The Nigerian National Petroleum Corporation (NNPC) has begun talks with foreign investment banks on funding options for its proposed new role as a commercially viable company rather than a cost centre, if and when the Petroleum Industry Bill (PIB) is passed by the National Assembly.

Based on media reports, The National Oil Company had initiated meetings with Standard Chartered, JP Morgan, and Deutsche Bank to explore finance options as it changes into a fully privatized commercial company in the event the PIB comes into law.

The new NNPC Ltd will be designed to the standard that will compete with International Oil Companies (IOCs) for oil and gas fields. NNPC Group Managing Director, Mr. Sanusi Barkindo, told bankers in London recently, that the corporation which is currently restricted by government funding shortfall of about $6 billion yearly for its operations with joint venture (JV) partners, is determined to transform or liquidate.

".... The government has taken the decision at the highest level for NNPC to reform and we are at an advanced stage in the legislative process," Sanusi Barkindo told the bankers.

The bankers suggested other options such as an initial public offering (IPO), project finance, pre-export finance, bond issuance, commodity- linked financing and the creation of a holding company to offer financial flexibility. And anticipated that demand for NNPC bonds would be high and it could issue $500 million to $1 billion.

The proposed industry reform bill is targeted at transforming NNPC into a profit-making organization that would independently fund its operations. The PIB also seeks to transform the existing Joint Ventures the NNPC holds with Oil companies like Royal Dutch Shell, ExxonMobil, Chevron, Agip, and Total on onshore and offshore acreages into an Incorporated Joint Ventures (IJVs), to finance its operations at the international market.

Following this development, the NNPC recently signed a Modified Carry Agreement (MCA) of $1.69 billion with Shell Petroleum Development Company, (SPDC), Total and Nigeria Agip Oil Company (NAOC), to finance their JV upstream project in Bayelsa state.

Alhaji Barkindo and other NNPC officials met Goldman Sachs, law firm Latham and Watkins, as well as two Nigerian banks. The meeting was to assess the state of the capital markets and how NNPC will prepare to tap them.