NNPC Towers, Abuja, Nigeria. Credit: iloveabuja.com.ng
Nigeria outlined a plan to overhaul state oil company NNPC and eventually list it on the stock exchange in a bid to modernize and streamline the industry.
The ministry of petroleum released a draft late on Thursday to underpin industry reform stalled for a decade amid disagreements and political infighting over how best to manage the nation’s energy resources.
The ministry seeks, in the proposal, to end the OPEC member’s reliance on oil exports and shift to a “gas-based industrial economy,” and said Nigeria needs to reform the oil sector or risk output falling.
“Unless there are additions to reserves and those reserves are brought into production, Nigeria can expect to see absolute declines in production from around 2020,” the plan said.
As a key step to improve crude output of around 2 million barrels a day, Nigeria wants to transform NNPC from the bureaucratic empire it is into an entity functioning like the private sector.
“NNPC will be made autonomous from the state, it will relinquish all its policy making and regulatory activities, and it will be treated on an equal basis with private sector operators for projects,” the draft said.
The West African nation has been mulling a sale of oil assets to raise hard currency as a slump in vital oil revenues has eroded the budget.
The proposal said a newly formed corporation could sell stakes “so long as the government shareholder retains effective control and ownership.”
The ministry said it will consult with lawmakers over the reform, but it faces serious challenges. Some members of parliament, including from the president’s All Progressives Congress (APC), have objected to government plans to sell oil and other assets to raise hard currency.
“It’s commendable that they have actually tried to make a petroleum sector policy,” said Aaron Sayne, senior governance officer with the Natural Resource Governance Institute.
However, he said the lack of details, specific targets and the backing of a broad coalition would make it difficult to achieve many of the aims.
“Where this is short on details is where the vested political interests are the strongest,” he said. “It’s not clear that it has the political support.”
The ministry’s draft proposes a similar approach to spur investment in the nation’s refineries, allowing the closure or privatization of them unless they can become profitable. It would also eliminate any remaining fuel subsidies and aim to deregulate fuel prices.
It also included placing more responsibility for oil spills and pollution on the companies operating them, including criminal “prosecutions of company directors where necessary.”
Shell, one of the largest international companies operating in Nigeria, Chevron, and ExxonMobil declined to comment on the plan. ENI did not immediately respond to a request for comment.
Source: Business & Financial News, Breaking US & International News | Reuters
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