FG Cuts JV Cash Call Arrears By Additional $300m, Outstanding Balance Slumps To $1.163bn

The federal government through the Nigerian National Petroleum Corporation (NNPC) has made an additional payment totalling $300,964,270 out of the Joint Venture (JV) cash call arrears owed some International Oil Companies (IOCs) as at August, 2021.

An analysis of documents presented by the NNPC to the Federation Account Allocation Committee (FAAC), for September indicated that the outstanding balance of $1,464, 796,384 has now been reduced to $1,163, 832,114.

The latest figures further showed that like Mobil Producing, Nigeria (MPN), whose $833.7 million had earlier been fully paid off, the NNPC has also succeeded in offsetting the arrears owed Chevron Nigeria Limited, which amounted to $1.09 billion in total.

With the new payments, the total cash call arrears paid by the government since 2016 now stands at $3.525 billion out of the initial negotiated sum of $4.689 billion.

In August, Economic Confidential had reported that the government was able to pay $266.141 million out of an outstanding balance of $1.730 billion of the JV cash calls between May 2020 and May 2021.

At the time, a review of documents presented by the national oil company’s to FAAC within the period further showed that there was a balance of about $1.464 billion after the last payment, which was made three months earlier.

By definition, cash calls are requests sent by JV operators to non-operating partners for payment in the light of anticipated future capital, operating expenditures or need of additional capital contributions.

The NNPC, in 2016, signed a cash call repayment agreement with its JV partners to defray cash-call arrears within a period of five years after many years of its indebtedness to its partners as it consistently failed to meet up with its indebtedness.

However, the documents showed that while total negotiated debt in August 2020 stood at $4.689 billion with total payment of $3.525 billion as of the end of the month, an outstanding sum of $1.163 billion is now left as balance.

It indicated that total payment to Shell Petroleum Development Company (SPDC) since the federal government began offsetting the arrears now stands at $680.6 million, with an outstanding of $691.905, while the entire debt of $833.751 billion owed Mobil Nigeria had been cleared.

Chevron Nigeria Limited, which was initially owed $1.097 billion, has also been fully paid, Total is being owed $199.241 million, while Agip has an outstanding sum of $272.685 million yet to be paid.

Earlier in March, the data released by the NNPC indicated that a total of $3.118 billion cash call debts had been paid the five major international oil companies (IOCs), leaving an outstanding debt of $1.570 billion.

In December 2016, the ministry of petroleum resources negotiated a discount with the IOCs, comprising SPDC, Total, Mobil, Chevron and Agip from about $5.1 billion down to $4.68 billion and had since then continued to reduce the debt payments in installments.

SPDC was initially owed a negotiated debt of about $1.37 billion, Total was owed $610.972 million, NAOC had a negotiated debt of $774.66, while Chevron’s debt at the time was $1.097 billion.

As of January 31, 2021, the NNPC had stated that its debt obligations to SPDC, CNL, TEPNG and NAOC respectively stood at $917.2 million, $55.4 million, $246.3 million and $351.9 million.

The NNPC further explained that in the case of SPDC, repayment was from the price balance distribution on Project Santolina; while in the case of CNL, repayment was from price balance distribution on Projects Cheetah and Falcon.

“NNPC has fully repaid its cash call arrears to MPN and all incremental barrels have reverted to base,” the NNPC stated.

The cash call arrangements, under which NNPC had to pay for its 55 per cent to 60 per cent share of investment in the upstream joint ventures, had been in place for over 40 years before it was restructured.

The huge payment of over $300 million in one tranche, indicates that the rising prices of oil which is now above $80 per barrel has also triggered more liquidity in the operations of the national oil company.