There are indications that the Federal Government has engaged oil majors and the Deposit Money Banks in discussions over $4 billion outstanding debts in the books of the Nigeria National Petroleum Corporation (NNPC). The talks also include raising capital needed for new drilling projects.
The Minister of State for Petroleum and the Managing Director of NNPC, Emmanuel Ibe Kachikwu, had earlier stated government’s intention to increase output to 2.5 million barrels per day by the end of 2016.
The outstanding debt was said to be the fallout of unclear structures in the corporation that allowed corruption and oil theft to flourish.
General productivity in the sector has long been relatively stagnant, with big projects not being developed due to government’s inability to fund them and the lingering uncertainty shrouding the country’s fiscal space.
Consequently, NNPC, which facilitates Nigeria’s oil production through joint venture partnerships, has been unable to pay its counterpart funding, with bills piling up since 2012.
Already, the minister has affirmed that the debt, as at November stood at between $3.5 to $4 billion, which NNPC wanted to cut through deals such as the $1.2 billion multi-year drilling financing, signed with Chevron in September.
He said that the corporation will begin to look at zero debt and if possible, ending the need for joint venture to depend on NNPC’s cash.
NNPC has already reported operational loss of N267.14 billion ($1.3 billion) for 2015 in what may be partly the consequences of fund paucity over the years.
“My ideal would be to bring in third party capital, do a joint investment and management of the refineries and work out a pay-out process over five to six years basically on lifting of some portion of the finished products,” Kachikwu told Reuters.
Kachikwu said NNPC was in talks with the Senate to speed up the process by splitting the PIB into three parts covering governance, taxation and business items such as oil block licensing.
The former Governor of the Central Bank of Nigeria, Lamido Sanusi, had alleged that Atlantic Energy’s deals were one route through which tens of billions of dollars in oil revenues were diverted from state finances.
Kachikwu said NNPC expected to conclude a deal within two months for a new partner to pay up to $1.3 billion to take over the Atlantic agreements.