NNPC Sets New Rules for JV Funding
Raises committee on cash call disbursement
By Mike Oduniyi
Amid claims of funding constraint, the Nigerian National Petroleum Corporation (NNPC) has set new guidelines for the funding of joint venture oil projects for this year, warning oil majors to keep strictly with the approved budget.
The Federal Government is providing $3.2 billion cash call for projects to be executed by the NNPC and its seven multinational joint venture partners.
The oil majors namely Shell Petroleum Development Company, Mobil Producing Nigeria Unlimited, Chevron Nigeria Limited, Nigerian Agip Oil Company, Elf Petroleum, Texaco Overseas Petroleum and Pan Ocean, said the government's contribution was about $600 million short of the projected funding.
The allocation, they said, would not cover many expansion projects planned by the joint venture partners, mainly in gas areas.
However, speaking to newsmen yesterday in Lagos, the Group General Manager of the National Petroleum Investment Management Services (NAPIMS), Mr. Philip Chukwu, said the budget cut necessitated the need for tight control on spending by the oil companies.
Chukwu said that a cash call committee has been set up, which has the responsibility to scrutinise claims submitted by the companies for cash call payment in respect of the work programme done in a particular month.
The committee, which is made up of officials from NAPIMS and the joint venture partners, must approve of the value of the job claimed by the oil firms. Also, the companies will be summoned by NAPIMS to account for funds given over a period of time, he said.
NAPIMS is the NNPC subsidiary managing Federal Government's investment in the oil and gas sector.
"They (the committee) look at the programme for each month, what is it they (the oil firms) are going to do for the next month. And once it is established what the values are, we then say yes this is the true value of the project," Chukwu said.
The NAPIMS chief, however, stressed that the "most important rule" was that the oil firms must not spend above their budget, warning that any defaulting company would have the excess deducted from its budget for the following year.
"We have only one source of funding, that is through the Federal Government and through the national budget," Chukwu said while disclosing that the draft for the payment of cash call for June this year was already being processed.
The NNPC had submitted demand for $4.9 billion cash call to cover Federal Government's funding of its average 57 percent equity in the joint ventures. The National Assembly, however, approved $3.2 billion.
Even before granting the approval, the National Assembly had to summon the oil companies to defend their budgets while threatening to order withholding of payments to firms that failed to defend their claims.
The oil majors account for more than 90 percent of Nigeria's daily crude oil output currently at around 2.4 million barrels per day (bpd).
It would be recalled that the NNPC between 2000 and 2002, carried out value-for-money audit on cash call claims by the companies who were then demanding payment of arrears of the money owed by the Federal Government, which hit $1 billion then.
Chukwu said the NNPC and its partners were still exploring ways to provide alternative funding for projects that would likely be affected by the budget cut.
The partners, he disclosed, were considering the alternative funding arrangement put in place for the development of the ExxonMobil's Yoho offshore oil field, where the US oil major provided the capital to cover NNPC's 60 per cent shares in the project after which the corporation will pay back from its share of the field proceeds.
Chukwu listed the projects that will likely be funded through this arrangement to include Mobil Producing Nigeria's $1.7 billion East Area Additional Oil Recovery project, Shell's Associated Gas Gathering Project, Agip gas project and Elf Petroleum Amenam/Kpono phase two development project.
"After capital investment (on the projects), there is the period of pay back and then you fund them in the normal day to day operations through joint venture arrangement," said Chukwu. He added that it was a high breed of the sort of arrangement used in financing the development of the first phase of Elf's Amenam offshore field which cost $1.2 billion and Shell EA shallow water field.
"From the discussions we have had, anybody who wants to do it will have to do something better than the Yoho model," he added.
|
