6 August 2018

Nigerian Banks Increasingly Involved in Petroleum Upstream - NNPC

The Nigerian National Petroleum Corporation, NNPC, Monday, disclosed that currently, Nigerian banks are deeply involved in providing funding for the upstream sub-sector of the petroleum industry.

In a statement in Abuja, Group Managing Director of the NNPC, Mr. Maikanti Baru, noted that the banks are increasingly becoming involved in the upstream because of the corporation's adoption of the alternative financing models for funding its Joint Venture, JV, obligations.

Baru, who stated this at the 42nd Society of Petroleum Engineers, SPE, Nigerian Annual International Conference & Exhibition, NAICE, declared that the alternative financing models had gone a long way in restoring confidence among investors and had also stimulated further Foreign Direct Investments, FDI, in the oil and gas industry.

According to him, alternative financing had deepened local banks' participation in the upstream sub-sector of the industry.

He observed that traditionally, Nigeria had 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).

He identified the non-traditional funding options to include contractor-financing/deferred payment, Pension Funds, Private Equity, Sovereign Wealth Funds, Export Credit Agencies (ECAs) and none-less Islamic/Sharia Finance.

He said, "With sustainable funding, deep-water Production Sharing, which currently accounts for 41 per cent of daily national production, had risen over the years, with over 2,000 per cent production growth recorded within the last ten years."

Baru noted that in order to meet government expenditure and strategic focus, the NNPC had to explore alternative financing, which he further described as important to the sustenance of the industry.

He charged stakeholders to pay attention to the increasing global competition, which he identified as competition for new production centres across the globe, especially in Africa; shale oil in the US, Argentina and other places; and the competition in terms of crude oil quality.

"To turn the wheel of the industry and ensure that funding does not limit our growth, it is important we consider both the traditional and non-traditional funding options.

"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," Baru noted.

Also speaking, Minister of State for Petroleum Resources, Mr Ibe Kachikwu, who was represented by his Senior Technical Assistant, Engr. Johnson Awoyemi, said the Federal Government had demonstrated commitment towards strengthening the industry by giving approval to the relevant oil and gas policies as championed by the Petroleum Industry Bill (PIB).

Also speaking, the Chairman, SPE Nigeria Council, Mr Chikezie Nwosu, called for immediate action to leverage the opportunities presented by the industry to develop other sectors.

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