•Advocate activation of IJV model provision in PIA
•Seek $15bn of Nigerian pension fund to help in long-term projects
Worried by the unabating dismal performance of the Nigerian oil and gas industry, particularly the upstream segment, industry stakeholders have again called on the federal government to urgently auction majority shareholding of the Nigerian National Petroleum Company Limited (NNPC) in the oil and gas assets.
They based their call on the funding challenge facing the industry, which according to them had been exacerbated by the ongoing exit of the international oil companies (IOCs) resulting in the dismal performance in oil production, foreign exchange earnings as well as infrastructure deficit.
They made the call in Lagos, during the management session at the ongoing 41st annual international conference and exhibition of the Nigerian Association of Petroleum Explorationists (NAPE), with the theme: “Repositioning the Oil and Gas Industry for Future Energy Dynamics.”
The session centred on “Energy Infrastructure Development, Financing and Monetisation Strategies in Nigeria: Reducing the Risk of Entry”, and had the immediate-past Managing Director of the Nigeria Liquefied Natural Gas Limited (NLNG), Mr. Tony Attah; Executive Secretary of Nigerian Content Development and Monitoring Board (NCDMB), Mr. Simbi Wabote, as speakers and contributors.
The Vice Chairman, Petroleum Technology Association of Nigeria (PETAN), Mr. Ranti Omole, also contributed to the discussion.
Aside calling for the sale of NNPC’s majority shareholding, the speakers also urged the government to urgently implement the Incorporated Joint Venture (IJV) model as provided for in the Petroleum Industry Act (PIA) to replicate the NLNG model.
The stakeholders also suggested that the government should intervene in the funding challenge hindering the needed investment into upstream projects by releasing $15 billion out of the $20 billion Nigerian Pension Fund Nigerian and invest it into long-term oil and gas projects.
In June, barely a fortnight into the inauguration of President Bola Tinubu as Nigeria’s head of state, his Policy Advisory Council had proposed the sale of the major stakes of NNPC in the upstream, midstream and downstream sectors of the oil and gas industry.
In the Policy Advisory Council Report dated May 2023, the council made up of renowned energy professionals, had projected that the federal government would earn about $17 billion from the sale of the NNPC’s majority stakes in the oil and gas assets.
But speaking at the NAPE event, Attah, who suggested the sale of major stakes of NNPC in the oil sector, said that would enable the government to make money available for investment into critical oil and gas infrastructure, which would ultimately address the decline in crude oil and gas production.
“Perhaps it’s also time for government to sell down. We are not saying exit. Sell down. Relieve yourself, raise fund and then we can start all over again to renew our infrastructure baseline”, he said.
Calling for the activation of IJV model provision in the PIA, Attah explained that it was because of the IJV ownership and operational model of NLNG that made it possible for the company to fund its projects without waiting for funds from the government.
Citing the ongoing Train 7 project, the former NLNG boss stated, “We went to the market, but we were able to go to the market on the back of a very robust balance sheet because we are not your conventional JV, we are an IJV.
“Now, when you talk about the bigger issues in the industry underpinned mainly by your conventional JVs, we need to point within the PIA provision that we should switch to the IJV, to the extent that today, government is 57 per cent of the JV upstream and it’s NCNC-No contribution, no chop. You are looking for government for every investment to bring 57 per cent of value, and we can tell in the last 20 years it’s not happening.”
Attah, expressed displeasure over Nigeria’s energy poverty status despite being a resource rich nation, saying that was painful as a Nigerian.
In his intervention, Wabote, who joined in the call for the sale of NNPC’s majority shareholding and adoption of IJV model, warned that retaining all of government’s share in the JVs would not achieve the expected result.
“I fully align with Tony in his position with regards to looking at the joint ventures that we have. It’s a huge challenge”, he said.
While pointing out that NLNG has succeeded because of the IJV model and was able to source for and get funding to execute its projects, Wabote said the Olokola (OK LNG) and the Brass LNG projects would not be actualised using the current JV model and poor balance sheet of the national oil company.
He further explained, “If we retain majority shareholding in any of those ventures in order to make it happen, I can assure you it’s not going to happen, because even within the Train-7 itself, to be able to get it going, NLNG had to carry their 49 per cent partner to make that happen.
“And even on the upstream projects that would supply the much needed gas to NLNG itself for Train 7, NLNG had to fund the upstream activities to produce gas for them.
“So, if you really want to look at other opportunities within the NLNG space, we must look at what Tony has suggested in terms of shareholding to be able to raise capital.
“The greatest challenge we have, you hear people talking about Floating LNG. It’s not an easy task to raise $3billion as we speak. I struggle with it because anybody you want to go and raise from will ask for your balance sheet. Do you have that balance sheet to raise that amount of money? It’s a challenge.”
The NCDMB Executive Secretary, however, advised the indigenous oil producers that had taken over the land and swamp assets divested by the IOCs to collaborate and create their own joint venture in order to develop their assets.
In his submissions, Omole suggested that the government should intervene in the funding challenge hindering the needed investment into upstream projects by releasing $15 billion out of the $20 billion Nigerian Pension Fund and invest it into long-term oil and gas projects.
He said: “We’ve been talking about the financing and I just checked. As at February 2023, the Nigerian Pension Fund was N15.5 trillion ($20 billion) and at least 80 per cent of that fund is in the money market… and we are looking for money. Why can’t we unscramble $15 billion out of the $20 billion and put them in longer-term investment.
“So, what are the hindrances to the indigenous operators that are looking for funding in penetrating or convincing the government or NNPC, Ministry of Petroleum Resources or talking to the Minister of Finance on how to utilise our long-term pension?”.