The Nigerian National Petroleum Company Limited (NNPC) recorded $920 million (about N386.4 billion) deficit in its planned funding for priority projects in the first four months of 2022, latest data from the national oil firm has shown.
It came amid increasing cash crunch and the inability of the organisation to meet its monthly financial obligation to the federation, comprising the federal, state and local governments, which operate a joint account
THISDAY recalls that in 2021, the company posted a deficit of over $2.6 billion for cost recovery and priority projects, although it budgeted about $5.8 billion for the purpose.
While through cost recovery, a party is able to recoup its capital and operating costs out of a specified percentage of production, the NNPC also has major oil and gas projects meant to boost the country’s production.
Some of the projects, which have been on for years include domestic gas development initiatives, frontier exploration, renewable energy and the Nigeria/Morocco pipeline.
They also include the Gbaramatu IPP/Excravos power plant, upgrade and rehabilitation of Delta IV, upgrade of Oben metering, Sapele metering station, Ajaokuta metering station as well as construction of Egbin 500mmscfd gas facility.
In addition, the NNPC had previously listed the construction of the West Niger Delta project, Asa north Ohaji project, Excravos/Lagos pipeline expansion, OB3 supply lines as well as the Ajaokuta-Kaduna-Kano (AKK) project as some of its priority projects.
The NNPC document showed that the entire appropriation for ‘calendarised’ cost recovery and funding for priority projects was $6.43 billion for the year, which was further segmented into $536 million monthly disbursement.
According to the document released by the corporation, between January and April, while it was supposed to pay a total $2.14 billion as recovery and project costs, actual functional funding remained at $1.22 billion at the end of the month.
In terms of actual functional dollar funding level, a breakdown of the releases showed that in January, $441.2 million was spent on cost recovery and ongoing projects, in February it was $137.3 million, while it was $322.9 million and $321.9 million in March and April respectively.
In the same vein, the shortfalls in funding for the months were $94.77 million in January, $398.7 million in February, $213 million in March and $214.334 million in April.
Meanwhile, in the last six years, the NNPC has reduced cash call arrears owed five International Oil Companies (IOCs) by $3.717 billion from the initial $4.689 billion in 2016, the NNPC data stated.
However, there were no new payments carried out in April and May, the latest document detailing NNPC’s presentation to the Federation Account Allocation Committee (FAAC), indicated.
But it showed that repayments to Mobil Producing Nigeria and Chevron Nigeria Limited remained cleared while Shell Petroleum Development Company, Total Exploration and Production Nigeria, as well as Nigeria Agip Oil Company were still being owed.
In all, the NNPC has paid $3.717 billion in the last six years out of the $4.689 billion renegotiated in 2016, but with $971.817 billion still outstanding. While SPDC is still has unpaid arrears of $595.1 million, Total is being owed $152 million while Agip’s debts remains at $224.64 million.
THISDAY recalls that the national oil company had signed the cash call repayment agreements with the five IOCs to defray the cash-call arrears within a period of five years after many years. However, the repayment period has now exceeded six years.
Cash Call obligations arise when non-operating JV partners like the NNPC are called upon to provide funding for operations usually based on each partner’s equity in the project.
The NNPC, in 2016, signed the cash call repayment agreement with its JV partners to defray cash-call arrears within five years after many years of its indebtedness to its partners.
Before then, it had consistently for years failed to meet its indebtedness to the IOCs, a situation the operators said caused loss of new investments in the oil and gas sector.
At the time, the Ministry of Petroleum Resources had negotiated a discount with the IOCs, comprising SPDC, Total, Mobil, Chevron and Agip from about $5.1 billion down to $4.68 billion and had since then continued to reduce the debt payments in instalments.
The cash call arrangements, under which NNPC pays for its 55 per cent to 60 per cent share of investment in the upstream joint ventures, had been in place for over 40 years before it was restructured.
President Muhammadu Buhari had declared that the reforms initiated by his administration in 2015 when he took office, including the JV renegotiations, succeeded in saving the oil and gas industry in the country from total collapse.
Buhari noted that, for instance, the payments of huge cash call backlog owed the country’s JV partners took off a huge burden from the NNPC, saying that the “transparency drive” in the national oil company was a product of those critical restructurings.
