The Minister of State for Petroleum Resources, Mr Ibe Kachikwu, said Royal Dutch Shell, ExxonMobil, Italy’s ENI, Chevron and France’s Total had accepted the $5 billion deal.
Kachikwu, disclosed that the payments would be made in the form of new oil production, adding that there would also be a one-off cash payment. The agreement would hopefully be finalised by the end of the year and covers the period from 2010 to 2015.
The delay in payments has hindered oil and gas investment and worsened a budget crisis as the government seeks to increase spending to get economy out of recession.
Despite having several joint venture agreements with IOCs, NNPC has consistently been challenged meeting its funding obligation. Prior to the oil glut, payment of cash calls and requests for payment for anticipated future capital projects sent by JV operators to the government as non-operating partners had always been a challenge, with payments either being partially made or not at all.
Commenting on the issue recently, the Managing Director and Chief Executive Officer, Seplat Petroleum Development Plc., Mr Austin Avuru, stated that “the cost of operation in the upstream sector has soared. Two critical factors account for this, security issues in the Niger Delta and bottlenecks in NNPC; project delays and $5 billion of cash calls in arrears that have not been paid to the point where you ask the question, is NNPC really adding value to the industry today?”
Also former Managing Director/CEO, Total E&P Nigeria, Elizabeth Proust, said “resolving JV funding could increase production by 2.8 billion cubic feet per day by 2020. Government and industry need to implement a sustainable solution to deliver vital funding.”