The perennial con­straint encountered by the Nigerian Na­tional Petroleum Corpo­ration (NNPC) in the ex­ecution of its joint venture cash call obligations may soon take a turn for the worse if the Federal Gov­ernment fails to approve stakeholders proposal that the corporation be allowed to access the international bond market to raise long term fund. This concern is growing as budgetary pro­vision to it from govern­ment continues to dwindle due to competiting national capital and fiscal demands.
Despite having several joint venture agreements with International Oil Com­panies (IOCs), NNPC has consistently been challenged meeting its funding obliga­tion.
Some of the joint venture partners include; the Royal Dutch Shell Plc in Shell Pe­troleum Development Com­pany (SPDC), where the corporation has 55 per cent interest, while Shell, Total and Agip have 45 per cent.
In the NNPC/Chevron joint venture, the NNPC has 60 per cent, while the IOCs have 40 per cent. The NNPC also has 60 per cent in the joint venture – Elf Petroleum Nigeria Limited, with the other partners having 40 per cent.
Under its joint venture ar­rangement in Mobil Produc­ing Nigeria Unlimited, the NNPC has 60 per cent, while the other partners led by Exx­onMobil have 40 per cent. Similarly, the NNPC has 60 per cent in the Nigerian Agip Oil Company (NAOC), while Italy’s Agip and other partners have 40 per cent.

Pan Ocean Corporation also has a joint venture ar­rangement with the NNPC, with the latter controlling 60 per cent and the former, 40 per cent. Texaco Overseas Nigeria Petroleum Company

is a joint venture where the NNPC has 60 per cent, while the other partners control 40 per cent.
However, it is believed that if the NNPC can faith­fully meet its obligations in the various joint ventures, Nigeria will reap bountifully from it through increased crude oil production going by its lion share in equity of the various JVs
But so far, the major con­straint confronting NNPC and the IOCs is the inability of Nigeria’s oil firm to pro­vide its own share of funding for the joint venture projects.
With majority stake in these projects, the failure of the corporation to meet its cash calls has not only stalled ongoing projects but also af­fected several other invest­ment decisions in the indus­try, especially those related to gas projects.
In a swift defense of the NNPC’s current dilemma with funding, in the area of JV funding, Group Man­aging Director, NNPC, Mr. Andy Yakubu, at an interac­tive session with the media in Uyo, Akwa Ibom State, recently, explained that as the majority partner in the JVs, NNPC was required to pay its share of the funds utilized in funding JV operations.
He explained that NNPC’s interests in the JVs are funded by direct budgetary appropriation in competi­tion with other government departments for funding. The limited resources of the Ni­gerian government, accord­ing to him have led to JV projects being underfunded leading to consequential cuts in exploration and produc­tion.
As a way out of the cur­rent funding logjam under the JV arrangement,Group Coordinator for Corporate Planning and Strategy and Director of Transformation at NNPC,Mr.Tim Okon, ex­plained that IJV is a venture which requires creation of a new legal entity in a specific country and allows two or more companies to collabo­rate and carry out a common activity requiring legal in­struments such as by-laws, articles of incorporation, and shareholder’s agreement.
He argued that incorpo­ration will allow NNPC to finance its share of JV opera­tions through a balance sheet as against the current JV option where NNPC’s only means of financing its share of investment was through FGN cash calls.
He argued that the key difference between incor­poration and status-quo was NNPC’s ability to raise debt, while the government can still maintain same share of ownership in JV via NNPC share.
Okon explained further that IJV solves funding prob­lem and creates self sufficient entity by removing the need for cash call and annual fund­ing strategy through a one-off equity injection,adding that JV Inc raises debt financ­ing by providing a solid bal­ance sheet to be used to raise funds
To address these fund­ing challenges,he stated that the Petroleum Industry Bill (PIB) has proposed the incor­poration of the joint ventures.
There are however worries by the IOCs, which currently operate the joint ventures,that the proposed legislation may compel them to cede the operatorship to the NNPC, which has majority stake.
Recently, the NNPC and Mobil Producing Nige­ria (MPN), a subsidiary of ExxonMobil were said to be planning to access the bond market by 2016, as part of the renewed efforts to ad­dress the funding challenges associated with the current relationship.
Under the NNPC/Mobil Joint venture, the National Oil Company owns about 60 per cent equity but its inabil­ity to provide its own share of the joint venture cash calls has made it increasingly dif­ficult for the other partners to execute oil projects.
Reuters news agency quoted the oil majors as say­ing that the NNPC’s lack of financing was one of the biggest impediments to the progress of Nigeria’s oil industry. Nigeria currently produces over 2 million bar­rels of crude oil per day and also holds the world’s ninth-biggest gas reserves.
It reported recently that theNNPC was meeting with her joint venture partner (Exxon) to brainstorm on alternative sources of fund­ing such as bond markets to enhance revenue.
Similarly,MPN’s Chief Financial Officer (CFO), Mr. Segun Banwo, was quoted as saying that “the joint ven­ture may leverage external financing options from 2013-2015 but will access the bond market by 2016.”
ExxonMobil’s subsidiary, Mobil Producing Nigeria (MPN) and the NNPC op­erate a joint venture with a capacity of over 550,000 barrels per day of crude oil, condensate and gas liquids.
The plan by the NNPC/Mobil joint venture partners to access the bond market by 2016 has the potential to address the lingering fund­ing challenges facing the oil and gas industry in financing projects.

JVs: NNPC eyes offshore bond market to ease funding constraints