightened when I visited in September 2006.
Accept, Mr. Chairman, the assurances of my highest consideration.
Olusegun O. Obasanjo, GCFR
President and Commander-in-Chief of the Armed Forces
Federal Republic of Nigeria