The Return of Dr. Rilwanu Lukman as Petroleum Minister

No Comments » January 4th, 2009 posted by // Categories: Energy Development Project



 

The Return of Dr. Rilwanu Lukman as Petroleum Minister – Can he turn Nigeria’s oil wealth from a curse into a blessing?

                                                                                               

Yes, he can but only if …

 

A number of very important events happened in Nigeria’s Oil, Gas and Power sectors and industries in the preceding year 2008. For example, from the side of the executive arm of government, one of the important events was the completion and submission to President Umaru Musa Yar’Adua (UMYA) the Report of the Presidential Committee on Oil and Gas Sectors Reform Implementation Committee; otherwise known as the Oil and Gas Implementation Committee (OGIC) and similarly, submission of the Report of the Presidential Committee on Power Sector Reform respectively. The OGIC Report itself, for example, was a product of syntheses of several other Presidential Committees on the reform of the Oil and Gas sectors, which were commissioned during the immediate past administration of President Olusegun Obasanjo (1999-2007).

 

These studies and reports were completed sometime in 2006 and submitted to the then President Obasanjo’s administration. Characteristically however, no ‘white papers’ on them were produced. Thus the reports, as usual and typical in Nigeria, were dumped and never implemented after colossal sums of money, man-hours and other scarce national resources were committed in producing them. Probably, the recommendations contained in them were repugnant to the interests of the pay master who, in the first place, ordered them to be produced.

 

President Yar’Adua thus inherited the OGIC and power sector reform documents. He therefore soon after his inauguration, decided to constitute yet another set of Presidential Committees to work on these existing documents. The Yar’Adua’s Presidential Oil, Gas and Power Reform Committees were headed by oil and power industry veteran, Dr. Rilwanu Lukman.

 

The second important event has to do with the continuous rise in crude oil price in the international market that started since 2002 and lasted up to mid-year 2008; getting to $147 per barrel in July 2008 and its sudden precipitous free fall to below $50 per barrel in October 2008. Since October 2008, the price keeps nose-diving downwards albeit with marginal recoveries since then. This high volatility situation created a panic situation for the 2009 federal budget framers, and by extension states and local governments’ finances.

 

Oil price and revenue volatilities are some of the important features of ‘resource curse syndrome’ often associated with very poorly managed economies of some natural resource-rich exporting developing and transition countries. For example, in recent years, the oil sector in Nigeria has accounted for about half of its gross domestic product (GDP), more than 95 percent of export receipts, and over 85 percent of government revenue. Thus any significant price swing downwards will significantly hurt the Nigerian economic wellbeing.

 

The Nigerian public reacted to the above two mentioned and other different events in various ways. However, the reactions from the general public, public policy analysts and critiques to the above major national and international events respectively, were mixed; ranging from high disappointments to cautious optimisms.

 

For example, those who were highly disappointed with the events in the oil, gas and power sectors in 2008, hinged their disaffection on the fact that those events did not positively changed their material conditions of life for the better. The same with the events such as the legislative investigations or probes of the power, oil and gas sectors covering the period of the Presidency of the immediate past administration of former president Obasanjo (1999-2007).

 

Therefore, for many Nigerians, the year 2008 was yet another precious time lost and a wasted golden opportunity for the executive and the legislative arms of government to turn around the fortunes of these sectors of the national economy for the good betterment of the populace. For example, all the end-of-year reviews by the Nigerian media and policy analysts point to these very concerns of the general public.

 

However, one particular event that attracted much concern and unnecessary uproar from certain quarters as the year 2008 was coming to an end was the appointment of Dr. Rilwanu Lukman as Nigeria’s substantive Minister of Petroleum Resource on December 17, 2008 by President Yar’Adua.

 

Incidentally, Dr. Lukman, also chaired some of the previous Presidential Oil, Gas and Power Sectors Reform Committees set up by the then President Olusegun Obasanjo. He was then the Presidential Adviser on Petroleum and Energy matters to President Obasanjo’s administration from 1999 to 2003. It was during his tenure as presidential adviser to President Obasanjo that the oil, gas and power sectors reforms were initiated. He voluntarily resigned and disengaged from President Obasanjo’s government in November 2003.

 

Again, in 2007, he providentially re-emerged or re-surfaced in government when he was appointed by President Yar’Adua as his Honorary Presidential Adviser on Petroleum, Energy and Strategic matters, the position he was holding up to the time he was appointed to his present position as substantive Petroleum Minister.

 

But before I proceed with my analysis of what the Nigerian public expects from Dr. Lukman this time around, it is necessary to digress a little and have a glimpse into the brief personal profile of the man, Dr. Rilwanu Lukman. His foray into the murky Nigeria’s public oil and energy arenas is legendary. It all started in January 1984, when he was first engaged as Federal Minister of Mines, Power and Steel Development (1984-85) by the then Olympian and strict disciplinarian military junta headed by Major General Muhammadu Buhari and the late Lt. General Tunde Idiagbon of blessed memory.

 

After the demise of the Generals Buhari and Idiagbon’s high handed military junta in 1985, Dr. Lukman’s high flying meritocratic rise in high profile public service saw him serving as Nigeria’s Federal Minister of Petroleum Resources (1986-89) and Chairman of the Nigerian National Petroleum Corporation (NNPC) during the period.

 

Concurrently as Nigeria’s Petroleum Minister, he served as President of the Organisation for the Petroleum Exporting Countries (OPEC) Conference for several consecutive terms from 1985-1989. From oil affairs he moved to foreign affairs where he served as Nigeria’s Minister of Foreign Affairs (1989-90) – all during the military Presidency of General Ibrahim Badamasi Babangida (1985-1993). He also served as Chairman of the Board of Directors of the defunct National Electric Power Authority (NEPA) from 1993-94.

 

Furthermore, Dr. Lukman was Secretary General of OPEC from 1995–2000. Thus record shows that he held sway at the OPEC for over two decades; both as Nigeria’s oil minister/OPEC President and the organization’s own Secretary-General – a position which he held for a record breaking period of almost six consecutive years (1995-2000).

 

It was from his position as Secretary-General at the OPEC Secretariat in Vienna, Austria that, in 2000 he was formally invited by President Olusegun Obasanjo and appointed as Presidential Adviser on Petroleum and Energy Matters to the Federal Government of Nigeria and Chairman of the NNPC, until in November 2003, when he voluntarily retired from public service.

 

He then moved to the private oil sector where, with his associates, formed a management team in 2004 that founded Afren Plc, an independent oil and gas exploration and production company (a Nigerian subsidiary was also formed in 2005 – Afren Nigeria Plc). He eventually became the company’s natural choice as pioneer Chairman. Dr. Lukman was also a Board member of Dietsmann NV of the Netherlands, a leading International Operation and Maintenance company in the upstream energy sector.

 

Once again, by providence in 2007, the offer to serve as Honorary Presidential Adviser on Petroleum, Energy and Strategic Matters was made to him by the newly elected Nigerian President, Yar’Adua. He graciously accepted the offer and this was the position he was holding until December 17, 2008, when again, by providence, President Yar’Adua appointed him as Nigeria’s substantive Minister of Petroleum Resources. He subsequently stepped aside as Chairman of Afren Plc in line with and compliance with Nigeria’s extant laws, rules and regulations.

 

It is therefore by another provident that Dr. Lukman will yet again be at the helms of affairs of managing the implementation of the government accepted reforms and restructuring of this troubled sector. The first time he undertook similar major oil and gas sector reforms and industry restructuring and at the same time, holding the portfolio of Minister of Petroleum Resources was in 1985/86-89. Hence, he is therefore at ease when it comes to handling Nigeria’s oil and gas matters in general and or Nigeria’s OPEC related oil matters.

 

This means he will be using his vast inside knowledge of the sector and industry, expertise and international contacts and networks; experiences gained over two decades ago, in implementing the reform agendas for the sector and industry, which he helped in fashioning over the years and managing the strategic but sadly, dwelling fortunes of the nation’s oil and gas resource endowments and revenues.

 

Therefore, the appointment of Dr. Lukman as Nigeria’s substantive petroleum minister has come at another yet opportune, but very difficult and rough time; given the existing global economic and financial crises and Nigeria’s troubled and ‘cursed’ petroleum sector. For example, the Niger delta’s physical environment from where the oil and gas sector has it roots and operates is a case in point. The region is the most trying, dicey and challenging oil and gas producing region in the world today, to say the least. Dr. Lukman and his team will have daunting balancing acts to perform in the coming months and years.

 

He can achieve some modicum of successes in these onerous tasks thrust upon him by providence, but, under a number of very difficult circumstances and assumptions to be outlined below.

 

The criticisms that trailed his latest appointment to lead the petroleum sector and industry as a substantive minister are quiet understandable; given his long term involvement in and with the sector and industry’s leadership, operational and management issues dating back to 1984 to date. 

 

However, in contemporary oil and gas worlds, the attributes of wisdom, varied wealth of industry experiences/exposures garnered at both local and global levels and taking the right decisions that produce the right results comes first before any other trivial issue. For example, the issue of age raised by some critiques is important in any human endeavor. However, age limit has its pros and cons in any give situation and depending on any given circumstance.

 

For instance, young age has its place when we are talking about involvement in physical oil and gas drilling, seismic shooting and other mundane jobs that require physical agility. Dr. Lukman is not expected to be physically and directly involved with these types of mundane industry activities in his present position as petroleum minister.

 

Moreover, not even the top, senior management and supervisory officers in the industry are in any way, physically directly involved in these types of mundane industry activities to say the least. Due to space limitation, I do not intend to go into deep analysis of this issue here beyond stating this obvious fact.

 

Therefore his ability to put an excellent team of young, able bodied and highly trained (with some modicum of experience and industry exposure) production geologists, engineers, economists and other relevant disciplines in the industry will and should be the overarching yardstick to judge his performance in the coming months and years.

 

Putting together a team of young honest technocrats, bureaucrats and other industry specialists will also be what will help him to succeed in conquering the debilitating negatives of the ‘curse’ of the sector and industry and hence, help pull out the country from the present stagnation and thereby escape the debilitating pains, agonies and tragedies of the ‘resource curse’ and ‘paradox of plenty’ afflicting Nigeria.

 

The challenges are daunting. The solutions are equally mind and brain challenging. However, focusing holistically at the big picture will make navigating the ‘cursed’ terrain much safer in grappling with the monstrous issues and problematic of the sector and industry. Therefore, I will outline just a few target areas that will require his immediate attention for a start. These are as follows:

 

a)      The unresolved Niger delta conundrum. No tangible progress can be made in Nigeria’s quest for achieving its target of 4million barrels of crude oil per day and a proven reserve of 40billion barrels of crude oil by 2010. Building a new national oil company that will be comparable to the likes of the Norwegian StatoilHydro, Brazilian Petrobras and Malaysian PETRONASamongst others without successfully tackling the Niger delta development tragedy and criminal belligerences going on in this heartbeat/life support zone of the nation will also be a pipe dream.

 

Dr. Lukman himself was candid enough and truthful on this nagging issue when he was submitting the final report of the OGIC to President Yar’Adua some months ago. He stressed that nothing could be achieved unless the Niger delta issue has been successfully resolved.

 

President Yar’Adua has since then noted this very important message and accordingly, set up the Niger Delta Technical Committee and followed it with the establishment of a special Ministry of the Niger Delta; with two powerful Ministers. This is in addition to the continued existence of the Niger Delta Development Commission (NDDC) as a special development intervention vehicle.

 

Dr. Lukman’s ministry of petroleum resources should not waste time in establishing a very strong working relationship with the new ministry of the Niger delta at the highest levels of policymaking and operational matters. Hence, I suggest the creation of a permanent inter-ministerial coordinating and consultative committee to effectively handle matters of concurrent interests and jurisdictions between the two ministries. This will eliminate all areas of possible conflicts, bureaucratic politics (and envy) and duplication of efforts and working at cross purposes.

 

b)      Internal reorganization of the Ministry of Petroleum Resources (or Petroleum Directorate as the case may be). No matter how excellent the reform agenda for the oil and gas sector has been engineered (let us pause for a while here and remember the tragedy that befell the Titanic super luxury cruise ship on its maiden journey), its implementation will depend on how excellent the statutory institutional setting is configured.

 

For instance, it is trite in public policy sciences, political economy and political science that institutional innovations are necessary to align the incentives of key domestic and international actors, and much greater levels of transparency than currently exist in the ministry of petroleum resources.

 

Simply restated, the existing setting in the Ministry of Petroleum Resources (or any new name it may soon acquire or assume) is very institutionally inadequate, weak and defective. This is where Dr. Lukman’s age, experiences and exposures will come handy. It is increasingly becoming clear that past reform policies have not provided the benefits they promised largely as a result of the existence of very weak, compromised and inept bureaucrats and technocrats at this institutional level.

 

It is here that Dr. Lukman should deploy his fountain of knowledge, age, experience and exposure to lay out a pathway for radically improving the management of Nigeria’s exhaustible natural resources and turn Nigeria’s oil and gas wealth from a ‘curse’ into a blessing!

 

Here again, he needs to collaborate with the relevant establishments such as the offices of the Secretary to the Government of the Federation and the Head of Civil Service of the Federation respectively, and the Bureau of Public Service Reform in order to remove the special technical cadres staff of the ministry from the unified mainstream civil service conditions of service and be placed on similar pedestal with their counterparts, say in the public and private oil establishments such as the NNPC, for example.

 

The success and or failure of the reforms that will come into effect very soon in the sector and industry depends on the quality of human resources attracted. This will also depends on the type of incentives provided to attract and retain the best workers into the new system and arrangements. For this to happen successfully, Dr. Lukman must look beyond the shores of Nigeria to bring back our young and highly trained and experienced brains in Diaspora in an open, transparent and competitive recruitment drive.

 

c)      Diversification from within: Atthe macroeconomic level, what Nigeria urgently needs is diversification away from the largely oil-based enclave economy (i.e. monoculture economy) to other sectors such as agriculture, tourism, manufacturing, information and communication technology (i.e. knowledge economy) etc.

 

However, Nigeria also urgently needs to diversify from within the extractive sector itself; by focusing equally on the development of gas and other alternative renewable energy resources that are equally abundantly endowed in the country. For example, for over fifty (50) years, Nigeria concentrated only in the exploration and development of oil and ignored the other hydrocarbons and non-hydrocarbon energy natural resources such as natural gas, coal, wind, solar, uranium, biofuels etc.

 

Now is the time to have a rethink and put in place the necessary enabling environments for profitable harnessing of these neglected dormant natural energy resources endowments. This can only succeed if the Hon. Minister will lay out a path for radically ministering the sector differently from what has been the practice in the past where the attention of everyone has been on oil at the expense and detriment of other equally very important components of the sector such as gas and biofuels.

 

Here again, he needs to collaborate with the relevant establishments such as the Energy Commission of Nigeria (ECN) (for renewable energy resources development), Ministry of Solid Minerals and Steel Development (for coal and uranium resources development), Ministry of Science and Technology (for nuclear energy development) and Ministry of Agriculture and Water Resources (for biofuels energy resources development). This again, calls for creation of a permanent inter-ministerial coordinating and consultative committee to effectively handle matters of concurrent interests and jurisdictions between these diverse ministries.

 

d)      Energy Diplomacy:  The question whether Nigeria has an oil (or broadly speaking, energy) diplomacy beyond attending the traditional meetings of the Organisation for the Oil Exporting Countries (OPEC), has been agitating my mind for a very long time. The question is very pertinent given the stark realities on the ground in contemporary international relations and diplomacy. Energy issues have become the driving forces in international affairs since the collapse of the dreaded Soviet Union and the ideologies of Communism and Socialism in 1989.

 

The answer to the above rhetorical question is absolutely zero. Nigeria abandoned its dynamic anti-apartheid anchored foreign and diplomatic policies of the 1970s, when oil was used to leverage our foreign policies and international economic relations with the rest of the world.

 

This lack of carefully crafted and sustained oil-backed foreign and diplomatic policies has caused Nigeria a lot in terms of respect of its citizens all over the world and its economic strength by virtue of being a major oil and gas nation. For example, ‘Citizen Diplomacy’ will take us nowhere if not backed by our comparative strength as a major oil and gas nation.

 

Can you imagine that the Russian Gazprom, a giant gas utility company has been sending the European nations panicking with mere threats of cutting gas supplies to the European consumers via Ukraine? There is a need to seriously a rethink Nigeria’s attitude on this issue as Nigeria moves to further develop and export its abundant natural gas via international pipelines in addition to the existing Liquefied Natural Gas (LNG) tanker fleets.  

 

Again, the 1991 Gulf War (involving Iraq, Kuwait and the United States of America), the current occupation of Iraq by the United States of America and its coalition partners and the many major deployment of US military assets and armed military personnel, especially in our own Gulf of Guinea region are all aspects of the new realities in the global economic self protection and self preservation by the industrialized nations of the west.

 

Energy security is behind all these developments and is now the new phase of economic ‘Cold War’ among the highly industrialized nations; especially those ‘addicted’ to insatiable oil consumption among them. But how does Nigeria features in this new global economic order?

 

Nigeria is an undisputed sixth largest producer of oil in the world, and the largest oil-producing country in Africa (if the Niger delta militants allow it to continue to be). Nigeria’s crude oil is of high grade and quality that makes it so important to major oil consuming nations such as the United States of America, for example.

 

Political and military instabilities in the Middle East and Arab oil producing countries have made Nigeria and the Gulf of Guinea as the next best alternative sources for oil sourcing by the industrialized oil importing nations led by the United States of America. Hence, Nigeria is considered as a strategic oil and gas exporting nation by the member nations of the Organization for Economic Cooperation and Development (OECD) and the new oil consuming nations of China and India among others.

 

 

Dr. Lukman needs to provide the lead to optimise the political fortunes that oil and gas bestowed on the country. Again, this calls for close collaboration and coordination between the petroleum ministry, its minister and the foreign affairs ministry and its minister and above all, the Presidency. Here again, his age, his tenure as Nigeria’ minister of foreign affairs (1989-90), OPEC experiences and exposures become excellent assets to deploy.

 

e)      Domestic self sufficiency in petroleum products and local contents benefits. Last but by no means the least, the issues of lack of domestic self sufficiency and local contents benefits have become the classical examples of Nigeria’s paradox of plenty and resource curse syndromes respectively. All the issues I outlined above become meaningless as long as Nigerians cannot drive any benefit of being citizens of the world’s sixth oil exporter and seventh in proven gas reserves.

 

For example, the existing situation whereby Nigeria imports almost all its domestic petroleum products requirements does not tell a healthy and proud story. This is where Dr. Lukman is going to face his greatest challenges. The challenges are such that they will make or mar his enviable reputation built over a period spanning over 30 years; through diligent hard work, exemplary character and national and international standing.

 

I cannot make any better suggestion here than to follow what he is bringing to the arena of petroleum public policy in Nigeria; especially regarding the role of government and the market in mediating public needs as far as domestic supply and consumption of petroleum products in Nigeria are concerned. For example, thorny issues like domestic fuels pricing, production and consumption subsidies are the greatest challenges here.

 

Public reactions to these issues are well known to all need no introduction to the Hon. Minister. However, how Dr. Lukman handles these thorny issues will also make or mar his reputation. His Nigerian and international experiences and exposures on these issues should inform him of the right or appropriate policies in confronting them.

 

Already, he has indicated that he does not belong to the ‘Washington Consensus’ reformers club. For example, he is opposed to full and ‘gangster-type’ of privatization of the nation’s refineries and other public assets in the downstream petroleum sector as being pushed by the immediate past administration of former President Obasanjo; whom he initially served as Presidential Adviser on Petroleum and Energy Matters (2000-2003). Ironically however, at his Senate confirmation screening, Dr. Lukman was reported as saying he supports government’s position on total removal of domestic fuel subsidies. There seems to be a contradiction here. However, time will sort things out.

 

If he eventually maintains his anti-Washington Consensus position, then, Nigerians will expect a different kind of approach and thinking on a wide range of unresolved issues in Nigeria’s downstream petroleum sector and quest for local contents actualization. For example, the annual government versus civil society confrontations on the vexatious domestic fuel pricing and subsidy removal are cases in point.

 

Already, the Nigerian labour leaders have issued an early warning that they will resist any attempt by the government to hike domestic fuel prices and or remove subsidies this year (i.e. 2009). Here again, Dr. Lukman’s OPEC experience and exposure regarding hard bargaining will be an advantage when dealing with labour unions and other members of the civil society community opposed to the wholesome implementation of the Washington Consensus inspired and designed energy pricing and subsidies reform agenda.

 

Dr. Lukman is schooled in OPEC’s consensus-based decision-making process. All issues are resolved and agreed upon based on general consensus by all parties. There is no room for obsolescing bargaining game. I expect him to bring these alternative policy and bargaining options and tradeoffs in his handling crisis situations; especially in trying to resolve government –civil society disagreements over domestic fuel pricing and subsidies removal.

 

I expect to see a genuine Government – Civil Society partnership coalescing into a genuine Government-Civil Society Consensus as an alternative to the existing failed Government-Washington Consensus neoliberal reform agenda in the sector.

 

Yes, if Dr. Lukman can bring about the above needed changes, then he can turn Nigeria’s oil wealth from a ‘curse’ into a ‘blessing’; giving the political will.

 

I offer him my prayers at all times for success in this onerous national assignment and service.

 

 

Abubakar Atiku Nuhu-Koko

Monday, 05 January 2009

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