The $5.1bn joint venture cash call argument between the Federal Government and international oil companies operating in Nigeria is over, the IOCs have said.
In 2016, the IOCs gave the Nigerian National Petroleum Corporation, which represents the Federal Government in different JV partnerships, a discount of $1.7bn from the $6.8bn cash call indebtedness of the NNPC to the oil majors.
The discount reduced Nigeria’s debt to the IOCs to $5.1bn and the NNPC subsequently started paying off the money, as confirmed by the IOCs at the just-concluded 2018 Nigeria Oil and Gas Conference and Exhibition in Abuja.
The firms stated that efforts being made by the NNPC to end the issue of JV cash call had not only addressed arguments about the subject, but had boosted investor confidence in the Nigerian oil and gas industry.
Although they expressed satisfaction with the repayment efforts of the Federal Government, the oil firms warned that the industry was still fraught with operational uncertainties that should be addressed.
The chief executives of the IOCs, who took turns to speak on what needed to be done to unlock investment potential in the industry, stated that they were glad because the issue that always brought about argument and obstructed negotiations for investments in Nigeria at their respective boards had been resolved.
The Country Chair, Shell Companies in Nigeria and Managing Director, SPDC, Osagie Okunbor, said, “For as long as I have been in this industry, we have been discussing cash call as a never-ending issue. I think that we were able to sit down together as an industry and government to try and tackle that issue and we should not underrate the importance of that.
“What that has done is that it opens up the appetite to have a conversation about investment. Nigeria is competing for capital with every other country in the world and, sometimes, we forget that and think that we are world unto ourselves. But the reality is that each of these companies (IOCs) operate in 20, 30, 80 countries and people are competing for capital.”
Osunbor observed that for the first time in a long while, some IOCs in Nigeria recently closed their year financial year without being owed cash call obligations by the NNPC.
Osunbor also stated that issues around security, contracting cycle, sanctity of contracts and thresholds of JVs and Production Sharing Contracts still needed to be sorted, as well as the reform laws in the industry.
“We have talked about the Petroleum Industry Bill for some time, just like the funding. For the first time we actually see very serious efforts to try and address this and what is helpful is that we don’t have a cacophony of voices. The PIB needs to be passed to remove uncertainties but not a PIB that does not encourage investments.”
The Managing Director, Chevron, Jeff Ewing, noted that there had been less argument on the JV issues and that this had restored confidence in the industry.
He said, “The government and our partners have done good things on the JV arrears. The execution of those agreements have gone very well, and it has really boosted our confidence in the JV. Some of the things that have happened have increased our activities in the JV because we now have some confidence.”
Ewing also stated that the gradual rise in crude oil price had further boosted the confidence of IOCs, but stressed that the firms were still selective in their investments.
“And so Nigeria needs to be competitive globally in the fiscal policies and ease of doing business. This is the discussion we have been having with the government and making sure that they understand the implication of the competitiveness of the industry.”
The Chevron boss added, “We have also talked about our concerns in the public hearing on JV gas in deep-water terms because they need to be competitive to draw more money into Nigeria. We see so much potential in Nigeria. There are big oil and gas reserves here but we just need to have the right framework in place to have a globally competitive fiscal price to help us develop.”
On his part, the Managing Director in Nigeria, Mobil Producing Nigeria, Paul McGrath, said the PIB and the reform in the National Assembly were laudable, but stressed that there was a need for an end result.
He said, “We need to have an industry reform bill or set of bills that will attract international investment, not push it away. I’ve been very encouraged with the dialogues we’ve had with the National Assembly and the technical teams till date.
“They have listened; they are listening and tried to engage the industry, and I think that is very interesting. But at the end of the day, we need to stop talking about industry reform, have industry reform and then move on and unlock the potential.”