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NNPC’s transformation: Get set, ready …

With virtually weeks to passage of the Petroleum Industry Bill (PIB) by the National Assembly, the country’s oil and gas behemoth, the Nigerian National Petroleum Corporation (NNPC), has instituted measures to commence transformation towards becoming a purely profit-oriented company as against the government oil and gas agency it had been since its establishment in .

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In fact, the current Group Managing Director of the Corporation, Dr. Mohammed Sanusi Barkindo, was appointed a year ago strictly to oversee this revolutionary transformation that would see the oil and gas behemoth transmute into one of the most efficiently run and dynamic oil companies in the world.

Accordingly, Barkindo and his team were appointed with a mandate to reform NNPC from a cost centre to a profit centre, bearing in mind that in all transformation efforts, appointment of a new management team is always essential to drive change. In management terms, this is always referred to as “the right horses for the courses.”

Thus, since the GMD’s appointment in January 2009, NNPC has embarked on a transformation journey requiring renewed vigour in establishing the corporation as a premier Nigeria Integrated Oil and Gas Company operating at world class levels to create high value opportunities for Nigeria and Nigerians.

From the commencement of Barkindo’s tenure, and at the request of the Minister for Petroleum Resources, NNPC along with eight other government agencies such as Ministry of Justice, Ministry of Finance, Budget Office of the Federation, RMAFC, FIRS, DPR, as well as NEITI, had participated fully in the development of the government memorandum on the Petroleum Industry Bill.

This bill lays out key legal fiscal and legal provisions that would have impact on NNPC’s operations going forward. In anticipation of its passage, the GMD has harnessed the full resources of the corporation in preparing the organisation for this epoch making legislation. Part of this anticipation include increasing commercial focus of NNPC in capturing value both for itself and for the state, significant long-term commercial value has in 2009 been created for NNPC through commercial re-negotiations of agreements with other parties.

Additionally, NNPC is developing the commercial capacity that would stand it in good stead as its transformation matures
The GMD and his reform-minded team instituted the transformation process at the strategic, operational, organisational and financial levels.

The strategic transformation involved definition and delineation of business boundaries, business unit models and their strategies and corporate strategy to anchor all strategic initiatives. Other features of the transformation include operational transformation involved increasing NNPC ‘s revenues, reducing capital expenditure, collecting on NNPC’s receivables and optimising the profitable use of NNPC’s assets through improved commercial focus in NNPC’s core businesses. To this extent, organisational transformation has commenced with redesigning and realigning organisational structure to match the business models of strategic business units putting in place best practice and business process in the organisation, developing performance management systems for effective motivation of our human capital and consequent management

Financial transformation of the corporation will involve capitalisation of our strategic business units, development of balance sheet for the SBUs and appropriate debt/equity structure that will be task efficient.

Following a thorough review of the condition of NNPC, Barkindo authorised the hiring of consultants to assist with defining the scope of change required and to bring international benchmark and best practices to the transformation efforts. The two key actions taken after reviewing with the consultants were: The Management retreat in Calabar in 2009 to examine the scope of change required, and the setting up of the Transformation Office to coordinate and monitor progress being made in the transformation journey.

The retreat in Calabar revealed the full extent of the challenge in reforming NNPC. These challenges may be attributable to both external and internal factors. Some of these external factors include oil/gas market volatility (oil fell from USD 140/bbl to USD 40/bbl over a 5 month period in 2008-09 before recovering more recently), vandalism of pipeline and other oil infrastructure, security/unrest in Niger Delta, and custom and clearance delays. Among the internal factors include limited revenue sources, high loss across and the value chain.


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