NNPC secures N4b to develop 36 oil wells

Ibe Kachukwu

Ibe Kachukwu

• Targets $5b revenue
• FG moves to boost power supply

A $1.2 billion (N4.4 billion) multi-year drilling financing package has been secured by Nigerian National Petroleum Corporation (NNPC) to develop 36 offshore/onshore oil wells.

It was gathered that the innovative move, made under NNPC/Chevron Nigeria Limited joint venture, is to alleviate the Federal Government’s cash call challenge.

Similarly, the Federal Government has commenced discussions with the Central Bank of Nigeria (CBN) and the National Pension Commission (PENCOM) to provide a pool of funds to boost electricity supply in the country.

In a statement issued in Abuja yesterday, the Group General Manager, Group Public Affairs Division of NNPC, Ohi Alegbe, said the funding package sourced from a consortium of Nigerian and international lenders is an integral part of the accelerated upstream financing programme initiated by the corporation to address the challenge being experienced by the Federal Government in providing its counterpart funding of joint venture upstream activities.

According to the statement, it is also envisaged that the initiative, apart from supplementing the cash-call commitment, would help in maintaining current production levels in the short term as well as replace depleting reserves.

A breakdown of the NNPC/ Chevron JV deal given at a signing-ceremony in London at the weekend indicates that the $1.2 billion is to be channeled into development of 23 onshore and 13 offshore wells on OML 49, 90 and 95 in two stages over 2015- 2018.

Stage one, comprising 19 wells, is projected to deliver 21,000 barrels of crude oil and condensate per day alongside 120, 000 million standard cubic feet of gas per day, mmscf/d, over 2015 and 2016.

Stage two, comprising 17 wells, is projected to yield 20, 000 barrels of crude oil and condensate per day alongside gas production of 7 mmscf/d between 2016 and 2018.

It is envisaged that both stages of the project would generate $2 billion to $5 billion of incremental revenue to the federation account.

Beyond the contribution to the national treasury, the projected peak incremental gas production of 127 mmscf/d, which is the electricity equivalent of 400 megawatts, would help boost the Federal Government’s domestic gas aspirations with expectant positive effect on power supply.

Speaking at the ceremony, Group Managing Director of NNPC, Dr. Ibe Kachikwu, described the alternative funding arrangement as the new contractual model in upstream financing which would serve as a template for future initiative to supplement the Federal Government’s joint venture cash call commitment.

While commending the NNPC/ Chevron Joint Finance Team and the Consortium of local and international lenders led by Standard Chartered Bank and United Bank for Africa (UBA) for a job well done, the GMD noted that the corporation will not relent in the renewed effort to restore probity and transparency to the process of generation, collection and remittance of crude oil proceeds.

“I have always believed that issues of federation accounts must be left sacrosanct and not to be toyed with. The Accelerated Upstream Financing Programme is designed to help us achieve this objective,” he said.

The Managing Director of Chevron Nigeria Limited, Clay Neff, pledged his company’s readiness to work assiduously with the NNPC to meet its set target in the project.

With the completion of its financing, Project Cheetah stands as the pioneer project under the Accelerated Upstream Financing Programme of the NNPC. The project is operated under the NNPC/CNL JV which is owned on a 60-40 basis in favour of the NNPC.

The NNPC/CNL Joint Venture is reputed as the 3rd largest producer in Nigeria. Project Cheetah is projected to achieve a peak incremental production of 61 million barrels of oil equivalent per day.

Fund to boost electricity supply
The funds to boost power supply, according to the Ministry of Power, would be accessed at single-digit and would ramp up operations and service delivery.

Though details of the funds are still not clear, government has also assured that power distribution companies (Discos) would get more to expand their distribution network as well as system upgrade and adoption of ICT solution to improve electricity supply.

In a statement issued in Abuja yesterday, Director (Public Affairs) System/Market Operation at the Transmission Company of Nigeria (TCN), Obiora Uzodike, quoted the Permanent Secretary at the Ministry of Power, Godknows Igali, as also charging participants in the electricity market to imbibe best business practices in order to bequeath a well-established electricity market to the next generation.

Igali spoke at a two-day interactive workshop on ‘Interpreting and Understanding the Market Rules’ for the electricity market participants in Abuja. He called on the market participants to be open, willing to learn and become better operators as the sector is still going through a learning curve.

He was quoted to have expressed confidence and optimism that the current challenges would be surmounted with time and the objectives of the privatisation achieved to position Nigeria on the path to sustained industrial development.

He also announced that bi-lateral discussions were ongoing with several international agencies on how to build flared-gas power plants, micro-grids and other renewable energy plants in order to provide more power for the grid and for Nigerians.

He assured that the government of President Muhammadu Buhari would provide an enabling environment to make the market succeed, judging from his official pronouncements and body language, privatisation is on course.

Central Bank of Nigeria had last year announced a N213 billion power intervention fund meant to settle gas legacy debt and put the new owners of the nation’s power utilities on a sound footing to address some of their challenges. It is not clear how the new fund announced by Igali would be structured.

Chairman of the Nigerian Electricity Regulatory Commission (NERC), Dr. Sam Amadi last week said operators in the power sector had only accessed about 50 per cent of the N213 billion market-based intervention funds provided for the sector by the CBN.

Speaking at the Senate probe, Amadi said: “So far, 50 per cent of the CBN fund has been disbursed because of key milestones needed to guarantee that the CBN key performance indicators are adhered to by operators in the sector.

“When we get to 6,000 megawatts, we will be quite comfortable to focus on addressing our regulatory challenges and strengthening the capacity of the sector. In the next couple of years, we hope that about 2000MW will come from coal power generation and from then, we should be adding an average of 2000MW annually to our capacity.”

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    rNigeria is rich,how comw we keep borrowing at every instance?coooruption?

  • emmanuel kalu

    why isn’t NNPC develop more of the gas infrastructure and reducing flaring. our focus should be on increasing our refining capacity, reducing gas flaring and utilizing more gas.
    so we are giving more money to discos, who have completely and totally failed to provide the much needed meters. yet another waste of money and time. we need to secure gas supply to generating plants, mandate the provision of meters to end the crazy billing and ensure all energy produced are used.

  • New Nigerian

    This deal comes across as a way for the rent seekers who were able to control oil revenues (by deducting from source and then paying whatever they felt after wards back to the federation account) to continue their nefarious activities and make it permanent . President Buhari should scrutinize this deal and cancel it, or at a minimum put it on hold for review. Borrowing $1.2 billion to fund a project that is “envisaged” to generate between $2billion to $5billion does NOT make sense, so which is it..is the total envisaged revenue between $2.2 billion and $6.2 billion? Any investor would take the lower number….There is a lot wrong with the economics of this deal and it is a sharp departure from how Nigeria funds development in the JV, which is based on actual cost (not based on joint-investment)

    Second, we need investment in the downstream industry – NNPC should be partnering to build refineries in Nigeria and other parts of the world to produce based on Nigerian crude and then sell refined products…this is the shift that is happening in the world market now for strategic oil companies. saudi Aramco is already doing this – soon will commission a new refinery in Texas based on their contribution of $10billion+ into that Project, another one in China….why is Kachukwu investing in exploration activities (the whole world is pulling back on exploration activities because of the gut in supplies) paying back the banks with revenue from the oil asset? This seem like a continuation of the failed strategy of Jonathan’s adminsitartion converting our commonwealth into private hands.