NNPC has obtained $3.7 billion alternative funding in three years — GMD

The Nigerian National Petroleum Corporation, NNPC, has obtained $3.7 billion in alternative financing agreements in the last three years, the Group Managing Director of the corporation, Maikanti Baru, has said.

A statement signed by the Group General Manager, Group Public Affairs Division of the NNPC, Ndu Ughamadu, said Mr. Baru said this while speaking at the 35th Annual Conference of the Nigerian Association of Petroleum Explorationists, NAPE, in Lagos on Wednesday.

The statement says with the new alternative funding arrangement in place, the government will be relieved of joint ventures cash call burden.

The GMD, in the statement, told delegates that securing external funding arrangement was crucial to sustaining oil and gas production in Nigeria and ensuring the survival of Nigeria’s energy future.

He also said the NNPC had embarked on several successful alternative funding programmes to sustain and increase the national daily production and productivity in the last three years.

Mr. Baru said, “the $3.7 billion financing package included the $1.2 billion multi-year drilling financing package for 23 onshore and 13 offshore wells under NNPC/Chevron Nigeria Limited Joint Venture termed Project Cheetah, the $2.5 billion alternative funding arrangements for NNPC/SPDC Joint Venture, $1Billion, termed Project Santolina, the NNPC/ CNL Joint Venture, $780Million, named Project Falcon as well as the NNPC/ First E&P Joint Venture and Schlumberger Agreement, $700Million.

“Project Cheetah is expected to increase crude oil production by 41,000bpd and 127Mmscfd with a government take of $6 billion over the life of the Project.

“In the same vein, Projects Santolina, Falcon and the NNPC/First E&P JV and Schlumberger Funding Arrangement are expected to increase combined production of crude oil and condensate by 150,000bpd and 618MMscfd of gas with a combined government take of about $32 billion over the life of the Projects,” Mr. Baru added.

The NNPC GMD pointed out that a critical part of President Muhammadu Buhari’s reforms is to develop a new funding method for the Joint Venture, JV, operations in order to eliminate the cash call regime, enhance efficiency and guarantee growth in Nigeria’s oil and gas industry.

NNPC and its JV partners began exploring alternative funding mechanisms that would allow the JV business finance itself due to the cash call underfunding challenge which rose to about $1.2 billon in 2016 alone in order to sustain and grow the business, Mr. Baru explained.

He noted that with about $600 million a month average JV cash call requirement, coupled with flat low budget levels over the past years, the budgeted volumes were scarcely delivered.

“The truth is that it is difficult to deliver the volumes without adequate funding. The low volumes and by extension low revenues had resulted in the underfunding of the ndustry by Government, which has stymied production growth,” he said.

Mr. Baru, who spoke on the “Review of the Current State of Funding for the Upstream Sector and the need for a New Policy Initiative”, commended NAPE for its contributions towards the shaping of the oil and gas landscape in Nigeria. He said it was mandatory on the NNPC to associate with NAPE for the benefit of the nation.

“It is on record that key pieces of legislation such as the Marginal Fields Act and the Deepwater Fiscal Policies, the Nigerian Content Act, as well as the Unitisation Policy were all based on templates that came out of previous NAPE Conferences,” he said.

The President of NAPE, Abiodun Adesanya, described the challenge of cash call as very critical as it affects all the objectives and targets of growing the reserves and increasing crude oil production in the country.