The presidency has authorized an experiment in oil joint-venture (jv) financing which will be welcomed by the industry. A letter from the new group managing director of the NNPC, Emmanuel Kachikwu, and countersigned by the head of state, identified Nigeria LNG as the business model. (The authenticity of the letter, according to a wire service, has been confirmed by the industry, if not by NNPC officials contacted.)

The jvs will be responsible for their own financing, and will pay royalties, taxes and dividends. They will therefore be detached from the federal budget and not waiting patiently for the payment of cash calls (the corporation’s share of their budgets). Initially the new format will be tested on some of the smaller jvs between the corporation and indigenous operators.

The story on the wires broke at the same time as a breakout session on energy policy on day two of the 21st Nigerian Economic Summit in Abuja. Kachikwu’s letter echoed calls at the session for the creation of independent jvs.

·A speaker from a top accountancy firm noted that production by the jvs had declined by 30% over the past decade, and probably far more. Late or non-payment of cash calls has slowed investment and therefore production. Theft, sabotage and insecurity are additional reasons. (Fortunately rising output under production-sharing contracts ((PSCs)) has largely offset the decline from jvs.)

Two panelists from the IOCs stressed the large tax take for the FGN. One said that the industry had paid out more than US$400bn in taxes over the past decade, including US$147bn from just one company. He struggled therefore to understand cash call arrears of US$6bn across the industry at end-2014 as well as dues under one PSC of a further US$10bn. Echoing a common complaint, he noted that his company pays 18 separate taxes/levies.

Two panelists from indigenous producers made the point that they suffered little, if any sabotage. One acknowledged the challenge of stealing his company’s dry gas and the other stressed the value of working with, and rewarding the local communities.

A panelist from the NNPC pledged that the average cycle for the completion of an oil industry contract would be slashed from 36 to six months in the next month. He put current crude oil production at 2.3 mpbd according to analysts at FBN Capital in Ikoyi.

Source: http://www.ebtsconsults.com/2015/10/nigeria-fx-rules-backed-by-woman-who.html