He also stated that the country no longer has the resources to fund its oil and gas industry, and it is therefore, considering and developing new models of financing for the industry in the days ahead.
Kachikwu, who spoke at a town-hall meeting in Abuja, yesterday, disclosed that in January 2016, the final decision on the fate of the country’s refineries would likely be made. He also stated that arrangements have been concluded to adopt a price modulation mechanism that would see the corporation setting a price ceiling of between N87 and N97 per litre for Premium Motor Spirit, PMS, also known as petrol.
Kachikwu, who doubles as the Group Managing Director of NNPC said, “Financing is going to be a key component of our goal, because new models of financing would have to emerge. The country does not have the sort of resources to continue to fund the oil industry. As we go upstream, we are going to begin to see a lot of innovative financing mechanism to provide funding for the oil industry.”
“My dream, if I achieve it, is that by the end of 2016, we would completely exit cash calls and be able to find our funds one way to help support our business and get a lot more autonomy in terms of running the industry and report, basically, profit to the Federal Government.”
On the unbundling process, Kachikwu said the NNPC would be broken into four key components, namely: the upstream company, downstream company, the midstream company, which is gas and power marketing, and the refining group holding company.
According to him, one of the major restructuring efforts would be in making the headquarters operations cost effective, hence, about more than half of its 2,200 core headquarters staff would be whittled down, with a lot of the affected staff a$$igned to the subsidiaries to help make the units more efficient and profitable.
Kachikwu said, come January 2016, strategic decisions would be made in terms of what areas of the country’s refineries would be closed to allow for full re-kitting before reopening them for operations, while it would also be considering the best operating model for the refineries.
“Ultimately, technical support, technical services, and technical joint venturing would also be models we would be looking at and reviewing in terms of the refineries. The whole idea is find the funds, find the right skills that you need, support the skills that you have and try to give out, real-time, above 90 per cent consistent performance in refining.”
On the issue of fuel subsidy removal and subsequent hike in the price of PMS (Petrol), Kachikwu stated that, “One thing we are very committed to next year, is to reduce the level of Federal Government subsidy, if any, to the industry, so that the industry can grow on its own strength. We can do that without the mechanism of saying subsidy is being removed or whatever, but have a benchmark approach to setting prices. We are going to see a lot more quarterly type analysis of what prices would go for the downstream industry, relative to the price of crude oil,” he stated.
“The report that fuel is going to sell for 97 was not a correct. I did not say refined products will sell for N97. I said that between a band of N87 and N97 per litre, we are going to be looking at prices. Today, the prices are largely close to N87, so there might be no need to change prices,” he added.
The minister also disclosed that the Federal Government was considering allocating a number of marginal oil fields to the Nigerian Petroleum Development Company (NPDC), if it performs creditably, so as to help it increase its crude oil reserves base.
He also disclosed that a much more focused audit would be conducted on the operations and activities of the NPDC, to ascertain its a$$et base and also determine whether it is increasing or depleting its reserves.
Speaking on NNPC’s financials, he said: “Most of the management accounts up to 2014 are fairly finished; we are now looking at external audits. Audits were last done in 2010. We have brought the management accounts up to current; the external audits are ongoing; the 2012 to 2014 audits we expect would be done by March next year, which would bring us likely current.”
According to Kachikwu, the focus of the Federal Government is to get the NNPC back to profitability to ensure the sustenance of the company, while it is also targeting an increase of Nigeria crude oil production to 2.4 million per day in 2016.
“For upstream there are some key essentials, average production for most of last year was 2.19 million barrels per day, while we think we ought to be able to move forward a little bit to 2.4 million barrels in 2016. To do that there are key things that needs to be looked at.”
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