The Nigerian National Petroleum Corporation, NNPC has said it has concluded plans to exit the Joint Venture cashcall system and also clear out it funding arrears.
At the opening ceremony of the 34th annual international conference and exhibition of Nigerian Association of Petroleum Explorationists, NAPE, the NNPC Group Managing Director, Dr. Maikanti Baru stated that exiting the JV will relieve government of the cashcall burden so that it could source for funds for its operations (estimated at $7-$9billion annually).
Baru said the chronic JV funding shortfalls being experienced in the industry had resulted in declining JV Oil production from about 1million barrels of oil per day 3-5 years ago to about 800,000 barrels of oil per day.
To address this structural funding problem which is further compounded by the security challenges in Niger Delta, Baru said NNPC is exploring alternative funding mechanisms that allows the Joint Venture Business finance itself by retaining its Operating Costs and Capital Allowances (Fiscal Costs) in order to sustain and grow the business.
“Where the fiscal costs for any year are not sufficient to fund the budgetary requirements of the Joint Venture, part of the profit margin could be retained to fund the budget and where necessary, external financing could also be sought to finance commercially viable and bankable Capital projects without recourse to Government treasury,” Baru explained.
“The JV cash call exit model we are pursuing guarantees Government most of the revenue that normally accrues to it from the JV operations by lifting the Royalty and Tax Oil upfront. This contributes 75% to 85% of the accruable revenues to Government.
“Consequently, the effect on Government take would be minimised. We are working assiduously to kick start this from 1st January, 2017,” Dr. Baru added.
Stating the reason behind the exit model, NNPC GMD said in 2016 alone, underfunding of NNPC Cash Calls is estimated to be about $2.5 billion. “This is aside the inherited arrears estimated at over US$6 Billion,” he said.


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