From Adewale Sanyaolu, Houston, Texas
FROM its current daily crude oil production at 2 million barrels per day (bpd), Nigeria is on the verge of suffering a further 40 per cent decline in the next five years if the challenges associated with its joint venture operations persist.
Managing Director of Seplat Petroleum Development Company Plc, Mr. Austin Avuru, who stated this at the ongoing Offshore Technology Conference (OTC) in Houston, Texas, USA, explained that if challenges which include long contracting cycle, cash call arrears and Joint Venture (JV) funding are not urgently addressed, the country’s oil and gas production would nosedive further.
Avuru argued that production from the JVs declined rapidly from 2.2 million (bpd) to 1.2 million bpd due to poor JV funding.
“Go and check production records, you will discover that JV production has declined from 2.2 million bpd to 1.2 million bpd. The only reason we are still doing 2 million bpd is that deepwater production made up for the gap. “In the next five years, our deepwater production will also be declining and the real impact of poor funding of the JV will start to manifest when, as a nation, we will be producing not more than 1.6 million bpd. So we must begin to address the challenges by doing the right thing,” he said.
On ways to correct the production imbalance, the Seplat boss urged the government to design a structure that will give each JV enough operational and financial independence to carry out its day to day running in a sustainable manner.
“JV today is a producing venture and if the minority is able to fund its share of operation from its revenue, why wouldn’t the majority party be able to do same. The structure of the JV and the JV agreement allows for self-funding mechanisms.
Once their budget is approved for the year, it will require no new legislation other than the Minister and the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC) to have the courage and allow the JV to be self-funding,” he said.
Avuru explained that when the JVs were being handled by the JV Dept (now NAPIMS), the General Manager, JV, will sign the cash call request and the Governor of the Central Bank of Nigeria (CBN) will approve immediately.