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The Federal Government
yesterday finalized agreement with five international oil companies (IOCs)
operating in the country on a new cash call exit policy aimed at restructuring
the financing template for oil earnings.
Leadership
report continues:
According
to the minister of states for petroleum resources, Dr. Emmanuel Kachikwu, the
agreement which involved Shell, Agip, Chevron, Total and ExxonMobil is expected
to increase investments and boost government revenues.
He
stated that net payments to the federation account is expected to double from
about US$7billion to over US$14billion by 2020, while the immediate effect of
the new cash call policy would increase net federal government’s revenue per
annum by about US$2billion.
In
addition the new policy is expected to bring clarity and stability to the
management of the country’s petroleum sector,
“These
strategies which are fully supported by the National Economic Council (NEC)
would lead to an increase in national production from the current 2.2mbpd to
2.5mbpd by 2019, as well as reduction in Unit Technical Costs from US$27.96/Barrel
Oil Equivalent (boe) to US$18/boe,” the minister stated.
The
minister stated that the previous cash call system was structurally defective
and has failed to address the perennial joint venture funding challenges being
experienced in the industry where the Federal Government underfunding of the
industry through JV Cash Calls stood at US$9.125 billion by September 2016.
The
new arrangement he stated would guarantee payments of statutory oil and gas
royalties and taxes by NNPC and its JV partners as well as profit from its
investments in the joint ventures.
Meanwhile,
there are indications that following the latest move the IOCs are prepared to
commit new investments to the tune of US$15 billion in the upstream sector of
the industry.
Vice
President Prof. Yemi Osinbajo, disclosed this in his address at the presentation
of the sector’s 2016 scorecard and agreements signing ceremony in Abuja
yesterday.
The
vice president who was represented by the attorney general and minister of
Justice, Alhaji Abubakar Malami stated that the current administration has
since inception implemented robust initiatives in the oil and gas sector aimed
at laying the foundation for building a sustainable oil sector while achieving
economic objectives.
Speaking on the development, the group managing director of NNPC, Dr. Maikanti Baru, stated that under the old funding arrangement, the entire corporation’s equity oil and gas revenues were paid directly into the federation account while the competition from other appropriate items of expenditure in federation budget limit the deduction of technical cost required to fund the cash call on monthly basis.
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