Govt moves to pay NNPC’s N800bn debt, increase oil output

• Production equipment not  maintained  for 20 years
• Pipelines, depots to be concessioned next month
The Federal Government is in dialogue with major oil giants and banks to raise capital for new oil drilling and to repay $4billion debt accumulated over the years by Nigerian National Petroleum Corporation (NNPC).

Minister of State for Petroleum Resources, Ibe Kachikwu, who confirmed this in a text message to The Guardian last night, harped on the need to address all outstanding cash calls arrears and restore confidence back to the sector through creative alternate funding schemes.

“We are in talks to address all outstanding cash call arrears and restore confidence back to the (oil) sector. This will be done through very creative alternate funding schemes…part of efforts to bring (the) sector to full production,” Kachikwu said.

The Minister who also heads the NNPC, had reaffirmed government’s commitment to increasing output up from 2.3million to 2.5million barrels per day before the end of the year despite operational shortcomings. He made the disclosure while speaking with Reuters yesterday.

Kachikwu added that government would also advertise concessions for pipelines and depots next month (March 2016).
The corporation’s dismal performance, which has been called into question, has seen the appointment of Kachikwu to oversee and overhaul its operations. Before he took over, Nigeria’s oil and gas output has been relatively stagnant as delayed government funding and uncertainty held up big offshore projects over fiscal terms.

Kachikwu said NNPC’s debt as of November 2015 stood between $3.5 and $4billion, which he aims to cut through deals like the $1.2 billion multi-year drilling financing signed with Chevron in September last year.

“There is increased conversation going on, I think when we met in December you had blocs that were hardly talking to one another, everybody was protecting their own positional logic. Now, I think we are having cross logic; people are saying, what’s the deficiency in your logic versus what’s the optimum side of your logic. So, people are talking a lot more intellectually now,” he said.

While lamenting that the country’s oil refineries had zero production in October last year due to abysmal level of decay, Kachikwu revealed that, for over 20 years, the equipment used had not been changed or maintained. To revamp assets such as refineries he said the country is in talks for partnership agreements with external investors such as Italy’s Eni and oil traders — Vitol and Gunvor.

“We haven’t been able to be sure that if we hold those meetings we can actually walk away with some consensus, and in the absence of that we didn’t think we should, and we thought that given what was happening in terms of… it’s a very funny dynamics because a lot of barrels are tumbling out from non-OPEC markets.

So, the Saudi philosophy is obviously working. But again, it’s not influencing however the pricing which means that whether we like it or not some barrels are also coming in which may be over production by members and non members to cover up whatever is going out,” he said.

Speaking on NNPC debt profile and the goal of ending the need for joint ventures dependent on NNPC cash, he said the target is that the corporation would begin to look at zero figures by the end of 2017. He said this even as he acknowledged that the corporation reported a loss of N267.14 billion ($1.3billion) for 2015.

As part of his revolutionary plan for the industry, Kachikwu sought third-party participation and investment. “My ideal would be to bring in third party capital, do a joint investment and management of refineries and work out a pay-out process over five to six years basically on lifting of some portion of the finished products,” he stated.

He disclosed that additional funding would be raised as NNPC is also looking into revamping joint ventures with local firms to boost productivity. He however stressed that this would depend on the Petroleum Industry Bill, a bill designed to revamp the sector that has been held up in the national assembly for years. To this end, he said NNPC was in talk the senate to speed up the process by slitting the bill into three parts, covering governance, taxation, and business items such as oil bloc licensing.

According to him the controversial strategic alliance agreements signed with Atlantic Energy under the previous petroleum minister Diezani Alison-Madueke which former central bank governor Lamido Sanusi described as one route through which tens of billions of dollars in oil revenue were diverted from state finances would be restructured to raised fund for oil blocs sold by Royal Dutch Shell.

Kachikwu stated that NNPC expected to conclude a deal within two months for a new partner to pay up N1.3billion to take over the Atlantic deals. “I’m saying to Atlantic, sorry, you’re out because there’s been a breach.

He said, “Whoever comes in has to give a sign in fee almost equivalent to what I’ve lost… We’ll have a massive increase in volume out of those fields, we’re going to have 150,000 to 200,000 barrels per day from current 40,000 to 50,000 barrels per day.”