Restructuring of NNPC to improve management of oil and gas assets

President Olusegun Obasanjo said the Nigerian National Petroleum Corporation (NNPC) was being restructured for a better and efficient management of the nation's oil and gas assets and to earn more revenue. The president has also directed the National Council on Privatisation (NCP), headed by Vice President Atiku Abubakar, to submit to him and the Federal Executive Council within eight weeks, the final draft of the new Nigerian oil and gas policy. The policy is to spell out how the nation would maximise the net economic benefit from oil resources.
Obasanjo, who spoke in Abuja at the national stakeholders' workshop on oil and gas policy for Nigeria, said the re-organisation in the NNPC was by itself, a major element of oil and gas sector reform. He added that the reforms was a "necessary adjunct of the restructuring of public enterprises involved in gas transport and trading, products marketing, oil services, etc."

Under the restructuring, the government reduced NNPC directorates from 6 to 4 while 24 senior officials including three group executive directors were retired. The president said though the country earned over $ 300 bn revenue from the petroleum sector over the past 30 years, it was however, still faced with "legacy of power failures, elusive and epileptic electricity available to less than 50 % of our population and a notoriously inefficient market for refined petroleum products."
"It was the desire to break free from this vicious circle of poverty amidst stupendous riches that has compelled this administration to undertake a comprehensive oil and gas sector reform programme," said Obasanjo who was represented at the workshop by his Special Adviser on Energy, Dr Rilwanu Lukman.

Under the reform plans according to the President, the Pipelines and Products Marketing Company (PPMC), an NNPC subsidiary, as well as the refineries will be privatised while new companies will be created out of the Nigerian Gas Company (NGC) and privatised to enable the country take full advantage of its huge gas resources.
"We recognised that all these developments will produce sub-optimal results if they are carried on outside the context of a comprehensive policy framework that sets out a clear path to the ultimate goal that I have earlier enunciated," said the President. He noted that the draft policy, prepared by the NCP, identified four key aspects of oil and gas policy. These are the sensitivity to the nation's natural environment, need to derive maximum economic benefit, competitive supply of products, and long term exploitation of hydrocarbon resources.

The workshop was organised by the Bureau of Public Enterprises (BPE) to sensitise all stakeholders in the petroleum industry to the draft policy produced by UK-based consultancy firm, Nexam. The Director-General of the BPE, Dr Julius Bala, said the policy was prepared by the 25-man Oil and Gas Sector Reform Implementation Committee (OGIC) headed by Lukman.
Bala said Nexam was appointed to, among other things, review and comment on existing and proposed sector policies, review the existing laws governing the petroleum sector and highlight appropriate future roles for the government regulatory agencies and the NNPC after privatisation. The draft policy recommended the creation of a National Petroleum Council, under which the Special Adviser on Energy and the Minister of Petroleum Resources would operate.

In the model structure contained in the draft, it was recommended that a National Petroleum Directorate (NPD) that will supervise the NNPC, oil companies should be created. Also, the National Petroleum Investment Management Ser-vices (NAPIMS), the NNPC subsidiary managing government's interest in joint venture oil business, would be under the Ministry of Finance.
However, these recommendations were strongly opposed by the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN). The union in its presentation at the workshop described the NPD as a duplication of the functions of the Department of Petroleum Resources (DPR).

PENGASSAN also said that rather than move NAPIMS to the Ministry of Finance, the agency, which manages payments of cash calls for the funding of government's equity in oil operations, should be merged with the DPR to form the Petroleum Inspectorate Commission/Petroleum Resources Commission.
"While the former NAPIMS handles investment roles, the latter will be concerned with government technical functions in the industry," the union said.