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Nigeria investing $7bn in joint ventures annually — NNPC

Nigeria is investing about $7bn annually in joint ventures in the oil and gas sector, the Nigerian National Petroleum Corporation has said.

In a report presented by the corporation at a recent stakeholders’ workshop organised by the Nigeria Extractive Industries Transparency Initiative on oil sector validation, the NNPC stated that it had been managing 14 JVs for the country.

It stated that 12 of the partnerships were actively producing, while two were greenfield investments that would mature next year.

The Group General Manager, Crude Oil Marketing Division, NNPC, Mele Kyari, explained in the report, which was obtained by our correspondent from NEITI in Abuja on Friday, that it was the duty of the corporation to manage the country’s interests in the oil and gas industry.

On Nigeria’s investment profile, he said the NNPC managed all upstream investments on behalf of the state, adding that this included the 14 JVs, nine production sharing contracts and one service contract.

For the JVs, Kyari said, “Out of the 14 JV partnership, 12 (five international oil companies and seven indigenous companies) are actively producing, while two are greenfield investment to be matured by 2019. The quantum of government investment in the JV is about $7bn per annum.”

In the JVs, the Joint Operating Agreement is the basic standard agreement between the NNPC and the operators.

JOA sets the guidelines/modalities for running the operations and is different from the Memorandum of Understanding. While JOA contains the basic understanding on the joint venture, the MoU is a response to the specifics of fiscal incentives.

In the JVs, one of the partners is designated the operator. The NNPC said it reserved the right to become an operator, as all parties are to share in the cost of operations.

Each partner can lift and separately dispose of its interest share of production subject to the payment of Petroleum Profit Tax and Royalty. The operator is the one to prepare proposals for programme of work and budget of expenditure joint on an annual basis, which shall be shared on share holding basis.

Each party can opt for and carry on sole risk operations. Technical matters are discussed and policy decisions are taken at operating committees where partners are represented on the basis of equity holding.

Some of the national oil firm’s JVs involving foreign owned companies are operated by Shell Petroleum Development Company of Nigeria Limited, a JV which accounts for more than 40 per cent of Nigeria’s total oil production (899,000 barrels per day in 1997) from more than 80 oil fields; Chevron Nigeria Limited, which is a JV that has in the past been the second largest crude producer (approximately 400,000bpd).

The NNPC also has JVs with Mobil Producing Nigeria Unlimited, Nigerian Agip Oil Company Limited, Elf Petroleum Nigeria Limited, and Texaco Overseas Petroleum Company of Nigeria Unlimited.

On Production Sharing Contracts, Kyari stated that 68 PSC blocks had been awarded and noted, “However, there are only nine currently operating, as average PSC daily production is 850,000bpd.”

He told his listeners that the NNPC was into one service contract, producing about 6,000bpd.

The oil firm’s group general manager also stated that the NNPC managed interface with operating companies on behalf of Nigeria.

According to him, the goal of the oil firm is to ensure the efficient management of Nigeria’s upstream oil and gas businesses to sustain industry growth and deliver maximum value for the benefits of Nigerians and other stakeholders.