Heavy losses threaten Nigeria's state oil firm: minister

ABUJA — Losses and liabilities totalling more than 2.5 billion dollars are pushing Nigeria's giant state oil firm NNPC towards extinction, Oil Minister Rilwanu Lukman warned on Friday.

The Nigerian National Petroleum Corporation is "running at a loss of more than 200 billion naira (1.32 billion dollars, 974 million euros) with contingent liabilities" of more than 1.25 billion dollars, he told senior officials of the organisation.

"If this trend is not reversed, the corporation as we know it today will cease to exist," Lukman warned in an address on the impending reorganisation of the company.

A Petroleum Industry Bill before the parliament seeks to transform NNPC into a profit-making and efficient organisation, divesting it of some regulatory roles and make it purely a commercially viable outfit.

"Stabilising the finances and operations of the company will require tough decisions and in some instances drastic measures may be necessary. We will make the decisions as carefully and humanly as possible," Lukman said.

Lukman said the next 18 months would be "critical and indeed the most challenging period in the history of this corporation and Nigeria's oil and gas industry."

NNPC's managing director Mohammed Barkindo said the corporation was technically insolvent in 2008, recording a negative account balance of about 326 billion naira (2.1 billion dollars, 1.6 billion euros).

"Technically, we are insolvent," he said, adding that last year the company lost 25 billion naira in terms of revenue and spent about 800 billion naira on fuel importation.

Nigeria, the world's eight largest oil producer, has been importing refined petroleum products for almost two decades as its four refineries are underperforming for local demand.

"We spent nearly 175 billion naira from 2000 to date on repair of vandalised pipelines. In 2009 we lost about 132 million litres of petroleum products as a result of theft and diversion," Barkindo said.

Armed militant groups in oil-rich Niger have caused havoc in the industry, disrupting production, kidnapping mostly foreign oil workers and sabotaging oil installations.

Barkindo said NNPC's inefficiency resulted in multiplicity of roles, a problem which the new bill seeks to tackle.

Nigeria derives more than 90 percent of its foreign exchange earnings from oil.