An oil industry expert has warned the Federal Government not to sell its stake in the Joint Ventures (JVs) now that oil prices are low and governors are looking for all sorts of bailouts and monies to share.
This was one of the views at the recent petroleum policy roundtable held under Chatham House rule in Lagos by the Centre for Petroleum Information (CPI).
While the experts agreed that there was urgent need for a restructuring of Nigeria’s petroleum sector, they differed sharply on what shape such restructuring should take, especially on the issue of the nation’s stake in JV operations.
“Government should sell down the federation’s interests in the JVs within a one year timeframe, immediately raise significant much needed cash for government at this time, transfer the financing burden to the private sector and see the push for 3 million barrels per barrels ambition actualised,” said an expert at the roundtable.
However, on the other side of the divide are the experts who see government’s stakes in JVs as family silverware that should not be tampered or sold. They feared that whatever monies that would be realised from such sale would be shared with nothing to show for it in the future, while the sale will also pave the way for foreigners to completely take over the nation’s petroleum industry.
Instead of the sale, they suggested a ring-fenced strategy for new big hydrocarbon assets that can be run from scratch as Incorporated Joint Ventures (IJVs) by creating separate corporation and allocating its shares for subscribers and then pushing out the IJVs to go raise money from anywhere in the world.
“Now is the time for IJVs. They are primed to be shielded from Nigerian National Petroleum Corporation (NNPC) bureaucracy and external politics; they would stick to budget discipline and pay board-recommended dividend after declaring profits.
“IJVs can work for new assets as it will take away all issues that will bug down the existing JV operations like the valuation and legacy issues,” some of them argued.
The experts all agree that major opportunities were lost in the past during high oil price regime as a result of not funding the JVs with government’s indebtedness to JV operations hitting about $6 million, adding that declining oil price has further slowed down development in the industry at this moment.
Other hindrances to the smooth running of the industry include lengthy contract approval cycle, which in turn breeds corruption; overtly ambitious Petroleum Industry Bill (PIB) with contentious issues and the current situation where the Nigerian Petroleum Development Company (NPDC) operatorship of divested assets have slowed down output of the assets.
On the way forward, one of the questions the experts proffered should be answered in the nation’s bid to restructure the petroleum industry is: Should the minister who drives policy be the one to chair the board of NNPC?
“The current administration should create ministry of energy to drive comprehensive energy policy; separate the energy ministry from NNPC, privatise the NNPC, unbundle Nigeria Gas Company; announce different approach to the PIB by breaking it up and passing them in bits, strengthen regulatory agencies, clarify PSC terms for gas, deregulate gas price, among others.”
The Centre for Petroleum Information is an educational, hydrocarbon-specific non-profit organisation established to pool expert knowledge and share value-added information for the benefit of its members and the industry.
FRANK UZUEGBUNAM
