The Nigerian National Petroleum Corporation (NNPC) has proffered new ways to attract more funds for operators to launch themselves into a new phase of oil field as Nigeria’s oil and gas industry grapples with funding challenges which has cut down investment in oil exploration.
The Corporation believes that attracting fresh funds to the industry will enable the country achieve its target of raising reserves to 40 billion barrels in 2020.
Speaking during management session at the 36th Nigerian Association of Petroleum Explorationists (NAPE) in Lagos, the Group Managing Director of NNPC, Dr Maikanti Baru, said that Nigeria has already set an achievable target of 40 billion barrels reserves and 3 million barrels a day production by 2020.
Baru, who was represented by Dr Victor Adeniran,the Chief Operating Officer, (COO) of NNPC Ventures, however said the industry requires special fund for hydrocarbon exploration to fully achieve its potentials.
“Currently, as a physical incentive, all exploration cost within the industry is expensed, this is a laudable and pro industry incentive from the government.
“The implications is that funding need to be incurred prior to taking benefits, hence the funding structure of exploration within the industry need to be strengthened,” Baru said.
However, we need to go beyond and above that Baru posited, adding that the Corporation on its part is willing to work with partners and the industry in that regard.
He said that on the part of government, we would open up new fields in terms of marginal fields development, dormant assets and new assets, as there are still condensing prospects for new oil and gas reserves in Nigeria particularly in the ultra deepwater and inland frontier basins, and the timing and process must be transparent.
According to him, if this is done on consistent basis, the nation’s reserve replacement ratio, newly discovered reserves versus productions in the next ten years will be more than double.
Baru also said that funds can be raised from the Nigerian Content Development Monitoring Board (NCDMB), Local Content Fund or from the Central Bank of Nigeria, CBN, Seismic exploration support fund for Seismic survey in under explored areas of the country.
The NNPC boss suggested that a revolving special fund can be created for the country’s hydrocarbon exploration on contributory funding basis.
He said the NNPC will be willing to support such structures and ready to create a workable framework.
Baru said that the identification, evaluation, diversification and source of hydrocarbon are quite important and government also need to develop a framework that responds rapidly and quickly to external stimuli, particularly oil prices and increasing competition from other basins within the Gulf of Guinea.
“Some of these incentives can include an allowance for deeper prospect drilling end of life tax break or tax holiday for matured assets, new reserves replacement bonuses.
“The new and replacement terms are intentionally placed to ensure benefit and additions are earned based on meaningful work not on simulation data, catalytic application of enhanced oil recovery techniques or the likes, lower royalty rate for small fields and small allowances”,” he added.