NAME: OKWUDIBONYE CHIAMAKA C.

CLASS: SS2

Question 1: Give reasons why the NNPC should control Petroleum Resources in
Nigeria
Answer:
The Federal Governments absolute powers over the petroleum industry are usually exercised
through some government institutions, namely, the Ministry of Petroleum, the Department of
Petroleum Resources (DPR), and the Nigerian National Petroleum Corporation (NNPC). The DPR
functions as the official regulator of the oil and gas operation in Nigeria, with the responsibility
of supervising the activities of all companies licensed to operate in the oil and gas sector,
including the NNPC.
The DPR is also charged with the responsibility of processing all applications for licenses and
leases in the oil and gas industry. It also ensures compliance of all oil and gas operators with
applicable regulations and good oil producing practices. The NNPC is the commercial and
business agency of the federal government in the oil and gas sector. The NNPC pioneers most
of the projects in the oil and gas industry through joint venture arrangements, production
sharing contracts, and other relatedcommercial partnerships with multinational oil companies.
Although ownership and control of all petroleum resources is constitutionally and statutorily
vested in the Nigerian federal government, the federal government creates arrangements for
the compensation of the oil producing areas through the payments of portions of centrally
collected oil revenues to those areas on a derivation arrangement

Question 2: Briefly Discuss the cost of Petroleum in the international market

Answer:
The price of oil, or the oil price, generally refers to the spot price of a barrel of benchmark
crude oila reference price for buyers and sellers of crude oil such as West Texas Intermediate
(WTI), Brent ICE, Dubai Crude, OPEC Reference Basket, Tapis Crude, Bonny Light, Urals oil,
Isthmus and Western Canadian Select (WCS). There is a differential in the price of a barrel of oil
based on its gradedetermined by factors such as its specific gravity or API and its sulphur
contentand its locationfor example, its proximity to tidewater and/or refineries. Heavier,
sour crude oils lacking in tidewater accesssuch as Western Canadian Select are less
expensive than lighter, sweeter oilsuch as WTI.
Organization of the Petroleum Exporting Countries (OPEC)
In 1960 the Organization of the Petroleum Exporting Countries (OPEC) was founded in Baghdad,
Iraq by its first five members Iran, Iraq, Kuwait, Saudi Arabia and Venezuela,with Qatar and
Libya joining immediately, followed by United Arab Emirates, Algeria, Nigeria, Ecuador and
Gabon the next decade. The goal of these countries was to increase its influence in the world oil
market, then dominated by a cartel known as the "Seven Sisters", five of which were
headquartered in the United States These companies had been controlling posted prices since
the so-called 1927 Red Line Agreement and 1928 Achnacarry Agreement, and had achieved a
high level of price stability until 1972. Angola joined the OPEC in 2007 and Equatorial Guinea in
2017
Crude oil prices to gas prices
From 1999 til mid 2008, the price of oil rose significantly. It was explained by the rising oil
demand in countries like China and India. In the middle of the financial crisis of 20072008, the
price of oil underwent a significant decrease after the record peak of US$147.27 it reached on
July 11, 2008. On December 23, 2008, WTI crude oil spot price fell to US$30.28 a barrel, the
lowest since the financial crisis of 20072010 began. The price sharply rebounded after the
crisis and rose to US$82 a barrel in 2009. In July 2008 oil reached a record peak of US$147.27
but by February 2009 it sank beneath $40 a barrel. On 31 January 2011, the Brent price hit $100
a barrel for the first time since October 2008, on concerns about the political unrest in
Egypt.[10] For about three and half years the price largely remained in the $90$120 range. In
the middle of 2014, price started declining due to a significant increase in oil production in USA,
and declining demand in the emerging countries. The oil glutcaused by multiple factors
spurred a sharp downward spiral in the price of oil that continued through February 2016. By
February 3, 2016 oil was below $30 a drop of "almost 75 percent since mid-2014 as
competing producers pumped 1-2 million barrels of crude daily exceeding demand, just as
China's economy hit lowest growth in a generation." Some analysts speculate that it may
continue to drop further, perhaps as low as $18 According to a report released on February 15,
2016 by Deloitte LLPthe audit and consulting firmwith global crude oil at near ten-year low
prices, 35% of listed E&P oil and gas companies are at a high risk of bankruptcy worldwide.
Indeed, bankruptcies "in the oil and gas industry could surpass levels seen in the Great
Recession
The causes of oil price fluctuations
There are two views dominating the oil market discourse. There are those who strongly believe
that the market has undergone structural changes and that low oil prices are here to stay for a
prolonged period. At the other end of the spectrum, there are those who think that this is yet
another cycle and oil prices will recover sooner rather than later. These two scenarios
structural versus cyclical reflect the high degree of uncertainty engulfing the oil market. This
presupposes that we can separate neatly the cyclical from the structural, but this would be an
oversimplification. All the factors discussed above have become intertwined and the response
of one part of the system will affect the other parts.
Benchmark pricing
In North America this generally refers to the WTI Cushing Crude Oil Spot Price West Texas
Intermediate (WTI), also known as Texas Light Sweet, a type of crude oil used as a benchmark in
oil pricing and the underlying commodity of New York Mercantile Exchange's oil futures
contracts. WTI is a light crude oil, lighter than Brent Crude oil. It contains about 0.24% sulfur,
rating it a sweet crude, sweeter than Brent. Its properties and production site make it ideal for
being refined in the United States, mostly in the Midwest and Gulf Coast regions. WTI has an
API gravity of around 39.6 (specific gravity approx. 0.827) per barrel (159 liters) of either
WTI/light crude as traded on the New York Mercantile Exchange (NYMEX) for delivery at
Cushing, Oklahoma. Cushing, Oklahoma, a major oil supply hub connecting oil suppliers to the
Gulf Coast, has become the most significant trading hub for crude oil in North America.
Speculation during the 2008 crisis
In June 2008 Business Week reported that the surge in oil prices prior to 2008 had led some
commentators to argue that at least some of the rise was due to speculation in the futures
markets. However, although speculation can greatly raise the oil price in the short run, in the
long run fundamental market conditions will determine the oil price. Storing oil is expensive,
and all speculators must ultimately, and generally within a few months, sell the oil they
purchase.
Impact of declining oil price
A major rise or decline in oil price can have both economic and political impacts. The decline on
oil price during 19851986 is considered to have contributed to the fall of the Soviet Union.Low
oil prices could alleviate some of the negative effects associated with the resource curse, such
as authoritarian rule and gender inequality. Lower oil prices could however also lead to
domestic turmoil and diversionary war. The reduction in food prices that follows lower oil
prices could have positive impacts on violence globally.

Question 3: Who is the NNPC?

Answer:
Nigerian National Petroleum Corporation (NNPC)

State-owned enterprise
Industry Oil and gas
Founded 1977; 40 years ago
Headquarters Abuja, FCT, Nigeria
Products Crude Oil, Gas, petroleum products, petrochemicals,
Website www.nnpcgroup.com

The Nigerian National Petroleum Corporation (NNPC) is the oil corporation through which the federal
government of Nigeria regulates and participates in the country's petroleum industry.
History
NNPC was established on 1 April 1977 as a merger of the Nigerian National Oil Corporation and the
Federal Ministry of Mines and Steel. NNPC by law manages the joint venture between the Nigerian
federal government and a number of foreign multinational corporations, which include Royal Dutch
Shell, Agip, ExxonMobil, Chevron, and Texaco (now merged with Chevron). Through collaboration with
these companies, the Nigerian government conducts petroleum exploration and production. In 2007,
the head of the Nigerian wing of Transparency International said salaries for NNPC workers were too
low to prevent graft.
The NNPC Towers in Abuja is the headquarters of NNPC. Consisting of four identical towers, the complex
is located on Herbert Macaulay Way, Central Business District Abuja. NNPC also has zonal offices in
Lagos, Kaduna, Port Harcourt and Warri. It has an international office located in London, United
Kingdom.
Leadership
Dr. Maikanti Baru is the current Group managing director. He was appointed as the Nigerian National
Petroleum Corporation Group chief executive officer on July 4th, 2016 under the presidency of
Muhammadu Buhari; he succeeded Dr. Ibe Kachikwu, the current Nigerian Minister of State, Petroleum.
NNPC Organisational Structure
The NNPC Group comprises the NNPC Board, the Group managing director's office, Seven operational
units as listed below. Each of the Unit is headed by a chief operating officer (COO). Its Divisions are
headed by Group General Managers (GGM) while its subsidiary companies are headed by Managing
Directors. NNPC has several subsidiaries, two partly owned subsidiaries and 16 associated companies.
Autonomous Business Units:
Upstream Company
Downstream Company
Refining Company
Ventures Company
Gas & Power Company
Corporate Services Units:
Finance and Accounts
Corporate Services