The Nigerian National Petroleum Corporation recorded a shortfall of $3.3bn in 2015 in its cash call obligations to joint venture oil and gas assets being operated by private firms, data from the corporation showed.
The NNPC was only able to pay $4.13bn to the JV partners as against $7.39bn approved to be paid for last year for the development of the assets.
The nation’s oil and gas production structure is majorly split between joint ventures onshore and in shallow water with foreign and local companies and production sharing contracts in deepwater offshore.
The NNPC owns between 55 per cent (for JVs with Shell) and 60 per cent (for all others) and the JVs are jointly funded by the oil majors and the government through the corporation.
Production from joint venture companies has over the past few years declined, partly due to funding constraints occasioned by the NNPC’s inability to meet its share of cash calls.
The Managing Director, Degeconek Nigeria Limited, Mr. Abiodun Adesanya, said the 53 per cent drop in NNPC cash calls payment to JV operators between 2005 and 2015 led to a 62 per cent drop in JV production that is masked by PSC production.
Adesanya, who stated this at the technical meeting of the Nigerian Association of Petroleum Exlporationists in Lagos, said the shortfall “plays a part in the decline of crude oil production from 2.3 million bpd to 2.1 million bpd over the same period.”
He said the country needed a right mix of policies and funding to grow its oil reserves to 40 billion barrels and grow production to three million barrels per day.
He said operators should focus on stabilising production, adding that they should identify low hanging fruits that require low cost workover/remedial operations and focus on high-performing assets to maximise production.
“Operators should focus on managing their financial position, optimising capital (debt versus equity mix; managing tax and corporate structure; renegotiating fiscal policies for optimal benefits where possible; and they could also divest asset to generate cash flow,” Adesanya said.
According to the NNPC, total export crude oil and gas receipt for last year is $4.74bn, of which the sum of $0.61bn was remitted to Federation Account while the balance of $4.13bn was used to fund the JV cash call for the period.
“JV cash call is a first line charge to Federation Account and 2015 approved budget requires monthly funding of about $615.8m. NNPC is therefore mandated to sweep all the export receipt to JV cash call funding implying a zero remittance to Federation Account.”