Abuja — Managing Director of the Nigerian National Petroleum Corporation, Dr. Maikanti Baru, has lamented the difficulties experienced by indigenous oil and gas firms in securing funds to finance their operations, stating that this has negatively affected their growth trajectory.
In a presentation titled, ‘Energy Security and Sustainable Development in Nigeria: The Way Forward,’ Baru stated that these indigenous producers had over the years become critical to Nigeria’s quest to grow its reserves, especially as these firms hold about 15 percent of the country’s crude oil and gas reserves.
He noted that the Nigerian oil and gas landscape was fast changing from international oil companies-dominated to a much more diversified cocktail of influences involving locals, independents, and the NNPC.
Baru said, “There is an emerging class of new producers within the oil and gas Industry who are primarily local independents with a non-diversified portfolio and lean balance sheet or required track record to raise substantial funds.
“They have become important because approximately 15 percent of both crude oil and gas reserves and national production lie in their hands. They also require substantial capital for growth.
“There is increasing global competition on Nigerian crude oil due to the rise of new production centers across the globe particularly in Africa, and Argentina.
“These portend a new dimension for the Nigerian oil and gas industry. Nigeria, therefore, needs to unlock new barrels as quickly as possible to stay relevant in the new emerging World. Without adequate funding, we cannot meet the targets.”
Baru explained that the Federal Government developed a new funding mechanism for its Joint Venture operations as part of wide-ranging reforms to eliminate the often difficult cash call regime, enhance the efficiency of the management of oil and gas resources and guarantee growth.
“To encourage the existing players in the industry, particularly our traditional JV partners, we undertook to settle all outstanding cash call arrears amounting to a negotiated sum of a little over $5 billion. This has restored confidence in the Nigeria Oil and Gas Industry, He explained.
As a result of the resolution of the cash call arrears issue, Baru added that the NNPC had signed third-party financing deals with several international and local banks on new oil and gas developments worth over $3 billion despite the depression in 2016/201 7.
“This demonstrates the faith in our Industry and the potentials we can unlock. For our IOC partners, we would continue to leverage the strong credit rating of partners, identify key quick-win projects that are easy to mature with strong cash flow projections and attract the necessary funding from the capital market,” Baru maintained.
He added that “These alternative financing approaches to fund NNPC’s JV obligations have helped to renew investors’ confidence and stimulate further Foreign Direct Investments. In particular, this has deepened local banks participation in financing the upstream sector as the financing are syndicated from local banks and International lenders.
“It is quite an exciting time ahead for the Nigeria oil and gas industry. The industry is funding both development and infrastructure through alternative means. NNPC appreciates the cooperation of its Partners, Government, and financiers towards moving the Industry forward.”