•Reaches $5.1bn debt settlement with oil majors •Seeks reduction of oil production cost to $18/b
Tobi Soniyi in Abuja and Chineme Okafor in Abuja
When a new funding regime that would eliminate joint venture cash calls comes on stream next year, Nigeria would attract $15 billion investments from its oil major partners, the federal government said yesterday.
According to the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, the new funding arrangement would save the country $1 billion annually, adding that the federal government had also successfully negotiated how its outstanding cash call debts put at $6.8 billon as at December 2015 would be settled.
The country is indebted to Exxon Mobil Corp., Royal Dutch Shell Plc Exxon, Chevron Corp., Total SA and Eni SpA for costs incurred from 2010 to 2015.
Saying by some strategic engagement with the oil majors, the debt stock had eventually been reduced to $5.1 billion, excluding the $2.6 billion outstanding for 2016, Kachikwu added that the new arrangement would free critical resources for the country as the oil companies would now be at liberty to find fresh funding sources for their operations.
The minister, who briefed State House correspondents after the National Economic Council meeting presided over by Vice-President Yemi Osinbajo yesterday, also said that the federal government was working on reducing the production cost of oil from $27 to $18 per barrel in the next two years, and eventually to $15 per barrel in the next four years.
He explained that the joint venture cash calls was high because the federal government failed to meet its obligations in the last five years, stressing, however, that rather than lament the situation, government decided to resolve the debt challenge.
According to him, the $5.1 billion would be paid within five years, interest free, and the barrels to pay will come from incremental barrels generated by the oil companies not on the current 2.2 million barrels.
He explained that if for any reason government did not meet those thresholds, it would not be able to pay the $5.1 billion and the $2.6 billion outstanding for this year.
He said: “We are trying to cover that through three thresholds: one is to continue to do accelerated cash call payments between October and December. Hopefully, that will bring the figure down to about $1.5 billion, which will be sinking resources from the FG, either through some of our reserve, or the Nigeria LNG, or a combination of that and alternative funding, to try and train staff. That should be completed hopefully by December.”
He added: “Beginning next year, if this goes into place, the issue of cash call era would have disappeared. The effect would be that investments in excess close to $15 billion are likely to be announced by the oil companies bringing back most of the projects within a couple of weeks once this is signed.
“For the first time, the oil industry will take responsibility for arranging their own funding and being able to produce oil and save the federal government the whole nightmare of cash calls every year.”
Apart from the efforts at reducing production costs, the minister said he expected the barrel reserve production to increase to about 2.5 million by 2019 and potentially to about 3 million barrels by 2021.
Also speaking later in the day at a stakeholders’ forum in Abuja, Kachikwu reiterated the federal government’s commitment to full deregulation of the downstream sector of the petroleum industry, saying that once the Dangote Group refinery comes on stream in 2019, the fate of the refineries in Kaduna, Port Harcourt and Warri would have to be determined.
He said: “Refineries would have to work; it is really not an option anymore. And not only should it work, it has to work very quickly. The reality is that if we do not privatise and we do not concession – which is not what we are doing – then we have a responsibility to find private capital to get them to where they should be.”
Kachikwu noted that the process for full deregulation had started, adding that government would continue to fine-tune it until it gets to where it should be.
“At every given time in the history of every country, you will always have partial deregulation. The reason being that you have to catch up each time and make an amendment, and even if it is just one day, you might have some level of subsidy for that one or two days before it is removed,” he said.
NNPC Develops Model for Quality Diesel
The Nigerian National Petroleum Corporation (NNPC) has said it is working on a scheme to improve the quality of diesel that will be used in the Nigerian market for efficient and optimal performance of diesel-powered engines.
A statement from the Group General Manager, Public Affairs Division of NNPC, Ndu Ughamadu, yesterday in Abuja quoted the Manager, Collaborative Research of the corporation’s Research and Development Division, David Akpan, as saying in a presentation made to the Group Managing Director of NNPC, Dr. Maikanti Baru, during an official tour of some R&D facilities in Port Harcourt.
The statement said that details of the research showed that the effort would achieve significant reduction in sulphur and carbon content as well as other impurities in diesel.
The R&D Division, it said, was working in collaboration with Petronas, Petrobras, Statoil and Saudi Aramco on this.
It also quoted Akpan to have stated that the project would involve non-conventional upgrading of other refined products including crude oil.
Baru, according to the statement, described R&D as a vital tool for advancement in any organisation desirous of re-inventing itself in the ever-competitive market place.
“Organisations that grow commit a significant part of their budget to research and development and we are going to do that; if what it takes for you to grow is to make you a limited liability company, we are going to do that,” he stated.
He equally charged the Division to brace up for the challenges that come with operating as a limited liability company.
According to him, “It means that your staff cost will not be borne by NNPC Corporate Headquarters but by you, and you have to make profit and support the Corporate Headquarters. We are looking forward to that day and we expect a lot from you.”
The statement said Akpan had earlier explained that the mission of the Division was to carry out research, develop technology and provide services to the oil and gas industry.
He added that its operation was propelled by the vision to be a world-class petroleum research centre driven by innovation and quality.