If all things work out as planned, an estimated $38 billion in term of revenue is expected to accrue to the Federal Government from all the oil fields under the current Joint Venture (JV) alternative funding with oil companies for asset lives of the fields.
The NNPC/Chevron Nigeria Limited JV, codenamed project Cheetah would fetch Federal Government $6 billion over the asset life of the project while NNPC/First E&P JV and Schlumberger, NNPC/Shell Petroleum Development Company (SPDC) JV alternative funding agreement would fetch government $32 billion over the lives of the projects.
The projects he said is expected to increase crude oil production by 47, 000 barrels per day and 127 million standard cubic feet per day of gas.
Maikanti Baru, group managing director, Nigerian National Petroleum Corporation (NNPC) said that in a year where fiscal costs are not sufficient to fund the budgetary requirements of the Joint venture, this alternative funding is the solution to the cash call challenge.
Baru said these in his keynote address at the 35th edition of the Nigerian Association of Petroleum Explorationists (NAPE) 2017 conference on the theme: Beyond the cash call: new Funding strategies for the Nigerian Upstream oil and gas Industry’ Wednesday in Lagos.
He opines that the implication of this alternative funding move is that the Joint Ventures will relieve Government of the cash call burden by sourcing funds for its operations. Cash call underfunding in 2016 alone amounted to $2.5billion bringing total cash call areas to $8.5billion.
Cash calls is the counterpart funding the NNPC pays yearly for the 60 per cent equity shareholding it owns in various oil and gas fields operated by International Oil Companies (IOCs) and indigenous oil firms.
“The JV cash call exit model we are pursuing guarantees Government most of the revenue that normally accrues to it from the JV operations by lifting the Royalty and Tax Oil upfront”, he said.
Maikanti Baru, in his keynote address on a review of current state of funding for the upstream sector and need for a new policy initiative stated that within the last three years, NNPC have embarked on several successful alternative funding programmes to resuscitate and increase national daily production and profitability.
The NPPC boss observed that the persistent low oil price in 2016 hovering around an average of 45 dollars per barrel is attributable to the supply glut in the global market, adding that this supply glut is known to be caused by an increase in shale oil production in USA as well as the economic slowdown in China and Japan.
He further stated conference is timely coming at a time the NNPC moves from incorporated cash call Joint Venture funding model to the incorporated joint venture companies whereby JV will source for the funds to fund their operations and share the remaining profits in promotion to their equities through defined limited policies.
He commended NAPE for the many contributions in shaping the oil and gas industry. “It is on record that key issues of legislation such as the marginal fields act and the deep water act, the Nigerian content act as well as unitasation policy were are based on templates that NAPE came out with from previous conferences”, he said.
Olusola Bello & Kelechi Ewuzie