Gains of reforms in the Nigerian oil sector

Apr 15, 2004 02:00 AM

On-going reforms in the petroleum sector has spurred increases in the country's crude oil reserve from 25 bn barrels to 34 bn barrels, with prospects of hitting the 40 bn barrels mark by the year 2010. Similarly, increase in daily crude production has risen from 2.5 mm bpd in 1999 to 3.0 mm barrels and there are clear indications that this would spring up to 4.5 mm bpd in the next six years.
Presidential Adviser on Petroleum Resources, Dr Edmund Dakorou, addressing participants at a conference organised by the National Alumni Association of the Petroleum Training Institute in Warri, Delta State, said the Federal Government had equally taken steps towards increasing the local content in the oil and gas sector through encouragement of indigenous participation in exploration and production activities.

According to Dakorou the far-reaching reforms initiated by the Federal Government four years ago have yielded immense benefits in both the upstream and down stream sectors, adding that the goals of the reforms were already being achieved.
"In view of the importance of the oil and gas sector to the nation's economy, the present administration introduced far-reaching reforms to ensure that the industry is repositioned and refocused along the lines of professionalism, accountability, openness, transparency, increased indigenous participation and multiplication of the nation's wealth", the petroleum adviser explained.

According to Dakorou the vexed issue of accumulated cash call which was a major problem hindering the operations of the oil firms in the past has been eliminated through prompt payment of the cash-calls by government, thereby boosting the confidence of the joint venture partners.
In order to further boost the operations of the firms in the sector, Dakorou said an alternative funding arrangement known as the Production Sharing Contract (PSC) has been introduced to ease cash call burden on the government treasury and supplement the joint venture cash calls in financing major exploration and production (E&P) projects.

Under this arrangement indigenous partners are allowed equity participation of 10 % while government takes 50 % and operators 40 %.
This funding mechanism has led to an unprecedented inflow of investment capital in the upstream sector of the petroleum industry and is now operational in some of the joint venture arrangements.

Source: This Day
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