Contracting circle which has been a major problem to business transaction in the oil and gas industry has been reduced to nine months and it is to further to be pushed downwards to a period of six months.
This is aimed at attracting investments into the industry and create confidence for the intending investors, reduce cost of production and beat inflation factors.
The Minister of State for Petroleum Resources, Emmanuel Ibe Kachikwu disclosed this yesterday at the opening Offshore Technology Conference (OTC) holding in Houstons , Texas, United States of America.
The minister who gave the opening remarks at an event titled: Global Energy Dynamics: Challenges and Opportunities in the Nigerian Oil and gas industry organized by the Petroleum Technology Association of Nigeria (PETAN) lamented the great loss the industry has suffered on account of elongated contracting circles which often lead to increase in the cost of production and also cost of doing business in the Nigerian Oil and Gas sector, adding that if investors must take the country serious the problems of contracting circle must be eliminated.
He also said that there are plans by the government to identify 100 projects that are being undertaking by Nigerian entrepreneurs in the oil and Gas which the government would help to seek for funds and anywhere in the world and ensure that grow
The government he said is eager to help Nigerians entrepreneurs grow so that they create jobs and boost the economy. The guidelines for the scheme he said would be out in the next 90 days
Emmanuel Ibe Kachikwu stated that the key to the resurgence being experienced in the Oil and Gas sector of Nigerian can be attributed to the continuous and holistic implementation of the Nigerian Petroleum Roadmap – “7 Big Wins” which is the short and medium term priorities to grow Nigeria’s Oil and Gas sector.
He highlighted that the launch and implementation of the “7BigWins” has laid a foundation for a new approach that is aimed at entrenching transparency, integrity and probity in the running of the affairs of the Ministry of Petroleum Resources and all Agencies being supervised under the Ministry thereby making the sector more result oriented and profit driven.
The Minister mentioned some of the key achievements recorded in the past 18 months of his stewardship in the Ministry with the opening up of the downstream sector to private players, private Investment and diversification of products sourcing through the introduction of Price Modulation Mechanism (PMM), and subsequently, Appropriate Pricing Framework (APF).
These policies he said have successfully reignited the commercial vibrancy of the downstream sector with a landmark move from a fully subsidy based sector to a liberalized sector, the total elimination fuel scarcity and long queues at filling stations, products adulteration and diversion, and profiteering that characterized the sector and plagued the nation in the past.
At a press conference held by the side the Minister of State while the PETAN forum was going on, he said that the Ministry has embarked on reforms to reposition the nation for petroleum products sufficiency and ultimately be a net exporter of such products.
“In line with these reforms, the Ministry and NNPC are aggressively driving the effort for private sector led refineries rehabilitation and expansion program. This is aimed at repositioning the country for petroleum products self-sufficiency, which will minimise the pressure on demand for foreign exchange for the importation of products”.
Another key milestone recorded recently was the commencement of settlement of outstanding joint venture cash call debts the Federal Government owes the International Oil Companies (IOCs), He stated that the first payment of $400 million was paid last week to the IOCs. The $400 million payment was part of cash call debt owed the IOCs in 2016. This, the Minister of State stated, was different from the discounted $5.1 billion cash call arrears it negotiated in December 2016 with the IOCs.
The Federal Executive Council had approved the Ministry’s proposal and the concurrence of the National Economic Council had been obtained to begin payments and The Ministry on behalf of NNPC had engaged the International Oil Companies and secured a discount of 25% with each JV Partner on the pre-2016 Cash Call Arrears resulting in a final settlement in the sum of US$5.1 billion payable from incremental production from the JV assets over a five-year tenor without any interest charges during the repayment period.
In addition, the 25% discount will not qualify for tax deduction. The sustainable funding of the JVs will lead to an increase in national production from the current 2.2mbpd to 2.5mbpd by 2019, while the immediate effect of the new cash call policy will increase net Federal Government Revenue per annum by about $2 billion.
Emmanuel Kachikwu said that the Federal Government of Nigeria having kept its own side of the agreement by making the first tranche of payment, the International Oil Companies have announced new investments in the upstream sector that will create limitless opportunities including job creation along the entire value chain.
He also harped on the extensive work collaborative work being done by the Ministry of Petroleum Resources with the National Assembly on the Petroleum Industry Governance Bill, this bill he stated would be followed by the Bill on Fiscal Terms.
He restated the efforts of the Federal Government to continue to build a strong collaboration between Nigeria and the World Bank on the Global Gas Flaring Reduction Energy and Extractive Global Practices (GGFR), adding that the National targets for gas flare out for Nigeria remains fixed at year 2020 while the target for the global initiative is 2030.
Part of the successes the Minister stated that was being worked on during the Press conference is the tracking of oil molecules from production to destination and also the work being put in to reduce the contracting cycle in the Nigerian Oil and Gas sector in order to ensure delivery of projects within the projected period.