Nigeria National Petroleum Policy Ministry of Petroleum Resources 2 Nigeria National Petroleum Policy THE GOVERNMENT OF THE FEDERAL REPUBLIC OF NIGERIA ----------------------------------------------------------------------------------------------- NATIONAL PETROLEUM POLICY ---------------------------------------------------------------------------------------------- The purpose of this document is to define the policy of the Federal Government of Nigeria in respect of Nigeria’s crude oil endowment, establish its medium to long-term targets for the development of its crude oil endowment and record strategies to be pursued to ensure the successful implementation of the Policy Ministry of Petroleum Resources 3 Nigeria National Petroleum Policy INDEX 1. EXECUTIVE SUMMARY .................................................................................. 14 2. OVERVIEW ....................................................................................................... 19 2.1. Statement of the Petroleum Policy ............................................................. 19 2.2. Overview .................................................................................................... 19 3. INTRODUCTION AND BACKGROUND ........................................................... 21 3.1. Definition of Petroleum for the Policy ......................................................... 21 3.2. International Background ........................................................................... 21 3.2.1. Historic Prices ..................................................................................... 21 3.2.2. Forecast Prices ................................................................................... 25 3.2.3. Cost of Producing a Barrel of Oil ........................................................ 28 3.2.4. International Refinery Business .......................................................... 28 3.3. Structure of the Nigerian Petroleum Industry ............................................. 34 3.3.1. Nigeria Upstream ................................................................................ 34 3.3.2. Nigeria Midstream Oil Network ........................................................... 36 3.3.3. Nigerian Refineries ............................................................................. 38 3.3.4. Nigeria Downstream ........................................................................... 41 3.3.5. Environmental Impact of Petroleum on the Niger Delta ...................... 41 3.4. Need for a New Petroleum Policy .............................................................. 44 4. VISION AND OBJECTIVES .............................................................................. 45 4.1. Vision ......................................................................................................... 45 4.2. Mission ....................................................................................................... 45 4.3. Strategic Policy Objectives ........................................................................ 46 5. GOVERNANCE ................................................................................................. 48 5.1. Legal and Regulatory Framework .............................................................. 48 5.1.1. Petroleum Industry Legislation ........................................................... 48 5.1.2. Main Provisions of Legislation ............................................................ 48 5.2. Institutional Framework .............................................................................. 49 5.2.1. Existing Regulatory Agencies ............................................................. 49 5.2.2. Effect of the Previous Institutional Framework ................................... 49 5.2.3. Reporting Practice .............................................................................. 50 5.2.4. Single Independent Petroleum Regulatory Commission .................... 50 5.2.5. Philosophy of the Regulatory Structure .............................................. 51 5.2.6. Petroleum Institutional Framework ..................................................... 52 5.2.7. National Petroleum Policy Directorate ................................................ 52 5.2.8. Strategic Planning and Policy Research Centre ................................. 53 5.2.9. Investment Promotion Office .............................................................. 53 5.2.10. Petroleum Safety Compliance ............................................................ 54 5.2.11. Technical Standards ........................................................................... 55 5.2.12. Metering and Measurement ................................................................ 56 5.2.13. Cost Monitoring and Control ............................................................... 56 5.2.14. Consumer Protection .......................................................................... 57 5.2.15. Donor Agencies .................................................................................. 57 5.2.16. Civil Society and Consumer Groups ................................................... 57 5.3. Commercial Framework ............................................................................. 57 5.3.1. Introduction ......................................................................................... 57 5.3.2. Access to Offshore and Onshore Networks ........................................ 58 5.3.3. Cost Benchmarking for Infrastructure Facilities .................................. 58 Ministry of Petroleum Resources 4 Nigeria National Petroleum Policy 5.4. Fiscal Framework ....................................................................................... 58 5.4.1. Government Fiscal Philosophy ........................................................... 58 5.4.2. Current Fiscal Structure ...................................................................... 59 5.4.3. Fiscal Rules of General Application .................................................... 59 5.4.4. Principles of the Fiscal Framework ..................................................... 60 5.5. Sector Financing ........................................................................................ 60 5.5.1. Main Financing Sources for Projects .................................................. 61 5.5.2. PSC Plus Cost Structures ................................................................... 61 5.5.3. Exit from Cash Call Arrangements ..................................................... 62 5.6. Sovereign Wealth Fund ............................................................................. 63 5.7. Niger Delta ................................................................................................. 63 6. INDUSTRY STRUCTURE ................................................................................. 64 6.1. A Clean Break from the Past ..................................................................... 64 6.2. Market Players ........................................................................................... 64 6.2.1. Roles of Government and Operators .................................................. 64 6.2.2. Corporatisation ................................................................................... 65 6.2.3. Restructuring of NNPC ....................................................................... 70 6.2.4. The NNPC / NOCN Subsidiaries ........................................................ 73 6.2.5. Nigerian Petroleum Development Company Limited (NPDC) ............ 74 6.2.6. Nigerian Petroleum Investment Management Services (NAPIMS) .... 74 6.2.7. Private Sector Companies .................................................................. 75 6.3. Market Structure......................................................................................... 76 6.3.1. Creating a Market Driven Oil and Gas Industry .................................. 76 6.3.2. Ensuring Private Investment across the Value Chain ......................... 76 6.3.3. Move from Oil as Source of Income to Fuel for Economic Growth ..... 77 6.3.4. Need to Improve the Whole Supply Chain .......................................... 78 6.3.5. Enabling Nigeria to become a Manufacturing Nation ......................... 78 6.3.6. Move from Crude Oil Export to Gas-Based Industrial Economy ......... 79 6.3.7. Following the Hydrocarbon from Extraction to Destination ................. 79 6.4. Procurement for Projects ........................................................................... 80 6.5. Asset Management .................................................................................... 80 7. UPSTREAM – DEVELOPING RESOURCES ................................................... 81 7.1. Maximising Production of Hydrocarbons within Nigeria ............................. 81 7.1.1. Maximise Existing Production ............................................................. 81 7.1.2. Maximise Additions to Reserves ......................................................... 82 7.2. Diversifying Petroleum Resources ............................................................. 83 7.2.1. Niger Delta .......................................................................................... 83 7.2.2. Benue Trough and Sedimentary Basins of Nigeria ............................. 83 7.3. Field Developments ................................................................................... 84 7.3.1. JVs and PSCs ....................................................................................
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