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NNRC Urges FG To Make NNPC More Commercially Focused

NNPC logo and tower

The Nigeria Natural Resource Charter (NNRC) has called on the Federal Government to use the opportunity provided by the prevailing socio-economic situation nationally and globally to embark on complete overhaul of the country’s oil and gas sector.

In particular, it urged government to make the national oil company, the Nigerian National Petroleum Corporation (NNPC) more commercially focused, competitive and productive in line with international best practices.

The NNRC, a non-profit policy institute, committed to effective natural resource governance in Nigeria, noted that over the years, NNPC has consistently underperformed against the NNRC’s global best practice benchmark for optimal national oil company performance. The benchmark prescribes that national oil companies be ‘accountable’ to their citizens and government, with ‘well-defined mandates and an objective of commercial efficiency’.

“It is expected that the NOCs that will succeed in maximizing their potential enterprise value, and thus maximize their revenue contribution to the nation, will be those who succeed at building strong governance along with capital and operational excellence into their culture,” the NNRC said in a statement signed by the Programme Coordinator, Tengi George-Ikoli.

The NNRC explained that a comparative analysis done on Norway’s Equinor and NNPC performance records showed that Equinor’s three refineries averaged 92.8% capacity utilisation in 2018 while NNPC’s three refineries recorded 11.21%. “A 2015 comparison of average refinery capacity utilisation in the USA of 90.98% and Nigeria of 4.88% is even worse. Unless NNPC’s refineries can operate at minimum 90% capacity they will continue to lose money,” the statement maintained.

In the area of revenues accruing to government, the NNRC’s comparison of NNPC’s performance to Brazil’s Petrobras or Malaysia’s Petronas, shows gross inefficiency. “Even when benchmarked with similar national oil companies in Africa such as Sonatrach of Algeria and Sonagol of Angola, the NNPC still falls short on different counts,” the statement added.

In the area of corporate governance, the NNRC pointed out that peer group companies that are wholly government owned like the NNPC do have strong governing boards constituted by competent professionals, instead of preference for political representation. “The NNPC is the only NOC with a serving government minister on its board. This brings unintended political baggage which impacts negatively on the smooth running of the organization,” the NNRC stated.

It added that “Closely linked to governance, management and delivery is the concern for organizational flux. Compared to other NOC’s the NNPC has had far more executive turnover.  Unlike Petronas where the average tenure of a CEO is 6 years, and 9 years in Saudi Aramco, NNPC by contrast has had 20 GMDs in 42 years, an average tenure of two years per chief executive.”

Reforming the Corporation, according to the NNRC requires new thinking and new strategies, starting with the recognition that NNPC is not and was never designed, from the beginning, to be a commercially driven enterprise.

“Had it been so, it would have been capitalised, granted more operational autonomy and burdened with fewer regulatory functions as in the NNPC Act. Its governing board would reflect that of a commercial enterprise, even if government owned like Saudi Aramco, with fewer ‘political appointees’,” the statement added .

Calling for a quick passage of the Petroleum Industry Bill (PIB), the NNRC noted that the law would be a good platform to remedy the deficiencies as it goes to greater lengths to separate commercial entities from regulatory authorities, leaving the NNPC to focus on finding, producing and commercializing petroleum resources.

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