Economy
NNPC Threatens to Cut JV Contracts Over Inflated Production Cost
By Adedapo Adesanya
The Nigerian National Petroleum Corporation (NNPC) has warned contractors that it would cancel some of its Joint Venture (JV) contracts over their bloated production cost.
The Group Managing Director (GMD) of the national oil company, Mr Mele Kyari, made this disclosure yesterday during the fourth edition of the Nigerian Association of Petroleum Explorationists (NAPE) webinar seminar series titled The Impact of COVID-19 on the Nigerian Oil and Gas Industry-The Way Forward.
He warned contractors, suppliers and companies against padded, over-bloated and unrealistic contract figures, which is costing the corporation and the country.
Mr Kyari said the activities of some of its partners, especially indigenous oil companies, involve producing oil at a very high cost of about $93 per barrel while some others are producing same at a relatively cheaper cost.
‘‘The era of some of our partners producing at a very high cost will no longer be acceptable to us anymore. It is either they become more efficient at what they are doing by cutting cost or be ready to be shown the way out.
‘‘If they are not ready to be cost effective, then we may have no other option than to cancel those contracts and give them to those that can manage and produce at a relatively cheaper cost. This is business and we cannot afford to run same like a charity organisation,” he said.
The NNPC chief lamented that the high cost of production in the industry was unacceptable and was as a result of a number of factors, some of which included; structural inefficiencies that exist in the system and processes, environmental factors which every contractor factors in while doing business; be it risk as it relates to human resources and materials.
He noted that every cost on the list of business has a premium that is related to the country’s operating environment, insisting that those premiums are much exaggerated and not reflective of the realities on ground because suppliers, contractors and companies were only taking advantage of such to hike contract cost.
Mr Kyari warned indigenous companies of this unwholesome act, saying the NNPC in its several dealings with them have observed a list of governance structure and processes that are not significant and is now enroaching on International Oil Companies (IOCs), eventually resulting into producing oil above its actual cost.
The NNPC GMD said the current vision is to achieve a $10 per barrel industry cost, adding that for these to happen companies must do so many things to arrive at that cost.
According to him, part of what should be done to achieve that target is for stakeholders to be more cost conscious, plan better, more realistic, and prudent and the appropriate leadership to drive the focus.
He assured that the attainment of a $10 per barrel by 2021 was possible; adding that such would enable the country to meet its three million barrels per day and 40 billion oil reserve targets in a seamless manner.
He noted that it was while discussions was ongoing among stakeholders to see how the cost of oil production could be reduced that the coronavirus pandemic hit the global stage, forcing the country’s hesdline crude price to an oil time low of about less than $10 per barrel.
He said the coronavirus pandemic has clearly proven to oil producers that the commodity could actually sell for less than $10 per barrel, adding that the country cannot continue to produce if something was not done about the cost.
He said it was time to consider current realities because oil producers that are not ready to produce at around $10 per barrel was not in tune with the market realities must be ready to quit the stage for those that are ready for the challenges ahead.
By Adedapo Adesanya
The federal government has begun the process of repaying the N4 trillion debt owed to Power Generation Companies (GenCos) with the launch of a N590 billion first-tranche bond issuance.
The initial tranche, part of the wider N4 trillion Nigerian Bulk Electricity Trading (NBET) Finance Company Plc Bond Programme, comprises N300 billion in cash bonds to be issued to the market and N290 billion in non-cash bonds to be directly allotted to GenCos on identical terms.
The bond term sheet revealed that the Series 1 bond will be issued between November and December 2025 with CardinalStone Partners Limited serving as the lead issuing house and financial adviser.
The seven-year bond has a coupon range of 16.25 per cent to 16.75 per cent and carries a full sovereign guarantee and will be listed on both the Nigerian Exchange Limited and FMDQ Securities Exchange, making it eligible for investment by pension fund administrators, banks, asset managers, insurers and high-net-worth investors.
According to the term sheet, “Series 1 Tranche A involves N300bn issued to the market for cash, while N290bn under Tranche B is allotted to the GenCos on identical terms. The bond will be issued between November and December, with a seven-year tenor on a fixed-rate coupon, redeemed on an amortising basis and paid semi-annually in arrears.”
The bond issuance marks a major step by President Bola Tinubu’s administration to resolve what experts describe as one of the most crippling financial crises in Nigeria’s power sector. The Series 1 bond carries a seven-year tenor, a fixed coupon rate, and semi-annual interest payments, and will be amortised over its lifespan.
The issuer also retains the discretion to absorb oversubscription of up to N1.23tn, creating room for additional non-cash bond allocations to GenCos if required.
The term sheet added, “Pricing will be based on the yield of the seven-year FGN bond plus a spread, and the issuance will be conducted through a book-build process. The minimum subscription is N5m, representing 5,000 units at N1,000 each, with additional subscriptions in multiples of N1,000.
“Proceeds from the issuance will be used to settle outstanding liabilities owed to GenCos. The instrument is guaranteed by the full faith and credit of the Federal Government, enjoys CBN liquidity status, meets PenCom compliance requirements, qualifies under the Trustee Investment Act, and will be listed on both the Nigerian Exchange Limited and the FMDQ OTC Securities Exchange.”
It further noted that “oversubscription may be absorbed at the discretion of the issuer up to a maximum of N1,230,000,000,000 approved for Phase 1 of this transaction. The issuer reserves the right to increase the size of the non-cash bonds to be issued to the GenCos under any Series or accommodate additional allotments as may be required.”
By Adedapo Adesanya
The Nigerian National Petroleum Company (NNPC) Limited and Heirs Energies have signed a deal to capture and use the gas flared at their onshore OML 17 joint venture in a bid to monetize the resource and reduce flaring.
The state oil company and Heirs Energies have signed the Gas Flare Commercialisation Agreements under the Nigerian Gas Flare Commercialisation Programme (NGFCP), a deal that will see both entities capture the gas flared across OML 17 and deploy it for use in power generation, industrial applications, liquefied petroleum gas (LPG), and compressed natural gas (CNG).
The agreements bring together Heirs Energies, as operator of the OML 17 Joint Venture, and approved flare gas offtakers – AUT Gas, Twems Energies, Gas & Power Infrastructure Development Limited (GPID), PCCD and Africa Gas & Transport Company Limited (AGTC) – under frameworks designed to eliminate routine flaring while converting previously wasted resources into economic value. The move is aligned with Nigeria’s gas development priorities and energy transition goals, Heirs Energies said in a statement.
Gas flaring has been a major issue at Nigeria’s oilfields where it is wasted instead of used for many industrial purposes, and holds back the country’s targets to reduce emissions.
Last year, World Bank data showed that Nigeria saw flaring volumes jump by 12 per cent, the second largest increase globally behind Iran.
Flaring at oil and gas facilities operated by the national oil company and several smaller companies, likely with limited expertise or funding for gas utilization, accounted for 60 per cent of Nigeria’s gas flaring and 75 per cent of the increase in 2024, the report found.
Commenting on the deal to monetize gas at OML 17, Heirs Energies CEO, Mr Osa Igiehon said that “Through disciplined investment, partnership with regulators and credible offtakers, and a clear execution focus, we are converting waste into value, strengthening domestic energy supply and supporting responsible operations across OML 17.”
On his part, the Chief Upstream Investment Officer of NNPC Upstream Investment Management Services (NUIMS), Mr Seyi Omotowa, representing NNPC Limited, described the milestone as a practical demonstration of Nigeria’s commitment to gas-based development.
“Flare gas commercialisation is not a compliance exercise; it is a strategic pathway to improving energy availability, deepening gas-based industrialisation and strengthening Nigeria’s position as a responsible energy producer. OML 17 has become a practical model of this vision, moving decisively from approval to delivery.”
He commended Heirs Energies for disciplined execution and investment, noting that the JV continues to set benchmarks for operational delivery and gas development within Nigeria’s upstream sector.
By Adedapo Adesanya
Data sourced from the latest Fact Sheet released by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) has revealed that daily petrol consumption in Nigeria dropped by 6.8 per cent to an average of 52.9 million litres in November 2025.
The November figure marked a decline from the 56.74 million litres per day recorded in October 2025.
Of the total petrol consumed last month, 19.5 million litres per day were supplied by local refineries, higher than the 17.08 million litres per day recorded a month earlier.
A major driver of this increase was the Dangote Refinery, supplying an average of 23.52 million litres per day, up from 18.03 million litres daily in the previous month.
The Fact Sheet showed that imports accounted for 52.1 million litres per day of total consumption, showing an increase from 27.6 million litres per day in October.
The NMDPRA described Dangote’s current output as a significant milestone in reducing Nigeria’s reliance on imported fuel.
In contrast, the NNPC-operated Port Harcourt, Warri, and Kaduna refineries recorded zero petrol output during the period, and all three facilities remained in various states of rehabilitation or shutdown.
According to the regulator, the surge in imports was triggered by low supply levels in September and October 2025, which fell short of national demand, the need to shore up national stock ahead of end-of-year peak consumption, NNPC’s importation efforts to rebuild inventory and ensure supply security, and delayed offloading of 12 vessels initially scheduled for October but discharged in November.
October 2025 recorded the highest consumption within the one-year review period, followed by November 2024 (56 million litres) and April 2025 (55.2 million litres), the report noted.
The data showed that Nigerians also consumed an average of 15.4 million litres/day of diesel daily in November, alongside 2.5 million litres/day of aviation fuel and 3,992 million litres/day of cooking gas.
-
Feature/OPED6 years agoDavos was Different this year
-
Travel/Tourism9 years ago
Lagos Seals Western Lodge Hotel In Ikorodu
-
Showbiz3 years agoEstranged Lover Releases Videos of Empress Njamah Bathing
-
Banking7 years agoSort Codes of GTBank Branches in Nigeria
-
Economy3 years agoSubsidy Removal: CNG at N130 Per Litre Cheaper Than Petrol—IPMAN
-
Banking3 years agoFirst Bank Announces Planned Downtime
-
Banking3 years agoSort Codes of UBA Branches in Nigeria
-
Sports3 years agoHighest Paid Nigerian Footballer – How Much Do Nigerian Footballers Earn