An agreement entered into by the Federal Government and International Oil Companies (IOCs) in December 2016 that would have resulted in the clearance of about US$6.2 billion in cash call arrears is no longer operational, Business Day reports.
The agreement failed to take-off because the government has failed to honour her obligations as agreed, leaving the IOCs confused on the government’s position. According to industry sources, there are some major areas of the agreement for the cash call exit, which the companies expected government to be committed to before they can be convinced that it is serious. The Federal Government had a 90-day period within which it and the IOCs should come to an agreement on some of the contentious issues, for the agreement to come into effect. But the 90-day window has since elapsed (in March) without the issues being resolved.
These included that the government should open an escrow account where $500 million of the US$1 billion initial payment would be deposited. The IOCs also insisted that they would no longer go to Abuja to seek the go ahead of NNPC to proceed with projects above $10 million as it took long in getting the NNPC to approve these projects. Instead the IOCs asked that the value of projects that required joint approval be raised to about $50 million and above. The IOCs also asked that if there is a budget that required joint approval, and the NNPC delays in granting that approval, after a certain number of days, that budget should be deemed approved.
It is understood that government is yet to give a definite feedback on all the proposals, more than 180 days since the agreement came into effect, leaving the IOCs more confused than before as they do not have a clear cut idea of what the government’s intentions are. The government, it is understood, paid some money to the IOCs in April and May this year, but did not specify what the payments were for exactly. The IOCs are also not sure whether the payment would be sustained in subsequent months, so that they can plan ahead, based on the payments.