Amid cash crunch, NNPC records project funding shortfall of $0.92 billion in four months


.Cash call arrears remain at N971.8 million. $321.9 million on cost recovery in April

Emmanuel Addeh

The Nigerian National Petroleum Company Limited (NNPC) has recorded a shortfall of $920 million (about N386.4 billion) in its planned funding for priority projects in the first four months of 2022, according to the latest data from the national oil company.

This came amid a growing cash crunch and the organization’s inability to meet its monthly financial obligations 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 more than $2.6 billion for cost recovery and priority projects, although it has budgeted about $5.8 billion for this purpose.

While through cost recovery a party is able to recover its capital and operating costs on a specified percentage of production, NNPC also has major oil and gas projects to boost the country’s production.

Some of the projects, which have been going on for years, include domestic gas development initiatives, frontier exploration, renewable energy and the Nigeria/Morocco gas pipeline.

They also include Gbaramatu IPP/Excravos Power Plant, Delta IV Upgrade and Rehabilitation, Oben Metering Upgrade, Sapele Metering Station, Ajaokuta Metering Station as well as the construction of the Egbin gas plant 500 mmscfd.

In addition, NNPC previously listed the construction of the Niger Delta West Project, the Asa North Ohaji Project, the Excravos/Lagos Pipeline Expansion, OB3 Supply Lines as well as the Ajaokuta-Kaduna-Kano Project (AKK ) as some of its priority projects. .

The NNPC document showed that the full appropriation for “schedule” cost recovery and priority project funding was $6.43 billion for the year, which was further segmented into $536 million. monthly disbursement.

According to the document released by the company, between January and April, when it was supposed to shell out a total of $2.14 billion in recovery and project costs, actual functional funding remained at $1.22 billion. at the end of the month.

In terms of actual functional funding level in dollars, a breakdown of releases showed that in January $441.2 million was spent on cost recovery and ongoing projects, in February it was 137, $3 million, down from $322.9 million and $321.9 million in March and April respectively. .

Similarly, the funding shortfalls 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, over the past six years, the NNPC has reduced cash call arrears owed to five international oil companies (IOCs) by $3.717 billion from the initial $4.689 billion in 2016, data shows. of the NNPC.

However, no new payments were made in April and May, says the latest document detailing NNPC’s presentation to the Federation Accounts Allocation Committee (FAAC).

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 due.

In total, NNPC has paid out $3.717 billion over the past six years out of the $4.689 billion renegotiated in 2016, but with $971.817 billion still outstanding. While SPDC still has outstanding arrears of $595.1 million, Total owes $152 million while Agip’s debts remain at $224.64 million.

THISDAY recalls that the national oil company had signed the fundraising agreements with the five CIOs to reimburse the fundraising arrears within five years after many years. However, the repayment period has now exceeded six years.

Cash call obligations arise when non-operating joint venture partners such as NNPC are called upon to provide funding for operations, usually based on each partner’s stake in the project.

NNPC, in 2016, signed the cash call repayment agreement with its joint venture partners to repay the cash call arrears within five years after many years of indebtedness to its partners.

Previously, it had for years consistently failed to honor its debt to CIOs, a situation which operators say caused the loss of new investments in the oil and gas sector.

At the time, the Ministry of Petroleum Resources negotiated a rebate with IOCs, comprising SPDC, Total, Mobil, Chevron and Agip, of approximately $5.1 billion to $4.68 billion and has since continued reduce debt payments in installments.

The cash call agreements, under which NNPC pays its 55-60% share of investment in upstream joint ventures, had been in place for more than 40 years before its restructuring.

President Muhammadu Buhari had said reforms initiated by his administration in 2015 when he took office, including JV renegotiations, had succeeded in saving the country’s oil and gas industry from total collapse.

Buhari noted that, for example, payments of huge cash call arrears owed to the country’s JV partners took a huge burden off the NNPC, saying the “transparency drive” in the state oil company was the product of these critical restructurings.

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