16 December 2016, Sweetcrude, Abuja – The Upstream petroleum sector in Nigeria which has recorded low investment in recent years would soon be upbeat in a flurry of activities.
This is the prevalent views of captains of the Oil and Gas Industry led by the Hon. Minister of Petroleum, Dr. Ibe Kachikwu, the Group Managing Director of NNPC, Dr. Maikanti Baru and chief executives of International Oil Companies (IOCs) at a signing ceremony of cash-call exit agreement between NNPC and its Joint Venture partners in Abuja today.
Speaking at the event, Dr. Ibe Kachikwu stated that the consensus in the industry is that with the signing of agreements to exit cash calls, investments would soon flow into the Nigerian Oil and Gas Industry.
He noted that the Federal government will clear unpaid bills worth $5.1 billion for oil production joint ventures piled up over many years under a deal signed on Thursday with Shell, Chevron, Total, Eni and Exxon Mobil.
The deal would unlock new investment in the Organization of Petroleum Exporting Countries (OPEC) member country, Kachikwu said.
He said the oil majors had given Federal government a discount of $1.7 billion, lowering the original amount from $6.8 billion.
The agreement would also ensure that future payments to production joint-ventures with oil majors would be paid in time, he told reporters after the signing.
He also said that Forcados exports would resume soon, without giving any more precise information. The grade has been under force majeure since February after multiple attacks on the pipelines that carry it to the export terminal.
The Minister said if the industry focused on key issues that impede the industry and resolve them, Nigerian Oil and Gas Industry would soon be able to compete favourably with its peers across the world.
“This event is significant because it has taken us to a point where we can compete with our colleagues all over the world. We have dealt with the downstream, and this is probably the most important item in the upstream and that is obvious we will begin to go into the policy measures and infrastructural development and the rest after the signing ceremony,” Kachikwu said.
In his remark at the event, NNPC GMD, Dr. Maikanti Baru recounted that a lot of work went into the signing ceremony of the cash call exit agreement noting that the Buhari Administration should be commended for mustering the desired political will to resolve the challenge.
He explained that the signing of the exit cash call agreements comprises three components which are: the process of settling the pre-2016 cash call areas; the process of sustaining the cash call payment from 2017; and agreement and settlement over performance in 2016.
Baru also commended the contribution of the Hon. Minister of State for Petroleum Dr. Ibe Kachikwu for his contribution to exit cash calls in the industry.
Baru stated that the Dr. Kachikwu offered necessary supports to put the framework of the agreement in place as well as energise the process when naughty issues capable of derailing negotiations aroused.
Also speaking during the signing ceremony, Chairman of Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry, who is also the Chairman and Managing Director of Chevron Nigeria Limited, Mr. Clay Neff, said that the signing ceremony represents a milestone in the Oil and Gas Industry in Nigeria.
Neff expressed optimism that the agreement would stabilise and also increase upstream production over time, stressing that the repayment of the arrears in a sustainable manner is a key enabler to additional investment in the upstream sector in Nigeria.
Under the new arrangement which came into effect following the signing of the agreement between the NNPC and the IOCs Joint Venture Partners, the entire NNPC equity oil and gas revenues are now to be paid directly into the Federation Account.
Hitherto, competition from other appropriated items of expenditure in the federal government’s budget has always limited the deduction of the technical cost required to fund the cash calls on a monthly basis.
It is expected that execution of this agreement would end the long-standing cash call challenges that have impacted the Nigerian oil and gas industry over the years.
With this arrangement, the federal government will continue to receive royalties, taxies and profit from its equity share of JV oil and gas production while the cost of operation is deducted upfront.
The agreement provides that the outstanding cash call arrears will be repaid within a period of five years through incremental production revenues without impacting the established based production revenue.