Interview for eBizguides, December 1st, 2003

Could you present us briefly the NNPC and give us an overview in facts and figures of what the company represents today?

NNPC is a key to the Nigerian economy. The oil and gas industry evolves around the NNPC. In the upstream sub-sector, NNPC has a number of contractual arrangements with operators through several PSC’s (Production Sharing Contracts) and Service Contracts. On the average, the contracts are 57.5% in favour of Nigeria and the balance in favour of the multinationals. There are of course other players that are not having any relationship with NNPC. At the same time, we also own at 100% our E&P (Exploration and production) company that is the NPDC subsidiary in Benin. Right now they have some fields in production and at the same time NPDC is also in some joint-venture for deep off-shore PSC arrangements. In the downstream area, we have four refineries comprising of three refining companies with a total capacity of 445000 barrels per day. One is located in Port Harcourt, one in Warri and the third one in Kaduna. We have over 5000 km. of pipelines, and 32 deposits with a capacity to hold 30 days of stock. As of today, NNPC is the major player in the downstream sector, almost holding the monopoly. However, with the recent liberalization, others are joining in the downstream supply and distribution system. For instance there are some products being imported and distributed, but it is still a small percentage of the total distribution. In terms of gas, NNPC is also a dominant player. We have NGC, a wholly owned subsidiary of NNPC in Warri. They are responsible for gas transport and delivery from the upstream E&P companies to the end users. We are also participating in the LNG program with a 49% stake. So whether you are talking about the upstream or downstream arena of gas, NNPC is the dominant player of the gas sector.

Among all those activities held by NNPC, which ones have the priority and in which sector do you want to concentrate?

In every sub-sector of the industry you might be talking about, NNPC is always present. Therefore, our objectives and aspirations more often than not are about the same aspirations and goals of the nation. If I might take it sector by sector, in the upstream area, the objective is to reach 36 billion barrels of reserves by the year 2007. In terms of production capacity, we want to bring it to 4.4 million barrels a day. We want to maximize sector value and ensure a fair share for the nation. To do so, we must improve Nigerian capacity and content. As you know, the petroleum industry is an enclave economy; generating limited multiplier effects to the broader economy. Not much has happened in terms of local content over the years, so we want to focus on that in the coming years. When it comes to the gas sector, the aspiration is to develop that market. By the turn of the decade it is our wish to obtain as much revenue from gas as we are obtaining from oil. But above all, we need to create a new industry, an integrated oil and gas industry. In the downstream, the goals are sufficiency and an efficient supply and distribution system. The objective is to follow the wind of liberalization until the downstream sub-sector is completely liberalized.

Is the NNPC involved in the construction of the West African pipeline?

Indeed, the project will start in 2005. NNPC is not only a participant in the project, it is also a mega-player.

You mentioned in the local newspapers that by March 2004 all the refineries would be privatised, Could you clarify the status on the privatisation of the refineries?

The privatisation process of the refineries is proceeding very well. By the first quarter of 2004 I expect that the first refinery will already be fully privatised. But it is not going to be just the sale of the refinery; we are going to make a type of arrangement where NNPC will still be a key participant. Whoever the buyer is, will bring in funds for modernization and will also provide management.

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NNPC has partnerships and joint-ventures with some of the biggest oil companies in the world. What actions are being taken to attract new partners towards the rich Nigerian oil industry?

We are trying to bring in as many new participants as possible. By January 2005, we will go with another license, and this time we are targeting at the entrance of a new participant. In the industry, there is a lot of transformation on-going and we are doing everything we can to make the system attractive to people. We want to provide the right environment. For instance, in the gas sector, we have the strategy to lift all the entry barriers, so people can come in and invest.

What can you tell us about the privatisation process of certain subsidiaries of the NNPC?

Indeed we are pursuing quite aggressively the privatisation of certain parts of NNPC like the refineries we already talked about, pipelines, stock deposits and certain petrochemical activities. In any case, there will always be the umbrella structure of the NNPC above the sector. Even when we get into all those joint-ventures, there has to be someone who will have to coordinate all those operations. And that is the NNPC.

You have just been appointed as Group Managing Director of the NNPC. As the new oil man of Nigeria, what do you want to achieve while being at the head of one of the biggest companies in Africa?

Capacity building. The institutional capacity is quite low, especially in the upstream sector, which is the backbone of the economy. We have already started to reassess that matter. We are bringing in very competent Nigerians from all over the world in a transparent and competitive scheme. By taking out X number of people and injecting highly proficient people then the system will be better off. All the transformation agenda will be pursued very aggressively. Keep in mind that I have been working on the other “building”, working on issues like liberalization, gas reforms and the reforms in the upstream area. Now that I am on the other side, I will pursue those changes aggressively.

Having known both sides of the sector, the private and the public, what would be your final message to the international business community interested into the Nigerian oil sector?

The opportunities are plenty. New licenses will be granted by January 2005. In the deep offshore a lot of world class discoveries are being made and people are understanding that the Gulf of Guinea is a centre of attraction in terms of deep off-shore exploration. At the same time, the gas reforms are meant to be finished and in January 2005 we will go live with our gas strategy. There will indeed be a lot of opportunities in that sector. In the downstream segment, because of the liberalization, there are already some possibilities. In terms of fiscal scheme, we have built quite an attractive structure. In the upstream, the government share is about 78%, which is quite attractive, in the deep off-shore area we are talking about a 50% government take and royalties are very low, having an overall fiscal scheme to be compared anywhere else in the world. The same goes for gas. In terms of stability of agreements, in Nigeria agreements are very stable. Even during the military area, all the engagements signed by our partners were respected. All these put together should give an investor the idea that Nigeria is an attractive place to put his money today.