FG Spends N851.4bn on JV Oil Assets

• FG Spends N851.4bn on JV Oil Assets

The Federal Government, through the Nigerian National Petroleum Corporation, spent a total of N851.38bn ($2.79bn) on joint venture oil and gas assets in the first five months of 2019.

The government has said it will reduce its stakes in the JV assets to 40 per cent this year but no time frame has been announced.

The NNPC, which represents the Federal Government in the JVs with private oil firms, has an obligation to make cash call payment for the development of the JV assets.

Latest data from the corporation showed that the N851.38bn paid from January to May was transferred into the JV cash call account from the proceeds of oil and gas exports and domestic sales.

The dollar allocation to the JV cash call account was $1.59bn while the naira portion was N366.39bn ($1.2bn at a budgeted exchange rate of N305/$).

The nation’s oil and gas production structure is majorly split between the JV onshore and in shallow water with foreign and local companies and Production Sharing Contracts in deepwater offshore, to which many international oil companies have shifted their focus in recent years.

The NNPC owns 55 per cent stake in its JV with Shell and 60 per cent stakes with others, including Chevron and ExxonMobil.

Under the JV arrangement, both the NNPC and private operators contribute to the funding of operations in the proportion of their equity holdings and generally receive the produced crude oil in the same ratio.

Total crude and gas export receipt of $547.61m was recorded in May 2019 as against $432.80m in April 2019, the NNPC said in its latest monthly report.

“Of the export receipts, $168.59m was remitted to the Federation Account while $379.02m was remitted to fund the JV cost recovery for the month of May 2019 to guarantee current and future production. Naira portion of N988,990,794 was transferred to the JVCR from domestic crude oil receipts,” it added.

President Muhammadu Buhari had directed that immediate action be commenced to restructure the JV oil assets “so as to reduce government shareholding to not less than 40 per cent and that this exercise must be completed within the 2019 fiscal year.”