The Federal Ministry of Petroleum Resources is at crossroads as the $7.4 billion cash call debts to Joint Ventures (JV) with Shell, Chevron, ExxonMobil and other international oil companies (IOCs) go bad. The recession facing the country, according to a document of the ministry seen by New Telegraph, will, if not stemmed, raise the cash call debts to $27 billion in the next 10 years.

Cash call is the counterpart funding the Federal Government pays yearly through the Nigerian National Petroleum Corporation (NNPC) for the 60 per cent equity shareholding it owns in various oil and gas fields operated by IOCs and indigenous oil firms (independents).

The debt overhang in cash calls by the NNPC to multinational and indigenous oil companies it operates Joint Venture (JV) project with, had already hit $7.4 billion as at last July, the document showed. “The cash call deficiency is $2 billion every year, about $200 million ($0.16666667 billion) monthly and this will be $20 billion in the next 10 years if nothing is done,” the document stated. “The cash call was $6 billion in 2015, but now $7.4 billion (approximately) as at July 2016.

While the NNPC is having difficulty to clear the backlog, the cash call will continue to accumulate if nothing is done,” it added. Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, had earlier hinted that it was becoming tougher for the government to finance its 60 per cent shareholding in the JVs. Stating the NNPC’s commitment to balance up the debts, Kachikwu told New Telegraph on the sidelines of a forum in Lagos, that the government planned to deploy other mechanism to finance the JV.

“The cash call is $2 billion every year,” he confirmed, adding: “This will continue to accumulate if we keep evading our shareholding financing.” He said: “I spend every night trying to get solutions and the best we can have is to get our production back to full capacity. “Capital expenditure (capex) world over is shrinking and absolutely we need to compete for that cash deficiency. To do this, we need to fulfill our obligations to Joint Ventures in terms of cash calls.”

The NNPC had, over the years, been battling to clear the cash call arrears. “The Federal Government is determined to settle the arrears to the operators of the various JVs,” Kachikwu had said. The recession, buoyed by oil price rout, had reduced the nation’s revenue from oil, and it is a major hurdle for government to accomplish its desire to settle the over $7 billion debt.

As at last January, NNPC, the oil ministry document revealed, owed the IOCs cash call arrears of $5.5 billion, while their indigenous counterparts are owed $1.1 billion, and an estimated $800 million that had accrued between January and April.

“The ministry is considering the adoption of zero funding model for the JV operations from January 2017 to halt the growth of the cash call arrears,” the document added. New Telegraph had earlier reported concerns raised by stakeholders about this model.

Managing Director of Seplat, Austin Avuru, had told New Telegraph that the zero funding model being contemplated by the ministry will cost the government more. The operators, he said, would source funding from banks, and interests paid on such loans secured by the oil firms will be factored into the cost of production.
“The zero JV funding seeks to empower the operators not to wait for the NNPC counterpart funding before going on with operations and projects implementation. “Therefore, the operators will source funds and go ahead with projects’ implementations, while the NNPC’s bureaucratic processes of approval, including endorsement by the National Assembly, continue.

“The operators of the JVs will deduct costs at the end and remit what is due to NNPC at the end of the deal,” Avuru said. “If government lacks capacity to pay its cash calls, let it choose from some alternative options including divesting some of its equity holdings to indigenous firms, adopt crude for cash calls or privatise the NNPC,” he said.

NNPC has, according to him, been able to meet only 30 per cent of the 60 per cent cash call it is supposed to pay. “As long as the funding issues exist, production will adversely be impacted,” Avuru said, warning that JV oil production has since dropped to one million barrels per day (bpd) as against about 2.5 million bpd in the past due to JV budget delay.
https://newtelegraphonline.com/oil-ministry-frets-7-4bn-shell-others-jv-loans-go-bad/

How is the cash call $2bn/year, and the outstanding was $6bn in 2015, and $7.4bn in 2016 and $20bn in ten years time?

Mr CHANGE should no longer increase fuel prices to raise cash...

Nawa ooo, Bad news everywhere!!! Which way Naija?

Something drastic needs to be done and done quickly.

But what exactly do we need to do to at least start to get out of this recession or be on track to get out of this situation we find ourselves.

Those at the helm feel everything is dandy and will hang on till death or God intervenes on behalf of this country.

Which way my country people...