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Yar'Adua scraps NNPC

Posted by By Hector Igbikiowubo & Ben Agande on 2007/08/30 | Views: 2540 |

Yar'Adua scraps NNPC


THE Federal Government adopted, yesterday, the Oil and Gas Industry Committee (OGIC) report recommending the restructuring of the Energy Ministry and the Nigerian National Petroleum Corporation (NNPC) as currently constituted into five agencies.

*Five new agencies emerge

ABUJA—THE Federal Government adopted, yesterday, the Oil and Gas Industry Committee (OGIC) report recommending the restructuring of the Energy Ministry and the Nigerian National Petroleum Corporation (NNPC) as currently constituted into five agencies. The creation of the new institutional structures is aimed at creating operational autonomy and minimising undue interference.

The adoption confirms Vanguard’s exclusive story of August 13, 2007 on government’s plan to carry out institutional reforms. The report said it was partly the reason Dr. Emmanuel Ebogah, an oil and gas industry expert/advisor to both the Malaysian and Libyan governments was appointed adviser to President Umaru Yar’Adua.

The decision to adopt the OGIC report was reached at the bi-monthly Federal Executive Council (FEC) meeting, which also constituted a National Energy Committee. The committee was given six months to implement the recommendations contained in the report.

Minister of State for Petroleum, Odein Ojumogbia, who addressed State House correspondents after the FEC meeting said under the new arrangement, the National Petroleum Directorate (NPD) would replace the existing Ministry of Petroleum, while the NNPC would be replaced with the National Oil Company (NOC).
The new National Oil Company, the Minister said, would be empowered to carry out responsibilities that are in tandem with similar companies in other parts of the world.

Besides, the Department of Petroleum Resources (DPR) which had the responsibility of policing the oil sector as a Department in the Ministry of Petroleum, has been replaced with an autonomous body to be called Petroleum Inspectorate Commission (PIC).

"It will be an autonomous body that would perform its oversight functions. The Pipeline Products Marketing Company (PPMC) will be replaced with a new body to be called Products Distribution Authority (PDA) while the National Oil and Gas Assets Holding Company (NOGAHC) will replace NAPIMS to handle the management of assets of the former NNPC," he said.

The Minister said the Federal Government’s decision was based on the recommendation of the harmonised reports of the Oil and Gas Reform Committee (OGRC) and another committee set up by the National Council on Privatisation (NCP).
The Committees were set up in 2000 to restructure the country’s oil and gas sector of the economy.

"One of the highlights of the new policy is the unbundling of the NNPC. This is going to create five new organisations out of the existing structure. A new petroleum directorate is to be set up. A national oil company, that is NNPC itself as it is now known, is to be reorganised to empower it to conduct itself like any other oil and gas company.

It will be isolated from some of its other functions. For example, DPR currently is a department in the Ministry of Energy but will now be replaced by a commission known as Petroleum Inspectorate Commission that would be independent and empowered to do what it is supposed to do which is to monitor the industry effectively.

"There is Petroleum Products Distribution Authority (PPDA) which is another new organisation. There is also the National Oil and Gas Assets Holding and Management Services Company which will effectively replace NAPIMS to manage the assets that are currently being managed under the umbrella of the NNPC.
"The FEC similarly approved the constitution of the Energy Council which will work within the six months time frame to implement these decisions.

"Those two reports were presented to the council today (yesterday), that is, OGRC with a working document comprising the document that came out of the National Council on Privatisation. The unbundling thing that was added to that OGIC report was a creation of the National Energy Council," he added
The National Council on Energy (NCE) is to be headed by the President and the vice president as Chairman and Vice Chairman respectively.

The OGIC report took into cognisance the need for a National Petroleum Research Centre (NPRC), noting that within the Nigerian oil and gas industry, little has been done in the areas of research and development, which constitute the cornerstone of any successful business.

Other members of the committee which will be inaugurated soon are the Ministers of Power, National Planning, Justice and Finance; National Security Adviser, Honorary Presidential Adviser on Petroleum, Rilwanu Lukman and four other members to be named by the President.

The Energy Council is expected to work out modalities for the implementation of the new policy thrust within the next six months.

Other decisions approved by the council yesterday were the approval for provision of electricity supply and upgrading of the lighting system at the Port Harcourt International Airport at N725.5 million and N92 million respectively.

Another contract was awarded for the provision of a 33KVA cables to boost power supply to the Murtala Mohammed International Airport, Ikeja at the sum of N166.790 million.

The contracts announced were the first to be approved by the Yar’Adua administration in its first hundred days in office.
The council also stopped the practice whereby ministries and agencies disburse capital expenditure for that particular year in the following year.

NNPC’s metamorphosis

In 1971, government promulgated Decree No 18 which established the Nigerian National Oil Corporation (NNOC) essentially to part-take in oil prospecting, mining, and marketing as well as refining within oil industry.

In April 1973, government pushed its ambition further when its appetite for increased participation in the sector resulted in the acquisition of 35 per cent equity participation in the operations of Shell-BP, Gulf Oil Company now Chevron and Mobil now ExxonMobil.

Government’s equity interest was manifested in a joint venture agreement with the foreign companies which play the role of operators despite the minority equity they maintain in those concessions today.

Other forms of agreement were reflected in the Oil Mining Lease (OML), and in the participatory agreement like the Joint Operating Agreement (JOA) and Heads of Agreement.

Oil production during the 70s and 80s was initially focused on the more accessible onshore and shallow coastal shelf areas
By April 1, 1977, government through Decree 33 merged the Ministry of Petroleum Resources with the Nigerian National Oil Corporation to form the present day Nigerian National Petroleum Corporation (NNPC).

By this Decree, the NNPC was saddled with the responsibility of all the functions hitherto performed by the NNOC including, Exploitation, Production, Transportation, Processing of oil, Refining, Marketing of crude oil and its refined derivatives plus the regulatory function formerly under the control of the Ministry of Petroleum Resources.
The regulatory arm of the new NNPC was referred to as Petroleum Inspectorate.

Between 1978 and 1979, government increased its equity participation in the exploration and production activities to 60 per cent in the Joint Venture companies and its dominance in the industry climaxed in 1979 with the nationalisation of the assets of BP.

By September 1979, NNPC brought to bear another form of agreement which reduced government's funding of oil and gas exploration and production activities in some foreign firms with the introduction of the Risk Service Contract (RSC).

The NNPC has since evolved into a corporate behemoth with about ten multi-million dollar subsidiary companies with separate boards and management teams running their affairs.

These companies include: the Warri Petrochemicals and Refining Company (WPRC), the Kaduna Petrochemicals and Refining Company (KPRC), the Port Harcourt Refining Company (PHRC), the Integrated Data Services Limited (IDSL), the Pipeline and Products Marketing Company (PPMC), Hyson, an offshore company, the Nigerian Engineering Technology Company (NETCO), the Nigerian Gas Company (NGC), the Research and Development company, and Duke Oil, the Nigerian Petroleum Development Company and the National Petroleum Investment Management Services (NAPIMS). The group currently has over 11,000 employees.



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