Industry experts have warned of the dangers of allowing the Nigerian National Petroleum Corporation (NNPC) to spearhead the formulation of policies for the oil and gas sector. The state oil company has rather been asked to focus on making the newly created directorates profit centres, instead of massive cash-guzzling points.
The experts point to the pronouncement by the Ibe Kachikwu, group managing director (NNPC) calling for the removal of petroleum subsidy as a policy issue that would only distract the NNPC from the current reforms being embarked upon by the new helmsman.
“I support the removal of petroleum subsidy because it is a monster that is not sustainable, creates black market, inefficiency and does not reach the people it is supposed to reach, but I do not think that the NNPC should be the one to lead that policy formulation for the subsidy removal and other policies in the oil and gas industry”, said Wumi Iledare, a professor of energy economics.
Iledare further said, “We should seize this opportunity of industry reform and separate policy formulation, regulation and commercial participation in our oil and gas sector. The ministry of petroleum should be reformed and empowered to perform its function as a policy formulator for the industry”.
Another industry operator told BusinessDay that “the irony of two incompatible roles for NNPC has distorted it as a national oil company, from the moment it emerged from a merger of the National Oil Corporation and Ministry of Mines and Power, in 1977.
“You cannot be a referee and a player in the same game and succeed in both. None of the successful national oil companies (NOCs) does that. The ones that have emerged profitable, such as Petronas of Malaysia, did so when they shed their quasi regulator pretentions and concentrated on operating a commercial model”.
Rather than dissipate its energy on policy making, industry operators want the NNPC to focus on ways of moving the state oil company towards commercial orientation, as well as dealing with all the issues arising from the collapsing of the eight former directorates into four.
In a recent editorial commentary, the Centre for Petroleum Information (CPI) said “the collapse of four directorates into two, eliminates two group executive directors (GEDs) but creates problems which would need to be thought-through.
“One such problem is capacity and the other, bureaucracy. The initial deficiency, which is out of tune with global best-practice, of most directorates being cost centres persists. That will require more deep-rooted restructuring.
“All the noise around subsidy and swaps disappears if ‘refining and marketing’ were a directorate/profit centre, rather than the current massive cash-guzzling ‘refining and technology’ directorate”, CPI said, adding that crude oil marketing and NAPIMS should be a profit centre to ensure true accountability and transparency.
“NNPC Capital should be revamped to autonomously fund the corporation’s viable projects without recourse to the Federation”, CPI said.
FRANK UZUEGBUNAM
