|Oil committees plan radical business model for NNPC future, Thursday, 05 Apr 2012|
(BusinessDay) The committees set up by the Petroleum Ministry to resolve the lingering matters of the nation's refineries and the desire to enthrone a proper governance structure for oil industry institutions like the NNPC are aiming to chart a radical business-like future for the Nigerian oil industry BusinessDay has learnt.† Reports of discussions so far held by the committees appear to point to a strong desire to whittle down the role and involvement of the government in the management of the nation's "wasting" oil and gas assets. The committees were appointed in the wake of the January fuel subsidy riots and the resulting sharp drop in the government's believability index and it was hoped the work of the committees made up of trusted technocrats would help rebuild the trust of the people in their government. Sources close to the committees say the AdedotunSulaiman led task force on corporate governance and controls in NNPC may recommend the transformation of the much maligned corporation into an investment company and a National Oil Company (NOC) operating in the form of the globally acclaimed models.
Reference has also been made to the Nigerian Liquefied Natural Gas structure which has ensured that the gas company operates at extremely high efficiency levels generating huge profit for the government and her partners in the business. The Investment Company (INVESTCO) shall be a full fledged commercial operation that may arise from the current Crude Oil Marketing department of the NNPC and it shall have as its key objective the management of the federation's oil and gas assets as is the case with Petoro of Norway. It shall have a management that is well versed in financial and portfolio management and able to meet annual set targets meant to deliver maximum financial returns for the federation. However, it is still unclear how the committee hopes to resolve the issue of raising the about $10-$14 billion required by the government to fund its Joint Venture, JV, cash calls annually. The Investco could have board chaired either by the Minister of Petroleum which then reports to the National Economic Council. The committee working on the petroleum refineries led by former finance minister, Kalu Idika Kalu appaers to have now settled down to work after some disappointments expressed by some members about the propriety or otherwise of the decision made by the Petroleum Minister to engage the builders of the nation's refineries to conduct a turn around maintenance before the task force was set up.
Members of the committee seem quite disposed to pushing for the sale of the nation's refineries but it still has to resolve the nagging question of whether it should be outright sale or if the government should retain its equity in them. However, the committee's job has become even more difficult for various reasons. The big global oil firms are quitting the refinery business around the world as a result of falling margins and issues around environmental concerns. And there is also the peculiar problem of the subsisting subsidy regime which does not accord sufficient comfort to prospective buyers of the refineries should the team recommend that they be sold. In arguing in favour of the privatisation of the refineries, reference is constantly made to the Port Harcourt Petrochemical plant which has been turned around by Indorama, today Nigeria's largest olefins producer, and one of the most profitable companies in the country. BusinessDay learnt that if new owners are found for the refineries and they are made to run like the Indorama plant, they could crash the imported portion of domestic demand of refined products to less than half of the current level. A source told our reporter that to guarantee a decent rate of returns for the new owners, should the government choose not to fully libralise the price of petrol, the subsidy can be focused and paid directly to the new owners of the refineries who would be made to buy their crude at international prices.
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