PETER OBASEKI, a Prolific Writer in his narration and navigation as Reviewer of the Book, argued that Dr. Ihetu’s book provides a stimulating and potent historical context that should guide Nigeria’s future in order to avoid very costly mistakes especially in the oil and gas sector…Excerpts:
I got an autographed copy of this book from the author himself, Dr. GODSWILL S. IHETU, in November, 2022, during the annual Edo State Alaghodaro Summit in Benin City.
I found the book highly engaging as a journey and footprint through the Nigerian Oil and Gas sector from inception. This is the nerve centre of the economy and its evolution should mirror our development as a country.
This review will focus on the oil and gas sector as the life-wire of the economy in terms of foreign exchange earnings, major source of government revenue, the basis of Nigeria’s trade with the rest of the world and the balance of trade.
The book is an autobiography but personal details were not covered, although they reflect the opportunities available to the youths of that era and how Ihetu, seized it through diligent focus to build such a strong academic and professional track-record. At the primary school level, he drew attention to certain species of insects that have now become extinct. Whether this is climate change or sheer Darwin law of natural selection is unclear but a warning worth taking seriously…how many more insects, animals and plants have become extinct and how do these affect the natural environmental balance?
The civil service of that era, especially in the 70s, was very powerful with super Permanent Secretaries at its apex of governance. The Ministry of Petroleum, Mining and Lagos Affair was at the centre of the evolution of the oil and gas industry.
The International Oil Companies (IOCs) were already firmly in place ahead of the Nigerian National Oil Company (NNOC), which was the precursor of the Nigerian National Petroleum Company (NNPC). Pioneers in the industry came from both the ministry and the IOCs, with clear differences in cultures and competencies. The book has copious, if comic account of these interactions and their deadly drag on the industry at the early stages.
Ihetu, a renowned British trained Mechanical Engineer and a Ph.D holder in the same field. There is no doubt, that the author found a balanced and very cognate vent for the application of his skills in the pipeline and depot construction projects of NNPC, across the country to form the bedrock of the downstream petroleum sector.
You could feel it in the book that he got completely immersed in these assignments, delivering 3,000 kilometres of pipeline with strategic depots as hubs across the country. These were achieved at a time when the social order in the country was taken for granted. Today that social fabric is broken under the weight of insecurity and vandalism.
This critical infrastructure has stopped to serve the laudable purpose, Right of Way (RoW) encroached and pipe lines destroyed. The question that suffices is: What is the alternative and how have we were able coped?
Haulage on trailer trucks have taken over, putting pressure on roads that were designed for lighter carriages. Another approach is the use of shuttle supply vessels. Both are not cost effective and the industry will need to restore cost effective downstream infrastructure, by returning to and revamping the original masterplan, perhaps through private sector involvement.
The book also gave a vivid account of the domestic aspect of gas monetization in the country through the 400 km Escravos to Lagos pipeline under the Nigerian Gas Company.
As a project, this was a piece of cake compared to the international bound NLNG project, Dr. Ihetu, deployed his intellectual capacity and his managerial acumen as the Managing Director of Nigerian Gas Company on how to vastly improve the revenue profile of the company.
He pursued debtors, including government institutions like NEPA and met a brick wall as NEPA in turn claimed that they were being owed by other government institutions. He introduced indexed pricing in domestic gas sales contract, drawing from his experience with LNG international sales contracts indexed on the price of crude oil.
The domestic gas sales contracts were indexed on automotive gas oil (AG0), a more expensive substitute. Despite the higher prices, this indexed arrangement was embraced by the private sector because it was considered still cheaper and perhaps, cleaner than AGO fired plants. Readers will find commentaries on the Oben-Ajaokuta gas pipeline indeed stimulating.
As the Book reviewer, I consider the liquified natural gas project as the finest part of this book and the pinnacle of Dr. Ihetu’s distinguished career. He was the technical insider and brain box that delivered the Nigerian Liquified Natural Gas project, surrounded and buffeted by diverse influences that derailed the project on so many occasions.
You will expect that host community crisis will be a key challenge but the relatively peaceful relocation of the Finima Community to the New Finima Town, covering 400 hectares was a tribute to Dr. Ihetu’s diplomatic dexterity.
The NLNG project was initially estimated to cost $4, 000, 000,000.00 (Four billion U.S Dollar) covering gas feed pipelines, liquefaction process and shipping. The two issues that bogged down the project were who should be the contractor for the core project or Engineering design, Procurement and Construction (EPC) between TSKJ and BCTS; the other was which liquefaction process technology should be adopted, TEALARC or APCI. The book presented detailed behind the scenes lobbies and epic clashes between technical judgement and political power play, throwing up corporate governance worst practices, including ministerial over-ride of board decisions and long periods without a board by the core investor, NNPC.
The financial components of the NLNG project were purely private sector, led by international financial institutions, including IFC, in a consortium of lenders. Since project political risk was high and governance weak, lenders insisted that shareholding structure initially 60% NNPC/core investor and participating IOCs collectively 40% should be reconfigured with NNPC’s equity interest reduced to 49%.
The book alluded to financial pressures on the part of government that might have helped to achieve this slash in equity, the movements in the project escrow account hints at this. The equity restructure fulfilled one of lenders conditions but also, strengthened the hands of the participating IOCs and improved governance, with the core investor losing the slot of Managing Director while taking the bitter demotion to the newly created Deputy MD position.
Dr. Ihetu, was in the tick of these as MD in the transition and was later proposed as the first Deputy Managing Director, although he resigned as the Managing Director of Nigerian Gas, Warri, in readiness for the role of pioneer Deputy Managing Director of NLNG, it never happened. The book explains all the drama and ambiguities surrounding the brief impasse even though it became a reference point and master class in Public Private Partnerships (PPP).
As you read the book, one cannot but wonder about the state of the gas supply contracts, over 20 years tenure mainly to European countries. What happens when those contracts expire given the changed geopolitical global position around gas as highlighted in the Russia-Ukraine war?
You also grasp why Bonny LNG failed and the lessons that NLNG learnt from that; you begin to imagine why Brass LNG and Olokola have not yet happened, despite a tight global gas market. It strikes you that as a country we continue to flare gas in the face of global climate change agenda and it is evident that there is no urgency in harnessing this hydrocarbon asset.
The eventual success of NLNG is a tribute to the technical depth, passion and resilience, even rugged character of Dr. Ihetu and other professionals as well as political leaders of that era. The book dispelled tribalism and highlighted lack of vision on the big picture, parochial interests as the bane of our society at the elite levels.
Dr. Ihetu, enjoyed the confidence, support and even friendship of key ‘Northerners’ in the course of his illustrious career, including Alh. Umaru Dikko, Alh. Ahmed Joda, Prof. Jubril Aminu and Prince Dalhatu Ado Bayero.
You will read why the Prince was fondly called “Dalha” and how Dr. Ihetu, acted for 20 times in his stead as GMD of NNPC. On the other hand, Dr. Ihetu, had professional clashes with ‘Southerners’ like Chief Marinho and Dr. Chu Okongwu. You will read about the turn of fortunes, eventual reconciliation and the letter in “red ink”.
In all these, the late Mr. Gamaliel Onosode, reputed as Boardroom Guru, of blessed memory, who was Chairman of the Working Committee on NLNG stood out as the silent force driving consensus between the private sector and the technical crew on one hand, and the government and political appointees at ministerial level on the other hand, leveraging his boardroom astuteness and disarming credibility.
The book reels out all the actors of that era in the petroleum industry, including President Muhammadu Buhari and his ride with Dr. Ihetu, along the right of way of the pipelines.
NLNG has been a huge success but the same cannot be said of the refineries where Dr Godswill Ihetu was not involved. He declined appointment as Managing Director of one of the refineries. It would have been expected that the NLNG shareholding, financing and governance structures should have long been replicated in the refineries and other key assets. For example, the book explained the trailblazing role of Dr. Ihetu in setting up NETCO, as a full-fledged engineering services company capable of competing for contracts within and outside of the group and with Bechtel as partners.
As Group Executive Director, the Telecoms department, fell under his supervision. He regretted that the huge spare capacity of the telecoms department was never monetized despite his recommendations. What is the state of these telecoms assets today given the sea changes in technology?
There is no doubt that the Petroleum Industry has evolved since the era of Dr. Ihetu, especially with the Petroleum Industry Act (PIA) with more active private participation upstream, the emergence of Dangote refinery and gas to power projects, but the book provides a very strong historical context that should guide the future in order to avoid very costly mistakes.
It is highly recommended to read this book thoroughly alongside the PIA in order to identify the gaps that existed which hopefully the Act will correct.
The essence of the book reverberates beyond the petroleum industry. Governments across tiers that are serious about partnerships with the private sector can learn a lot about tackling vested interests through proper governance structures. Financial institutions can also pick up lending nuggets around how to identify exogenous risks hovering on projects. The author called salient attention to the differences between “project mode” and “operational mode”, requiring very distinct competencies and climates.
Readers will find very interesting angles on all the defining issues of the industry. For example, the smoke from which the allegation of missing N2.8bn came out was explained in details. There was no fire, it was a hoax as the Ayo Irikefe judicial panel found out. My mind went back to school days at the University of Lagos and the protests that this issue generated across the country, with professor Ayodele Awojobi computing the interest on N2.8bn per day, per hour and per minute. According to the author, the substance remained that the finance and accounting functions of the corporation, at that time required strengthening to avoid such misleading information.
Dr. Ihetu was retired in 1999, at the commencement of a new civilian dispensation. His career sunset marked another chapter in the evolution of the NNPC with the appointment of Dr. Jackson Gaius-Obaseki, a pioneer, thorough bred professional, in the core upstream sector, as the Group Managing Director.
Their paths crossed at Nigeria Gas Company, with Dr. Ihetu as the boss as well as Managing Director and Dr Jackson Obaseki as Executive Director. They found common professional ground around gas.
The author of this highly recommended book, FROM OLOIBIRI TO BONNY, is an octogenarian, but still mentally vigorous and physically agile.
He has helped posterity by documenting his priceless recollections, after a most distinguished career, giving off his fullest in the services of the country. Unfortunately, these rich legacies have not been consolidated by the country, and this dedicated type of public servants are getting fewer. Reading this book will rekindle hope in the ability of the people of this great country to reclaim their pride of place by creating a truly productive citizenry.
OBASEKI, FCIB, Prolific Writer, Retired Bank Executive, Governance Consultant @ MCI ASSOCIATES, Chairman of an Oil & Gas Field Services Company (MCI AGENCY LTD) Writes from Lagos.