The Nigerian National Petroleum Company (NNPC) Ltd., yesterday, said it leveraged its financial autonomy derived from the Petroleum Industry Act (PIA) 2021, to clear the $3.8billion legacy cash call debt owed its Joint Venture (JV) international oil companies (IOCs) partners.
NNPC Ltd.’s Chief Upstream Investment Officer, Bala Wunti, said this at the ongoing fourth Nigerian Oil and Gas Opportunity Fair, in Yenagoa, Bayelsa State.
He said that based on the provisions of the PIA, the NNPC was able to work out and execute a payment plan for the cash call obligations while balancing its energy security obligations to the country.
Cash Calls obligations arises when an operator calls up other non-operating JV partners to provide funding for operations, which is based on each partner’s equity and on approved budgets.
The NNPC JV partners include the Shell Petroleum Development Company (SPDC); Mobil Producing Nigeria (MPN); Chevron Nigeria Limited (CNL); Total Exploration & Production, now TotalEnergies; and the Nigeria Agip Oil Company (NAOC).
Wunti added that the enactment of the PIA and its implementation effectively ended the fiscal uncertainties and empowered the newly established institutions to discharge their mandates effectively.
He NNPC and its IOC partners successfully confronted prevailing challenges and are poised to increase national production output and usher in a new era of growth and opportunities in the Nigerian upstream oil and gas industry.
He said: “We have seen the worst, lessons have been learned and the solutions are being institutionalised to ensure we never see a repeat.”
Recall that NNPC in 2016 signed a cash call repayment agreement with its JV partners to defray cash-call arrears within five years after many years of indebtedness, which stalled investment in the upstream sector, until the debts were paid off last year.
We want to address the energy challenges so that industrialization can come to the country. Forty-eight per cent of all revenue that comes to the government comes from the oil and gas sector and we are in a very good position to support the growth of the economy.
Success factors
Wunti also the success story to the achievement through the NNPC Upstream Investment Management Services (NUIMS), to clear the huge backlogs of cash call debt of over $3.8billion, thereby restoring the JVs’ confidence to ramp up production and increase their spending to procure the necessary services required to do so.
Additionally, he informed that response to the security challenges by rallying stakeholders to implement holistic hydrocarbon infrastructure security architecture to tackle the issue of crude oil theft and vandalism of oil and gas assets was a big advantage.
He said the architecture comprises Government Security and Intelligence Agencies (GSIAs) supported by Private Security Contractors (PSCs) drawn from the host communities with vast knowledge of the terrains and the communities, a development that has brought tremendous results in a cost-effective manner.
To address the high upstream production cost, he said the Nigerian Upstream Cost Optimisation Programme (NUCOP) was launched to bring synergy amongst upstream players in the country to drive down costs.
“Progress has been recorded with improvements in the contracting cycle and co-sharing of services amongst upstream operators,” he added.
Wunti reiterated that local content and capacity development in the upstream industry is non-negotiable, and urged stakeholders to take advantage of the many opportunities available with an expected uptake in drilling activities, demand for line pipes, and consumables essential for growing production output.
He concluded that focus has shifted towards consolidating on these gains to raise production output to 1.8 million barrels per day (mbpd) in July, and spur growth to achieve a target of 2m bpd by the year end.
He added that this opens up massive opportunities for all stakeholders, especially direct and indirect jobs creation, contractors and suppliers will get busier, with a ripple effect on other sectors of the economy.
Stakeholders’ support
Also speaking, the NNPC Group Chief Executive Officer, Mele Kyari, urged all stakeholders to join the NNPC in growing crude oil and gas production.
He informed that NNPC will be supplying 300,000 bpd of crude oil to the Dangote Refinery, which is coming on stream next week.
He said: “We want to address the energy challenges so that industrialization can come to the country. Forty-eight per cent of all revenue that comes to the government comes from the oil and gas sector and we are in a very good position to support the growth of the economy.”
