Operators seek Nigeria LNG model for funding Joint Venture projects

06 October 2015, Lagos – Executives of some exploration and production (E &P) have advocated for the adoption of the Nigeria Liquefied Natural Gas (NLNG) model for funding joint venture projects by the Nigerian National Petroleum Corporation (NNPC) and some local and international oil companies operating in the country.

Oil rig operating on Aje 5 well.

Oil rig operating on Aje 5 well.

They noted that with the failure of the National Assembly to pass the Petroleum Industry Bill (PIB), which seeks to address the funding challenges, the adoption of the LNG model would ensure that each joint venture is self-sustaining.

Three of the executives, who spoke to THISDAY on condition of anonymity at the weekend, said federal government’s apparent reluctance to incorporate the joint ventures was due to the inordinate ambition of officials of government, particularly the Minister of Petroleum to control the NNPC.

“The government officials want to control the NNPC because they see control of NNPC as the control of the treasury. The original aim of the PIB was to address the funding challenges but at the end, they removed the Incorporated Joint Venture from the bill. Now, the actual problem the PIB was originally designed to address has been neglected while they are using politics to pursue other issues in the bill,”
said a Chief Executive Officer of one of the exploration and production companies.

One of the executives also recommended for the LNG model to free the federal government from any cash-call obligations.

“In the absence of the PIB, they should adopt the LNG model and let each venture be self-funding. When they adopt the LNG model, the two parties will sit together and decide how to raise fund for their operation because there will be no need for government appropriation,” he said.

Another executive told THISDAY that with the adoption of LNG model, the government will derive its revenue from taxes, royalties and NNPC’s share of profit in the form of dividends.

“But each minister of petroleum wants to control the NNPC and that was why they expunged the incorporated joint venture (IJV) model from the PIB,” he added.

The Transition Committee set up by President Muhammadu Buhari at the eve of his inauguration had in its 800-page report in April 2015 recommended a quick passage of the old version of the PIB, which seeks to create incorporated joint ventures (IJVs) between the IOCs and the NNPC.

THISDAY gathered that the IJV model had faced opposition from officials of government on one hand and the IOCs on the other hand.

While the Minister of Petroleum wanted to control the NNPC, the IOCs were concerned that with the NNPC controlling majority stakes in the proposed IJVs, the company will manage the joint venture partners, as against the current arrangement where the IOCs with minority stakes in the JVs, are managing the JV companies.

Group Managing Director of NNPC, Dr. Ibe Kachikwu said recently that the corporation would explore the LNG model to fund the arrears of JV cash-calls, which had accumulated to about $6 billion.



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