23 August 2016, Lagos – The Nigerian National Petroleum Corporation (NNPC) has said that it will redevelop abandoned oil fields as part of the efforts to ramp up the country’s production and shore up federal government’s revenue.
NNPC also requires an average of $600million as joint venture (JV) cash calls every month.
Speaking at the recent 2016 conference organised in Lagos by energy correspondents, the Group Managing Director of NNPC, Dr. Maikanti Baru said extending the frontiers by diversifying the production mix and terrain was another strategy the corporation would pursue.
“We will encourage oil exploration and development in new areas, redevelop abandoned fields and ensure full utilisation of existing production acreages. The incremental production will help shore up government revenue,” he said.
Baru argued that given the low oil price, sustainable returns need to be maintained.
To achieve this objective, the NNPC boss said the corporation was working on cost-saving measures that would ensure safe and profitable operations of the assets, while guaranteeing adequate margin for both the government and investors.
“Initiatives such as service sharing for clustered assets, standardisation of operating framework and contracts, resource pooling and reducing contract cycle time will be pursued. To diversify the source of government revenue and capture value across the entire value chain, we will aggressively pursue domestic refining to take advantage of improved refining margin during period of low oil prices. To address the current sub-optimal performance of the domestic refineries, a new rehabilitation strategy, which includes the rehabilitation of all refineries, modification of the refinery business model and governance structures that tie capital investment performance to actual refinery output,” Baru explained.
Baru noted that the huge drop in revenue earnings as a result of the slump in oil price poses a grave danger to the funding of the budget, stressing that the major challenge is securing the crude volumes to a level that ensures the delivery of the revenue target given that the price of oil is internationally determined.
He said the government was working to resolve the security issues so that the corporation could guarantee the volumes.
Baru said the $600 million monthly joint venture cash calls required by the NNPC had imposed huge funding challenges, adding that the corporation cannot deliver volumes without adequate funding of the oil and gas industry.
“With average JV cash call requirement of about $600 million a month, and coupled with flat budget levels over the past years, leading to underfunding of the industry. The underfunding has stymied production growth; therefore managing the funding issues is our most immediate challenge and transparent innovative financing approaches are being reviewed to address these funding shortfalls,” Baru added.
- This Day