The Nigerian National Petroleum Corporation on Wednesday said it had secured a total of $3.7bn in alternative financing agreements in the last three years.
The Group Managing Director, NNPC, Maikanti Baru, said securing external funding arrangement was crucial to sustaining oil and gas production in Nigeria and ensuring the survival of the country’s energy future.
He was quoted in a statement issued in Abuja by the corporation’s spokesperson, Ndu Ughamadu, as saying, “Within the last three years, we have embarked on several successful alternative funding programmes to sustain and increase the national daily production.”
Baru said the $3.7bn financing included the $1.2bn multi-year drilling financing package for 23 onshore and 13 offshore wells under the NNPC/Chevron Nigeria Limited Joint Venture termed: Project Cheetah; $2.5bn alternative funding arrangement for NNPC/SPDC JV termed: Project Santolina; the $780m NNPC/CNL JV termed: Project Falcon; as well as the $700m NNPC/First E&P JV and Schlumberger agreement.
The corporation noted that Project Cheetah was expected to increase crude oil production by 41,000 barrels per day and gas by 127mmscfd, with a government-take of $6bn over the life of the project.
Baru stated that in the same vein, Projects Santolina, Falcon and the NNPC/First E&P JV, and the Schlumberger funding arrangement were expected to increase combined production of crude oil and condensate by 150,000bpd and 618mmscfd of gas, with a combined government-take of about $32bn over the life of the projects.
He observed that evolving a new funding mechanism for the JV operations was a critical part of President Muhammadu Buhari’s reforms aimed at eliminating the cash call regime, enhancing efficiency and guaranteeing growth in the nation’s oil and gas industry.
Baru stated that as a result of the cash call underfunding challenge, which rose to about $1.2bn in 2016 alone, the NNPC and its JV partners began exploring alternative funding mechanisms that would allow the JV business finance itself in order to sustain and grow the business.
He added that with an average JV cash call requirement of about $600m a month, coupled with flat low budget levels over the past years, the budgeted volumes were hardly 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 industry by the government,” the GMD said.
The NNPC boss stated that currently, with the new alternative funding arrangement in place, JVs would now relieve the government of the cash call burden by sourcing for funds for their operations, estimated at between $7bn and $9bn annually.