Why Nigeria is unbundling NNPC

Jun 05, 2009 02:00 AM

The Federal Government gave reasons why the unbundling of the Nigerian National Petroleum Cooperation (NNPC), into 10 different organisations was imperative, insisting that the unbundling would seek to transform it into an integrated, international, commercial oil and gas corporation.
According to the government, this move is also with a view to ensuring a regime of revenue generation and profitability "in such a way that it would be divorced of its current conflicting roles of policy regulation and national assets management to function properly as a profit-oriented, commercial and duly capitalised limited liability company with rights to raise funds for its projects and operations."

This was revealed by Dr Emmanuel Egbogah, Presidential Adviser on Petroleum Matters at the high level Roundtable on the International Gateway Economic Partnership Summit (I-GEPS), in Dublin, Ireland. In his paper, entitled: Nigeria's Oil and Gas Industry: The Reforms and Investment Opportunities, the Presidential Adviser said NNPC would be broken into the following organisations:
-- One Policy Body, the National Petroleum Directorate, charged with the responsibility of detailed policy initiation, formulation and development for optimum resource utilisation. This is also expected to serve as the secretariat for the minister.

-- Three Regulatory Agencies viz.:
1. National Petroleum Inspectorate, which would be an autonomous stand alone Technical regulator and will replace the Department of Petroleum Resources (DPR).
2. National Petroleum Assets Management Agency, which will manage the petroleum assets, undertake costs and commercial regulation of the industry with the aim of ensuring the nation derives maximum value from its oil and gas resources.
3. Petroleum Products Regulatory Agency, will regulate the commercial aspects of the downstream sector of the industry.

"One Commercial Centre, The Nigerian National Petroleum Company, will have strict commercial orientation and focus, vertically integrated and capable of competing both locally and internationally in all relevant segments of the oil and gas industry."
"One Research and Development Centre, The National Petroleum Research Centre, NPRC, will be responsible for research and development, and promoting capacity building and maximising local value addition."

-- One Manpower Training Centre, Petroleum Training Institute.
-- Two Fund Organisations
1. Petroleum Equalisation Fund
2. Petroleum Technology Development Fund

"National Frontier Exploration Services, to be responsible for regulating and stimulating petroleum exploration activities in the unassigned frontier acreages of Nigeria."
Explaining further, Dr Egbogah said "the reform also provides for the conversion of all existing joint ventures into incorporated joint ventures (IJVs). Each IJV will be a corporate entity to be incorporated under the laws of the Federal Republic of Nigeria, and the incorporation process, including capitalization and restructuring, will be carried out through negotiations with the respective International Oil Companies (IOCs), during the reform transition period."

To assuage the fears of those who might be at sea regarding the importance of the unbundling process, the Presidential Adviser was quick to further explain that "apart from immediately eliminating problems of cash call constraints, the IJV concept will free up funds which will be available to the federal government to invest in other areas of social and economic development of the country".
He then said the Petroleum Industry Bill (PIB), regarding the Oil and Gas Sector Reforms, which is a more all encompassing legislation-in-making, had its implementation committee reconstituted by President Umaru Musa Yar'Adua in 2007, under the chairmanship of Dr Rilwanu Lukman.

The committee is saddled with the responsibility of implementing the National Oil and gas Policy approved by the federal Executive Council, FEC, and to actualize the reform.
In pursuanceof this, the Adviser said, a Petroleum Industry Bill was drafted, in line with the policy as an all encompassing legislation to regulate major aspects of the Nigerian Petroleum Industry.

Source / Vanguard
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