Its important we explain this JV thing well…
1. in the past NNPC owns 50% of the UJVs…so we get that share of the revenues less costs
2. if we reduce our stake in the JVs (which is what is planned), our share of the profit of the UJVs will fall, in essenc our crude oil revenues will fall…as outr costs fall…
3. However i see the UJVs will now be incorporated, thus they will be liable to pay Corporate Income Tax…so our fiscal revenues go up.
The question is this, these steps are aloready in the PIB…(now called the PIGB)…why has the PIGB not been passed”
MEMORANDUM ON THE ADOPTION OF SUSTAINABLE OPTION FOR FUNDING JOINT VENTURE CASH CALLS BY THE HONOURABLE MINISTER OF STATE, PETROLEUM RESOURCES
Minister of State for Petroleum Resources, Dr. Ibe Kachikwu stated that the current upstream Joint Venture arrangement in the Nigeria’s oil and gas industry is unincorporated Joint Venture (UJV) meaning that NNPC and the International Oil Companies (IOCs) partner in each Joint Venture as unique and separate legal entities.
- The Minister also noted that while the NNPC pays the entire Oil and Gas revenues realised from the JV operations into the Federation account, the production costs are appropriated, calendarized and paid monthly as Cash Calls to the JV operations from the NNPC and IOCs.
- According to the Minister, January – November 2016 underfunding of the NNPC Cash Calls is estimated at US$2.3 billion. This is in addition to the inherited arrears estimated at USD$6.8 billion for year ending 2015.
- However he disclosed that through negotiations the $6.8B past due Cash Calls burden on the Federation has now been reduced to $5.1B, which would be paid based on an improved oil production output.
- Under the new funding stream, the JVs would become incorporated and source for their own financing, freeing-up the FG from the budgetary obligations of coming up with the cash calls already put at $2.3B so far this year alone.
- Under the alternative funding regime, the technical cost of oil production in the country would also come down from about $27 per barrel to $18.
- The new arrangement, he assured would drive up investment in the oil and gas sector while also boosting production output and revenue significantly.
- For instance net payment from oil production to the Federation account is expected to peak under the new arrangement to about $18B by year 2020 while raising output to 3million barrels per day.