Nigerian state oil company will privatize: report

By Reza Amanat
LONDON (MarketWatch) -- Nigeria's cash strapped state-owned oil company, Nigerian National Petroleum Corporation, or NNPC, is heading towards privatization, U.K. newspaper the Sunday Telegraph reports.

According to the newspaper, NNPC has began talks with investment banks including Standard Chartered PLC (STAN.LN), JP Morgan, and Deutsche Bank AG /quotes/comstock/13*!db/quotes/nls/db (DB 74.05, +1.87, +2.59%) in order to discuss financing options in its aim to become a privatized commercial company.

NNPC, which is hamstrung by a government funding shortfall of up to $6 billion (GBP3.95 billion) a year for its upstream operations with joint venture partners including Royal Dutch Shell (RDSB.LN), Exxon Mobil Corporation /quotes/comstock/13*!xom/quotes/nls/xom (XOM 66.32, +0.02, +0.03%) , Chevron Corp. /quotes/comstock/13*!cvx/quotes/nls/cvx (CVX 73.86, +0.29, +0.39%) , Agip SpA, and Total SA /quotes/comstock/13*!tot/quotes/nls/tot (TOT 58.55, +0.50, +0.86%) , is determined to "transform or liquidate," general manager director of NNPC Mohammed Barkindo told bankers in London, the Telegraph reported.

"There is no plan B. 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," Barkindo is quoted by the newspaper as saying.

Banks have suggested a number of options, including project finance, bond issuance, pre-export finance, commodity-linked financing, the creation of a holding company to offer financial flexibility and also an initial public offering, the report said.

However, any IPO is unlikely to happen for the next five years, senior NNPC officials told the Sunday Telegraph.

Barkindo and his senior team have also met Goldman Sachs Group /quotes/comstock/13*!gs/quotes/nls/gs (GS 175.19, +1.66, +0.96%) , law firm Latham and Watkins, and Nigerian banks UBA and First Bank of Nigeria to assess the state of the capital markets and how it will prepare to tap them once Nigeria's Petroleum Industry Bill, which underpins its transformation, has become law, the Telegraph added.

Oil infrastructure, including those owned and operated by Shell, have suffered from frequent criminal and militant attacks in the Niger Delta, prompting the company's chief executive officer, Peter Voser, to declare that the country is no longer a key area for growth.

However, Ann Pickard, the outgoing regional executive vice-president of Shell Exploration and Production, Africa, said Shell has no plans to "pull out of Nigeria," the Telegraph said.