(Reuters) – Nigeria plans to stop cash call payments to the five majors pumping the bulk of its oil output and instead wants them to raise money from international finance markets, President Umaru Yar’Adua has said.
He did not give a timeframe. Nigeria’s oil industry is currently dependent on cash call payments to function and changing the financing arrangements would require the legal structure of the sector to be reformed.
Yar’Adua came to power in May and his government in August announced a restructuring of the oil industry, saying it would take six months to complete.
“Part of the reasons why we are restructuring our oil sector is to free the resources that we pay the oil companies under joint venture agreements for critical areas like power, education and health,” Yar’Adua was quoted as saying in a statement issued by his office late on Friday.
The statement said Yar’Adua wanted oil companies to fund joint venture projects with money raised on the international finance market instead of relying on contributions from the federal government.
Nigeria, an OPEC member, is the world’s eighth-biggest oil exporter. It is also Africa’s most populous country with 140 million people, most of whom live in desperate poverty.
The five multinationals operate joint ventures with the Nigerian state oil company and under the cash call system, the companies and the government are supposed to put in equal funding every year to maintain and develop their facilities.
But the requirements presented by the companies have often been more than the government could afford and it has offered a lower amount — about $4 billion per year in recent years. Continued…