Page 8 - AfrOil Week 27

AfrOil invEstmEnt AfrOil
NNPC pays off MPN debt in move towards IJVs
niGERia
NIGERIAN National Petroleum Corp. (NNPC) has paid o its cash call arrears owed to Mobil Producing Nigeria (MPN), the local subsidiary of ExxonMobil, and has set out plans to trans- form its joint ventures (JVs) into incorporated joint ventures (IJVs).
NNPC said, on July 3, that it had paid down the full amount to MPN, of $833.57mn. e two companies held a commemorative ceremony, involving NNPC’s outgoing head, Maikanti Baru. e cash came from additional produc- tion from the JV, so paying down the debt had no impact on the “revenue ow from the JV to the federation”, Baru noted.
Now that the cash call has been paid o , the additional 45,000 barrels per day (bpd) of oil will now provide additional revenues for Nigeria.
MPN’s managing director, Paul McGrath, congratulated Baru on the repayment progress, saying that the ExxonMobil unit saw this as a positive in terms of driving additional projects with NNPC. Baru and the NNPC team had resolved “what was becoming an intractable matter. is is in addition to other noteworthy contributions he has made to the advancement oftheindustrysinceassumingo ce.”
NNPC went on to say the ceremony also saw a deed of settlement on pre-production costs for the Usan eld, with a negotiated cost of $1.08bn, versus the original $1.45bn cost. Esso Explora- tion and Production Nigeria took over operator- ship of Usan in 2014, holding a 30% stake, and began producing in 2012.
NNPC and the foreign companies reached a deal to pay o the pre-2016 cash call arrears, a total of $5.1bn. A statement in April from the company said it had paid down $1.5bn of this amount. Furthermore, the company has improved its current debt paying, claiming to have covered these in 2017 and 2018.
Changing over
Baru went on to note that, with support from Nigerian President Muhammadu Buhari, the plan was for “NNPC and MPN to within two years, migrate the [JV] into an [IJV] with its Board operating independently and paying div- idends to its shareholders”.
This plan was expanded on by Baru at an industry conference in Abuja last week. Speak- ing at Nigeria Oil and Gas, Baru – represented by NNPC’s chief operating o cer, Bello Rabiu – said the switch to IJVs would make the oil and gas business more productive.
e current model of alternative funding – as demonstrated by the cash call repayment with MPN – is only temporary. Moving to IJVs is
out:
On July 7, baru announced that he had retired from service at NNPC, handing over the top job to Mele Kyari.
intended to allow projects to self nance.
“ e only option which is the same every- where in the world is for any project or any business to fund itself and the only way it can fund itself is for the business to see itself as both funded by equity and debt. e incorporation element of IJV allows it to operate as an inde- pendent entity that can source capital to fund its projects and deliver dividends to shareholders at
the end of each nancial year,” Rabiu said.
e o cial went on to say trust had improved between the government and the foreign majors since 2015. Paying down cash calls has helped
make this case.
he also noted the importance of gas develop-
ments, which should bene t GDP gures more than oil’s contribution.
e planned shi to IJVs has been one under discussion for some considerable time, since at least 2008. While this most recent statement appears to focus on working with foreign majors, in 2015 a proposal for Nigerian Petroleum Development Co.’s (NPDC), in its operations with local companies, was put forward.
e plan had been raised early in the propos- als for the much-discussed – and much delayed – Petroleum Industry Bill (PIB). Progress on this legislation has stalled.
Broadly, an IJV might function in a similar manner to Nigeria LNG (NLNG). The move would do much to open up funding sources for Nigerian projects, and therefore production, but it is not yet clear how this level of independence would function in a situation of potentially con- icting political needs.™
P8
w w w . N E W S B A S E . c o m Week 27 09•July•2019