Joint Venture companies to spend $12bn in 2016

The Nigerian National Petroleum Corporation (NNPC) and its joint venture companies are to spend over $12 billion on their   operations in the fiscal year 2016.

A breakdown of the budget provisions indicates that capital expenditure is to account for 59 percent of the budget, which is equivalent to $6.96 billion, while the remaining 39 percent is to go to operating expenditure that is equivalent to $4.93 billion, during 2016.

According to the work programme of the companies, the areas of their operations to  benefit from this budget proposal  include drilling of wells, seismic processing and analysis, upgrade of terminals and development of oil and gas producing infrastructure.

Other areas are the Independent Power Plant (IPP) projects and Domestic gas projects, local content development and sustainable community development programmes, environmental protection, safety and security.

An oil and gas industry operator who spoke to BusinessDay on the condition of anonymity, said  most of the budgets are going on what he described as routine maintenance operations  in the companies, as no new projects are being embarked upon.

BusinessDay Research and Intelligence Unit (BRIU) findings reveal that despite the dip in oil prices, security and crude oil  theft  challenges, oil and gas companies, including Shell Petroleum Development Company (SPDC), ExxonMobil Nigeria, Chevron Nigeria Limited (CNL), Nigerian Agip Oil Company (NAOC), and Total Exploration and Production Nigeria Limited (Total E&P) will spend 32 percent more than in the 2015 proposed budget of $8.99 billion and 82 percent higher than actual budget of $6.55 billion of the same year.

SPDC accounts for 30 percent of the proposed budget, equivalent to $3.53 billion. ExxonMobil with $2.60 billion, represents 22 percent of the proposed budget. Chevron occupies the third position with total budget of $2.47 billion, indicating 21 percent of the total budget. Total E&P came forth with a total budget of $1.78 billion and Nigerian Agip Oil Company occupied the fifth position with a total budget of $1.52 billion.

Another industry operator, Chijioke Mama, energy researcher and analyst said that the projections will augur well for Nigeria’s service providers in the oil and gas industry.

“If the projections are right, then it is a positive for service companies in Nigeria because the budgets from the giants of the industry are meant to trickle down to the service providers. It might just revive the sleeping industry now, with new contracts and make significant contribution to the economy.”

The SPDC investment of $3.53 million is made up of joint venture base exploration and production, which accounts for 64 percent of the total budget, translating to $2.24 billion; Domestic Gas and Independent Power Projects account for 21 percent, which translates to $723 million, and the remaining $563 million or 16 percent is for servicing of Modify Carry Agreement (MCA2).

On exploration and production, SPDC investment in 2016 will be focusing on preparation and drilling wells, seismic processing and analysis, upgrade works at Forcados and Bonny terminals, upgrade of oil and gas infrastructure, flow line replacements, emergency pipeline repair, etc.

Olusola Bello, Olowa Peter & Isaac Anyaogu