The Federal Government has found an extra annual revenue flow of $5.6billion with the finalisation of a new exploration and production contract with American oil company Schlumberger.
A statement from the Nigerian National Petroleum Corporation (NNPC) said the deal was closed out over the weekend by Maikanti Baru, its Group Managing Director, in London.
The contract, valued at $1.082billion, will be largely funded by Schlumberger. The firm is expected to bring in $724.14million, while $358.79 will be funded with cash flows that are derived from the project.
After Schlumberger has received all due compensation and recovered its costs in line with agreed terms, the government’s yearly share of $5.60billion in taxes and royalties and further $1.32billion in net cash flows will begin to stream in.
This type of E and P deal leaves no financial burden on the government; it is the model contract it needs to help it exit cash call obligations it pays under Joint Ventures.
Speaking after signing the production contract agreement, Baru said the structure of the funding package deployed by the corporation was guided by the need to instill transparent and accountable processes. In order to dispel any speculation of foul play, Baru noted that NNPC followed strict compliance with all extant laws, regulations and established governance protocols, as well as overriding national interest and drive to achieve competitive market pricing for such greenfield project.
“Apart from aligning wholly with government’s aspiration of increased crude oil and gas production, reserves growth and monetisation of the nation’s enormous gas resources, the model is in tandem with one of the corporation’s 12 Business Focus Areas (BUFAs); ramping up crude oil and gas reserves and production which also supports government’s 7 Big Wins aspirations,” Baru disclosed.
The agreement with Schlumberger was done undder the auspices of a joint Venture agreement with First E&P.
Under the tripartite agreement between NNPC, First E&P and Schlumberger, Oil Mining Leases (OML) 83 and 85-Anyalu and Madu oil fields, are 60 per cent owned by NNPC and 40 per cent owned by First E&P. The fields are said to have crude oil reserves of 193 million barrels and gas deposits of 0.637 trillion cubic feet and will be operated by First E&P.
Schlumberger will provide services for the operation of the shallow water oil fields under a limited exclusive basis. The company is also expected to drive technology transfer during the course of operation.