The Federal Government said it will terminate the funding of a $7.39 billion, about N1.478 trillion  per annum Joint Venture, JV cash call obligation before year end.

The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, disclosed this at the Oloibiri Lecture Series and Energy Forum organised by the Society of Petroleum Engineers, SPE Nigeria Council, last week in Abuja.

He said the discontinuation of the cash call obligation,  will give the oil majors a free hand to source for funding from financial institutions or other sources to execute their projects.

Specifically, the Nigerian National Petroleum, NNPC, had said that JV cash call is a first line charge on the Federation Account, adding that the 2015 approved budget required monthly funding of about $615.8 million, which  translates to $7.39 billion in 12 months.

Kachikwu also told participants at the Oloibiri forum that the government is concentrating on bringing in production sharing contract, PSC-type elements into the JV structures, to enable them get them back to work.

Making the system work

According to him, the target that had been set within its systems was to see whether they can get to a point where by the end of this year, they will be able to transit completely away from cash calls. This will ensure that oil companies are freed up to go to banks and raise the money that is required to make the system work.

Kachikwu maintained that a lot of committees had been set up to work on the issue, between NNPC and the oil companies, and expressed the hope that some solutions would be arrived at quickly.

He  also disclosed that Government planned to undertake a revision of certain contractual terms in the petroleum industry, in order to cut cost and ensure the growth and development of the sector.

He said:  “We are having a lot of conversations with oil companies; that is going to continue; but the essence is that we have to begin to define the contractual terms in this industry. Production Sharing Contract (PSC) terms have not been revised for quite a while; we will be looking at those.

“ For the first time I think we are moving faster probably than the oil companies. We have continued to push them because it is so critical for me that by June or July of this year, some agreements are reached; some agreements are concluded and some level of financing would begin to come into the sector in such a way that I could get them, at least for 2016 to 100 per cent activity type environment. “

Furthermore, he said the government had put machinery in motion to ensure the reduction of the contract approval cycle from two years to six months by the year end.

He said: “Another major issue that is of concern to us is that of bureaucracy. I am sure those of you who are dealing with most of our systems are beginning to notice a very drastic reduction in the time it takes for us to get back to you and deal with transactions.

“I am committed to cutting these down and my commitment has been to try and move from an average of a two-year time-table for contract approvals to not more than six months. It is struggling right now, but quite frankly, by the end of the year we should be able to achieve those objectives.

“And that comes from a good relationship. As long as we are both talking to ourselves and understand that we have the same common problem, we would be able to move faster.”

Continuing, he said:  “The National Petroleum Investment Management Services, ( NAPIMS), for example, would be moved from being a sector hidden under the Exploration and Production (E&P) group down straight away to the Group Managing Director’s (GMD) office and maybe, potentially, after the PIB, back to the minister’s desk. That way we are having the deals with the oil companies very direct and very timely, then we can reach the conclusions that we want.“