The Guardian: Nigeria agrees $15.2 bln oil budget for 2008

Reuters
Monday January 28 2008

ABUJA, Jan 28 (Reuters) – Nigeria has agreed with foreign companies a joint investment of $15.2 billion in oil ventures this year and is seeking debt finance to foot part of its share of the bill, a top official said on Monday.

The five joint ventures that pump the bulk of Nigeria’s crude oil have suffered from decades of underinvestment due to government budget constraints, causing output to stall or even decline despite huge reserves in the ground.

The government has a long-standing target of reaching 4 million barrels per day by 2010, but output has stagnated at around 2 million for the past few years.

“(Our target) implicates a significant investment in the upstream which is not happening now,” Minister of State for Petroleum Odein Ajumogobia said at a press briefing.

The eight-month-old government of President Umaru Yar’Adua aims to address the issue with a thorough reform of state-run Nigeria National Petroleum Corp. which should allow it to raise international capital at highly competitive interest rates.

The government has decided to use $4.97 billion from its 2008 budget to invest in the ventures, and is seeking $3.8 billion financing from international and local banks to reach $8.8 billion.

Ajumogobia provided no comparative figures for 2007, but the government budgeted about $4.2 billion for the ventures last year and debt financing was negligeable.

In subsequent years, a restructured national oil company will increase debt financing until it covers the entire government share in the five ventures that pump about 1.5 million barrels of crude oil a day, he added.

“We hope that money from the budget will reduce to the point where the industry can finance itself,” he said.

The government has about a 60 percent share in each of the ventures with Royal Dutch Shell, ExxonMobil, Chevron, Total and Agip.

Nigeria also pumps about 500,000 barrels per day from new oilfields in deep water offshore, but these are guided by contracts under which the foreign partner foots all the investment costs and reaps a greater share of the revenue.

International banking consortiums have presented the government with proposals to find the extra money required in the joint ventures and the government is expected to decide on a financing arrangement within weeks.

Ajumogobia said he hoped debt financing would exceed $30 billion in the joint ventures over the next four years, from close to zero now.

Nigeria would have to negotiate a higher quota from OPEC if the investments pay off with more production, he added.

(Reporting by Tom Ashby, editing by Anthony Barker)
 
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