Nigeria announces oil, gas industry restructure

Sept. 4, 2007
Nigeria is radically restructuring state-owned Nigeria National Petroleum Corp. and the Nigerian energy sector under a new oil and gas policy that will take 6 months to implement.

Uchenna Izundu
International Editor

LONDON, Sept. 4 -- Nigeria is radically restructuring state-owned Nigeria National Petroleum Corp. and the Nigerian energy sector under a new oil and gas policy that will take 6 months to implement.

An NNPC spokesman told OGJ the aim of the restructuring was to improve the commerciality of the company in its new state. "The government is looking to loosen its ties so that it becomes internationally integrated to be like Petrobras, Petronas, and Statoil," he said.

Undergoing major changes are the Department for Petroleum Resources (DPR), the Ministry of Petroleum Resources, and the Petroleum Products Price Agency, which regulates domestic pump prices.

A national energy council, led by Nigeria's president Umaru Yar'Adua, will spin out five separate units from NNPC with separate and autonomous functions to reduce corruption within the country's oil industry:

-- National Petroleum Co. of Nigeria (Napcon), which will replace the current NNPC, will have seven directorates, including: upstream; refinery and petrochemical; marketing and investments; gas and power; engineering and technology; finance and accounts; and corporate services, said NNPC.

Napcon will be awarded oil and gas blocks in Nigeria to put the energy industry under domestic control rather than having dominant international operators such as Royal Dutch Shell PLC operate the blocks. It will also aim to increase Nigeria's refining capacity to 1 million b/d from 445,000 b/d over the next 5 years.

In NNPC's current format, it works with foreign partners to produce oil but also imports fuel and has regulatory and administrative duties leading to confusion and conflicts of interest. It has faced many accusations of corruption and mismanagement.

-- National Petroleum Directorate (NPD) will replace the existing Ministry of Petroleum, said the newly appointed Minister of State for Petroleum Odein Ojumogbia.

-- Petroleum Inspectorate Commission (PIC) will replace DPR, which polices the oil industry as a department within the ministry of petroleum. "[PIC] will be an autonomous body that would perform [DPR's] oversight functions," Ojumogbia said. DPR will be scrapped.

-- Products Distribution Authority (PDA), a new body, will replace the Pipeline Products Marketing Co., he said.

-- National Oil & Gas Assets Holding Co. (NOGAHC) will replace NNPC's frontier exploration services arm, Napims [National Petroleum Investment Management Services], to handle the management of assets of the former NNPC, added Ojumogbia.

Doubts surface
However, Nigerian oil companies, wondering whether the changes will be effective, stress that the government must leave these new agencies to run independently if they are to differ than NNPC.

Andrew Hayman, director of industry relations at IHS Consultancy, said the reforms were welcome if they lead to improved efficiency in joint venture operations and more application of the government's share of financing of oil operations. He told OGJ that operators such as Shell have said they were unable to fulfill their operations because of a shortage of government funds.

The policy reforms were approved at the last meeting of the Federal Executive Council, which took place last week.

The government's action follows reports published in 2000 by the Oil and Gas Industry Reform Committee and the National Council on Privatization, which proposed new operational models for the energy ministry and NNPC.

Contact Uchenna Izundu at [email protected].