Experts advise against scrapping of NNPC, suggest reform
Experts in the petroleum industry have admonished the administration of President Muhammadu Buhari to ensure continued existence of the Nigerian National Petroleum Corporation (NNPC), just as they canvassed structural reform for the oil giant.
The experts’ position came on the heels of a recent call by the Governor of Kaduna State, Mallam Nasir El-Rufai, for scrapping of the NNPC, to foil alleged corruption in the corporation, believed to have seriously hampered growth of the nation’s economy.
But the experts, at a roundtable on petroleum policy organized by the Centre for Petroleum Information (CPI) in Lagos, said NNPC holds great prospects for development of the nation’s oil sector.
In a statement signed by the forum’s Chairman, Chamberlain Oyibo, and the Executive Director of CPI, Victor Eromosele, the participants said “Nigeria will always need a national oil company, by whatever name, to achieve desired goals of the government for the oil industry.”
They pointed out that other national oil companies like Statoil of Norway, operate on higher profile by engaging in activities in 25 countries, while Petronas of Malaysia operates in 34 countries, but NNPC operating only in one country (Nigeria).
The statement stressed the need for NNPC to operate as a commercial entity and run like other national oil companies as an accountable, commercial entity, with freedom to operate and without the undue constraint imposed by remote influence. “NNPC can be efficient and can create substantial value, currently lost”.
According to the forum, if the dearth in investment in recent years in Nigeria’s petroleum industry, reflected in declining production and static hydrocarbon reserves, is to be reversed, some form of industry-wide restructuring is imperative.
The participants expressed belief that operators in the country’s oil and gas sector should move ahead with their investment plans, with or without the Petroleum Industry Bill (PIB) because uncertainty persists as to when it will convert to an Act. They argued that national objectives and value proposition would determine the shape the restructuring of the oil sector should take. “For new major ‘ring-fenced hydrocarbon assets,’ there was unanimity that the best structure is Incorporated Joint Venture (IJV),” the statement said.
A member of the panel and former Special Adviser to the President on Petroleum Matters, Dr. Emmanuel Egbogah, recalled frustrated attempts at introducing IJV years back despite its strong merits, describing Nigeria Liquefied Natural Gas (LNG) company as a classic example of a very successful IJV.
At the roundtable, “a case was made for partial sell-down of NNPC’s share of JV assets, given the speed at which it could be done and the obvious benefits in the light of current national liquidity challenge.
“However, the roundtable raised issues around valuation and the certainty and utilisation of proceeds of sale. Given their legacy issues and limited, remaining productive useful lives, many at the roundtable favoured the status-quo for existing assets.”
On the existing JVs and PSCs, the roundtable recognised the challenges inherent in the existing structures both in the unincorporated joint ventures and production-sharing contracts. It noted that their drawbacks can be minimised by IJVs for future ring-fenced new hydrocarbon assets.
Doubting the sustainability of the Petroleum Product Pricing Regulatory Agency (PPPRA) model, the forum questioned the rationale for certain items in the template, which they said, had been made worse by the sliding oil price.