‘How to bridge $5b oil exploration funding gap’
• Nigeria’s oil may dip 40% within five years
Crude oil production of Nigeria may not rise beyond the 2.4 million barrels per day until the country frees the Joint Ventures (JVs) to seek funding in the international arena for the bridging of the funding gap that exists, industry experts have said.
Taking turns to speak at the ongoing Offshore Technology Conference in Houston, Texas, United States under the auspices of Petroleum Technology Association of Nigeria (PETAN), experts submitted that government must allow the JVs to embark on self-funding in order to ease the perpetual dearth of funding that has continually held back aggressive production.
This comes as the Nigerian National Petroleum Corporation (NNPC) puts the JVs funding gap at $5 billion.
The corporation also hinted that it transferred $236.7 million into the funding of joint ventures in the month of February this year. According to the NNPC, it had earlier paid $407.9 million to JVs in January, which were also the total crude oil earnings for that month.
At a panel session on the theme “The Nigerian oil and gas industry, current realities, exciting opportunities,” organised by PETAN, speakers urged government to consider the option in view of the huge cash calls debt to the JV partners, in the face of dwindling oil revenues as a result of declining global crude prices.
Indeed, they noted that the NNPC has been unable to meet its share of the funding, commonly referred to as cash calls, required to maintain and develop new oil projects over the past few years.
Oil companies have blamed funding shortfalls for the delay or outright scrapping of dozens of new projects, particularly those targeted at ending gas flaring, while they focused only on high-end priority projects.
At the event, Managing Director and Chief Executive Officer, Seplat Petroleum Development Company Plc, Austin Avuru, said that government should allow self-funding of JVs in the country, which would give the oil majors a free hand to source funding from financial institutions or other sources to execute their projects.
He submitted that the projection of Nigerian’s oil producing capacity dipping by 40% in the next five years would have been felt much earlier if not for the contribution of the deepwater production, which has made up the shortfall of about one million barrels.
Avuru hinted that production from the JV has declined rapidly from 2.2 million Barrels Per Day (bpd) to 1.2 million bpd due to poor JV funding.
His explanation: “The production records show that JV production has declined from 2.2 million bpd to 1.2 million bpd. The only reason we are still doing 2 million bpd is that deepwater production made up for the gap. In the next five years, our deepwater production will also be declining and the real impact of poor funding of the JV will start to manifest when as a nation, we will be producing not more than 1.6 million bpd. So we must begin to address the challenges by doing the right thing.”
The Seplat boss decried the involvement of the National Assembly in matters that are purely commercial and exclusive reserve of oil and gas professionals by legislating on JV operation.
Avuru, who is a former President of the National Association of Petroleum Explorationists (NAPE), believed that granting financial autonomy to JVs would assist to increase the country’s present production from 2.2 million barrels per day to about four million barrels per day, which he said the country needed to be among top crude oil producing countries in the world.
He said that the government should focus on increasing the country’s crude oil refining capacity to 2.2 million barrels per day and halt importation of petroleum product.
Also at the event, Group Managing Director (GMD), Dr. Emmanuel Kachikwu, who was represented by the Group Executive Director, Gas and Power, Seidu Muhammad, said that joint venture funding had continued to be a formidable challenge to the corporation.
Kachikwu listed the current challenges to include insecurity, decline in the prices of crude oil, high cost of crude oil production, dwindling government oil revenue, saying that government was committed to ameliorating the challenges as daunting as they appeared.
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