Nigeria’s Oil & Gas industry Soon To Yield $10bn Investment

A big gathering of global oil companies operating in Nigeria held in Madrid, Spain on October 3 this year, where deliberations were about the prospect of engagements that could yield up to $10 billion worth of investments in Nigeria’s oil and gas sector.

The prospect was however hinged on the conditionality of peace in the often restive Niger Delta area and government’s resolve the settle the recurring fiscal and governance issues around the sector.

At the meeting, stakeholders like oil service giant, Baker Hughes, Shell, Chevron, Eni, ExxonMobil and Total recognised the fact there is appetite for dollar inflows into Nigeria’s oil industry.

Sources close to the meeting said the participants were however concerned that other oil dependent economies are not on their knees like Nigeria which has her oil production crippled as a result of the resurgence of militancy in the oil rich Niger Delta.

If the deal is eventually consummated, it could help revitalise the local content aspect of the country’s oil and gas sector and lift daily production by 600,000 barrels per day within six months. Standard Chartered Bank, arranging the deal, will see each of the multinational oil companies contributing between $1.5bn and $2bn to the fund.

BusinessDay investigations reveal that the financial arrangement which was to come through the “Modified Carry Agreement’’ was designed to finance Joint Venture Upstream projects where these companies had agreed to use their money to salvage the production situation in the oil and gas sector.

The Modified Carry Agreement is a financing agreement whereby the International Oil Companies (IOC’s) would advance loans to the Nigerian National Petroleum Corporation (NNPC) for the purpose of investing in upstream projects. The “Modified Carry Agreement’’ (MCA) introduces greater transparency and accountability, with repayment and compensation being through getting some percentage of crude oil.

This arrangement, if it scales through, would also enable government to pay the $8 billion cash call arrears which has been outstanding for the past years, along with the settlement of the $10 billion.

However, the major concern of the IOCs is the onslaught of Niger Delta militants on oil facilities, the latest being the recent bombing of the main pipeline to the Bonny Export Terminal. “No matter the billions of dollars you bring into the oil sector, once there is no peace, it cannot yield anything”, an industry source said.

They fear that it would be difficult for investors to commit their money if security cannot be guaranteed. The joint venture production has come to a third of the typical 1.2 million barrels per day production in normal circumstances on account of restiveness in the region.

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