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Financial Times: Financing woes

Published: November 8 2007 02:00 | Last updated: November 8 2007 02:00

Images of machinegun- toting militants in speedboats have come to symbolise the woes of oil majors in Nigeria, but problems financing joint ventures with the government have also been a headache.

Typically, the state owns 60 per cent of each joint venture for oil exploration, with partners including Shell, ExxonMobil, Chevron, Total and Agip.

The idea is that the companies and government share the costs through an annual fundraising exercise known as the “cash call”, then split the profits.

In practice, the state-run Nigerian National Petroleum Corporation rarely provides what the companies want. Now Nigeria wants to allow each joint venture to approach the capital markets as a separate entity to raise funds on the basis of its assets and production prospects.

The government would retain its stake but the funding needs would, in theory, be met by local and foreign investors.

Copyright The Financial Times Limited 2007

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