…As NCDMB launches $200 million Nigerian Content
25 August 2017, Sweetcrude, Abuja – The Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu, has stated that ageing pipelines are responsible for the reduced crude oil output recorded in July.
The minister stated this on Thursday while speaking on the sidelines of the launch of the $200 million Nigerian Content Intervention Fund (NCI Fund) and memorandum of understanding signing between Nigerian Content Development and Monitoring Board (NCDMB) and Bank of Industry (BOI).
Kachikwu said oil production, excluding condensates, was slightly below 1.8 million barrels per day in July.
He said, “We continue to have challenges, some of our pipelines are old, so these are basically technical. They are not militancy-induced stoppages, but they are basically maintenance-induced stoppages.”
Crude oil production, which fell in 2016 as a result of attacks on the oil facilities, recently increased to 1.8 million barrels per day after the attacks ceased.
When asked if Nigeria would join the production cuts agreement by the Organisation of Petroleum Exporting Countries at the November meeting, Kachikwu responded: “I can’t disclose that.”
While attending the 172nd OPEC meeting, which held in Vienna, in May, Kachikwu had said Nigeria had no problem joining the OPEC cut as long as production hits the catch point.
In his speech earlier at the event, Kachikwu said the NCIF would address funding challenges which hamper the growth of indigenous manufacturers and assist in meeting the target of reducing the cost of production in the oil and gas sector.
The minister added that the event was “significant for the oil and gas industry and the Nigerian economy because the NCI Fund being launched today has been long expected and will go a long way in addressing the funding challenges which hamper the growth and success of indigenous manufacturers, service providers and other key players in the sector.”
He added that, “Over the years, Nigerian companies have found it difficult competing with their counterparts from jurisdictions where funding is accessible for 5% or less as compared to our market where bank lending rates hover around 20%,” he said.
“Some Nigerian banks are still unable to provide long-term financing required by the local supply chain to build needed capacity; the banks also lack sufficient knowledge of the oil and gas sector. The pedigree and operating model of the Bank of Industry (BOI) is expected to close this gap.
“It is a known fact that the exorbitant cost of funds in our market is partly responsible for the high cost of service delivery by Nigerian Oil and Gas Service Providers (NOSPs) and this feeds into the unacceptable high cost of our crude oil production.
“At the SPE conference in Lagos weeks ago, I directed all players in the sector to work assiduously to cut the cost of producing a barrel of oil, which current stands at $32/barrel. I am optimistic that the NCI fund, which will be accessed at a single digit interest rate, with a tenor of five years, will help in this regard.”
The minister added that, “The Governing Council of the Board, of which I am the Chairman, approved this transaction at our last meeting with an initial outlay of $200m. This is to ensure that a wide spectrum of NOSPs access the Fund. We are also desirous of catalyzing the growth and development of Nigerian Content in all its facets, including Manufacturing, Asset Acquisition, Contract financing and Contract financing for community contractors.
“The Governing Council’s approval is in keeping with the Economic Recovery and Growth Plan of the Muhammadu Buhari led administration, which recognizes access to cheap funds as a key enabler for industrialization.”
He said, “I have been assured by the Executive Secretary of NCDMB that the modalities for accessing the NCI Fund have been simplified and is now devoid of cumbersome processes and conditions that affected the old model.
“The Board must also ensure that it deploys effective communication strategies and educates Nigerians sufficiently on the terms of the Fund and conditions that must be met before companies can apply and secure loans under the NCI Fund.”
Kachikwu advised companies that will successfully access the NCI Fund to be diligent in utilization and faithful in repayment. “There is a tendency for companies to assume that it is free money and decide not to repay.
“To forestall this, NCDMB and BOI must adhere strictly to the detailed operating model, to ensure that only serious companies with bankable business plans and prospects of repayments access the funds,” he said.
Also speaking at the event, the Executive Secretary of the NCDMB, Eongr. Simbi Wabote, explained that the NCI Fund is a portion of Nigerian Content Development Fund (NCDF), which was established by Section 104 of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act and is drawn from 1% of all contracts awarded in the upstream sector of the oil and gas industry.
He noted that although the Board began in 2012 to collect the funds, it has not been very successful with utilizing it to support the operations of indigenous service companies in the industry. “This has created a lot of frustration among stakeholders who felt that the purpose of the NCDF was not being achieved,” he said.