The Nigerian National Petroleum Corporation (NNPC) is the oil corporation through which the federal government of Nigeria regulates and participates in the country's petroleum industry.
Type: State-owned enterprise
Industry: Oil and Gas
Founded: 1977
Headquarters: Abuja
Products: Crude oil, Gas,
Petroleum products, Petrochemicals
Website: www.nnpcgroup.com
MISSION
An integrated Oil and Gas Company,
engaged in adding value to the nation’s hydrocarbon resources for the benefit
of all Nigerians and other stakeholders.
VISION
To be a world-class oil and gas
company driven by shared commitment to excellence.
HISTORICAL
The NNPC was established on April 1, 1977 as a merger of
the Nigerian National Oil Corporation and the Federal Ministry of Mines and
Steel.
It is empowered by law to manage the joint venture
between the Federal
Government and a number of International oil Companies, (IOCs)
including Royal
Dutch Shell, Agip, ExxonMobil, Chevron, and Texaco (now
merged with Chevron).
The activities include oil
exploration, refining, petrochemicals and products transportation as well as
marketing
Between 1978 and 1989, NNPC
constructed refineries in Warri, Kaduna and Port Harcourt and took over the
35,000-barrel Shell Refinery established in Port Harcourt in 1965.
Today, NNPC has its
headquarters Abuja, and zonal offices in Lagos, Kaduna, Port Harcourt and Warri, as
well as an international office in London, United Kingdom.
In 1988, the NNPC was
commercialised into 12 strategic business units, covering the entire spectrum
of oil industry operations: exploration and production, gas development,
refining, distribution, petrochemicals, engineering, and commercial
investments.
LEGAL
FRAMEWORK: The constitution bequeaths, all minerals, gas, and oil in
every part of the country to the Federal Government. As such, the NNPC
appropriates portions of their revenue to the government, which accrues nearly
60% of the revenue generated by the oil industry in this manner. The revenue
gained by the NNPC accounts for 76% of Federal Government revenue and 40% of
the entire country's GDP. As
of 2000, oil and gas exports account for 98% of Nigerian export earnings.
ORGANISATIONAL
STRUCTURE AND SUBSIDIARIES
The NNPC Group comprises the NNPC Board, the Group
Managing Director's office, seven operational units as listed below. Each of
the Unit is headed by a Chief Executive Officer (CEO). Its Divisions are headed
by Group General Managers (GGM) while its subsidiary companies are headed by
Managing Directors.
Currently, the subsidiary companies
include:
•
Nigerian Petroleum Development Company (NPDC)
•
The Nigerian Gas Company (NGC)
•
The Products and Pipelines Marketing Company (PPMC)
•
Integrated Data Services Limited (IDSL)
•
National Engineering and Technical Company Limited (NETCO)
•
Hydrocarbon Services Nigeria Limited (HYSON)
•
Warri Refinery and Petrochemical Co. Limited (WRPC)
•
Kaduna Refinery and Petrochemical Co. Limited (KRPC)
•
Port Harcourt Refining Co. Limited (PHRC)
•
NNPC Retail
•
Duke Oil
In addition to these subsidiaries,
the industry is also regulated by the Department of Petroleum Resources (DPR),
a department within the Ministry of Petroleum Resources. The DPR ensures
compliance with industry regulations; processes applications for licenses,
leases and permits, establishes and enforces environmental regulations. The
DPR, and NAPIMS, play a very crucial role in the day to day activities
throughout the industry.
CORE VALUES BINDING STAKEHOLDRES
•
Respect for the Individual
•
Staff development and growth
•
Integrity, transparency and accountability
•
Professional Excellence
JOINT VENTURE OPERATIONS WITH
IOCs
Nigeria currently operates two
contract models to aid funding and exploration of oil and gas projects. These
are:
- Joint Ventures (JV) under Joint Operating Agreements (JOAs) between international oil companies (IOCs) and NNPC, with NNPC representing the interest of the Nigerian government; and
- Production Sharing Contracts (PSCs) with IOCs.
The principal contract model for the
purpose of exploration and production of resources was the joint venture arrangement.
The JVs typically govern onshore/shallow water projects. This was introduced in
1986 following the global oil glut. Under this arrangement, each of the
partners to the JV has an obligation to contribute financially, to the extent
of the percentages held in the contract, towards the exploration and
development of the oil and gas blocks. These are called cash calls. All parties
are entitled to their share of oil after fiscal deductions have been made,
including royalties paid to government and petroleum profit tax. NNPC,
possessing majority of the shares in these arrangements, however, has been
unable to fund its equity participation in the joint ventures (JV) .This has
led this arrangement to be increasingly unmanageable.
To end this situation, the Production
Sharing Contracts (PSCs) were introduced in 1993 and was backed by the Deep
Offshore and Inland Basin Production Sharing Contracts Decree No. 9 of 1999 as
amended, referred to as the PSC law This law amends both the general Petroleum
Act 1969 (as amended) and the Petroleum Profit Tax Act (as amended). These
pre-existing petroleum laws are to be read in conformity with the PSC law. In
other words, the PSC law prevails in the event of any inconsistency between the
provision of the PSC law and any other pre-existing law The PSCs typically, but
not always, govern deep-water projects.
Under this arrangement, NNPC enters
into an agreement with the International Oil Company (IOC). However, NNPC does
not have a contractual financial obligation to aid the exploration and
exploitation of oil blocks The IOC singly explores, exploits and bears all the
risks and costs of exploiting oil and gas deposits which are covered by its
license. In the event that there is no commercial discovery of oil in area
covered by the license, the IOC does not recover any cost. However, in the
event of a commercial find, the IOC is entitled to recover its investments
through “cost oil”. After the payment of royalty oil and tax oil to the
government, the parties to the PSC share the “profit oil”.
Crude oil swap deals are used to
make sure that there is a constant supply of refined petroleum products to meet
the energy demand in the country. NNPC has a mandate to supply the country with
petroleum products. Hence, it is allocated 445,000 barrels of crude per day to
achieve this. However, because the Nigerian refineries run at very low 18-20%
capacity, Nigeria usually has about 222,500 barrels of oil left from its
allocation of 445,000 barrels per day NNPC thus allocates the rest of the crude
oil to oil trading companies through a “swap arrangement” which mandates the
company to supply Nigeria refined petroleum products in exchange for crude oil.
Crude swaps occur in two forms:
a. A trader lifts cargo of NNPC oil
for export. Instead of paying cash for the oil, trader brings back refined
petroleum products purchased from a 3rd party as in-kind payment. This
transaction contractually should occur within 30 days of the date on the oil
cargo’s bill of lading; or
b. A foreign refinery lifts, transports
and refines cargoes of Nigerian crude, then ships the results back to PPMC.
Again, the oil is paid for (mostly) in kind rather than with cash. This should
occur within 35days of the date on the oil cargo’s bill of lading.
While this arrangement has proved
useful as a stopgap measure to ensure stable inflow of petroleum products in
Nigeria, there are reports that show that the swap deals are plagued with
corrupt practices principally because there are limited or no information
available the swaps The Joint House Committee on Petroleum Resources Upstream
Downstream and Justice, in 2014, made a critical observation showing that some
trading companies would sometimes lift crude oil without supplying appropriate
petroleum products.Also, recent analysis shows that Nigeria loses money in
logistics costs from refining the crude abroad and the use of several smaller
vessels to deliver the products from the mother vessel that is usually berthed
in Lome These unclear issues have led to the advocacy for abolition of swap
deals or for better transparency and accountability of the entire process
The NNPC has 6 joint ventures
involving Foreign owned oil companies. There are;
1.
Shell Petroleum Development Company of Nigeria
Limited (SPDC):
2.
Chevron Nigeria Limited (CNL):
3.
Mobil Producing Nigeria Unlimited
(MPNU):
4.
Nigerian Agip Oil Company Limited
(NAOC):
5.
Maidstream Ventures including , Greenfield Refinery Initiative,
Refineries & Petrochemicals, Nigerian Gas Master Plan, Renewable Energy and
Gas & Power
6.
Downstream Ventures
CORRUPTION ALLEGATION IN THE NNPC
The NNPC came under public
attack especially during the last regime after allegations of corruption were
leveled against it. Some of the corruption allegations are as follows:
Non
Remittance of revenue to Federation account:
The Auditor General of the Federation (AuGF) declared to the
National Assembly on the 14th of March 2016 that NNPC has failed to
remit the sum of N3.235Trillion to the Federation Account for the
period ended 31st December 2014.
Also, on the 9th
of December 2013, a letter from then Central
Bank of Nigeria (CBN) Governor , Mallam Sanusi Lamido Sanusi to the
President, dated 25 September 2013 , accused the NNPC of failing to remit funds to the Federation
account between 2013 and 2014, amounting
over $49.8 billion.
A Reconciliation Committee (comprising representatives of
(i) CBN (ii) NNPC (iii) DPR (iv) FIRS (v) OAGF (vi) The Budget Office of the
Federation (vii) Federal Ministry of Finance (viii) Federal Ministry of
Petroleum Resources) was set up.
The Reconciliation Committee estimated unremitted funds
at $10.8bn on 18 December 2013 while CBN changed its claim to $12bn. An independent Forensic Audit report of the NNPC by PwC showed that the total cash remitted into the
Federation accounts in relation to crude oil liftings was $50.81bn and NOT
$47bn as earlier stated by the Reconciliation Committee for the period from
January 2012 to July 2013.
No staff of the NNPC or Ministry of Petroleum has so far
been punished, though on Thursday, 20 February 2014, the whistle-blowing CBN
Governor was suspended from office by the President.
KPMG Report
In December 2011, the federal permitted a forensic report conducted by KPMG to be
published. The audit, commissioned by the Ministry of Finance following
concerns over the NNPC’s transparency, detailed the NNPC’s sharp business
practices, violation of regulations, illegal deductions of funds belonging to
the state, and failure to account for several billions of naira that should go
to the federation account.[3]
Auditors allegedly found that between 2007 and 2009
alone, the NNPC over-deducted funds in subsidy claims to the tune of N28.5
billion. It has not been able to account for the sum ever since.[4]
Willbros Group Inc
Also, in May 2008, Willbros Group Inc,
a US company, admitted to making corrupt payments totaling over $6.3 million to
officials at the NNPC and
its subsidiary NAPIMS, in return for assistance in obtaining and retaining
contracts for work on the Eastern Gas Gathering System (EGGS).[5]
ABB Vetco Gray
Yet again, in July 2004, ABB Vetco Gray, a US
company, and its UK subsidiary ABB Vetco Gray UK Ltd, admitted to paying over
$1 million in bribes to officials at NNPC subsidiary NAPIMS in exchange for
obtaining confidential bid information and favourable recommendations from
Nigerian government agencies.[6]
In November 2013 after a report was published by Swiss
Non-governmental advocacy organization - Erklärung
von Bern - allegations of heavy fraud surfaced, placing the NNPC under
suspicion of siphoning off $6.8 billion in crude oil revenues.
NEITI:
The Nigerian Extractive Industries
Transparency Initiative, NEITI, in its recent report indicted the NNPC for
withholding and short-changing the country of over $13.29 billion over a nine-year
period. NEITI in its Audit Report for 2013, had accused the NNPC and its
subsidiaries of failing to remit $3.8 billion and N358.3 billion in 2013, and
over $12 billion between 2005 and 2009, stating that these outstanding payments
were due from unpaid consideration from divested Oil Mining Leases (OML), cash
call refunds, crude oil liftings and Nigeria Liquefied Natural Gas, NLNG,
dividends over a nine-year period.
In addition to the indictment by
NEITI, the NNPC had been accused on a number of occasions of large scale graft,
and serving as a conduit for the diversion of the country’s finances to private
account. The NNPC had also been accused of entering into deals that were
detrimental to the economy of the country among others.
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