By Adewale Sanyaolu
International Oil Companies (IOCs), in Joint Venture (JV) operation with the Federal Government, have agreed on $1.7 billion discount on cash call arrears, which has accumulated to $6.8 billion.
With this discount, Nigeria will now have to clear unpaid bills worth $5.1 billion for oil production JV piled up over many years, Minister of State for Petroleum Resources, Mr. Ibe Kachikwu, said in a speech at the signing ceremony held in Abuja, yesterday.
The IOCs that agreed to the discount deal included Shell, Chevron, Total, Eni and ExxonMobil.
According to Kachikwu, the deal would unlock new investment, adding that the repayment would take place over the next five years.
The Minister said the agreement would also ensure that future Nigerian payments to production JVs with oil majors would be paid on time, adding that the Federal Government has reached agreement on a new cash call exit policy with the IOCs.
Kachikwu said the agreement will bring clarity and stability to the management of the country’s main revenue source, stating that the initiative has already received the approval of the Federal Executive Council (FEC).
‘‘It is part of new measures and strategies aimed at eliminating the burden of JV cash call arrears and securing future funding for the upstream petroleum sector.
These strategies, which are fully supported by the National Economic Council (NEC) will lead to an increase in national production from the current 2.2mbpd to 2.5mbpd by 2019, as well as reduction in Unit Technical Costs from $27.96/barrel oil equivalent (boe) to $18/boe.
According to him, the net payments to the Federation Account is expected to double from about $7 billion to over $14 billion by 2020 and the immediate effect of the new cash call policy will increase net Federal Government revenue per annum by about $2 billion.
Kachikwu said innovations and initiatives championed by the ministry over the past year have revamped the sector, restored investors’ confidence which was at an all-time low and positioned Nigeria’s oil and gas value chain for profitability.