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Nigeria will look to privatize its state oil firm Nigerian National Petroleum Corporation (NNPC) under a draft new petroleum law currently in Parliament for discussion, Reuters reported on Monday, quoting the bill it has seen.
Nigeria’s Senate and the House of Representatives have to pass the bill, which has been years in the making, in order to become law.
According to two sources who spoke to Reuters, Nigeria’s President Muhammadu Buhari has already sent the bill to the Nigerian Senate.
Under the draft law, Nigeria would operate NNPC as a commercial entity that will not have access to state funds, Reuters reported.
Nigeria, currently Africa’s biggest oil producer and exporter, has been preparing a draft petroleum bill for two decades, looking to amend the royalty regime and the production-sharing regime of its oil and gas reserves.
Apart from the privatization of NNPC, the bill will also amend the newly changed offshore royalties and raise the threshold of the price-based royalty to above $50 a barrel from $35 per barrel, Reuters reports.
Related: Oil Bulls Return As OPEC+ Reassures Markets
At the end of last year, Nigeria introduced a combined production and price-based royalty system to replace the existing production-based royalty system, which varies according to areas of operations, KPMG commented on the amendments. Nigeria introduced a baseline royalty of 10 percent for crude oil and condensates produced in the deep offshore of more than 200 meters (656 feet) in depth and 7.5 percent for the Frontier and Inland Basin. The price-based royalty applies when the price of oil exceeds $20 a barrel.
Earlier this month, NNPC’s group managing director Mele Kyari said that the company was in talks to hand over the majority stakes in Nigeria’s four refineries, which are all in dire need of an upgrade.
Nigeria has four refineries, two in Port Harcourt, and one each in Warri and Kaduna, but all refineries in Africa’s largest oil producer are very old and in need of refurbishment. Over the past five years, utilization rates at those refineries haven't exceeded 30 percent.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.