Categories
Economics

The Nigerian National Petroleum Corporation (NNPC) and Organization of Petroleum Exporting Countries (OPEC)

The Nigerian National Petroleum Corporation (NNPC)

In order for government to strengthen and establish its control in the oil industry, the Nigerian National Oil Corporation (NNOC) was established by a decree in 1971. In the same year, Nigeria joined the Organization of Petroleum Exporting Countries (OPEC) as the 11th member  country.  At that time, the Ministry of Petroleum Resources whose functions were mainly regulatory was also running concurrently with the NNOC.  It was not until 1st April, 1977 that a merger between the NNOC and the Ministry of Petroleum Resources created the Nigerian National Petroleum Corporation (NNPC).

File:NNPC Logo.jpg - Wikimedia Commons

The Roles of NNPC and OPEC in the Exploration, Production, Refining, Marketing and Distribution of Petroleum Products

The Role of the NNPC

  1. Oil refining in Nigeria is done under the watchful eagle eye of NNPC
  2. In the area of man-power training of Nigerians, crucial role was played by NNPC in order to ensure that they occupy managerial, professional and supervisory grades in all the oil companies operating in the country.
  3. Their product movement section is responsible for planning operations to pump products from the source of supply to various destinations in a safe, economic and controlled manner and ensuring adequate stocks in the depots to meet tanker-truck loading demands.
  4. They oversee all the activities of all other companies licensed to engage in oil activities in the country to ensure compliance with the laws and regulations relevant to the oil industry.

Organisation of Petroleum Exporting Countries (OPEC)

In reaction to the outrageous and unprecedented exploitation by the oil extracting multinational companies, which at that time were controlling oil operations in the oil industry in the host countries? The outcome of the meeting of Iran, Iraq, Kuwait, Saudi Arabia, Venezuela from September 10-14, 1960 aimed at protecting their mutual interest and to counter the atrocious act of foreign oil companies who sell oil in their own interest was the formation of the Organisation of Petroleum Exporting Countries (OPEC).  Nigeria joined the organization in 1971.  Its membership has risen to fourteen as at May, 2017. Other countries are Algeria, Angola, Ecuador, Equitorial Guinea, Gabon, Libya, Nigeria, Qatar, United Arab Emirate.

https://upload.wikimedia.org/wikipedia/commons/thumb/3/3f/OPEC_Logo.svg/500px-OPEC_Logo.svg.png

Objectives of OPEC

  1. To coordinate and unify the petroleum policies of members and the determination of the best means for safeguarding their interests individually and collectively.
  2. To devise ways and means of ensuring the stabilization of prices in the international oil market with a view to eliminating harmful and unnecessary fluctuations
  3. To ensure the revenue from sales of oil is maximize to member countries.
  4. To fix supply that each member will bring to the market in order to prevent glut.
  5. To negotiate for the participation of member-nations in the oil exploitation and exploration
  6. To ensure that participation of foreign multinational companies in oil exploitation and exploration does not jeopardize the interest of its member nations.
  7. To provide financial assistance to poor non-oil producing countries so as to close the gap between the rich and the poor nations.

The Roles of OPEC in the Production, Refining and Marketing of Petroleum Products

  1. OPEC has been able to maintain relatively stable price of petroleum.
  2. OPEC played direct role in the exploration and production of oil by directing its members in June, 1968 in order to acquire participating interest in such activities in their territories.
  3. Another major role played by OPEC is re-directing the political imbalance between the Third World countries and the so-called First World nations.
  4. Through the activities of OPEC, it has been able to make improvement in energy efficiency particularly in major industrialized countries.
  5. Also, OPEC ensures efficient and regular supply of oil to the world market.

Problems of OPEC

Problems of OPEC include the following:

  1. Incessant oil price fluctuations which result into oil-glut many times.
  2. Stability of oil prices at times proved difficult because not all crude oil producers are OPEC member.
  3. Non-compliance with quotas by some members. Some of them do violate the agreement and thereby produce quantities above given quota.
  4. OPEC lack of political coherence also counted against the achievement of its objectives in the 1960s.
  5. The rivalry for the leadership of the organization is also a big problem to OPEC.
  6. The activities of the advanced countries in stock-pilling oil which contributed to the fall of oil price is causing great concern to OPEC.
  7. International oil companies supported by various states indulged in political manouvres among OPEC members in an attempt to play off one exporting countries against others.
  8. Political disagreement which sometimes leads to war between member-nations like Iran and Iraq war caused as serious problem to OPEC.
  9. The rivalry of the leadership of the organization is also a big problem to OPEC.
  10. OPEC is faced with the problem of increasing research by western advanced nations to find substitute for oil.

Solutions to the Problems of OPEC

  1. Concessions have been given to some member-nations in order to lessen their home problems.
  2. The organization always imposes penalty on its members that side-track their agreed fixed production quota.
  3. The organization has established research department in its headquarters in order to promote efficient exploitation and extensive exploration.
  4. OPEC tries to maintain inelastic price by fixing production quotas for its members.
  5. Conferences have been holding to discuss the reasons why quotas should be adhered to, particularly to stabilise prices.
  6. The adoption of rotating its key-posts to lessen the leadership rivalry position among member-nations.

EVALUATION (POST THE QUESTION TITLE AND YOUR ANSWERS IN THE BOX BELOW FOR DISCUSSION AND EVALUATION)

  1. What are some of the positive contributions of petroleum to the Nigerian economy?
  2. Discuss the role of OPEC in the production, refining and marketing of petroleum in member nations.

Join Discussion Forum and do your assignment: Find questions at the end of each lesson, Click here to discuss your answers in the forum

Ad: Get a FREE Bible: Find true peace. Click here to learn how you can get a FREE Bible.

For advert placement/partnership, write [email protected]

Download our free Android Mobile application: Save your data when you use our free app. Click picture to download. No subscription. stoplearn

We are interested in promoting FREE learning. Tell your friends about Stoplearn.com. Click the share button below!