The Federal Government, through the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, and the representatives of International Oil Companies (IOCs) have reached an agreement on a new cash call exit policy and settlement of outstanding $6.5billion.
It is part of new measures and strategies aimed at eliminating the burden of Joint Venture Cash Call arrears and securing future funding for the Upstream Petroleum Sector.
These strategies which are fully supported by the National Economic Council (NEC) will 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 $27.96/Barrel Oil Equivalent (boe) to $18/boe.
The net payments to the Federation Account is expected to double from about $7 billion to over $14 billion by 2020 and the immediate effect of the new cash call policy will increase net FGN Revenue per annum by about $2 billion.
Kachikwu outlined other innovations and initiatives championed by the ministry over the past year which have revamped the sector, restored investors’ confidence which was at an all-time low and positioned Nigeria’s Oil and Gas value chain for profitability.
It would be recalled that based on historical records, the current Cash Call system has been 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 $9.125 billion by September 2016. This arrangement will 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.
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