23 November 2017, Sweetcrude, Abuja — The Nigerian National Petroleum Corporation (NNPC), Wednesday, said it has secured a total of $3.7bn in Alternative Financing Agreement for three major oil and gas projects in the last three years.
Speaking at the 35th Annual Conference of the Nigerian Association of Petroleum Explorationists (NAPE) in Lagos, Group Managing Director of the NNPC, Mr. Maikanti Baru, said the funding was for Projects Santolina, Falcon and the NNPC/First E&P Joint Venture and Schlumberger arrangement
According to Baru, the $3.7 billion financing package included the $1.2 billion multi-year drilling financing package for 23 onshore and 13 offshore wells under NNPC/Chevron Nigeria Limited Joint Venture termed Project Cheetah and the $2.5 billion alternative funding arrangements for NNPC/SPDC JV ($1 billion) termed Project Santolina; NNPC/CNL JV ($780 million) termed Project Falcon as well as the NNPC/First E&P JV and Schlumberger Agreement ($700 million).
Baru stated that Project Cheetah is expected to increase crude oil production by 41,000 barrels of oil per day (bopd) and 127 million standard cubic feet per day (mmscfd0 with a Government-take of $6 billion over the life of the Project.
In the same vein, Baru disclosed that Projects Santolina, Falcon and the NNPC/First E&P JV and Schlumberger Funding Arrangement are expected to increase combined production of crude oil and condensate by 150,000 bopd and 618 MMscfd of gas with a combined Government-take of about $32 billion over the life of the Projects.
He averred that securing external funding arrangement was crucial to sustaining oil and gas production in Nigeria and ensuring the survival of Nigeria’s energy future.
“Within the last three (3) years, we have embarked on several successful Alternative Funding Programmes to sustain and increase the national daily production and producibility,” Baru said.
He disclosed that evolving a new funding mechanism for the JV operations was a critical part of President Muhammadu Buhari’s far-reaching reforms aimed at eliminating cash call regime, enhancing efficiency and guaranteeing growth in the nation’s oil and gas industry.
He explained that as a result of the cash call underfunding challenge which rose to about $1.2bn in 2016 alone, NNPC and its JV partners began exploring alternative funding mechanisms that would allow the JV business finance itself in order to sustain and grow the business.
He added that with average JV cash call requirement of about $600 million a month, coupled with flat low budget levels over the past years, the budgeted volumes were hardly delivered.
“The truth is that it is difficult to deliver the volumes without adequate funding. The low volumes and by extension low revenues had resulted in the underfunding of the Industry by Government, which has stymied production growth,” he added.