The ongoing disputes between the Nigerian National Petroleum Corporation and international oil companies over Production Sharing Contracts is hampering further investment, even as funding challenges have led to a significant decline in joint venture oil and gas production.
Faced with declining oil revenue, Nigeria announced in 2015 that it planned to review the PSCs with foreign companies, proposing an increase in royalty rates for terrains beyond 1,000 meters, from zero to three per cent, and a royalty rate of eight per cent for output of up to 50,000 bpd. The Group Managing Director, NNPC, Dr Maikanti Baru, said in his presentation at an industry conference in Lagos last week that “Negotiations between the NNPC and the PSC contractors [are] ongoing to resolve all PSC disputes.”
The Chief Executive Officer, Stanbic IBTC Bank, Mr Demola Sogunle, in his presentation at the Nigerian Annual International Conference and Exhibition of the Society of Petroleum Engineers, also said the Joint Venture Agreement model had been challenged in recent years, majorly due to funding challenges, which had negatively impacted on growth of JV oil and gas production. In December 2016, the NNPC exited the cash call agreement and opted for alternative financing arrangements.