Yemisi Izuora/Ijeoma Agudosi
An indigenous oil and gas company, Seplat has clearly noted that it is not contented with the current Joint Venture (JV) arrangement in Nigeria’s oil and gas industry.
The company is of the opinion that Nigeria’s oil industry will grow bigger than what it is now if a workable funding structure that will chuck out the current JV structure is observed.
It said Nigeria can boost its oil and gas production by changing the way capital investments are funded in its joint ventures with energy companies.
Current structure allows allows the government through the State-owned oil firm, the Nigerian National Petroleum Corporation (NNPC) to retain an average 55 percent stake in five joint ventures with Royal Dutch Shell Plc, Exxon Mobil Corp., Chevron Corp., Total SA and Eni SpA that pump more than 80 percent of the country’s crude and under the arrangement government pays the same share of capital contributions for the operation of the oil ventures.
Seplat runs a joint venture with NNPC after buying assets sold by Shell, but is now advocating that the current funding arrangement be scrapped in favor of a method less dependent on the government.
Making this position at the just concluded World Economic Forum (WEF) which held in Cape Town, South Africa, chairman of Seplat Ambrosie Orjiakor said ‘The “cash call” requirements are a constraint affecting production,’.
According to Orjiakor, We need to find a situation where the joint-venture partners sit down and agree on what percentage of production should be dedicated on operation and capital expenditures. That way you ensure that growth in the industry is guaranteed, that the production will increase, that the reserves will be increased and that there will be room for exploration activities as well.
At the moment the country makes great effort to meet its share of funding to the operation of the joint ventures with energy companies, thereby limiting the scope for increasing production and is also indebted to companies including Shell, Exxon Mobil, Total and Eni, which had provided loans in the past to fill the funding gap.
“We would like to see government also thinking about divesting some of its joint-venture assets such that the private sector will drive the industry,” Orjiako said.
As energy companies including Shell, Chevron, Total and Eni continue to divest assets in onshore areas plagued by communal unrest and disruptions in favor of offshore investments, Seplat will be looking for opportunities to expand.
“We believe we can engage the communities where we operate differently, being Nigerian companies,” Orjiakor said, adding ‘We are looking to see more of that happen and that will create more opportunities.”
When Seplat took over its current oilfields from Shell, they were producing 14,000 barrels of crude per day, according to Orjiakor. Currently, the company pumps an average of 70,000 barrels a day and sees daily output reaching 85,000 barrels by 2017, he said.
With Nigeria seeking to tap its gas reserves to meet pent up power demand, Seplat has expanded its gas investments, improving output from 90 million cubic feet per day in 2010 to the current 200 million cubic feet, the chairman said. It plans to reach a capacity of 300 million cubic feet next year.
“We have increased the ability to deliver gas to different parts of the country, to the north and to the west and indeed into the West African gas pipeline,” he said.