The Federal Government will next week
announce a major overhaul of the Nigerian National Petroleum Corporation
as well as the firm’s unbundling into 30 different companies, the
Minister of State for Petroleum Resources and Group Managing Director of
the NNPC, Dr. Ibe Kachikwu, has said.
According to him, the government has
started resolving the governance issues in the oil and gas sector,
adding that an overhaul had not happened at the corporation in the past
20 years.
Kachikwu, who disclosed this at the
Society of Petroleum Engineers’ Oloibiri Lecture Series in Abuja on
Thursday, also stated that the latest financial report of the NNPC for
the month of January showed that the corporation’s losses had reduced
from the over N160bn of some six months ago to about N3bn.
Explaining the restructuring by the
Federal Government in the oil sector, the minister said, “We are
starting first with simple governance issues; those that are not
contentious, that are very rapid and that deal a lot with the
transformation of the national oil company.
“For the national oil company, a lot of
work is going on; I am sure some of you have seen the effects; but
within the next one week, we are going to be announcing some real major
overhaul of the system, one that hasn’t been done in over 20 years.”
Kachikwu added, “The effect of that will
be to quite frankly unbundle the huge company into four to five main
operational zones – the upstream, downstream, midstream, refining, and
of course, every other company that is trending to the venture group.”
“But what is more important is that at
the same time, we are also unbundling the subsets of these companies to
close to about 30 independent companies with their own managing
directors; and so, titles like the group executive directors, which you
have been used to in the last 30 years, will disappear; and in place of
those, you are going to have chief executive officers.”
This, he said, would make people take
responsibility for their titles, as the positions must mean something
and not administrative roles.
The minister said, “So, at the end of
the day, a CEO of an upstream company must deliver upstream results, and
we are very focused on that and along those chains. We are doing very
dramatic things within the sector to bring the change and I am happy
that we are gaining the cooperation of people within the industry; that
is the only way we can guarantee sustainable career path for those in
the industry.
“We are potentially moving in a
direction where quite frankly for the first time in about 15 years, this
company will be profitable; but that is a tip of the iceberg, because
by the time these 30 companies are unbundled with their managing
directors setting programmes, you are going to meet us in the active
work space, we are going to be competing and we are going to make these
things work.”
On the slump in global crude oil prices,
Kachikwu said the government had been meeting with other oil exporting
countries, and expressed the hope that the price of the commodity would
soon rise to around $50 per barrel.
He said, “I don’t need to tell you about
the price of oil, despite the shuttle diplomacy here and there. It is
still very challenging but at least we are inching up, and for the first
time, we are beginning to have both the Saudis and the Russians come
back on the table.
“Hopefully, if the meeting that we are
scheduling to happen in Russia between the OPEC and non-OPEC members
happen around the 20th of March, we should see some dramatic movements.
We are not likely going to see the prices of many years ago, but I think
we are very humble today to accept that if we hit the price of $50, we
will be celebrating and that is the target that we have.”
The minister further stated that
focusing on gas policies was a key element for him, adding, “The target
that I am setting for myself is a 12-month type agenda to try and arrive
at some of these conclusions: some working with the (National)
Assembly, and some working with policymakers and the industry.”
Kachikwu said he had been involved in so
many conversations with oil companies and that the essence was to
define stipulated contractual terms in the industry.
He noted that production sharing
contract terms had not been revised for quite a while, adding that the
government was focusing more on how it could bring PSC-type contracts
into joint venture structures.
The minister stated, “The target I have
set within our system is to see whether we can get to a point where at
the end of this year, we will be able to transmit completely away from
cash-call type environment. And that way, the oil companies are going to
be freed up and be able to go out there to begin to look for the kind
of funding they require.
“For the first time I think we are
getting quite faster than the oil companies and we are going to continue
to push them. It is so critical for me that by June this year, some
agreements are concluded and some levels of financing are coming in to
the sector in such a way that I can get them, at least for 2016, to 100
per cent activity-type of environment.”
Kachikwu, however, denied reports that
expatriates would take over key functions of the NNPC, but noted that
experienced hands would be needed at the Nigerian Petroleum Development
Company, a subsidiary of the national oil firm.
He said, “I did not say that we will
engage foreigners to come and work at the NNPC. We were dealing with a
specified branch of NNPC, which is the NPDC. This is because if the NPDC
is going to compete, it will do that on a universal level. It can’t
play as a local Nigerian company and want to take part in mainstream oil
exploration and production.
“And so far, we haven’t done it right.
So, what I felt was that we are going to bring in experienced hands.
Experienced hands could be Nigerians and not that expatriates
necessarily bring more value to the table than Nigerians do. But we are
looking at being able to get outside the NNPC box and bring in people,
they may be Nigerians or foreigners. This is because collaboration with
technical foreign organisations is essential to drive the process.”
Reacting to the announcement by the
minister, the Head of Energy Research, Ecobank Capital, Mr. Dolapo Oni,
said the overhaul of the corporation was very critical at this time of
low global oil prices.
He said, “We have always said the NNPC
is too large and that it will be better if it was split down along its
functions. I like the idea of upstream, downstream and midstream. It
will make the NNPC more efficient; each of those units will have to
generate its own revenue and run its own expenses. So, accounting will
be a lot easier, and the corporation will be more efficient
operationally.
“But, maybe, we should try not to do too
much too fast. I hope there is a plan to achieve this over a period of
time, not just immediately, because then, it will create some
bottlenecks. Some functions that were subsumed within the entire NNPC
body before, now have to be delegated to specific subsidiaries. And that
has to be done very well to ensure there is no overlapping of
functions.”
An energy expert and Technical Director,
Drilling Services, Template Design Limited, Mr. Bala Zakka, stressed
the need to address the opaque nature of the NNPC and improve its
transparency.
Zakka said, “The reason why that is
necessary is that up till this moment, the NNPC is still looking choked
with very few people carrying out complex and tasking responsibilities.
“There is this thinking that probably
the inefficiencies and lack of performances are due to that complexity
of the NNPC with just very few people.”
According to him, the corporation is not
too complicated because it is so big or bigger than companies like
Saudi Aramco or Petrobras of Brazil or Petronas of Malaysia, but it is
looking complex in its workability.
“So, if breaking it down and having
heads of different divisions will help open it up and bring about
transparency, then it is a welcome idea,” he added.
The Director, Emerald Energy Institute,
University of Port Harcourt, Prof. Wumi Iledare, who commended the
minister’s efforts in overhauling the corporation, said, “He has big
ideas to move the corporation forward, and it is a welcome idea to break
the NNPC into independent companies. But the governance structure of
the oil and gas industry is a very important aspect to critically look
into.”
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