The Nigerian National Petroleum Corporation (NNPC) is in talks with oil majors and banks to raise capital for new drilling and to repay up to $4 billion in debt that the state oil company has accumulated over years of mismanagement, the Group Managing Director of NNPC, Dr. Ibe Kachikwu, has told Reuters.
Kachikwu, who is also the Minister of State for Petroleum Resources, said he wants to increase output to up to 2.5 million barrels a day by the end of 2016. Currently, Nigeria pumps 2.3 million barrels a day.
President Muhammadu Buhari has made reforming the oil sector a priority as a slump in oil prices hammers the economy. The former military ruler fired the NNPC board and appointed Kachikwu to overhaul NNPC whose opaque structures allowed corruption and oil theft to flourish.
Nigeria’s oil and gas output has been relatively stagnant as big offshore projects have been held up by much-delayed government funding and uncertainty over fiscal terms.
Africa’s biggest economy produces oil with foreign and local firms through production sharing contracts and joint ventures but investments have been held up because NNPC has been unable to pay its share: bills have been piling up since 2012.
Kachikwu said debt as of November stood at $3.5 billion to $4 billion, which NNPC wants to cut through deals such as a $1.2 billion multi-year drilling financing signed with Chevron in September.
“The target is that over 2017, we’ll begin to look at zero,” he said in an interview with Reuters, referring to debt and the goal of ending the need for joint ventures to depend on NNPC cash.
NNPC has been in talks with oil majors such as Italy’s Eni and oil traders Vitol and Gunvor, seeking partnerships to revamp assets such as refineries after decades of neglect.
Cash-strapped for years, it reported a loss of N267.14 billion ($1.3bn) for 2015.
“My ideal would be to bring in third party capital, do a joint investment and management of the refineries and work out a payout process over five to six years basically on lifting of some portion of the finished products,” Kachikwu said.
He said the government would also advertise concessions for pipelines and depots next month.
NNPC is also looking at revamping joint ventures with local firms to boost productivity but this would depend on the Petroleum Industry Bill (PIB), a project to revamp the sector that has been held up in parliament for years.
Kachikwu said NNPC is in talks with the Senate to speed up the process by splitting the bill into three parts covering governance, taxation and business items such as oil block licensing.
NNPC would also restructure strategic alliance agreements held by Atlantic Energy promoted by Mr. Jide Omokore and Kola Aluko to raise funds for oil blocks sold by Royal Dutch Shell.
The controversial deals were signed under the previous oil minister, Mrs. Diezani Alison-Madueke, who was briefly arrested in London last year on suspicion of corruption.
Former Central Bank of Nigeria (CBN) governor Lamido Sanusi alleged that Atlantic’s deals were one route through which billions of dollars in oil revenue were diverted from state finances.
Kachikwu said NNPC is expected to conclude a deal within two months for a new partner to pay up to $1.3 billion to take over the Atlantic’s agreements. The blocks were originally sold to indigenous oil companies by Shell.
“I’m saying to Atlantic, sorry, you’re out because there’s been a breach,” he said. “Whoever comes in has to give a sign-in fee almost equivalent to what I’ve lost … we’ll have a massive increase in volume out of those fields, we’re going to have 150,000-200,000 barrels a day from the current 40,000-50,000,” he said.