THIS DAY.

The Organisation of Petroleum Exporting Countries (OPEC) Fund has announced that it will contribute $14.3 million to Phase II of the feasibility study for the Nigeria-Morocco Gas Pipeline estimated at $25 billion.

This is coming as the Nigerian National Petroleum Company (NNPC) Limited has offset its cash call debts to International Oil Companies (IOCs) to the tune of $3.717 billion in the last six years, a new report by the national oil company has indicated.

However, as the NNPC is reducing the debts owed the IOCs, rising petrol subsidy claims incurred by the company have continued to take tolls on the economy with analysts projecting that it will raise Nigeria’s fiscal deficit to N10 trillion at the end of the year.

To be directly financed by the OPEC Fund for International Development (IFID), the intervention, OPEC said, is meant to support the Moroccan government’s national development strategy aimed at transitioning to a low-carbon energy system.

According to OPEC, it will further diversify the country’s energy mix and help it in achieving its renewable energy commitments.

The study will carry out detailed evaluations of the implementation and design process for the eventual construction of the gas pipeline, thus facilitating the final investment decision.

OPEC Fund’s contribution, the organisation added, will specifically co-finance the survey works for the North Area (Senegal – Mauritania – Morocco) of the NMGP.

THISDAY gathered that Morocco and the OPEC Fund signed an agreement at the weekend to jointly fund the feasibility study ahead of the construction of the world’s longest offshore pipeline connecting Nigeria to Morocco.
The gas pipeline project would cover 7,000 kilometres through 13 West African countries, and extend to Europe, according to Worley, the company handling the current phase of the project.

It was further learnt that the London team of the Australian energy firm will deliver the onshore part of the Front-End Engineering Design (FEED) study, including the Environmental and Social Impact Assessment (ESIA) and Land Acquisition Studies (LAS), on the proposed pipeline from Nigeria to Morocco.

Morocco’s Economy and Finance Minister, Nadia Fettah, signed the agreement alongside the Director-General of the OPEC Fund, Abdulhamid Al khalifa, and Managing Director of Morocco’s National Office for Hydrocarbons and Mines (ONYHM), Amina Benkhadra.

Co-financed with the Islamic Development Bank (IDB), the study comprises a body of research on the execution of the Nigeria-Morocco Gas Pipeline, including the technical, financial, and legal aspects, a statement after the event indicated.

Launched through a joint initiative in 2017, the pipeline is set to boost local economies’ competitiveness by providing secure access to an energy source and aims to deliver gas from Nigeria to Europe as well as supply countries along the way. In December 2021, Morocco and Nigeria signed an agreement to fund the FEED after the project was approved by the IDB. Morocco and Nigeria agreed to provide joint funding for the mega project. The FEED study is projected to cost $90.1 million in total.

President Muhammadu Buhari had in 2021, held a phone call with Morocco’s King Mohammed VI, where the Nigerian leader expressed his country’s determination to bring the pipeline online as soon as possible, according to a report by Morocco World News.

Based on the 25-year estimate given in 2017, the construction of the $25 billion projects is expected to be completed by 2046.

The pipeline would connect Nigerian gas to every coastal country in West Africa (Benin, Togo, Ghana, Cote d’Ivoire, Liberia, Sierra Leone, Guinea, Guinea-Bissau, Gambia, Senegal, and Mauritania), ending at Tangiers, Morocco, and Cádiz, Spain.

Meanwhile, NNPC Limited has offset its cash call debts to the IOCs to the tune of $3.717 billion in the last six years, a new report by the national oil company has indicated.

Data from the NNPC showed that $3.717 billion has been paid in the last six years out of the $4.689 billion debts owed to the five joint venture partners.

Out of the $3.717 billion paid during the period under review, about $40 million was paid in March 2022, leaving a balance of $971,817,730.

In its presentation to the Federation Account Allocation Committee (FAAC) in April, the NNPC indicated that it has reduced the 2016 renegotiated debt to less than $1 billion.

The five oil majors initially owed by the national oil company were: Shell Petroleum Development Company (SPDC), Mobil Producing, Nigeria, Chevron Nigeria Limited, Total Exploration as well as Nigeria Agip Oil Company (NAOC). However, the debts owed Mobil and Chevron have been fully paid by the NNPC

Mobil and Chevron had a renegotiated debt of $833.751 million and $1.097 billion respectively. Shell’s initial $1.372 billion has been reduced to $595.1 million.

Similarly, Total’s $610.9 million has been reduced to $152.06 million, while NAOC has a balance of $224 million from the initial $774.66 million in 2016.

Cash calls are requests sent by JV operators to non-operating partners for payment in the light of anticipated future capital, operating expenditures or as additional capital contributions.

The NNPC had in 2016, signed a cash call repayment agreement with its JV partners to defray cash-call arrears within five years after many years of its indebtedness to its partners.

Before then, it had consistently for years failed to meet its indebtedness to the IOCs, a situation the operators said caused a loss of new investments in the oil and gas sector.

Petrol Subsidy Payments to Raise Fiscal Deficit to N10tn in 2022

In another development, rising petrol subsidy claims incurred by the NNPC have continued to take tolls on the economy with analysts projecting that it will raise Nigeria’s fiscal deficit to N10 trillion at the end of the year.
The development, according to economic analysts from Afrinvest Securities Limited, will weigh heavily on Nigeria’s growing debt profile with a correspondent fall in capital expenditure.

In the April edition of the Afrinvest Monthly Market Report, which was released yesterday, analysts from the research firm noted that a revised expenditure plan passed by the National Assembly in April brought about a 702.0 per cent surge in the provision for petrol subsidy payment for 2022 to N3.6 trillion.

This, the report said, followed the 18 months postponement of the implementation period of the new Petroleum Industry Act (PIA) 2021, which ought to have ended the subsidy regime by February 2022.

According to the report, the revised expenditure plan showed that the federal government’s revenue projection for 2022 was lowered by N772.9billion to N9.97trillion, thus expanding the estimated fiscal deficit for the year by 15.1 per cent to N7.4trillion.

The report, however, maintained that given its weak optimism about the likely improvement in revenue from oil and gas, and the independent revenue from other sources, the actual deficit for 2022 will be in the threshold of N10trillion.

The report stated: “First, on the domestic scene, the National Assembly in April passed the revised N17.3trillion expenditure plan for the executive in 2022, which translates to an increase of N192.5 billion over the amount earlier passed in December 2021.

“The revised expenditure plan saw non-debt recurrent expenditure and debt service provisions rise by 2.9 per cent and 2.5 per cent respectively to N7.1trillion and N4 trillion, while provisions for statutory transfers and capital expenditure were lowered by 6 per cent and 1 per cent to N800 million and N5.4 trillion respectively.

The increase in the non-debt expenditure was largely due to the 702.0 per cent surge in provision for petrol subsidy payment for 2022 to N3.6 trillion, following the 18 months postponement of the implementation period of the new Petroleum Industry Act (PIA) 2021, which ought to have ended the subsidy regime by February 2022.”
The report said the increase in debt service provision is to cushion the knock-on effect of the rising interest rate environment in the external and domestic debt market amid rising inflationary pressure.

It noted however that “Sadly, the federal government’s revenue projection for 2022 was lowered by N772.9 billion to N9.97 trillion, hence, expanding the estimated fiscal deficit for the year by 15.1 per cent to N7.4 trillion.”

The report maintained that “Given our weak optimism about the likely improvement in revenue from oil and gas, independent revenue, and revenue from other sources as earlier captured in our January 2022 macroeconomic outlook report (A Mix of a Boom & Gloom), we maintain that actual deficit for 2022 may top N10 trillion.”