Wabote charges African producers to finance projects with oil windfall

Sopuruchi Onwuka

African petroleum producers have the opportunity under the prevailing oil price strength to forge contributory funding schemes that would pool financing for new oil and gas development projects in the continent.

Nigerian Content Development and Monitoring Board (NCDMB) which currently supports industry capacity initiatives in the country with affordable credit facilities say its contributory funding model provides a pathway out of global credit freeze on fossil energy industry.

The Oracle Today reports that multilateral credit agencies including the World Bank, the International Monetary Fund (IMF) and leading international banks have since blocked credit lines to coal and petroleum projects in response to global concerns about climate change.

The credit freeze and associated channeling of massive funds to cleaner renewable options are part of measures to accelerate energy transition. But African nations have declared that petroleum remains the available and affordable energy for economic development of the continent. And overcoming funding challenge for the industry has remained a key problem for African petroleum producers.

Executive Secretary of NCDMB, Engr Simbi Wabote, declared at a conference in Lagos that governments of Africa and industry players must skirt around the funding challenge by tapping into the prevailing revenue windfall and existing collaboration with development banks to create alternative financing channel to foreign debt markets.

He urged policy drivers in the continent to replicate the Nigerian Content Fund (NCF) model to pool funds for energy financing, optimize existing and new cross-border infrastructure for energy access, and take advantage of rising population and productivity of the continent in achieving energy independence.

He advised leaders of the continent who are expected to feature in energy policy debates in Abuja, Nigeria, in the week devise a means of building common pool of funds to development of huge mega oil and gas projects.

In pointing out that world financial institutions were getting reluctant to finance hydrocarbon-related projects, Engr Wabote canvassed the “creation of an African Local Content Fund that could be utilized to set up a bank or finance institution to provide funding for the development of oil and gas projects in Africa. This is especially important against the backdrop of the reluctance and outright declaration by some banks and financial institutions to stop funding of hydrocarbon-related projects. I hope the AFRIEXIM Bank, AFDB, or the AU through the AFCFTA Secretariat need to institute a form of contribution, no matter how little, as a fund to support the continent’s need for funds.”

He explained that “in our own case, the deduction of one percent of every contract awarded to any contractor, subcontractor, alliance partner or any other entity involved in any project, operation, activity, or transaction in the upstream sector of the Nigeria oil and gas industry has resulted in us having a pool of funds to support various intervention programmes.”

In pointing at the possible sources of funding, Engr Wabote described the recent spike in crude oil prices above $90 per barrel as an excellent opportunity for African oil producers and its service providers to develop new fields, ensure security of supply and affordability as well as increase revenue generation.

He noted that the price of crude oil has increased by 50 percent in 12 months and African oil producers should use the opportunity to also make plans towards energy transition, and lowering the cost of services.

Dwelling on the topic “Sub-Saharan Africa Local Content Collaboration Strategy,” Engr Wabote stated that an enabling regulatory framework backed with the appropriate legislation is very fundamental in Local Content practice and commended African oil producers for putting in place investor-friendly laws to promote the oil and gas industry as well as ongoing collaboration among the countries to advance the local content journey.

He noted that such laws would align with the goals of the Africa Continental Free Trade Agreement (AFCFTA) which seeks to create the world’s largest free trade area by integrating 1.3 billion people across 54 African countries, with the objective of tapping into a combined Gross Domestic Product (GDP) of over $3 trillion.

He described AFCFTA as the practice of Local Content on the continental level, noting that it is a huge trading and collaboration platform for the participating countries.

The NCDMB boss harped on the need for African oil producers to utilize existing cross-border infrastructures to unlock the development of stranded assets or bring energy closer to the people.

He also mentioned that the existing West Africa Gas Pipeline (WAGP) and ongoing AKK gas transmission infrastructure provide a good opportunity to serve regional markets. He also pointed out that the SHI-MCI yard in Lagos which is the only FPSO integration yard infrastructure in Africa has put Nigeria at a vantage position to serve the wider African market.