Research has shown that the Nigeria National Petroleum Corporation (NNPC) is one of the world’s poorest performing National Oil Companies (NOCs) due to the inadequacy of its enabling laws.
This finding is according to a comparative analysis done by the Nigerian Natural Resource Charter (NNRC) of national oil companies (NOCs) across the world, which placed NNPC amongst the least profitable NOCs compared with its peers such as Brazil’s Petrobras, Norway’s Equinor and Malaysia’s Petronas.
The analysis compared the revenue, governance and accountability structures of the NOCs in line with Precept 6 of the NNRC’s Benchmarking Exercise Report (BER).
Oil sector expert, Dr Adedeji Adeniran who spoke at a webinar on Precept 6 of the NNRC BER, said the NNPC has performed poorly on this benchmark which requires that Nationally owned companies should be accountable, with well-defined mandates and an objective of commercial efficiency.
According to him, studies have found NNPC lacking as a state-owned enterprise on Role and Funding, Corporate Governance, as well as Accountability and Transparency.
Also speaking at the online Master Class organized by the NNRC, Energy Expert, Mr. Najim Animashaun, blamed the NNPC’s poor performance on the laws setting it up, which he said, did not explicitly mandate the NOC to be commercially driven.
Animashuan who emphasized that commercial efficiency was key to successful operation of an NOC, stressed that for NNPC to achieve turnaround and become commercially viable, the laws setting it up have to be changed.
This submission is further validated with the NNPC’s recently published audited financial statements which showed huge records of losses across the Corporations subsidiaries.
Underscoring the place of commercial mandate in NOC’s enabling laws, the NNRC’s findings showed that Brazil’s Petrobras, for instance, generated $97 billion and $95 billion in revenues in 2015 and 2018 respectively, while the NNPC generated $10 billion and $16.16 billion within the same period.
By contrast, while the NNPC has reserves of 32.5 billion barrels and 137.5tcf of gas, Brazil has approximately 8.2 billion barrels and 80tcf of gas.
The analysis however, explained that Petrobras was able to generate that much revenue despite having less oil and gas reserves than the NNPC, and facing the worst corruption scandal of its history, because it has been restructuring and has a commercial mandate.
While urging Nigeria to speedily pass the Petroleum Industry Bill (PIB) and make commercial efficiency the objective of the new NOC, the NNRC emphasised that commercial efficiency is key to the health and sustainability of a national oil company.
It added further that while a well managed NOC have greater potential to translate wealth into sustainable development that benefits citizens, mismanaged NOCs often exacerbate waste and deprive the country of valuable resources.
In view of this, the NNRC advocated that the new NOC to be created from the passage of the PIB should be capitalised and professionally recruits its workforce up to Board levels.
Animashaun who faulted the present composition of the NNPC Board in which only two out of the 11-member Board have oil and gas industry experience, emphasised that the lack of technical ability in the board was pointer to the fact that big reforms are needed to make the Corporation profitable.