From Juliana Taiwo-Obalonye, Abuja
The Federal Government is targeting to raise $15 billion from its planned joint venture cash calls exit with oil companies by next year.
This means that beginning from 2017 when the new funding regime begins, fresh investments in excess of $15 billion by oil companies would come into the country.
The Minister of State for Petroleum, Dr. Ibe Kachikwu, made the disclosure during his ministry’s presentation to the National Economic Council (NEC), seeking its endorsement of the proposal already approved by the Federal Executive Council (FEC) to change the funding configuration of JV for upstream companies.
Kachikwu, who briefed State House Correspondents after the NEC meeting presided by the Vice President, Yemi Osinbajo, put the current cash call arrears in the oil sector over the last five years to December 2015 at about $6.8 billion.
He added that as at 2016, the government had accumulated unpaid cash call arrears of over $2.5 billion. According to him, the debt accumulated due to failure to pay the joint cash calls when oil was selling for $110 – $120 per barrel.
He said it had become difficult to pay the debts due to militancy and the drop in oil prices from $110 to $40.
Kachikwu said, “there really wasn’t any justification why these monies shouldn’t have been paid over the past five years, adding that the implication of debts was government’s inability to meet its cash call obligations.
“When that happens, you find that your reserve begins to deplete, your ability to maintain production at current level will begin to dissipate and cost of per barrel of production at joint ventures continues to rise because of the very little volumes chasing the cost, and at the end of the day, the investor’s confidence begins to wane. So a lot of the projects that ought to have happened in this country were basically abandoned.”
The Minister said earlier in the year that the government took on an initiative of working with NNPC and the Ministry of Petroleum to try and find a sustainable solution for funding JV cash call.
He said, “we have been able to find that solution. What we have been able to put together has enabled us to save over $1.7 billion for the government on the $6.8 billion that was previously owed. So we are going to be owing only $5.1 billion as opposed to $6.8 billion.”
He explained that the $5.1 billion will be paid within five years, interest free and the barrels to pay will come from incremental barrels generated by the oil companies not on the current 2.2 million barrels.