The Nigerian National Petroleum Corporation (NNPC), Nigeria’s state-owned corporation which produces more than 90% of the country’s oil and gas through partnerships with oil firms, has expressed interest in acquiring assets of international oil companies (IOCs) under a buy and operate model. The scope of activities at NNPC covers licensing, exploration and production (E&P), refining, petrochemicals, products transportation and marketing.
Nigeria’s oil production is currently 2.5 million barrels a day (b/d), stagnant since the 1980s, while IOCs have estimated that the country is capable of producing more than 4 million b/d. Further, data obtained from the Ministry of Petroleum Resources showed that at the end of 2012, the crude oil reserve base stood at 36.8 billion barrels – a 0.06 per cent decrease as compared to year-end 2011 figures. This has triggered concerns on the strategic oil and gas reserves base, which stakeholders believed could be better exploited, if the regulatory framework is right.
This, in turn, has led to demands for restructuring NNPC to fulfill its expected potential, resulting in a re-shuffle in senior management. Nigerian president Goodluck Jonathan replaced the managing director and three other senior directors in June 2012. Andrew Yakubu, a chemical engineer who held several posts in NNPC previously, has been appointed the new managing director. Also, NNPC is eyeing tie-ups with IOCs for access to deeper pockets. Earlier this year, the state-owned oil major and US-based multinational oil and gas corporation ExxonMobil said they were examining the possibility of tapping international bond markets in 2016 to raise money for exploration projects.
Besides the long overdue overhaul of the NNPC, which inherited legacy systems from its predecessor, the Nigerian National Oil Corporation, in 1977, the sub-optimal deployment of petroleum resources is also being blamed on the delay in the passage of the Petroleum Industry Bill (PIB). IOCs and local players alike have been clamouring for a fair legislation to govern the petroleum sector. However, while such a piece of legislation has been structured in response to industry needs, it has been in gestation since 2008. The PIB was sent to parliament in July 2012, but has yet to become law. The uncertainty looks set to continue, as Nigerian lawmakers have said the bill needs further revision before being passed.
However, once the bill does become law, it is set to revolutionize the petroleum landscape in Nigeria. The bill is expected to empower authorities to crackdown on the rising cases of crude oil theft. Crude oil theft hit a new high in 2012 with the country as losses occasioned by the criminal practice and the ravage of flooding cost the nation an estimated $6.45 billion last year, according to figures released by the Central Bank of Nigeria (CBN).
Meanwhile, even as the restructuring of NNPC is in full swing and a revised PIB in the pipeline promises a brighter future for the oil sector, the Federal Government’s attempts to discourage total dependence on imports are bearing fruit. Aggregate imports fell marginally to $16.55 billion in the first quarter of 2013 compared to $16.98 billion in the year-ago period, according to the CBN. The decline in imports may be credited to the on-going reforms in the petroleum sector. Restoration work in the refineries and pipeline distribution network/storage systems have contributed to a stable supply of petroleum products across the country. Further, the External Sector Development Report for the first quarter of 2013 by the CBN showed that aggregate exports went up by 4.9 percent from $22.63 billion in the fourth quarter of 2012 to $23.74 billion in the first quarter of 2013.
Moreover, foreign exchange inflows grew by 21.3 percent to $34.20 billion in the first quarter of 2013 compared to $28.19 billion in the first quarter of 2012. External reserves as at end-March 2013 stood at $47.88 billion against $35.2 billion in the year-ago period, with capacity to finance 22.8 months of current foreign exchange disbursements and 11.2 months of imports. The CBN report also noted that aggregate foreign capital inflows increased by as much as 46.2% in the first quarter of 2013 on a year-on-year basis, indicating heightened investor interest in the country.
Source: Petroleum Economist, Business Day, The Guardian (Nigeria), ‘External Sector Development Report – Quarter one 2013’ by the Central Bank of Nigeria.
Nigerian National Petroleum Corporation (NNPC)
Established in 1977 to conduct petroleum exploration activities, state-owned oil major NNPC inherited the organization structure of its predecessor, the Nigerian National Oil Corporation (NNOC).
Besides its existing mandate, the corporation was given powers and operational interests in refining, petrochemicals and products transportation as well as marketing. Between 1978 and 1989, NNPC constructed refineries in Warri, Kaduna and Port Harcourt and took over the 35,000-barrel Shell Refinery established in Port Harcourt in 1965.
In 1988, the NNPC was commercialised into 12 strategic business units, covering the entire spectrum of oil industry operations: exploration and production, gas development, refining, distribution, petrochemicals, engineering, and commercial investments.
Source: Company Website