They have thus recommended that indigenous private firms with capacity and expertise should be granted the right to operate those assets to ramp up the exploration and production in the country.
According to an audit report by PricehousewaterCoopers, the NPDC is estimated to have operatorship in assets worth $3bn (about N591bn, based on N197 to a dollar.
The experts who spoke with our correspondent in separate telephone interviews on Friday, said the NPDC’s lacked the sufficient funding capacity to carry out the expected development on the assets.
An operator is a key decision maker on an oil and gas asset and plays the pivotal role of determining how an asset is to be developed.
Although the NPDC is the operator of the divested assets assigned to it by the NNPC in 2011, the assets are being funded through Strategic Alliance Arrangements with Septa Energy (relating to the NPDC’s 55 per cent operated interest in the OMLs 26, 30, 34 and 42) and Atlantic Energy (which has production interests in the OMLs 4, 38 and 41).
Atlantic Energy provides direct advice to the NPDC on commercial, technical and financial matters as well as pays the company’s share of operational and capital expenditures cash calls. The company then receives 100 per cent cost recovery of OPEX and CAPEX cash calls and a percentage share of profit oil from the NPDC’s working interest as well as its entitlement from independent oil lifting rights.
Under the arrangement, Septa is required to match the NPDC’s 55 per cent share of petroleum operation costs (for the development of the OMLs 4, 38 and 41) as well as provide training facilities for the NNPC/NPDC employees. In turn, Septa will receive allocation of the cost oil sufficient to recover its costs as well as the share of oil profit upon the full recovery of the development costs.
According to the PwC audit report, the NPDC has yet to complete the payment for the eight assigned assets, with only $100m paid out of the total value of $1.85bn assigned by the Department of Petroleum Resources.
An energy law and policy expert, who is also a Senior Associate at Banwo and Ighodalo, Mr. Ayodele Oni, said it would be better to have indigenous companies with adequate capacity take over the assets as operators until the NNPC was better structured and suited to act in such capacity.
“Government, generally speaking, is a poor businessman and that truism runs true with the NNPC. The best the government should be is a non-operating partner and even in those circumstances it typically finds it difficult to meet its cash-call obligations.”
Noting that the choice of the operator in a JV situation is very critical and should not be dealt with lightly, Oni said, “I doubt that the NNPC and the NPDC do have that capacity yet (the execution of Strategic Alliance Agreements by the NPDC buttresses this point) particularly because of the influence of the government over those entities.”
The Technical Director, Drilling Services, Template Design Limited, Mr. Bala Zakka, said unnecessary political interference had been the bane of the company.
The Head of Energy Research, Ecobank Capital, Mr. Dolapo Oni, noted that the companies that won the assets recently divested by Shell were all awarded the operatorship as many of them were deemed to be quite experienced and able to conduct the field operations.
He said, “So where possible, this is expected to be the norm, going forward, especially when you look at the funding capacity of the NPDC, which is not very large. The NPDC is unable to conduct development at a fast pace as it can only prioritise some fields at a time with the amount of funds that it has.”
Ideally, the NPDC would have been the best option if it had the right funding structure – a borrowing base of about $10 – 12bn behind it, he said, adding that “In the absence of that sort of structure, the alternative is to allow individual companies to operate the blocks and give the NNPC/NPDC its share of revenues.
“If you look at Seplat’s performance on the blocks acquired in 2010 from Shell, that is the OMLs 4, 38 and 41, they ramped up production from about 16,000bpd to over 59,000bpd on the fields within four years. This is an example of what an indigenous company can achieve with an operated field.”
Oni said other companies such as the Niger Delta Petroleum Resources and Neconde Energy Limited had also shown similar progress.
“Operatorship is all about technical and financial capacity to deliver. History has shown that the NPDC, which operates assets on behalf of the NNPC, has not met expectations,” said the Team Lead, Oil and Gas Upstream, Diamond Bank Plc, Mr. Onome Atife.
He noted the delay in carrying out repair works on vandalised facilities and the inability to meet its portion of cash-call requirements due to government bureaucratic bottlenecks, “All these negatively impact production on a local and national scale,” he added.
The NPDC also has 100 per cent ownership of five blocks (OMLs 64, 65, 66, 111 and 119), with 60 per cent participatory interest in four blocks: OMLs 60, 61, 62 and 63, among others.