Selling crude oil not best world practice – NNPC GMD

Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr. Maikanti Baru
Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), has said that selling of crude oil is not the best world practice.

Baru made this known at a Public Hearing on the Petroleum Industry Governance Bill (PIGB) on Wednesday in Abuja.

According to him, the practice around the world is for Nigerian Petroleum Company to enter into contracts with the Nigerian Petroleum Assets Management Company (NPAMC) to sell crude oil on behalf of the agency.

The PIGB seeks to unbundle NNPC by creating more entities.

“The NNPC supports the creation of the Nigerian Petroleum Regulatory Commission (NPRC), the Nigerian Petroleum Assets Management Company (NPAMC) and the Nigerian Petroleum Company (NPC).”

He said that the creation of these entities would create ensure transparency in the petroleum sector.

He commended the Senate for the enormous work it had put in the development of the Bill.

“This largely reflects the aspirations of industries for the replacement of an effective institutional and regulatory framework that promotes growth and efficient operations.

“NNPC recognises the presentation of the governance and industrial framework as separate legislation isolated from fiscal and commercial framework that enables speedy consideration and provides ease of execution when eventually passed into law

As part of NNPC’s recommendation, Baru said that there should be more emphasis on transparent and efficient administration, creating lower overhead cost for petroleum companies.

“This is very important under undulating oil and gas prices,” he noted.

The NNPC GMD noted that to enhance transparency in the proposed Nigeria Petroleum Company, which is being mulled as the successor company of the NNPC, it should be mandated to publish annually a detailed report on all petroleum revenue payments made to government.

“This should include all royalties, rentals, fees, Petroleum Profit tax, corporate income tax, other taxes, bonuses, profit oil/gas shares from each of the licences, leases and contracts.” he said.

Other proposed changes listed by the corporation include more emphasis on a low cost, transparent and efficient administration, creating lower overhead costs for petroleum companies, institutional linkages with government decisions related to renewable resources.

The list also included power generation, climate change policies and other policies affecting the petroleum industry through the roles of the Minister and the proposed National Petroleum Regulatory Commission (NPRC).

The NNPC is also seeking a better definition of the roles of the Minister of Environment in relation to the Minister of Petroleum and the NPRC.

It also wants increased institutional attention to the development and distribution of natural gas, clarity in Joint Venture (JV) and Production Sharing Contract, PSC ownership of assets including the handling and sale and disposal of available production.

The NNPC wants the new law to ensure proper delineation of the responsibilities of the proposed new entities including the enactment of transition provisions for effective management of assets.

It further seeks re-enforcement of exploration and production from the frontier basins; much more emphasis on measures that reduce corruption and increased transparency, among other items.

The NNPC however supports the creation of three entities as enshrined in the draft PIGIFB 2015 Bill.

These entities are the Nigerian Petroleum Regulatory Commission (NRC), as a regulatory entity for the entire petroleum industry (Upstream, midstream and downstream), the Nigerian Petroleum Assets Management Company (NPAMC)as a counterpart and administrator of production sharing agreements, and such other risk-based agreements as the government may decide.

The creation of the Nigerian Petroleum Company(NPC)is also being considered as a vertically integrated oil and gas company operating as a fully commercial entity across the value chain.

The value chain included includes the current Joint Venture Operations, Nigerian Petroleum Development Company, NPDC operations, Frontier Exploration and other upstream/service activities, refinery; Petrochemicals, downstream activities as well as sale and disposal of crude oil and products.

Comrade Hyginus Chika Onuegbu, Chairman PIB Committee of Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), said that “Nigeria had lost 200 billion dollars of investments due to its inability to legislate the proposed reforms in its oil and gas industry.

He, nonetheless, said that the bill would determine the future of the Nigerian oil and gas industry, as well as the Nigerian workers’.

“The bill also plans to change the ownership structure of the government establishments in the petroleum sector, including asset sales and eventual divestments.

“Clearly, the bill is intended to privatise as much as is practicable government interest in the petroleum sector. This, if not carefully handled, will lead to serious labour issues,” he said.

He, however, underscored the importance of transparency and accountability in the nation’s oil and gas sector.

Onuegbu said that the global best practice was to have a policy formulating body, government ministry or department, an independent regulatory body and a national oil company for commercial operations.

“The global best practice is that the minister and the Ministry of Petroleum should be concerned with broad policy framework and not with the day-to-day running of the industry while the regulator is allowed to carry out its regulatory functions with little or no interference.”

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