15 December 2016, Abuja – The Federal Government on Wednesday formally ended the era of cash call payment by the joint venture operators in the oil and gas industry.
President Muhammadu Buhari said while presenting the 2017 Budget to the joint session of the National Assembly that effective January 1, 2017, the government would no longer provide money for joint venture cash calls in the national budget for oil and gas operations.
Cash calls are financial contributions by partners in the oil and gas joint venture operations to fund the cost of oil production.
In Nigeria, the Nigerian National Petroleum Corporation, NNPC, on behalf of the federal government, accounts for 60 per cent equity in joint venture operations with ExxonMobil, Chevron, Total, Agip and Pan Ocean. The corporation holds 55 per cent stake in the Shell Joint Venture.
By implication, the NNPC is expected to contribute the equivalent of its equity in each of the joint ventures to the approved annual budget to fund the JV operations.
Over the years, the NNPC found it difficult to meet its cash call obligations to the various JVs, resulting in programmes in the industry often being scaled down or suspended for inadequate funding.
Government’s inability to meet its cash call obligations to the joint venture over the years was identified as one of the challenges responsible for the lack of growth in the country’s oil and gas industry.
Evolving a new funding mechanism for the joint venture operations was part of the focus of the reforms undertaken by government to eliminate the often difficult cash call regime, enhance the efficiency of the management of oil and gas resources and guarantee growth.
As part of the reforms, President Buhari said on Wednesday effective January 2017, his administration would no longer provide for Joint Venture cash-calls.
“This new funding arrangement is expected to boost exploration and production activities, with resultant net positive impact on government revenues which can be allocated to infrastructure, agriculture, solid minerals and manufacturing sectors.”
The Executive Council of the Federation and the National Economic Council recently approved a new funding regime for joint venture oil and gas operations in the country.
- Premium Times