NNPC, independent producers bicker over asset operation

There is  disquiet over the best model for operating the oil assets acquired by some  Independent Petroleum Producers, as the  winners of the assets and the Nigerian National Petroleum Corporation (NNPC) are peddling various models in an ongoing raging debate.

  While the Independent Petroleum Producers want to take over the operatorship of the  assets, Emmanuel Kachiukwu, the new group managing director of the NNPC allegedly  prefers a different model which would still  make the Nigerian Petroleum Development  Company (NPDC)  remain the operators of the assets.

The companies, under the aegis of the Independent Petroleum Producers Association of Nigeria (IPPAN) had met with President Muhammad Buhari a few weeks ago, with a single plea to wrest operatorship from the beleaguered government agency, the NPDC and at the meeting, the president asked the group managing director of NNPC to follow up the independents to resolve their worries.

   Industry sources however said the hopes of the independent producers may have been dashed with the alleged description of such arrangement as illegal by the NNPC boss.

The NNPC boss is said to prefer an Incorporated Joint Venture (IJV) arrangement with the independent producers.

But producers are said to have argued that the IJV cannot work except there is a reconstruction in the ownership structure of the assets, which should be similar to what  obtains in the Nigeria Liquefied Natural Gas(NLNG) company limited.

This situation has created an atmosphere of uncertainty for some of the Independent Petroleum Producers, such as  First Hydrocarbon  of Nigeria  Limited ,Elan oil Limited , ND Western, Shoreline and Neconde, which fall in the second group of  the participants  that won the assets  but  were denied  operatorship.

This has resulted in them losing huge sums of money  because of  the perceived lack seriousness of the NPDC  which is the operator of the assets. The NPDC is not aggressive in its drilling activities which could add more value to the assets and this a major concern for the firms that have equities in the assets.

Industry analysts say the gains of having the concessioners  taking over the operatorship is huge because they would be able to access  the necessary funds to boost the production level of  the producing  fields from banks and put in place infrastructures to enhance production.

According them, Seplat Petroleum Development Company was able to hit the over 80 ,000 barrels mark from about 20,000 barrels per day because the company took charge of the operations and development of the fields  it acquired.

Today, Seplat can go the capital market to raise money to execute it projects without having to wait for the NPDC, an oil and gas industry analyst said.

An executive director of one the producing companies, who spoke with BusinessDay in confidence, said government’s stands to gain more if the companies that won the assets are allowed to operate them, rather than leaving them in the hands of NPDC.

The NPDC is said to currently owe Seplat about $500 million which it is yet to refund to the company.

  With the record of non-performance, he said no serious bank would listen to NPDC   when it goes to them for money.

The Independent Producers, it was learnt, are of the opinion that for the IJV arrangement to work, government might have to sell between 5-6 per cent of her stake in the assets, so that the oil producers can have majority  stakes.

The Independent Petroleum Producers are critical components of the nation’s oil and gas industry that the government can no longer wish away.

They currently have a combined production capacity of about 400,000 barrels per day of crude oil and produce about 900 million standard cubic feet of gas per day.  They are expected to contribute 50 percent to domestic gas supply by 2018 to power the economy.

The other concern raised by the producers  over the operatorship of the assets by NPDC is that they would not be able to raise funds from the banks under such arrangement because the banks would want to give them loans based on  evidence that the concessioners are in firm control of the assets .

Some of the Independent Producers who spoke   with BusinessDay said they are still looking forward to engaging with the Emmanuel Kachiukwu, or whoever is appointed as the Minister of Petroleum Resources, so as to resolve the issues at stake.

“We need to be listened to by the government for the benefit of the country and the economy in general because of our current contribution to the production level”, an executive director of one of the independent companies who does not want his name mentioned said.

The other group of the asset winners are Aiteo, New Cross ,Erotron consortium and Crester.

Olusola Bello