NNPC Worries Over Lack of Funding for Oil Exploration

• NNPC Worries Over Lack of Funding for Oil Exploration

The Group Managing Director, Nigerian National Petroleum Corporation, Dr Maikanti Baru, has raised concerns over the dearth of funding for oil and gas exploration in the country.

Baru, who delivered an address on Monday at the 42nd Nigeria Annual International Conference and Exhibition of the Society of Petroleum Engineers in Lagos, said funding centred on production.

He said the settlement of all outstanding cash call arrears owed joint venture partners, amounting to a negotiated sum of $5bn, had restored confidence in the nation’s oil and gas industry.

He said, “We have signed third-party financing deals with international banks on new oil and gas development worth over $3bn despite the recession in 2016 and 2017. This demonstrates the faith in our industry and the potential we can unlock.

“We also executed a novel contractors financing deal of over $700m with Schlumberger for the development of the 250 million barrels of oil equivalent per day from OMLs 83 and 85 under the JVs with First E&P.

According to Baru, over the short to medium term, the NNPC intends to focus on access-based lending for the Nigerian Petroleum Development Company, its upstream subsidiary.

He said, “And for the OMLs where it (NPDC) has JVs with indigenous operators, the NNPC also has a goal of incorporating bonds and other long-term financial instruments in the coming years.

“For our IOC partners, we will continue to leverage the strong credit rating of these partners, identifying key quick-win projects that are easy to mature with strong cash flow projections and attracts necessary funding from the debt market.

“These attractive financing approaches to fund the NNPC JVs obligation have helped to renew investors’ confidence and cement further foreign direct investments. In particular, this has deepened local banks’ participation in the financing of the upstream as the financing is syndicated from local banks and international lenders. It is quite an exciting time ahead in the Nigeria oil and gas industry.”

According to the NNPC GMD, the industry is funding both development and infrastructure through alternative means.

“So far, the financing has centred on production. I would like to see the industry concentrate and develop in many ways, especially on how to finance exploration. This, I believe, will be the key takeaway from this workshop as it appears to be an area yet untapped. Can we create an industry pool that will be funding exploration?” he said.

Baru noted that the theme of the conference, ‘Diversification of the Nigerian economy: The oil and gas industry as an enabler’, was in line with the current administration’s economic agenda of diversifying the economy.

“Nigeria has depended solely on oil and gas revenues without focusing on developing other potential revenue yielding sectors of the economy,” he added.