Nigeria To Split NNPC Into 30 Units
State-owned Nigerian National Petroleum Corporation (NNPC) is to be “unbundled into 30 profit-making companies,” said Nigeria’s minister of state for petroleum and NNPC group chief Dr Ibe Kachikwu on March 3 at an industry event in the capital Abuja. The corporation's losses have been reduced “from 160bn naira ($800mn)” to a monthly 3bn naira loss in January 2016, he said, and “by year end should start making some profit.”
“For the first time, we are unbundling NNPC into 30 independent companies with their own managing directors. Titles like Group Executive Directors are going to disappear and in their place you are going to have CEOs and they are going to take responsibilities for their titles,” said Kachikwu.
He noted that Nigerian President Muhammadu Buhari’s government will “focus on developing the nation’s gas resources” in order to boost revenues under its diversification policy. Efforts to redraft a Petroleum Industry Bill, talked over in parliament since 2007, have been redoubled too.
Last summer newly-elected Buhari, who is also petroleum minister, reportedly wanted to overhaul and break up NNPC. In August, he sacked its board and chose Kachikwu – a former executive vice chairman and general counsel of ExxonMobil in Africa – as NNPC chief and his deputy oil minister.
Africa’s biggest oil producer has suffered from the slump in oil prices, and also from declining LNG export prices. But local gas prices have trended higher in recent years and are now about $3/mn Btu or more – so on a par with netbacks from LNG exports. This means the upstream sector has an opportunity as never before to switch more of its gas sales to the domestic market, including for power generation, and to stem gas flaring.
But this means directing investment into new power plants to produce the electricity which Nigerians badly need. For that, investor confidence and a drive against corruption are required. World Bank data for 2012 show only 55% of Nigerians had access to electricity, compared to 64% in nearby Ghana.
The past and current Nigerian government have targeted 20 gigawatts of installed gas-fired power generation by 2020, from barely 4 GW now. But plans to develop new gas-fired plants with a mix of private and foreign investment have progressed only slowly since Buhari came to power last year. Moreover to achieve 20 GW gas-fired plants by 2020 it is estimated that discovery and development of 850bn m3 (30 trillion ft3) more gas reserves would be required, requiring major upstream investment and slashing waste.
Nigeria still flares about a quarter of the gas it sells: in 2014 its marketed production was 44bn m³ – split more or less half and half between the local market and LNG exports -- yet an extra 10.7bn m3 were flared. Only Russia, a far larger gas producer, flares more.
Mark Smedley