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Nigeria Changes Payment Structure For Joint Ventures

Nigeria’s NNPC said it is changing the way energy joint ventures paid operating costs to help ensure smooth financing for projects that have often struggled to secure timely contributions from the state-run oil firm.

The new “incorporated joint venture” model would allow the ventures to operate as independent entities, so they could raise capital through equity or debt and then pay dividends to shareholders, NNPC said in its statement.

Under the current structure, energy firms operating the ventures cover costs and issue cash calls to NNPC for its share.

The state-run company, which is responsible for oil production that provides the bulk of government revenues, has rarely paid on time and faced an even bigger challenge after the 2014 oil price slump, which led to a sharp rise in its arrears.

Those arrears are being paid off with surplus oil output. But outgoing NNPC head Maikanti Baru said this payment arrangement was only a temporary measure.

NNPC did not give details about the new structure or say when it would be introduced, but the model could take the burden of regular payments away from NNPC and the government.

NNPC has already announced plans to slash its stakes in the joint ventures to less than 40% this year from between 55% and 60% in a bid by the government to raise revenues.

Its partners include Royal Dutch Shell, Chevron and ExxonMobil.

Reforming any part of NNPC poses political challenges in Nigeria. NNPC previously launched plans here to change the funding structure of ventures but this was introduced on a trial basis and was not widely implemented.