Nigeria’s state-owned oil firm, the Nigerian National Petroleum Corporation (NNPC), is mulling the idea of introducing a new model for the funding of its oil exploration and production projects with its partners.
The new model known as the incorporated joint venture (IJV) will replace the current model it is running with its partners known as Joint Ventures (JVs), the corporation said in a statement it released Thursday.
But the new plan had come to light Wednesday at the Nigeria Oil and Gas (NOG) conference in Abuja where Maikanti Baru, the corporation’s group managing director, who steps down next week, told participants that the new model would improve the fortune of the industry long seen as failing in meeting its cash-call obligations to its international partners involved with it in the joint ventures, many of which the NNPC own majority shares on behalf of the Nigerian federation.
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The corporation’s spokesman, Ndu Ughamadu, a group general manager and head of the group public affairs division, who issued an official statement Thursday, said Baru’s consideration for the IJV model was borne out of the need to encourage healthy business culture and growth in the energy sector.
Baru in his presentation at the conference, made on his behalf by Bello Rabiu, NNPC’s chief operating officer, said the IJV model, when implemented, would make oil and gas business more productive and beneficial to investors.
Baru explained that the current alternative funding arrangement was a temporary measure and that the objective of the IJV model was to create a robust business system that allows for projects self-financing and guarantees a win-win situation for all stakeholders.
“The only option which is the same everywhere in the world is for any project or any business to fund itself and the only way it can fund itself is for the business to see itself as both funded by equity and debt. The incorporation element of IJV allows it to operate as an independent entity that can source capital to fund its projects and deliver dividends to shareholders at the end of each financial year,” Baru said.
He said the issue of trust between government and international oil companies (IOCs) has improved, noting specifically, that “the trust level on both sides had significantly improved since 2015 till date.”
The confidence of the IOCs was restored, he pointed out, by prompt payment of cash-call arrears and other measures initiated by the corporation.
Baru further stated that the corporation was paying more attention to gas development due to its potentials to service the energy needs of Nigerians and revive moribund factories in the country.
According to him, contrary to the current ugly trend of fuel importation, the corporation has developed serious strategies to produce gas in-country in sufficient quantity for both local and export markets.
Baru said proper gas development and utilization could generate more Gross Domestic Product (GDP) to the nation far beyond what the oil contributes to the country’s economy.