NNPC: Achievements and Contributions to the Nigerian Economy

The Nigerian National Petroleum Corporation (NNPC) announced in
October last year that the much-anticipated Okpai Power Plant in Delta
State, the largest gas-power initiative in the African continent, is
on the verge of becoming operational. The two phases of the project
that would together generate 1,000 MW of electricity on completion is
being implemented under the Clean Development Mechanism Protocol of
the UN Framework Convention on Climate Change. The rare achievement,
which marks a significant milestone in the country's infrastructure
development, reconfirms NNPC's position as a principal driving force
behind the Nigerian economy.The state-owned NNPC provides fuel to
industrial facilities, commercial enterprises and individuals, with
operations that cover the extended spectrum of the Nigerian petroleum
industry. An extensive brief tasks it with all aspects of production,
distribution and marketing, besides training workers, managing oil
leases, encouraging indigenous participation, ensuring uniform pricing
in local markets and exploring allied industries, among other things.
With sales totalling $2.6 billion in 2005, it is a major revenue
earner for the government that additionally provides employment to
over 15,000 people. The company's history goes back to 1971, when the
Nigerian National Oil Corporation (NNOC) was created after the country
signed on to be a member of the OPEC.Six years into its existence the
company was renamed to its present avatar, while the government went
on to decentralise it into nine subsidiaries in 1981. Over the next
two decades, the NNPC significantly augmented its holdings in multiple
oil ventures amid sustained attempts to make it a financially
autonomous and commercially integrated entity. However, even as
foreign oil companies clamoured to invest in Nigeria, the NNPC faced
severe challenges due to political instability, inept governance and
massive corruption.The evolution of NNPC into present day is also a
story of grave mismanagement, severe operational failures and frequent
scandals. Investigations by the 1980 Crude Oil Sales Tribunal found
widespread irregularities that cost the government over $2 billion in
revenue losses. The company was the subject of international censure
the same year when one of its offshore wells was involved in an oil
spill that resulted in the deaths of 180 people. Relations with
international oil companies soured over disputes that saw the
incarceration of the then Nigerian minister of petroleum resources in
1990. The oil and gas sector was understandably the focus of reforms
unveiled at the beginning of the new millennium, by which time the
company's frequently exposed malpractices caused it to be viewed with
widespread popular disdain. A series of layoffs ensued between 2003
and 2005 when several thousand employees were let go. Around the same
time, the NNPC enthusiastically started out several joint ventures in
offshore drilling and gas production.Despite its chequered past, the
company has been responsible for significant achievements in Nigeria's
economic development:* NNPC oversaw the country's first equity stake
in oil production with the Agip Oil Company in the mid-60s to better
exploit resources for national development.
* It spearheaded oil
exploration to confirm Nigeria's position as the top crude exporter in
Africa in the 1970s, boosting oil revenue from N200 million to N10
billion through the decade.
* In 2004, the NNPC unveiled plans to
launch the ambitious West African Gas Pipeline to supply Nigerian
natural gas to several neighbouring countries.
* Nigeria emerged as an
important exporter of natural gas with the establishment of the
liquefied natural gas plant in Bonny in 2005 as part of efforts to end
gas flaring by the end of this year.
* NNPC entered into a $1 billion
joint-venture in the offshore Agbami fields to increase national crude
production capacity by a further 250,000 barrels per day.
* Through
its recent Okapi Power Plant, the NNPC will generate the first carbon
credit in compliance with the Kyoto Protocol and related UN
resolutions.While the NNPC looks set to achieve more significant
landmarks in the years ahead, its performance faces tremendous
pressures from both within and without. The company's future hinges on
its ability to identify and capitalise on new opportunities that are
in line with Nigeria's plans for accelerated development. Its sphere
of influence on almost every aspect of growth bestows on it critical
significance in the context of Nigeria's goals for universal basic
human rights. Although much government effort in recent years has been
devoted to reversing the country's traditional dependence on
non-renewables, the oil and gas industry is predicted to grow
exponentially over the next few years. With oil accounting for 81% of
present government revenue, the NNPC has a major role to play in
reversing decades of economic stagnation and driving massive
entrepreneurial growth. Curious as it may seem, it is oil revenue that
funds Nigerian government initiatives to diversify the economy and
achieve rapid enterprise revolution across non-oil sectors. With NNPC
confident of improving known crude reserves from 36 billion barrels to
50 billion barrels by 2015, the sector assumes all the more
importance.Revamping the oil and gas industry into an engine for job
creation, poverty alleviation and rapid national growth has to be one
of the fundamental objectives of the NNPC in coming years. Optimising
its performance over the next decade calls for detailed review of
several considerations:* Enhancing access to capital and technology
and promoting independent control of joint-venture investments.
*
Multiplying gas production and improving transmission to both domestic
and regional gas markets.
* Establishing strategic partnerships with
global gas companies to secure presence in international markets.
*
Achieving production efficiency and selective growth to improve
capacity in joint-venture operations.
* Rationalising the NNPC
portfolio to ensure focus on high-growth potential assets.
* Extending
refineries and gas-based industries to help turn Nigeria into a
regional hub for petroleum products.
* Reducing operational
constraints and production suspensions resulting out of vandalism and
violence.
* Implementing further reforms in the oil and gas sector to
improve transparency and boost investor confidence.One of NNPC's
biggest challenges is providing a level-playing field for investors in
Nigeria, both existing and new. In this connection, the proposed
Petroleum Industry bill and amendments to the country's tax regime are
expected to go a long way in further opening up the sector to foreign
investors.Reforming the NNPC into a commercially aggressive entity
will require further reforms, especially to improve internal
regulatory authority and deter corruption. Political instability has
obviously been one of the major hurdles in the company's performance,
and Nigeria must ensure its independence from partisan or bureaucratic
interference. That NNPC has a critical role to play in furthering
Nigeria's economic interests is without question. What remains to be
seen is how far it is able to deliver on this promise!