Buhari has approved NNPC’s unbundling proposal – Kachikwu; now to be split into 4 units
President Muhammadu Buhari has approved the next restructuring phase of the Nigerian National Petroleum Corporation (NNPC), the Minister of State for Petroleum Resources and the corporation’s Group Managing Director, Dr. Ibe Kachikwu, disclosed, Thursday.
Kachikwu who announced this at a Town Hall meeting with journalists and civil society organisations in Abuja, added that the next phase of the restructuring, as approved by the president, would see the state oil company broken into four different autonomous profit-oriented companies.
According to him, the four firms to emerge from the exercise are the upstream company, the downstream company, midstream company, and the refining group holding company.
All of them would operate independently with quasi-managing directors and remit profits and taxes to the coffers of the government.
Kachikwu said: “Right now I have just received the president’s approval to embark on the final phase of the restructuring we are doing.
“That restructuring effort will unbundle this company into four key components: the upstream company, the downstream company, midstream company which is the gas and power company and then of course, the refining group holding company.”
He further explained that the effect of the restructuring would enable NNPC to focus on individuals who will lead as quasi-managing directors to run the entities with the aim of delivering profits for the organisation.
He explained, however, that there would still be other managing directors at the corporate level.
“A lot of the non-performing but asset-based subsidiaries that we have, we will put them into a venture company where we will begin to help manage them to profitability and hopefully either spin them off ultimately or make them so profitable that we may decide to keep them.
“This is the sort of financial model that we are going to be dealing with over the next few months and trying to set up a performance index that is comparable with the very best in the world,” he explained.
The minister also spoke on some of the activities that he would focus on in 2016. According to him, cutting production cost; growing crude oil production to 2.4 million barrels per day (mbpd); cutting government’s subsidy on domestic supply of petrol through market-based methods; helping the country exit the onerous cash call regime in joint venture operations; reducing the industry’s contracting cycle to six months; and reengineering a profitable operational model for the country’s four refineries, would be his focus in the coming year.
He said: “For upstream, some key essentials: average production for this year was about 2.1 million barrels per day, but we think we ought to be able to move forward a little bit to about 2.4 million barrels per day in 2016.
“To do that, there are key things that need to be looked at. Oil majors have major issues in terms of funding; there are lots of cash call arrears which we need to look at. So a lot of financial engineering will be needed to enable us support that industry.
“Finance is key, cost is key. In an era of declining price of oil, it is going to be very essential that we are able to produce the most competitive oil in the market and that is the OPEC philosophy, we must be the least cost producers and so our energy is going to focus on working with NAPIMS and every other directorate here to bring down substantially the cost per barrel of oil in this country.
“Other than the cost element, obviously, is speed. One of the greatest problems we have in the upstream is the turnaround time for the approval of projects and on the average it is two-and-a- half years. We are committed to taking that to six months.”
In the downstream segement, he said: “Downstream problems obviously have been the systematic degradation of our ability to deliver services on time.
“That comes to the issue of pipeline ruptures; the issue of the inability of our refineries to perform; and not just being able to manage the entire infrastructure we have to be able to deliver services.
“We need to focus quite frankly on reengineering through investments in some of these facilities and some of the things we are looking at in 2016 would be joint ventures with technical partners to come and help us run some of these plants.”
