The NNPC says it is devising new ways to attract more funding for operators in Nigeria’s oil and gas industry to launch them into a new phase of exploration.
The operators have been grappling with funding challenges which has cut down investment in oil exploration.
Maikanti Baru, the Group Managing Director of NNPC, said the corporation believed that attracting fresh funds to the industry would enable the country to achieve its target of raising reserves to 40 billion barrels in 2020.
Mr Baru, who spoke at the 36th Nigerian Association of Petroleum Explorationists, NAPE, in Lagos, said that Nigeria had already set achievable target of 40 billion barrels oil reserves and three million barrels a day production by 2020.
Mr Baru was represented by Victor Adeniran, the Chief Operating Officer, COO, of NNPC Ventures.
He said the industry required special fund for hydrocarbon exploration to fully achieve its potential.
“Currently, as a physical incentive, all exploration cost within the industry is expensed, this is a laudable and pro industry incentive from the government.
“The implications is that funding need to be incurred prior to taking benefits, hence the funding structure of exploration within the industry needs to be strengthened,” Mr Baru said.
Mr Baru said the corporation was willing to work with partners and the industry in that regard.
“We would open up new fields in terms of marginal fields development, dormant assets and new assets, as there are still condensing prospects for new oil and gas reserves in Nigeria, particularly in the ultra-deep water and inland frontier basins, and the timing and process must be transparent.”
According to him, if this is done on consistent basis, the nation’s reserve replacement ratio, newly discovered reserves versus productions in the next 10 years will be more than double.
Mr Baru also said that funds could be raised from the Nigerian Content Development Monitoring Board, NCDMB, Local Content Fund or from the Central Bank of Nigeria, Seismic exploration support fund for Seismic survey in under explored areas of the country.
The NNPC boss suggested that a revolving special fund could be created for the country’s hydrocarbon exploration on contributory funding basis.
He said the NNPC would be willing to support such structures and was ready to create a workable framework.
Mr Baru said that the identification, evaluation, diversification and source of hydrocarbon were quite important and government also needed to develop a framework that would respond rapidly and quickly to external stimuli, particularly oil prices and increasing competition from other basins within the Gulf of Guinea.
“Some of these incentives can include an allowance for deeper prospect drilling end of life tax break or tax holiday for matured assets, new reserves replacement bonuses.
“The new and replacement terms are intentionally placed to ensure benefit and additions are earned based on meaningful work not on simulation data, catalytic application of enhanced oil recovery techniques or the likes, lower royalty rate for small fields and small allowances,” he said.