Abandoned projects come on stream as NNPC exits JV cash call

The exiting of the joint venture cash call by the Nigerian National Petroleum Corporation NNPC which is the holder of the government’s equities in the Joint Ventures operations in the upstream sector of the oil and gas industry would allow some of the projects that have been abandoned to come on stream.

With the abandoned projects brought to life, there would be job opportunities, improved oil production will yield foreign exchange earnings which will boost Nigeria’s reserves and help the economy out of the current recession.

The country needs the support of the International Oil Companies (IOCs) if the industry must move forward. As a matter of fact the current recession the country is in stems from the fact that the oil and gas sector has not been well funded for several years and because of this many projects that would have added value to our Gross Domestic Products (GDP) have been put on hold on account of lack of funding.

Apart from the issue of militancy the only major problem confronting the industry is that of lack of funding, this was why when the Ibe Kachikwu signed the $1.5 billion alternative funding arrangement with Chevron Nigeria the industry operators were relieved that all hopes were not lost after all.

With the exiting of the joint venture cash call arrangement the government can reach agreements in major areas, including costing, and it will be possible for us to increase investments in oil and gas with or without the Petroleum industry Bill (PIB).

We are sure that by December, this year, we will get more visible and viable projects through alternative funding arrangements. These will in­clude foreign funds, and bonds among others.
Already, the NNPC has secured a $1.2 billion multi-year drilling financ­ing package for 36 Offshore/Onshore Oil wells under the NNPC/Chevron Nigeria Limited Joint Venture. The package which is being financed by a consortium of Nigerian and interna­tional lenders is an integral part of the Accelerated Upstream Financing Programme initiated by NNPC to ad­dress the perennial challenge experi­enced by the Federal Government in providing its counter-part funding of JV upstream activities.
It envisaged that the initiative apart from supplementing the Cash- Call commitment would help in the maintenance of current production levels in the short term as well as replacing depleting reserves.
Break­down of the NNPC/Chevron JV deal which was executed at a signing-ceremony in London mid last year indicates that the $1.2bn is to be channelled into the development of 23 onshore and 13 offshore wells on OML 49, 90 and 95 in two stages over 2015-2018.
Stage one, comprising 19 wells, is projected to deliver 21, 000 barrels of crude oil and condensate per day alongside 120, 000million standard cubic feet of gas per day (mmscf/d) over 2015 and 2016. Stage two, com­prising 17 wells, is projected to yield 20, 000 barrels of crude oil and con­densate per day alongside gas pro­duction of 7 mmscf/d between 2016 and 2018. It is envisaged that both stages of the project would generate $2 to $5 billion of incremental rev­enue to the Federation account.
Beyond the contribution to the na­tional treasury, the projected peak incremental gas production of 127 mmscf/d, which is the electricity equivalent of 400 megawatts, would help boost the Federal Government’s domestic gas aspirations with ex­pectant positive effect on power sup­ply.
Maikanti Baru had earlier indicated that NNPC need to focus on abandoned proj­ects. “So, we will look at projects that can deliver high yields at low cost. We should market our potentials to the world because capital goes to those who desire it. We are ready to move around the world to attract the huge capital that we need. Indeed, the na­tion needs huge funds to stimulate and sustain operations in these years.”
Clay Neff, the outgoing chairman and managing director of Chevron Nigeria said Project Cheetah is projected to achieve a peak incre­mental production of 61 million bar­rels of oil equivalent per day.
Shell Petroleum Development Company in its 2016 Facts Sheets said, “The planned start-up dates for two major gas gathering projects – Forcados Yokri Integrated Project (FYIP) and Southern Swamp Associated Gas Gathering (SSAG) Solutions have been delayed due to a lack of adequate joint-venture funding.

The report further noted that: “Progress was made on several gas gathering projects, which are now at advanced stages of completion. For example, we have installed a gas-gathering plant at the Olama Station that is ready for final commissioning. The Adibawa, Escravos and Otumara Gas Gathering Projects are also at advanced stages of completion,” it stated.
Osagie Okunbor, Managing Director Shell (SPDC) and Country Chair, Shell Companies in Nigeria, had said: “Shell Companies in Nigeria are also actively involved in the development and utilization of natural gas, pioneering its production and delivery to domestic consumers and export markets.
“The truth is that the Nigerian Federal Government cannot be talking about improving the nation’s power supply through gas powered stations when gas projects that would ensure this happens, are being stalled by IOCs due to funding constraints by JV partners, which the Federal Government’s NNPC handles a major stake of. It will also be foolhardy for the NNPC and the Federal Government to address the issue of gas flaring and expect an improvement in the nation’s electricity supply when some identified all-important gas projects are left stalled or abandoned due to funding constraints. It simply does not make sense,” he said.
The NNPC subsidiary is owing the IOCs involved in JV production about $7 billion. This is just an example of the failure of the Federal Government and the NNPC/Subsidiaries not fulfilling its JV funding obligations as the major stakeholder.
The alternative funding options have been widely welcome many stakeholders as they see a big relief for many of the local and international companies that have been either thinking of closing shops or have actually closed shops.

Olusola Bello