Oil workers suggest alternative ways of funding joint venture operations

16 June 2015, Lagos – Oil workers, under the umbrella of Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), have urged the federal government to review the current funding arrangement for the Nigerian National Petroleum Corporation (NNPC) Joint Venture (JV) operations with the international oil companies (IOCs) in view of the Corporation’s huge indebtedness to the oil majors.

Pengassan_1The oil workers reasoned that alternative funding for the JVs operations with the state oil company, NNPC will address the funding challenge, which has adversely affected the JV operations over the years.

Speaking in Lagos at the weekend, Chairman of the association, Mr. Emmanuel Onuorah said the  alternative ways of funding the JVs should include Incorporated Joint Ventures (IJV) modelled after the Nigeria Liquefied Natural Gas (NLNG); traditional JV with government reducing its interest;  service contract with oil firms as contractors, and tax based system where government detaches itself totally from operations in the sector and raise revenue from taxation.

Onuorah said the suggested alternatives, if applied, would enable government and NNPC to resolve the issues concerning the huge debts owed the oil companies because of the government and NNPC’ inability to pay their own counterpart funding of JV operations.

He, however noted that JV between NNPC and oil firms accounts for more than 60 per cent of Nigeria’s crude oil production.

Onuorah also canvassed that security personnel should be adequately empowered for them to be able to checkmate crude oil theft and pipeline vandalism.

He pointed out that crude oil theft has deprived Nigeria  huge income, adding that the government should  equip the security forces to fight crime in the industry.
“The nation is losing about 250kbpd and 400kbpd of crude oil to theft and pipeline vandalism. This is the combined production of Ghana, Garbon and Equatorial Guinea.”

He also noted that what was lost as revenue if the crude oil price is put at an average of $60 per barrel,  will translate to between US$15 million and US$25 million respectively.

He said: “As a major stakeholder in the industry, we lament the huge loss, which could have been deployed into critical areas of national development.”

He posited that huge unbudgeted costs are being incurred to repair damaged or vandalised pipelines and advised the government to put a stop to the menace urgently.

In the meantime, a coalition of Civil Society Organisations (CSOs) have advised the federal government to quickly initiate a phased divestment of its shares in the JV operations, pointing out that the huge cash call debt obligation, which the JV has imposed on Nigeria was enormous .

According to the organisations, the divestment will open the arrangement for private sector participation and enhance increased inflow of revenue to the federation.

Besides, they noted that it will reduce corrupt practices, wastes and other leakages associated with the management of the JVs over the years.

– This Day

About the Author