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FG to unbundle NNPC into five operating zones, 30 companies

By on March 5, 2016

The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, on Thursday disclosed that the federal government would next week announce the final outcome of its planned major overhaul of the Nigerian National Petroleum Corporation (NNPC).

Kachikwu in Abuja said that the structural overhaul would see the national oil company broken into five major operational zones and about 30 independent companies with their chief executive officers given measurable targets to achieve.

According to him, the structural shift would also see these new players competing for business opportunities across the global oil and gas industry with sustainable profits expected from them.
“We are starting first with simple governance issues, those that are not contentious and the way that we are going, that is very rapid and that deals a lot with the transformation of the national oil company,” said Kachikwu.

He made this disclosure while speaking at the 25th annual Oloibiri Lecture Series and Energy Forum (OLEF) of the Society of Petroleum Engineers, Nigerian Council.
The focus in this year’s OLEF lecture was on technological advances in hydrocarbon exploration and exploitation in a low oil price scenario.

Kachikwu said on the NNPC overhaul: “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 really major overhaul of the system, one that hasn’t been done in over 20 years.

“The effect of that would 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 about 30 independent companies with their own managing directors and so titles like group executive directors which you have been used to in the last 30 years will disappear and in place of that, you are going to have chief executive officers.”

The minister explained that people who would get the job of heading the new companies would have to take responsibilities for the titles they would be assigned.

According to him, “They have to mean something, they are not administrative roles. So, at the end of the day, a CEO of an upstream company must deliver me upstream results and we are very focused on that.

“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 because that is the only way we can guarantee sustainable career paths for those in the industry.”

He also announced that the NNPC had within the last seven months begun to cut down on its losses, adding that from the N160 billion loss which the corporation last incurred, it recorded loss of N3 billion in its January operations.

Kachikwu stated that he expects the corporation to soon turn around the corner and begin to record its first profits from June this year.
He added that further improvements in the operations of the company would be stimulated by its unbundling into 30 new companies.

“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,” said Kachikwu.

He also stated that there were key issues that he considered pertinent and which he would pursue within the year to improve the workings of the country’s oil sector.
These issues, he said, included cutting production costs of the industry and firming up key policy positions on gas.

The minister equally announced that the country would shortly initiate a review of the terms in the production sharing contracts (PSC) and joint venture agreements (JVA) which both govern its partnerships with international oil companies.

“The fact is that you have got to get the upstream working again. The reality is that if we continue at this rate, the natural curve decline that you see in the production terrains will be devastating over the next five years, and so I am very committed personally to try and do some things that will move the oil industry back to work.

“We will definitely be working with the industry to try and get to a position that everybody is comfortable with. But then we have no alternative today than giving more attention to what we need to do with gas.

“In terms of the value chain logistical dynamics, we got to begin to talk to ourselves because many times we have a polarised relationship between the oil companies and the government, but the reality is that to succeed, we all have to play in the same box and so, I am having a lot of conversations with the oil companies and that is going to continue.

“But the essence is that we have got to begin to define the contractual terms in this industry. PSC terms haven’t been revised for quite a while, we will be looking at those; JVs, we will be focusing more on how we can bring in the PSC-type terms into JV structures, so that way, we can begin to get them to work,” he said.

On gas, Kachikwu stated that the country had spent so many years on which very dramatic policy positions ought to have been taken.

“If we had a parallel income stream that is very sufficient like the crude oil, through policy development, if that was there, we would have a mix of income and that would have softened our difficulties.

“So, again, focusing on gas policies for me is a key element and 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 assembly, and some working with policy makers,” he added.

The minister also took out time to provide an update on the attempts he had initiated to get oil producing countries to collaborate on achieving oil price stability.

According to him, another round of meetings with member countries of the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC members would be hosted by Russia at its capital, Moscow on March 20.

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 to the table.

“When I started that whole move, I was criticised and told that it would not hold but I am happy that over the last few weeks we see that everybody has bought into that and we are beginning to see prices inch up very slowly.

“But hopefully, if the meeting that we are scheduling to happen in Russia between the OPEC and non-OPEC members happens on the 20th of March, we should see some dramatic movements, though we are not likely going to see the prices of many years ago.

“I think we are very humbled today to accept that if we hit the price of $50 we will be celebrating and that is the target that we have.”

Meanwhile, the Managing Director of the Pipelines and Product Marketing Company (PPMC), Mrs. Esther Nnamdi-Ogbue, has said that she expects that the current fuel shortages across the country would end by the weekend.

Nnamdi-Ogbue said in Abuja yesterday that the PPMC had already initiated measures to see that the situation eases off by the weekend.

She told reporters that eight petrol bearing vessels of about 40 metric tonnes each were being expected in the shores of the country.

According to her, this volume should be able to give the country enough stock to overcome the scarcity.
“The scarcity is caused when there is any issue or breach at any point in the value chain and then when the reaction did not take immediate effect, it reflects shortly afterwards.

“There was sensitisation of the public a few weeks ago about the probable situation.
“However, right now, we have about eight vessels coming in, each of which capacity ranges from between 30 to 40 thousand metric tonnes and these should be more than enough to ensure sufficiency,” said Nnamdi-Ogbue.

She further stated that on Wednesday alone, over 1,000 trucks were loaded and trucked out by the major marketers and PPMC.

“We have about 400 intervention trucks being used right now so that we can service marketers that we need to ensure fuel supply in their filling stations, especially in Abuja and Lagos where they consume about 60 per cent of daily national consumption figures.

“We have people trucking out (fuel) from Port Harcourt, Warri, Oghara and Calabar as alternative sources for Lagos. So all efforts are being made to ensure that by weekend, all these would be a thing of the past.

“We share in the pain of all motorists, all Nigerians and all efforts are being made, including fighting against every process being used to break the stranglehold of corruption and all those engaged in sharp practices.

“Right now, more than 300 trucks should be arriving in Abuja and we are tracking them to ensure that they arrive here,” she said.
She also revealed that the staff of PPMC had been deployed to monitor the distribution processes.

 

[ThisDay]