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NNPC GMD, Dr Maikanti Baru

NNPC Secures $3.7bn Alternative Financing

Targets 38bn in Revenue, 190,000 Increased Production

The Nigerian National Petroleum Corporation has secured a total of $3.7bn in Alternative Financing Agreement in the last three years, Group Managing Director of the Corporation, Dr. Maikanti Baru has said.

Dr. Baru, 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.

“Within the last three  years, we have embarked on several successful Alternative Funding Programmes to sustain and increase the national daily production and producibility,” Dr. Baru told delegates at the annual conference.

According to the GMD, the $3.7bn 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).

Dr. Baru, who spoke on the theme: “Review of the Current State of Funding for the Upstream Sector and the need for a New Policy Initiative”, commended NAPE for its contributions towards shaping the Oil and Gas landscape in Nigeria, said it was incumbent on NNPC to associate with such a professional body for the benefit of the nation.

“It is on record that key pieces of legislation such as the Marginal Fields Act and the Deepwater Fiscal Policies, the Nigerian Content Act, as well as the Unitization Policy were all based on templates that came out of previous NAPE Conferences,” he said.

Corroborating Dr. Baru’s case for Alternative Funding, former GMD of NNPC, Engr. Funsho Kupolokun, called for fresh approaches such as the involvement of more indigenous participation to address the challenges of funding upstream operations in the country.

Earlier in his speech, President of NAPE, Mr. Abiodun Adesanya, described the challenge of cash call as very critical because it affects all the objectives and targets of growing the reserves and increasing crude oil production in the country.

This year’s NAPE Conference has as its theme: “Beyond Cash Call: New Funding Strategies for the Nigerian Upstream Oil & Gas Industry.

Meanwhile,the Corporation has so far completed, commissioned and delivered 500km of gas pipelines between 2010 to date as part of an aggressive expansion of gas pipeline infrastructure across the country.   

Group Managing Director of the NNPC, Dr. Maikanti Baru, stated this on Tuesday in Abuja at the 2017 Conference and Annual General Meeting of the Nigerian Society of Engineers.

In the paper entitled, “Revival and Development of Local Manufacturing Industries: Chemical and Petrochemical Industries”, Dr. Baru, who is a Fellow of the NSE, said the accelerated expansion of the gas pipeline system was sequel to the directive of the then President Olusegun Obasanjo who mandated the oil companies operating in-country to support the power generation effort.

He said the directive became imperative after the government realized that adequate power supply was key to reviving the moribund industries.

The GMD listed the gas pipelines so far delivered by the Corporation to include; the 196km Oben Gas Plant to Geregu Power Plant pipeline, 110km Escravos-Warri-Oben gas pipeline, 128km Ukanafun-Calabar pipeline, 50km Emuren-Itoki pipeline, 31km Itoki- Olorunshogo pipeline and 24km Imo River-Alaoji gas pipeline.

He noted that all available thermal power plants in the Country are today connected with permanent gas supply pipelines.

Dr. Baru added that with NNPC driving the realization of Federal Government’s aspiration to expand the gas pipeline network to all parts of the Country, about 2,700MW of Thermal electricity was expected to be added to the National Grid in the near future, to  exponentially generate more power for new industrial revolution with a view to achieving sustainable economic growth.

He noted that the earlier government’s initiative in this regard populated the seeds for the growth of Nigeria’s gas-fired power plants, which gradually scaled up thermal power contribution to more than 70% of total power generated in the Country today.

Providing details of the planned expansion of the gas infrastructure, the NNPC GMD said the lines would be bolstered with the ongoing construction of the 127km East-West OB3 gas pipeline joining Oben to Obiafu-Obrikom.

He explained that the strategic infrastructure was scheduled for completion by 4th quarter of 2018, while the 363km looping expansion of Escravos-Lagos Gas Pipeline System was expected for delivery by Q1 2018.

He also explained that Engineering, Procurement and Construction (EPC) tender evaluation process for Ajaokuta-Abuja-Kaduna-Kano (popularly known as AKK683km) gas pipeline contract, and the EPC tender process for the Qua Iboe Terminal to Obiafu/Obrikom (QIT-Ob/Ob gas pipeline) gas pipeline were on-going.

Upon completion the remaining projects are expected to add over 1000 kilometers to the nation’s gas pipeline network.

On funding of Oil and Gas development projects, Dr. Baru said the Corporation was adopting the Public Private Partnership (PPP) models in building and expanding the gas infrastructures.

He said the development of the Ajaokuta–Abuja-Kaduna–Kano (AKK) Gas pipelines which was the first in line under the arrangement would be built through contractor financing where the selected Contractors would be providing financing to build the line and recover their cost through transportation tariff.

“This model will be extended to other major backbone pipelines in the Nigerian Gas Master Plan,’’ he said.

He concluded that once these projects were completed, a nationwide gas infrastructure backbone would be in place to fully enable the establishment of an integrated gas pipeline infrastructure grid across the entire Country.

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