Why Nigeria petroleum industry needs restructuring- Cyril Odu

Cyril Odu

By Oluwagbenga Bankole

A former Chief Financial Officer at Mobil Producing Nigeria and presently Executive and Partner at African Capital Alliance Mr. Cyril Odu has stated that the declining oil prices on the back of ample supply and slowing global economic growth, inability to fund joint ventures leading to production decline and acute shortage of gas with significant growth in domestic gas demand are some of the reasons Nigeria Oil and Sector need restructuring.

Speaking at a forum recently in Lagos, Odu said the industry is currently undergoing weak and volatile recovery, adding that it is currently having significant impact on government revenues.

Odu further stated the 53 per cent JV volumes declined in last ten years,the growing of PSC volumes by 1200 per cent over same period and JV underfunding as one of the reason this present government must restructure the sector, adding the decline set to worsen given government budgetary constraints.

He also said the government should find a drastic solution to the inadequate integration between gas producers and Nigeria National Petroleum Corporation.

“Other typical reasons why I think the oil and gas sector need restructuring include, Crude oil evacuation challenges leading to unsustainable downtime up to 30% for onshore, NPDC operatorship funding and management issues, downstream sector deregulation outstanding and continuous holding back of significant investments in the sector due to the cloud of uncertainty around the passage of the Petroleum Industry Bill (PIB),” he stated.

He advised the government to separate the Ministry of Energy and Ministry of Petroleum Resources from NNPC.

Odu also implored that government to sell the federation JV equity and exit operations in stages to the private sector, stating that this would immediately raise significant cash for the Government, and transfer the financing burden to the private sector.

He further stated that; “with enhanced production, (new) private partners will still pay royalties & taxes. Hence, 90% of net revenues continue to go to Federation versus current 94% government take (assuming continued NNPC participation at the same level) but with a reduced burden to the national budget. Evidently, this is not a sale of family silver as some think.”