Nigeria targets sale of 40 percent of new state oil firm

Nigeria plans to split the Nigerian National Petroleum Corporation (NNPC) into two to help ease a planned stake sale of at least 40 per cent of a newly created National Petroleum Co (NPC) in coming years, according to a draft of a long-awaited oil bill seen by Reuters.

The bill envisages the sale of at least 10 per cent of NPC over five years, and is targeting 40 per cent or more over 10 years. The transaction is expected to fix a cash shortage that is hampering investment at NNPC and end graft.

The National Assembly is to start debating within days the amended Petroleum Industry Bill (PIB), in the works for a decade and designed to change everything from taxes to environmental rules and revenue sharing, as well as overhauling NNPC.

Lawmakers have not previously been able to agree on the 200-page bill, but President Muhammadu Buhari has made its passing a priority as he seeks to overhaul the oil and gas sector, which accounts for 70 percent of state income.

NNPC’s output has been stagnant at around two million barrels a day for years as the company struggles with graft, bureaucracy and funding problems.

To accelerate the reform process, the nation is breaking up the bill, with the first part dealing with the reform of NNPC, a pet project of Buhari.

“Divestment of shares … may include the sale or transfer of shares to institutional or strategic investors,” the draft said, without giving more details.

A sale of at least a 10 per cent stake in the new firm is to take place within five years, with the rest to happen within 10 years, the bill says. The previous draft had called for a 30 per cent sale within six years.

It gave no reason for the longer timeframe, but a source involved in the draft, said selling a larger stake was intended to raise more funds and help minimise the risk of corruption, because of the greater influence of outside investors and private firms.

“Bidding is open to international investors,” the source said.

Part of Nigeria’s output comes from joint ventures (JV) with foreign and local companies in which NNPC holds the majority stake. However, NNPC is always behind on covering its share of costs owing to the slow pace of government approvals, explaining the need for outside funding.

The act that created NNPC decades ago contained legal grey areas which allowed mismanagement to go unchecked and billions of dollars in revenue to go seemingly unaccounted for.

NPC will look after JVs mainly with oil majors, while the second company to be created from NNPC, dubbed NPAM, will manage all production-sharing contracýts and service agreements, a second source involved in drafting the bill said.

The draft bill already lists 26 licences but the source said there would be many more.

The second source involved in the drafting also said that the other bills which would be part of the overall reform of the energy sector have not yet been finalised.