Identifier
Created
Classification
Origin
07LAGOS602
2007-08-30 15:35:00
CONFIDENTIAL
Consulate Lagos
Cable title:
NIGERIA ANNOUNCES REORGANIZATION OF ENERGY SECTOR
how-toVZCZCXRO4641 PP RUEHPA DE RUEHOS #0602/01 2421535 ZNY CCCCC ZZH P 301535Z AUG 07 FM AMCONSUL LAGOS TO RUEHZK/ECOWAS COLLECTIVE PRIORITY RUEHUJA/AMEMBASSY ABUJA PRIORITY 9156 RUEHC/SECSTATE WASHDC PRIORITY 9375 INFO RUEHBJ/AMEMBASSY BEIJING 0099 RUEHWR/AMEMBASSY WARSAW 0507 RUEHCD/AMCONSUL CIUDAD JUAREZ 0487 RUEHIT/AMCONSUL ISTANBUL 0484 RUEHSO/AMCONSUL SAO PAULO 0447 RUFOADA/JAC MOLESWORTH AFB UK RUEKJCS/SECDEF WASHINGTON DC RUCPDOC/DEPT OF COMMERCE WASHDC RHEBAAA/DEPT OF ENERGY WASHINGTON DC RUEATRS/DEPT OF TREASURY WASHDC RUEAIIA/CIA WASHINGTON DC RHEFDIA/DIA WASHINGTON DC
C O N F I D E N T I A L SECTION 01 OF 03 LAGOS 000602
SIPDIS
SIPDIS
STATE FOR AF/W, INR/AA, DS/IP/AF, DS/ICI/PII, DS/DSS/OSAC
OSLO FOR HELENA SCHRADER
DOE FOR GPERSON, CAROLYN GAY
TREASURY FOR ASEVERENS, SRENENDER, DFIELDS
COMMERCE FOR KBURRESS
STATE PASS USTR FOR ASST USTR FLISER
STATE PASS TRANSPORTATION FOR MARAD
STATE PASS OPIC FOR ZHAN AND MSTUCKART
STATE PASS TDA FOR NCABOT
STATE PASS EXIM FOR JRICHTER
STATE PASS USAID FOR GWEYNAND AND SLAWAETZ
E.O. 12958: DECL: 08/30/2017
TAGS: EPET ENERG PGOV NI
SUBJECT: NIGERIA ANNOUNCES REORGANIZATION OF ENERGY SECTOR
LAGOS 00000602 001.2 OF 003
Classified By: Consul General a.i. Donald McConnell; Section 1.4 (B,D)
C O N F I D E N T I A L SECTION 01 OF 03 LAGOS 000602
SIPDIS
SIPDIS
STATE FOR AF/W, INR/AA, DS/IP/AF, DS/ICI/PII, DS/DSS/OSAC
OSLO FOR HELENA SCHRADER
DOE FOR GPERSON, CAROLYN GAY
TREASURY FOR ASEVERENS, SRENENDER, DFIELDS
COMMERCE FOR KBURRESS
STATE PASS USTR FOR ASST USTR FLISER
STATE PASS TRANSPORTATION FOR MARAD
STATE PASS OPIC FOR ZHAN AND MSTUCKART
STATE PASS TDA FOR NCABOT
STATE PASS EXIM FOR JRICHTER
STATE PASS USAID FOR GWEYNAND AND SLAWAETZ
E.O. 12958: DECL: 08/30/2017
TAGS: EPET ENERG PGOV NI
SUBJECT: NIGERIA ANNOUNCES REORGANIZATION OF ENERGY SECTOR
LAGOS 00000602 001.2 OF 003
Classified By: Consul General a.i. Donald McConnell; Section 1.4 (B,D)
1. (C) Summary: On August 29, the Government of Nigeria
announced the decision to "unbundle" the Nigerian National
Petroleum Corporation (NNPC) and to create five new
independent agencies. International oil companies (IOCs)
were aware of the plan to restructure, but did not expect it
to take place so quickly. Whether the problems associated
with implementing the new plan will outweigh the potential
gains in efficiency from the restructuring remains to be
seen. End Summary
2. (U) On August 29, the Government of Nigeria (GON)
announced the decision, taken that day by the Federal
Executive Council, to "unbundle" the Nigerian National
Petroleum Corporation (NNPC) and to create five new
independent agencies. Minister of State for Energy
(Petroleum) announced to the press that the Ministry of
Petroleum Resources will become the National Petroleum
Directorate (NPD). A new National Oil Company (NOC) will
assume the core functions of the NNPC. The National
Petroleum Investment Management Services Company (NAPIMS),a
division of NNPC, will be replaced by the National Oil and
Gas Assets Holding and Management Company (NOGAHAMC). The
Department of Petroleum Resources (DPR),currently a division
of the Ministry of Petroleum Resources, will become the
Petroleum Inspectorate Commission (PIC). The Petroleum
Products Distribution Agency will replace the Pipeline
Product Marketing Company (PPMC),also a division of NNPC.
3. (U) According to press reports, the energy sector
reorganization is the harmonized result of recommendations by
the Oil and Gas Reform Committee, commissioned by former
President Obasanjo in 2000 and chaired by the Honorary
Strategic Advisor to the President on Energy Rilwanu Lukman;
and by a committee established by the National Council on
Privatization to examine the oil and gas industry. The
harmonized report, called "Roadmap for the Restructuring of
the Oil and Gas Industry in Nigeria" was reportedly submitted
to President Yar'Adua in June by the Secretary to the
Government of the Federation, Alhaji Babagana Kingibe.
National Oil Company Free of Government Control
-------------- --
4. (U) Under the new arrangement, the NOC will conduct
itself like a private oil and gas company. The Petroleum
Inspectorate Commission (PIC) will be an agency independent
of the Ministry of Energy, and will be empowered to provide
effective monitoring of the industry. Fuel importation will
be supervised both by PIC and the Petroleum Products
Distribution Agency (PPDA),and the refineries will be
privatized. Plans also call for further unbundling of the
Nigerian Gas Company as well as pipeline and storage
facilities into gas transmission and gas
distribution/marketing companies, press reports stated.
5. (U) The Federal Executive Council also mandated
implementation of the National Oil and Gas Policy (NOAGP) to
take place within the next six months. One of the goals of
the policy is to make Nigeria self sufficient in the energy
sector, according to press reports. In a third, related
move, the FEC approved the constitution for the National
Council on Energy (NCE) to implement and fine-tune the NOAGP,
which includes the restructuring of the energy sector. The
NCE will be chaired by President Yar'Adua. Other members of
LAGOS 00000602 002.2 OF 003
the Council are Vice President Goodluck Jonathan, who will
function as Deputy Chair; Odein Ajumogobia, Minister of State
for Energy (Petroleum); Minister of State for Energy (Gas)
Olusina Emmanuel, and Minister of State for Energy (Power)
Mrs. Fatima Ibrahim; Attorney General and Minister of Justice
Michael Aondoakaa; Minister of Finance Shamsudeen Usman;
Minister of National Planning Sannusi Daggash; Strategic
Advisor to the President on Energy Rilwanu Lukman; and
National Security Advisor General Ibrahim Mukhtar. Four
additional members will be appointed by the President.
6. (U) In press reports, Minister Ajumogobia said that the
establishment of the NCE is a condition precedent to the
declaration by the President of a state of emergency in the
energy sector.
IOCS Expected Reorganization But Timing a Surprise
-------------- --------------
7. (C) John Chaplin, Managing Director of ExxonMobil, told
Poloff that the company had known "bits and pieces" of the
reorganization plan, but that the timing of the announcement
had come as a surprise. The company had seen the Lukman
Committee report as early as 2002. Chapman believes the
thrust of the reform is to give Nigeria a national oil
company that functions the way a company should. The change
would allow the NOC to control its own revenue and to raise
needed funds from the capital markets. This is an important
change, Chaplin noted, because currently NNPC is completely
in the dark as to its profits or losses; requests for profit
and loss statements go unanswered because NNPC does not have
them. The impact of the change in NAPIMS is less clear, he
said. Work with NAPIMS is a challenge for international oil
companies (IOCs),but at least now the IOCs can go over
NAPIMS head for occasional help from NNPC to force decisions
to be made. NAPIMS, because it approves all contracts, is
seen by most as "an opportunity to make money"; a whole
industry has grown up in which people insert themselves into
the contracting process in the hope of making money on the
deal. Whether the changes will help with this problem or
create other efficiencies remains to be seen, he said.
8. (C) Ann Pickard, Regional Executive Vice President for
Shell Oil, said that she and executives from Shell Petroleum
and Development Corporation (SPDC) of Nigeria met earlier in
the week with the President and the Minister of State for
Energy (Petroleum) and received "no signals" that the
restructuring was imminent.
9. (C) O.B. Haffner, Corporate Affairs Manager of Total
Nigeria Ltd. said he had been aware that the restructuring
was coming. Speaking about the downstream end of the
business, which he oversees, Haffner said that replacing the
Petroleum Products Distribution Agency with the new Pipeline
Product Marketing Company (PPMC) could help assure that
petroleum products are more evenly distributed around the
country, to the benefit of states in the northern part of the
country. Currently, massive quantities of imported fuel are
pumped into the tanks of marketers in Lagos, where the bulk
of the imported product is sold. The marketers then truck
the remainder to other parts of the country for sale at
prices higher than the regulated price.
Reorganization Will Not Affect Existing Contracts
-------------- --------------
LAGOS 00000602 003.2 OF 003
10. (C) Olisa Agbakoba, President of the Nigerian Bar
Association, downplayed fears expressed by some that the
reorganization would interfere with existing contracts or
ongoing court cases to which NNPC is a party. Under the law
of succession, he said, the reorganization will not absolve
the successor of the legal obligations of its predecessor.
All legal aspects of the changes will be worked out in due
course, he said. Peter Esele, President of the Petroleum and
Natural Gas Senior Staff Association of Nigeria (PENGASSAN),
told Poloff that the unions were "fine with the
reorganization."
11. (C) Comment: Few people expected the Government to
move so quickly to effectuate this restructuring, which has
been under study for seven years. Whether the problems
associated with implementing the new structure outweigh the
potential gains in efficiency from the restructuring remains
to be seen.
MCCONNELL
SIPDIS
SIPDIS
STATE FOR AF/W, INR/AA, DS/IP/AF, DS/ICI/PII, DS/DSS/OSAC
OSLO FOR HELENA SCHRADER
DOE FOR GPERSON, CAROLYN GAY
TREASURY FOR ASEVERENS, SRENENDER, DFIELDS
COMMERCE FOR KBURRESS
STATE PASS USTR FOR ASST USTR FLISER
STATE PASS TRANSPORTATION FOR MARAD
STATE PASS OPIC FOR ZHAN AND MSTUCKART
STATE PASS TDA FOR NCABOT
STATE PASS EXIM FOR JRICHTER
STATE PASS USAID FOR GWEYNAND AND SLAWAETZ
E.O. 12958: DECL: 08/30/2017
TAGS: EPET ENERG PGOV NI
SUBJECT: NIGERIA ANNOUNCES REORGANIZATION OF ENERGY SECTOR
LAGOS 00000602 001.2 OF 003
Classified By: Consul General a.i. Donald McConnell; Section 1.4 (B,D)
1. (C) Summary: On August 29, the Government of Nigeria
announced the decision to "unbundle" the Nigerian National
Petroleum Corporation (NNPC) and to create five new
independent agencies. International oil companies (IOCs)
were aware of the plan to restructure, but did not expect it
to take place so quickly. Whether the problems associated
with implementing the new plan will outweigh the potential
gains in efficiency from the restructuring remains to be
seen. End Summary
2. (U) On August 29, the Government of Nigeria (GON)
announced the decision, taken that day by the Federal
Executive Council, to "unbundle" the Nigerian National
Petroleum Corporation (NNPC) and to create five new
independent agencies. Minister of State for Energy
(Petroleum) announced to the press that the Ministry of
Petroleum Resources will become the National Petroleum
Directorate (NPD). A new National Oil Company (NOC) will
assume the core functions of the NNPC. The National
Petroleum Investment Management Services Company (NAPIMS),a
division of NNPC, will be replaced by the National Oil and
Gas Assets Holding and Management Company (NOGAHAMC). The
Department of Petroleum Resources (DPR),currently a division
of the Ministry of Petroleum Resources, will become the
Petroleum Inspectorate Commission (PIC). The Petroleum
Products Distribution Agency will replace the Pipeline
Product Marketing Company (PPMC),also a division of NNPC.
3. (U) According to press reports, the energy sector
reorganization is the harmonized result of recommendations by
the Oil and Gas Reform Committee, commissioned by former
President Obasanjo in 2000 and chaired by the Honorary
Strategic Advisor to the President on Energy Rilwanu Lukman;
and by a committee established by the National Council on
Privatization to examine the oil and gas industry. The
harmonized report, called "Roadmap for the Restructuring of
the Oil and Gas Industry in Nigeria" was reportedly submitted
to President Yar'Adua in June by the Secretary to the
Government of the Federation, Alhaji Babagana Kingibe.
National Oil Company Free of Government Control
-------------- --
4. (U) Under the new arrangement, the NOC will conduct
itself like a private oil and gas company. The Petroleum
Inspectorate Commission (PIC) will be an agency independent
of the Ministry of Energy, and will be empowered to provide
effective monitoring of the industry. Fuel importation will
be supervised both by PIC and the Petroleum Products
Distribution Agency (PPDA),and the refineries will be
privatized. Plans also call for further unbundling of the
Nigerian Gas Company as well as pipeline and storage
facilities into gas transmission and gas
distribution/marketing companies, press reports stated.
5. (U) The Federal Executive Council also mandated
implementation of the National Oil and Gas Policy (NOAGP) to
take place within the next six months. One of the goals of
the policy is to make Nigeria self sufficient in the energy
sector, according to press reports. In a third, related
move, the FEC approved the constitution for the National
Council on Energy (NCE) to implement and fine-tune the NOAGP,
which includes the restructuring of the energy sector. The
NCE will be chaired by President Yar'Adua. Other members of
LAGOS 00000602 002.2 OF 003
the Council are Vice President Goodluck Jonathan, who will
function as Deputy Chair; Odein Ajumogobia, Minister of State
for Energy (Petroleum); Minister of State for Energy (Gas)
Olusina Emmanuel, and Minister of State for Energy (Power)
Mrs. Fatima Ibrahim; Attorney General and Minister of Justice
Michael Aondoakaa; Minister of Finance Shamsudeen Usman;
Minister of National Planning Sannusi Daggash; Strategic
Advisor to the President on Energy Rilwanu Lukman; and
National Security Advisor General Ibrahim Mukhtar. Four
additional members will be appointed by the President.
6. (U) In press reports, Minister Ajumogobia said that the
establishment of the NCE is a condition precedent to the
declaration by the President of a state of emergency in the
energy sector.
IOCS Expected Reorganization But Timing a Surprise
-------------- --------------
7. (C) John Chaplin, Managing Director of ExxonMobil, told
Poloff that the company had known "bits and pieces" of the
reorganization plan, but that the timing of the announcement
had come as a surprise. The company had seen the Lukman
Committee report as early as 2002. Chapman believes the
thrust of the reform is to give Nigeria a national oil
company that functions the way a company should. The change
would allow the NOC to control its own revenue and to raise
needed funds from the capital markets. This is an important
change, Chaplin noted, because currently NNPC is completely
in the dark as to its profits or losses; requests for profit
and loss statements go unanswered because NNPC does not have
them. The impact of the change in NAPIMS is less clear, he
said. Work with NAPIMS is a challenge for international oil
companies (IOCs),but at least now the IOCs can go over
NAPIMS head for occasional help from NNPC to force decisions
to be made. NAPIMS, because it approves all contracts, is
seen by most as "an opportunity to make money"; a whole
industry has grown up in which people insert themselves into
the contracting process in the hope of making money on the
deal. Whether the changes will help with this problem or
create other efficiencies remains to be seen, he said.
8. (C) Ann Pickard, Regional Executive Vice President for
Shell Oil, said that she and executives from Shell Petroleum
and Development Corporation (SPDC) of Nigeria met earlier in
the week with the President and the Minister of State for
Energy (Petroleum) and received "no signals" that the
restructuring was imminent.
9. (C) O.B. Haffner, Corporate Affairs Manager of Total
Nigeria Ltd. said he had been aware that the restructuring
was coming. Speaking about the downstream end of the
business, which he oversees, Haffner said that replacing the
Petroleum Products Distribution Agency with the new Pipeline
Product Marketing Company (PPMC) could help assure that
petroleum products are more evenly distributed around the
country, to the benefit of states in the northern part of the
country. Currently, massive quantities of imported fuel are
pumped into the tanks of marketers in Lagos, where the bulk
of the imported product is sold. The marketers then truck
the remainder to other parts of the country for sale at
prices higher than the regulated price.
Reorganization Will Not Affect Existing Contracts
-------------- --------------
LAGOS 00000602 003.2 OF 003
10. (C) Olisa Agbakoba, President of the Nigerian Bar
Association, downplayed fears expressed by some that the
reorganization would interfere with existing contracts or
ongoing court cases to which NNPC is a party. Under the law
of succession, he said, the reorganization will not absolve
the successor of the legal obligations of its predecessor.
All legal aspects of the changes will be worked out in due
course, he said. Peter Esele, President of the Petroleum and
Natural Gas Senior Staff Association of Nigeria (PENGASSAN),
told Poloff that the unions were "fine with the
reorganization."
11. (C) Comment: Few people expected the Government to
move so quickly to effectuate this restructuring, which has
been under study for seven years. Whether the problems
associated with implementing the new structure outweigh the
potential gains in efficiency from the restructuring remains
to be seen.
MCCONNELL