Nigeria Oil Industry May be Crippled Unless Urgent Steps are Taken, Former NNPC GMD Warns

Former Group Managing Directors of the Nigerian National Petroleum Corporation (NNPC) yesterday rose from a meeting in Abuja and declared that the current situation affecting Nigeria’s oil and gas sector was capable of leading to its total collapse if left unattended to.

The former GMDs, who attended the meeting included HRM (Dr.) Edmund Daukoru, Chief Odoliyi Lolomari, Dr. Thomas M. A. John, Engr. Lawrence Amu, Dr. Jackson E. Gaius-Obaseki, Engr. Funsho Moses Kupolokun, Engr. (Dr.) Abubakar Lawal Yar’Adua and Dr. Joseph Thlama Dawha, while Chief Festus Marinho, Dr. Chamberlain Oyibo, Dr. Mohammed Sanusi Barkindo. Engr. Austen O. Oniwon, and Engr. Andrew Laah Yakubu were absent, although with apologies.

The erstwhile NNPC bosses said after a brainstorming session with corporation’s current GMD, Dr. Maikanti Baru, that the federal government and stakeholders must now chart a new course to reform the country’s oil industry.

They also indicated that certain operations of the NNPC would have to be reformed to give it a chance of surviving through the prevailing challenges in the industry.

A statement from the Group General Manager Public Affairs of NNPC, Mallam Garuba Deen Muhammad, disclosed that the meeting with the former heads of the corporation included the Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu.

The statement said during the meeting, Baru presented the operational status of NNPC and the industry as well as his ’12 Business Focus Areas’ with which he hoped to reposition the NNPC on the path of growth and profitability.

The former NNPC helmsmen, according to the statement, jointly reviewed the current state of the industry, deliberated on ways to resolve issues militating against the progress of the sector and recommended measures to move it forward.

“During the brainstorming session, they expressed serious concerns on the declining production level and its attendant consequences on the environment and the nation’s revenue.

“They further agreed that if the current situation remains unchecked, it could lead to the crippling of the corporation and the nation’s oil and gas sector, the mainstay of the Nigerian economy,” said the statement.

It added that, following their deliberations, the former GMDs identified the key challenges , noting that “insecurity is threatening production and damaging the Niger Delta environment.”

According to the statement, they therefore expressed the “urgent need for government and security agencies to refocus as well as engage the various host communities as well as established social and traditional structures to develop an actionable partnership framework toward finding a lasting solution to the present unrest.”

“The former GMDs are concerned about the increasing negative perception of the corporation by Nigerians especially in terms of opaqueness and accountability. They therefore called on the corporation to educate Nigerians on NNPC activities as a commercial entity managing the nation’s assets in trust.

“The former GMDs advised that the refineries be rejuvenated using the Original Equipment Manufacturers (OEMs). Also, the refineries must be restructured to operate as an Incorporated Joint venture (IJV) similar to the Nigerian Liquefied Natural Gas (NLNG) model with credible partners having requisite technical and financial capabilities.

“The former GMDs commended NNPC for resolving the fuel supply crisis and urged the corporation to emplace measures that will ensure sustenance of seamless supply of petroleum products nationwide.

“They, however, noted that the PMS price cap of N145/litre is not congruent with the liberalisation policy especially with the foreign exchange rate and other price determining components such as crude cost, Nigerian Ports Authority (NPA) charges etc. remaining uncapped,” the statement explained.

It further noted: “The former GMDs advised that funding of JV operations should be the first line charge to oil revenue to ensure sustainable production and reserve growth.”

On oil exploration in Nigeria’s frontier areas, the statement said:” The former GMDs endorsed Mr. President’s steer for sustaining exploration activities in the frontier basins particularly the on-going efforts in Chad Basin and the Benue Trough. They therefore advised the GMD to pay priority attention to the Chad Basin where promising prospects are recorded.”

It noted that they also raised concerns on others issues they consider necessary to the growth of the industry.

“The former GMDs noted that for effective functioning of any National Oil company (NOC), the technical components of the country’s Exploration and Production (E & P) must be integrated as part of the country’s NOC. They therefore posited that NAPIMS being the technical component of Nigeria’s E&P, and not just an investment vehicle, must remain with and managed by NNPC. Taking NAPIMS out will make NNPC an ineffective NOC.

“The current Petroleum Industry Bill (PIB), which proposed the incorporation of NAPIMS and taking it out of the NNPC will inhibit the effective functioning of the NNPC as a National Oil Company (NOC). This will make NNPC to operate at a different level compared to its peers in other OPEC Member Countries. While the former GMDs have no issues with incorporation, they strongly advise against taking NAPIMS out of NNPC,” the statement quoted them to have said.

On NNPC’s relationship with other stakeholders in the industry, the former GMDs encouraged NNPC to improve its relationship with its key stakeholders such as the federal government, the National Assembly, host communities and especially its international Joint Venture partners.

“The former GMDs expressed serious concerns about the continued dwindling of NNPC revenue and advised that the corporation should pay particular attention to its revenue-generating entities such as the Nigerian Petroleum Development Company (NPDC), retail and the refineries to return the corporation to high performance, growth and profitability.

“The former GMDs were worried about the level of NNPC’s debt profile. They advised that as a matter of urgency, NNPC should establish the true state of its current financial status and immediately decide on the most appropriate capitalization model.

“The former GMDs also reviewed the state of NNPC Pensions. They advised that NNPC should explore avenues to close the pension funding gap including the restructuring of the current model,” the statement added.