NIGERIAN OIL & GAS: A MIXED BLESSING? A Chronicle of NNPC's. Unfulfilled Mission MA OLORUNFEMI AKIN ADETUNJI ADE OLAIYA. Prestige

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1 NIGERIAN OIL & GAS: A MIXED BLESSING? A Chronicle of NNPC's Unfulfilled Mission BY MA OLORUNFEMI AKIN ADETUNJI ADE OLAIYA Prestige

2 CONTENTS LIST OF ABBREVIATIONS AND ACRONYMS ACKNOWLEDGEMENTS FOREWORD INTRODUCTION XIII XV XIX XXIII CHARTER ONE 1 EVOLUTION OF THE PUBLIC SECTOR OF THE NIGERIAN OIL INDUSTRY OIL PROSPECTING ACTIVITIES IN NIGERIA 1 EMERGENCEOF THE PUBLIC SECTOR IN 2 THE NIGERIAN OIL INDUSTRY FEDERAL GOVERNMENT OWNERSHIP 4 OF OIL AND OIL OPERATIONS OIL AS A TOOL FOR DEVELOPMENT 4 STRUCTURAL DEVELOPMENT OF OIL MINISTRY 4 PANACEA TO MANPOWER SHORTAGE 7 LIST OF SUPERINTENDING MINISTERS OF 8 PETROLEUM SINCEINDEPENDENCE TILL DATE INDIGENOUS PIONEERS OF THE PUBLIC 9 SECTOR OF THE OIL INDUSTRY

3 CHARTER TWO 13 DEVELOPMENT OF PETROLEUM POLICES THE PRE- AND POST-INDEPENDENCE DEVELOPMENT 13 OF POLICIES IN THE OILINDUSTRY FEATURES OF EARLY POLICY FORMULATION 14 STRATEGIC PROMULGATION OF PETROLEUM 19 DECREE 51 OF 1969 DEVELOPMENT OF POLICIES IN THE NIGERIAN 19 OIL AND GAS INDUSTRY Concession Policies 21 Acreage Delimitation and Allocation Formula 22 Petroleum Conservation Policy 23 Manpower Development Policies 23 Indigenous Participation 23 LOCAL CONTENT 26 FRONTIER EXPLORATION ACTIVITIES 26 IN THE PETROLEUM INDUSTRY OFFSHORE, DEEP WATER ACTIVITIES 27 EVENTS LEADING TO GRANTING SPECIAL FISCAL 28 INCENTIVES FOR THE EXPLORATION AND DEVELOPMENT OFDEEP OFFSHORE FIELDS THE JOURNEY TOWARDS GAS UTILIZATION 30 AND COMMERCIALISATION CONCEPT OF INDEPENDENT POWER PRODUCER (IPP) AS A GAS 31 UTILIZATION POLICY GOVERNMENT INVOLVEMENT IN DOWNSTREAM 32 AND PRODUCTS PRICING PETROLEUM UNIFORM PRICING POLICY 36 PARTICIPATION IN UPSTREAM THROUGH NNOC AND NNPC 38

4 CHARTER THREE 41 ORGANISATION OF PETROLEUM EXPORTING COUNTRIES (OPEC) THE FORMATION OF OPEC AND THE STRUGGLE FOR CONTROL 41 OFCRUDE OIL PRICING Structures and Operations 43 Nigeria's Membership of OPEC 45 ASSESSING THE BENEFITS OF NIGERIA S OPEC MEMBERSHIP 46 CHARTER FOUR 49 THE NIGERIAN NATIONAL OIL CORPORATION AND ITS ACTIVITIES THE FORMATION OF THE NIGERIAN NATIONAL 49 OIL CORPORATION The Internal Considerations 49 The External Considerations 50 NNOC - THE INITIAL ADMINISTRATIVE HICCUPS 51 CHARTER FIVE 57 THE VISION OF NIGERIAN NATIONAL PETROLEUM CORPORATION THE FORMATION AND OPERATIONS OF NIGERIAN 57 NATIONAL PETROLEUM CORPORATION TAKE-OFF STRUCTUREOFNNPC 58 ENGINEERING DIVISION 60 EXPLORATION AND EXPLOITATION DIVISION 61 COMMERCIAL DIVISION 63 THE PETROLEUM INSPECTORATE 65

5 The Fields Operation Department 66 The Conservation Department 66 The Processing Department 67 The Marketing Department 61 The Planning and Management Department 67 Office of the Head of Inspectorate 68 SECTORIAL DEVELOPMENT 68 CHARTER SIX 71 THE STAKEHOLDERS AND CONTENDING POLICY ISSUES EARLY PERSPECTIVES ON OIL REVENUE 71 MILITARY ADMINISTRATION AND ATTEMPTS 72 AT POPULIST POLICIES MILITARY ADMINISTRATION AND THE RISE OF POLITICAL 74 PATRONAGE FEDERAL CHARACTER AND CORPORATION'S NEED FOR MERIT 75 DIVERTING THE NNPC FROM ITS CORE BUSINESS 76 IN-BUILT CONSTRAINTS TO SOUND CORPORATE 77 GOVERNANCE GOVERNMENT POLICIES AND THE MIRAGE OF DEVELOPMENT 77 CHARTER SEVEN 81 THE CHALLENGES OF PETROLEUM PRODUCT SHORTAGES GOVERNMENT ACQUISITION OF REFINERIES 81 STRATEGIC PETROLEUM PRODUCTS STORAGE 83 OTHER METHODSINTRODUCED TO TACKLE FUEL SHORTAGE 84

6 PETROLEUM EQUALISATION FUND (PEF) 86 SCARCITY OF PETROLEUM PRODUCTS AND THE 87 DISINTERESTEDNESS OF PRIVATE INVESTORS IN REFINERIES GOVERNMENT INTERVENTION IN PRODUCT PRICING, 88 DISTRIBUTION AND MARKETING CHAPTER EIGHT 91 COMMERCIALISATION OF NIGERIAN NATIONAL PETROLEUM CORPORATION (NNPC) HISTORICALBACKGROUND 91 DESIGNING NNPC'S COMMERCIALISATION 92 CONSEQUENCES 95 CHAPTER NINE 97 COMPARATIVE ANALYSIS OF NATIONAL OILCOMPANIES THE FORMATION OF NATIONAL OIL COMPANIES 97 ACQUISITION OF PARTICIPATIONINTEREST AND THE 99 GROWTH NOCs THE ASCENDANCY OF NATIONAL OIL COMPANIES (NOCs) 100 INDICES FOR THE SUCCESS OF NATIONAL OIL COMPANIES 101 BROAD CLASSIFICATION OF NOCs 102 CHANGING MARKET SITUATION 104 POSITION OF NNPC AMONG WORLD NATIONAL OIL 105 COMPANIES NATIONAL PETROLEUM INVESTMENT MANAGEMENT 110 SERVICES (NAPIMS)

7 CHARTER TEN THE UNFULFILLED DREAM III INTRODUCTION 111 CONSEQUENCES OF NON-CAPITALISATION 112 EROSION OF PROFESSIONAL AUTHORITY 112 INFRASTRUCTURAL COLLAPSE 113 DEARTH OF RESEARCH AND DEVELOPMENT 114 CONCLUSION IIS CHARTER ELEVEN 117 THE WAY FORWARD TO A FULLY INTEGRATED AND PROFITABLE NATIONAL OIL COMPANY WHAT NAPIMS MUST DO TO IMPROVE HER PERFORMANCE 119 AND IMAGE APPENDIX 1: LIST OF NNPC CHIEF EXECUTIVES TILL DATE 124 ANDTHEIRTENURES APPENDIX 2: LIST OF POST-1988 SUBSIDIÄRES 125 AND THEIR FUNCTIONS APPENDIX 3: START-UP OFFICERS-IN-CHARGE OF NNPC 126 INDEX 129 ABOUTTHEAUTHORS 139