The Petroleum Technology Association of Nigeria (PETAN) has stated that the exit of joint venture cash calls by the Nigerian National Petroleum Corporation (NNPC) will end the era of project deferments and cancellations by the international oil companies (IOC), which were caused by paucity of funding.
The NNPC in December 2016 exited the cash call arrangement with the IOCs and got a discount of $1.7 billion from the $6.8 billion it owed its JV partners as cash call obligations.
Under the deal, the corporation was requested to pay $5.1 billion out of the $6.8 billion, in addition to the $1.2 billion cash call debt owed the partners in 2016.
The corporation paid the first tranche of $400 million in April 2018 with a firm commitment to pay the outstanding debts before April 2018.
With the corporation’s exit of JV cash call model, the JV partners adopted self-funding model to execute oil and gas projects, thus freeing the federal government from budgetary allocations for the projects.
Speaking to journalists at the weekend after a meeting of PETAN in Lagos, the Chairman of PETAN, Mr. Bank-Anthony Okoroafor said the country’s exit from the JV cash call model would end the era of project deferments and cancellations by the IOCs.
According to him, the new self-funding model will also open up Nigeria’s oil and gas sector and ensure that the service providers are paid promptly by the IOCs.
”I remember that in the past, when you execute a project for an IOC, you will not be paid. When you ask them, they will tell you that the government has not paid their own part of the JV cash call. But now, they will go and borrow money and if they self-fund themselves, the issue of waiting for the government to provide their own cash call before they pay for the work done will no longer arise. We think that the difficulty they experienced in accessing fund is a thing of the past,” Okoroafor explained.
The PETAN Chairman pointed out that the association highlighted developments in Nigeria’s oil and gas industry in 2017, noting that the exit from the cash calls model was significant as the IOCs would no longer focus on the federal government for funding.
“We reviewed the exit of cash calls; we reviewed the Minister’s Seven Big Wins; we reviewed the gas policy; we reviewed the new oil policy and we then looked at the investments and new capacities acquired by our members within 2017,” he added.
“On the other policies that we discussed such as the gas policy that was signed, what does it tell us? It opens the industry to gas; it encourages people to explore for gas, instead of exploring only for oil; it opens the gas market,” Okoroafor said.
The PETAN chairman also noted that the new gas policy would correct the fiscal terms for gas to make the industry attractive for genuine investors.
“The gas policy is wholistic; the same thing with the new oil policy. The last time something was done in all these policies was in 2007,” he added.