Tinubu’s policy advisory council proposes sale of NNPC’s stake in oil, gas assets

The Policy Advisory Council of President Bola Tinubu has proposed the sale of the majority stakes of the Nigerian National Petroleum Company (NNPC) Limited in the upstream, midstream and downstream sectors of the oil and gas industry.

According to the Policy Advisory Council Report dated May 2023, the FG will gain around $17 billion from the sale of the NNPC’s controlling shares in the oil and gas assets.

Tinubu’s administration, according to submissions from the advisory council’s Energy and Natural Resources subcommittees, should consolidate regulatory agencies by merging the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), and the Nigerian Content Development and Monitoring Board (NCDMB) under a single regulator.

Austin Avuru, Olu Verheijen, AbdulRasaq Isa, Bashir Bello, Ifeanyi Ajuluchukwu, Doyin Akinyanju, Tinuade Sande, Ahmad Zakari, George Etomi, Nasiru Wada, Mohammed Abbas, and Segun Lawson are among the council members.

They proposed that the government set some goals for the first 100 days, which would finish in August 2023.
The council encouraged Tinubu’s administration to restructure NUPRC and NMDPRA in order to meet defined milestones and headhunt and install capable resources in key positions in the oil and gas sector.

The council also recommended that the president hire professional, tested, reform-focused leaders for NNPC and guarantee that the business fulfils its purpose as a commercial organisation as defined by the Petroleum Industry Act (PIA).

According to the Council, NNPC should be reinforced and placed in a position to pay taxes, royalties, and earnings to the Federation Account while being adequately governed by the NUPRC, NMDPRA, and NCDMB.

Though the president has removed the petrol subsidy, the council, which was formed when Tinubu was elected president, has also proposed deregulation of petrol pricing and implementing the Federal Direct Cash Transfer Programme, with a $8 billion Direct Cash Transfer to the poorest 30 million Nigerians.

The council told the president to work with key political and community stakeholders to address insecurity in oil-producing states, particularly Imo, Delta, Ondo, Rivers, Bayelsa, and Akwa-Ibom.

It urged for the military task force’s activities to be reformed with clearly defined key performance indicators (KPIs) and subsequent management to address weaknesses.

To enhance finance in the oil and gas sector, the council proposed a debt repayment system and a move to market prices for gas.

It emphasised the importance of Tinubu’s government enacting strong policies to unlock Nigeria’s energy potential in order to fuel economic growth and diversification while increasing energy security in the long run.

According to the Council, government should work to raise Nigeria’s oil and gas production to 1.8 million barrels per day (mbpd) and 3.5 billion cubic feet (bcf) in the next 18 months ending December 2024.

In addition, the advisory council urged President Tinubu to mandate NNPCL, NUPRC and NMDPRA to close out outstanding divestments and contract issues for project delivery clarity.

“The president should strip NNPCL of policy-making roles and keep NCDMB within its mandate as prescribed by the Local Content Act and integrate NUPRC, NMDPRA, and NCDMB into a single regulator or include all midstream activities into NUPRC’s scope,” the council said.

The advisory council also called for the expansion of domestic gas reserves and the promotion of the development of a diversified oil and gas industry by implementing reforms in the PIA, including the National Gas Transportation Network Code (NGTNC).

While proposing the development of a sustainable financing model to facilitate boost oil and gas development projects, the council stressed the need for the government to facilitate a third-party gas pricing framework for the export market.

In addition, the report advised the president to enact Fiscal Enablers for NAG and Deepwater via Finance Act and expand stabilisation in PIA to cover full credit for post-Final Investment Decision (FID) levies and taxes.

“Bring ready Brownfield Project onstream from 10 critical gas projects and oil projects at FID,” the report revealed.

Meanwhile, the council urged Tinubu’s government to achieve a daily crude oil production target of 2.5 million barrels per day and 5 billion cubic feet (bcf) of gas daily by May 2027.

The council also recommended that the NNPC should form global strategic partnerships with other co-venturers.
Tinubu’s advisory council also advised the new government to, “sell down interests in JVs to a minority position and develop an operating model that eliminates cash calls.

“Sell down/divest interests in the refineries and build the NLNG operating model and bring remaining Brownfield Project on-stream including 10 critical gas projects, oil and gas projects post FDP and pre-FID.

“Bring Greenfield Projects to FID to grow production, such projects included deepwater oil and NAG (Non-associated gas) projects, develop offshore gas hub, and FLNGs (Floating LNGs),” the report added.

According to the council, the Tinubu administration should restore Nigeria’s lost revenue by restoring oil and gas production with a view to ensuring that Nigeria Liquefied Natural Gas plants run at 100 percent capacity and unlock 12 gigawatts (GW) of stranded gas-fired power generation.

“The government should work towards growing the country’s oil and gas production capacity to 4 million barrels per day (bpd) and 12 bcf/d to domestic and export by 2030 and 25-30 GW of power generation by 2030.”

To diversify revenue sources and boost job creation, the advisory council emphasised the need for the government to convert oil and gas into industrial products and feedstocks, aggregate demand in industrial clusters and prioritise export-oriented projects to improve bankability.

While proposing the need for Nigeria to transition to Net-zero by 2060, the council said that gas should be used as a transition fuel to displace diesel and biomass, reduce emissions in operations, and drive energy efficiency.

In addition, the report recommended that “within the first 100 days, constitute a team to evaluate portfolios of upstream, midstream and downstream.

“Decision analysis to carry out a high-level valuation and establish the range of consideration, commence preliminary engagements with potential buyers and financiers.

“In the first 18 months, with assets up to $4.5 billion, the government should appoint an external investment banker, legal advisor and financial advisor to identify and test transaction principles with key buyers.

“They should establish the transaction process and execution time frame and assess market conditions for the transaction,” the report said.

Abubakar Ibrahim | Business Day

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