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NNPC cash call funding arrears swells to $8.5bn



The Nigerian National Petroleum Corporation (NNPC) yesterday raised the alarm that its Joint Venture (JV) cash call arrears has hit an all time high of $8.5 billion as at 2016.
This was as its oil and gas revenue shrunk to $114.18 million in September from $183.93 million in August, representing about 36.9 per cent as against 17 per cent decline in August.
Group Managing Director (GMD) of NNPC, Mr. Maikanti Baru, painted the gloomy picture at the 34th Nigerian Association of Petroleum Explorationists (NAPE) Annual International Conference and Exhibition with the theme, “Nigerian Oil and Gas Industry: Tackling Our Realities” held in Lagos on Tuesday.
The further drop in oil revenue is contained in the latest group financial report for the month of September, released by NNPC yesterday.
Given a further breakdown of the debt profile, Baru said underfunding of NNPC cash calls in 2016 alone is estimated to be about $2.5 billion, aside the inherited arrears amounting to over $6 billion.
To address the huge funding gap, the GMD said NNPC management with the Minister of State for Petroleum Resources and the JV partners to exit the cash call system and also clear funding arrears.
A JV operation is a standard practice in the ownership of oil and gas assets in Nigeria. It usually takes the form of an agreement between the national oil company, in this instance, the NNPC, IOCs and sometimes, indigenous oil companies.
Under the arrangement, all parties contribute to funding oil exploration and production operations in the proportion of their JV equity holdings and receive crude oil produced earnings in the same ratio.
On the planned JV exit strategy, Baru said the NNPC and the Ministry of Petroleum Resources are exploring alternative funding mechanism that allows the JV business finance itself by retaining its operating costs and capital allowances (fiscal costs) in order to sustain and grow the business.
“Where the fiscal costs for any year are not sufficient to fund the budgetary requirements of the JV, part of the profit margin could be retained to fund the budget and where necessary, external financing could also be sought to finance commercially viable and bankable capital projects without recourse to government treasury,” he said.
According to him, the import of the above is that the JV will relieve government of the cash call burdens by sourcing funds for its operations (estimated at $7-$9 billion annually). Further breakdown of the oil earnings show that contribution from crude oil amounted to $73.71 million while gas and other proceeds was $40.47 million.
Of the total receipt, the sum of $114.18 million and $Nil were remitted to fund JV cash call and Federation Account respectively.
The poor performance in revenue accruable to government coffers, according the the financial statement, is attributable to attack and sabotage of oil facilities in the Niger Delta.
‘‘At Forcados Terminal alone about 300,000bopd were shut in since February 2016, following force majeure declared by SPDC. A number of crude oil liftings were deferred until the repair is completed. Other major terminals affected by the renewed spate of vandalism include Bonny, Usan, Que Ibo terminals, and the recent attack on the Nembe Creek Trunk Line (NCTL),’’ the corporation said.