18 November 2016, Sweetcrude, Abuja – The Federal Government announced on Thursday that it has reached a deal to pay $5.1 billion in unpaid bills to oil majors including Royal Dutch Shell and Exxon Mobil.
The Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu, who made the announcement in Abuja said the agreed amount, which is $1.7 billion less than the total amount owed, would be paid within five years, interest-free.
The Nigerian National Petroleum Corporation (NNPC) has amassed a total of $6.8 billion in unpaid bills up to December 2015, so-called cash calls, that it was obliged to pay under joint ventures with Western oil firms, with which it explores for and produces oil.
Under the arrangement, payment will be in the form of crude oil cargoes but only when Nigeria’s production exceeds 2.2 million barrels per day, Kachikwu said, which is the nation’s current production when all fields are operating properly.
“If for any reason we did not meet (the) threshold we will not pay the $5.1 (billion), so that is fantastic,” he said of the deal, which has been approved by the National Economic Council, an advisory body to the government.
Kachikwu last week said Royal Dutch Shell, Exxon Mobil, Italy’s ENI, Chevron and France’s Total had “accepted” what he described at the time as an “outline settlement”.
The petroleum ministry has for more than a year been trying to reduce its financial obligations, which have accumulated over several years. Kachikwu said there is at least $2.5 billion in additional debt that has accrued this year that it is still working to repay.
According to a report by FT, the payments would be made in the form of new oil production, quoting the minister and “people close to Western companies”. There would also be a one-off cash payment.
The agreement would hopefully be finalised by the end of the year and cover the period from 2010 to 2015, the paper said.
The delay in payments has hindered oil and gas investment in the country and worsened a budget crisis as the government seeks to increase spending to drag Africa’s biggest economy out of recession.
Nigeria’s oil and gas output had been relatively stagnant for years until militants started a wave of attacks in January to fight for a greater share of oil revenues.