The Nigerian National Petroleum Company (NNPC) may metamorphose into a Limited Liability Company (LLC) according to the steps taken in the petroleum industry reform bill to amend changes to deepwater royalties and create new regulatory bodies.
The legislation proposes the creation of the Nigerian National Petroleum Company Limited that will inherit the assets and liabilities of the NNPC to be determined the Minister of Petroleum and the Minister of Finance as well as the establishment of Nigerian Upstream Regulatory Commission and The Nigerian Midstream and Downstream Petroleum Regulatory Authority.
The government would then pay cash for shares of the company and it would operate as a commercial entity without access to state funds.
The changes could make it easier for the struggling company to raise funds. However the bill does not require government to sell shares in the company and, unlike previous reform proposals, does not set a deadline for privitisation to be completed.
The bill proposes that the petroleum minister shall within 6 months from the commencement of the Act, incorporate a limited liability company called the Nigerian National Petroleum Company Limited (NNPC Limited) under the Companies and Allied Matters Act.
Sections of the bill state, “The Minister (of Petroleum) and the Minister of Finance shall determine the assets, interests and liabilities of NNPC to be transferred to NNPC Limited or its subsidiaries and upon the identification, the minister shall cause such assets, interests and liabilities to be transferred to NNPC Limited.
“Assets, interests and liabilities of NNPC not transferred to NNPC Limited or its subsidiary under subsection 1 of this section shall remain the assets, interests and liabilities of NNPC until they become extinguished or transferred to the government.’’
“NNPC shall cease to exist after its remaining assets, interests and liabilities other than its interests, assets, and liabilities transferred to NNPC Limited or its subsidiaries under subsection 1 of this section shall have been extinguished or transferred to the government.”
“The minister shall be at the incorporation of NNPC Limited, consult with the Minister of Finance to determine the number and nominal value of the shares to be allotted which shall form the initial paid-up share capital of the NNPC Limited and the government shall subscribe and pay cash for the shares.’’
It also states that the “ownership of all shares in NNPC Limited shall be vested in the government at incorporation and held by the Ministry of Finance incorporated on behalf of the government.”
The bill also states that the proposed Nigerian Upstream Regulatory Commission will be responsible for the technical and commercial regulation of upstream petroleum operations while the new Nigerian Midstream and Downstream Petroleum Regulatory Authority shall be responsible for the technical and commercial regulation of midstream and downstream petroleum operations in the petroleum industry.
The legislation would also amend controversial changes to deep offshore royalties made late last year by cutting the royalty that companies pay the government for offshore fields producing less than 15,000 barrels per day to 7.5% from 10%.
It would change a price-based royalty too, so that it kicked in when oil prices climbed above $50 per barrel, rather than $35.
It would also codify in law that companies cannot deduct gas flaring penalties from taxes, a practice that was the subject of a court case.
The measure would also scrap the Petroleum Equalisation Fund (PEF), which used to distribute cash to keep nationwide petrol prices uniform and create new regulatory bodies, scrapping the Petroleum Products Pricing Regulatory Agency (PPPRA) and transferring to a new commission many of the tasks currently handled by the Department of Petroleum Resources (DPR).