Business

NNPC to split into 30 firms –Kachikwu

…Reduces operating losses to N3bn monthly

From Dennis Mernyi, Abuja

Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has disclosed that the restructuring of the Nigerian National Petroleum Corporation and cost reduction efforts have brought down the corporation’s losses from N160 billion monthly to N3 billion in January with expectations of more profitable operations from June 2016 the first in 15 years.

Kachikwu who stated this at the 25th Oloibiri Lecture Series and Energy Forum organised by the Society of Petroleum Engineers (SPE), Nigeria Council in Abuja, said government would next week announce a major shake in the Corporation.

According to him, “for the national oil company, a lot of work is going on. I am sure some of you have seen the effects but within the next one week, we are going to be announcing some really major overhaul of the system, one that hasn’t been done in over 20 years.” He also gave indications that the Nigerian National Petroleum Corporation (NNPC) would be unbundled into 30 different companies, operating in five major zones of upstream, midstream, downstream and refining with their own chief executive officers.

“The effect of that would be to quite frankly unbundle the huge company into four to five main operational zones; the upstream, downstream, midstream, refining and, of course, every other company that is trending to the venture group.

“But what is more important is that at the same time, we are also unbundling the subsets of these companies to close to about 30 independent companies with their own Managing Directors and so titles like the Group Executive Directors, which you have been used to in the last 30 years will disappear and in place of that, you are going to have Chief Executive Officers.

“People have got to take responsibilities for the titles, they have to mean something, they are not administrative roles. So at the end of the day, a CEO of an upstream company must deliver upstream results and we are very focused on that and along those chains, we are doing very dramatic things within the sector to bring the change and I am happy that we are gaining the cooperation of people within the industry. That is the only way we can guarantee sustainable career path for those in the industry,” he explained.

Kachikwu noted that in the light of low oil price, companies operating in the country have to work harder to reduce production cost as a way of improving profits and revenues available to the government. This, he said, could be achieved by the deployment of new technology that makes cost more efficient.

“Cost is very important to us because I think we all got very spoilt in the era of $110 per barrel oil and we are going to focus on how we are going to cut costs. We set a benchmark of 30 per cent cost cut in our OPEX numbers and determinedly using that as a guide in our CAPEX numbers by 20 per cent. We are achieving that in some areas but at the end of this year, the sheer reality of oil industry competition will force down the prices because the reality is that if you are not able to bring in a barrel of oil at a competitive cost, you are dead on arrival,” added.

Speaking earlier, the Chairman of SPE, Nigeria Council, George Kalu, said the theme for the year, “Technological Advances in Hydrocarbon Exploration and Exploitation: Solution to Global Oil Price Stability”, was designed to elicit discussion on how operators could reduce cost.

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