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• Minister of State, Petroleum, Ibe Kachikwu

NNPC Borrows to Fund Chad, Benue Explorations

By John Meze, Lagos:

The efforts of the management of the Nigerian National Petroleum Corporation (NNPC),under the leadership of Dr. Maikanti Baru, has in recent time, embarked on aggressive transformation and increased exploratory operations in the nation’s frontier basins of  Chad Basin and Benue Trough, supposedly, in line with the aspiration of the administration of President Muhammadu Buhari to increase the reserve bases  of the country, but paucity of funds seems to be the Achilles’ Heel of its efforts.

Dr. Baru, since assumption of office last year, has been drumming up support for the transformation, increased exploration activities with critical stakeholders in Bauchi, Borno, Sokoto and Nassarawa States, and the improvement of the output of the four refineries in the country, however, these , though, with good intentions may  produce the required results.

In Nassarawa State, recently, he disclosed that NNPC’s Frontier Exploration Services (FES), a service company of the Corporation, had mobilized the Integrated Data Services Ltd (IDSL), (an  Upstream arm of the NNPC) to acquire seismic data in the Benue Trough commencing from the Keana area.

And at a recent   visit to the GMD, by the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) which commended the Nigerian National Petroleum Corporation (NNPC) for the exploratory activities it has been spearheading in inland basins, the GMD, disclosed that President Muhammadu Buhari had mandated him and the corporation’s Management to, also, bring back the refineries to their glorious days.

However, he averred that funding has been a major challenge in the rehabilitation of the refineries but expressed the optimism that the various options being explored would yield positive results.

PENGASSAN’s National President, Comrade Francis Johnson, led the Central Working Committee (CWC) of the union on a courtesy visit to the NNPC Group Managing Director, Dr. Mikanti Baru, said the yeoman job being undertaken by the NNPC with regards to the frontier basins would benefit the nation ultimately, but expressed the hope that the union’s fervent prayer was for a breakthrough to be achieved in the Corporation’s exploratory efforts in the basins would be achieved.

“PENGASSAN will support any effective, efficient and sustainable model that can make the refineries viable,’’ Comrade Johnson said.

He also called on the GMD to intensify the ongoing rehabilitation of the downstream facilities, especially the depots, pipelines, tank farms and jetties to further ensure seamless supply of products across the country.

In another development, Baru, while speaking during the signing of the memorandum of understanding (MoU)  with the Kebbi State Government (KBSG) at the NNPC Towers, in Abuja , the MoU was to commence the practical implementation of the NNPC Fuel-Ethanol Projects in Kalgo and Koko Besse Local Government areas of Kebbi State.

On the same token is the efforts of the corporation to rekindle, the seemingly rested efforts to venture in to biofuel which saw it, over 16 years ago acquiring lands for the development of farms and facilities to enable it commence production of fossil fuel alternatives production in the country.

At Kebbi State Government, he informed, that the partnership would   build an 84 million litres per annum capacity fuel-ethanol project as   a part of efforts geared towards transforming the corporation into an integrated energy company,

Dr. Baru stressed that the Sugarcane and Cassava-Fuel Ethanol Project in Kebbi State would involve the development of 20,000 hectares of an integrated plantation and plant complex.

He said, “Let me use this opportunity to convey my sincere appreciation to the Government of Kebbi State on her interest to partner NNPC in achieving the Federal Government’s mandate on automotive biofuels production in Nigeria. Today is a watershed in the life of Kebbi State prime position as the food basket and feeder of the nation. The MoU today will move you to the next level of not just a feeder of the nation, but one which also provides fuel for the nation. We hope that very soon, you will invite President Muhammadu Buhari for the ground breaking of the project.”

The GMD listed the benefit of the project to include: creation of rural wealth, generation of 1,000,000 direct and indirect jobs, co-generation of about 64 megawatts of bio-electricity to power the plant and lighten up the surrounding communities, effecting reduction of Greenhouse Gas Emissions, production of refined sugar and Industrial starch as well as production of animal feeds.

“We are greatly encouraged to observe that Mr. President, Muhammadu Buhari, is very passionate about the Biofuel Industry vision. It is my expectation that the signing of the MoU between KBSG and NNPC will open the way to the Federal Government’s Economic diversification drive. Also, it is hoped that this event will send a clear message to other State Governments who are yet to come on board in the new agro-allied industrial revolution,” Dr. Baru averred.

Dr. Baru stated that the potentials for biofuels in the country and for export were enormous, adding  that the NNPC was willing to offer opportunity for investment in the project by citizens of the State.

Earlier, Kebbi State Governor, Alhaji Abubakar Atiku Bagudu, who led a high powered delegation representing every strata of the state, congratulated the President and the GMD for the vision of the biofuels project, stressing that the move would transform the NNPC into a fully-fledged energy company.

Alhaji Bagudu stated that the energy sector was an evolving one, adding that Kebbi State was thankful for the opportunity to partner with the NNPC on the biofuels project.

“The GMD and top management of the NNPC, we in Kebbi State will do our utmost best to make sure that the objective of the biofuel project is realized,” Gov. Bagudu reassured.

It should be note that since the year 2000, the corporation had acquired lands across the nation for the further development of production of bioifuels in the country but this has not been effected for the reason of paucity of funds even when crude oil prices were on the hike.

And in a bid to ensure these goals are met,  the  Corporation has secured a total of $3.7billion in Alternative Financing Agreement in the last three years, according to, Dr. Maikanti.

The GMD, who made this known while speaking at the 35th Annual Conference of the Nigerian Association of Petroleum Explorationists (NAPE) in Lagos, recently, said that securing external funding arrangement was crucial to sustaining oil and gas production in Nigeria and ensuring the survival of Nigeria’s energy future.

His words, “Within the last three (3) years, we have embarked on several successful Alternative Funding Programmes to sustain and increase the national daily production and producibility.”

He, informed that the $3.7billion financing package included the $1.2Billion multi-year drilling financing package for 23 onshore and 13 offshore wells under NNPC/Chevron Nigeria Limited Joint Venture termed Project Cheetah and the $2.5Billion alternative funding arrangements for NNPC/SPDC JV ($1Billion) termed Project Santolina; NNPC/CNL JV ($780Million) termed Project Falcon as well as the NNPC/First E&P JV and Schlumberger Agreement ($700Million).

Project Cheetah is expected to increase crude oil production by 41,000bopd and 127Mmscfd with a Government-take of $6Billion over the life of the Project.

In the same vein, Projects Santolina, Falcon and the NNPC/First E&P JV and Schlumberger Funding Arrangement are expected to increase combined production of crude oil and condensate by 150,000bopd and 618MMscfd of gas with a combined Government-take of about $32Billion over the life of the Projects, Dr. Baru added.

He observed that evolving a new funding mechanism for the JV operations was a critical part of President Muhammadu Buhari’s far-reaching reforms aimed at eliminating cash call regime, enhancing efficiency and guaranteeing growth in the nation’s oil and gas industry.

Explaining further, Dr. Baru noted that as a result of the cash call underfunding challenge which rose to about $1.2bn in 2016 alone, NNPC and its JV partners began exploring alternative funding mechanisms that would allow the JV business finance itself in order to sustain and grow the business.

He added that with average JV cash call requirement of about $600 million a month, coupled with flat low budget levels over the past years, the budgeted volumes were hardly delivered.

“The truth is that it is difficult to deliver the volumes without adequate funding. The low volumes and by extension low revenues had resulted in the underfunding of the Industry by Government, which has stymied production growth,” he observed.

Today, with the new Alternative Funding Arrangement in place, JVs will now relieve Government of the cash call burden by sourcing for funds for their operations, estimated at $7-$9 billion annually.

The appropriate application of these funds, so acquired may be another issue at point, if they are misapplied by the operators of these ventures and still make the efforts die  a still birth as experienced in the past regimes at the corporation.

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