The Group Managing Director of the Nigeria National Petroleum Corporation (NNPC), Dr. Maikanti Baru, has said that the decision by the corporation to seek alternative financing models for its Joint Venture (JV) projects has restored investors’ confidence characterized by improved Foreign Direct Investments (FDI) inflows into the nation’s oil and gas industry.
Baru gave this hint while speaking at the 42nd Society of Petroleum Engineers (SPE) Nigerian Annual International Conference & Exhibition (NAICE) in Lagos.
He pointed out that in order to turn the wheel of the industry and ensure that funding doesn’t limit the entity’s growth, it is important that traditional and non-traditional funding options were explored.
In his paper titled: “Revamping the Nigeria Oil & Gas Industry through Alternative Funding: Opportunities, Challenges, Innovations & Solutions”, the industry expert pointed out that alternative financing had deepened local banks’ participation in the upstream sub-sector of the industry.
This is even as he disclosed that based on sustainable funding, deep-water Production Sharing, which currently accounts for 41 percent of daily national production, had risen with over 2000 percent production growth recorded in the past decade.
Baru explained that to meet government’s expenditure and strategic focus in the hydrocarbon resources industry, the Corporation had to explore alternative financing due to its importance to the sustenance of the industry.
The NNPC boss charged participants at the conference to take serious note of the increasing global competition, exemplified by the shale oil in the US, Argentina and other places; and the competition in terms of crude oil quality.
According to him, Nigeria had traditionally raised funds utilising equity or self-funding from cash-flow, commercial debt instrument or partner funding in form of Carry or Modified Carry Arrangement (MCAs).
Baru listed the non-traditional funding options as including, contractor-financing/deferred payment, Pension Funds, Private Equity, Sovereign Wealth Funds, Export Credit Agencies (ECAs) and none-less Islamic/Sharia Finance.
Baru said: “There is need to sustain the industry for it to continue to deliver the much needed revenue and provide the springboard for economic diversification. We must therefore keep the goose which lays the golden egg alive.”
In his opening address at the conference, the Minister of State for Petroleum Resources, Dr Ibe Kachikwu, who was represented by his Senior Technical Assistant (STA), Engr. Johnson Awoyemi, noted that government had demonstrated its commitment towards strengthening the industry by giving approval to the relevant oil and gas policies as provided for in the Petroleum Industry Bill (PIB).
In his remarks, the Chairman, SPE Nigeria Council, Mr. Chikezie Nwosu, advocated urgent action to leverage the opportunities presented by the industry to develop other sectors of the nation’s economy.
