Having cleared the $833.57 million owed to Mobil Producing Nigeria (MPN), barely two years after it signed a cash-call Repayment Agreement with its Joint Venture (JV) partners, the Nigerian National Petroleum Corporation (NNPC) is set to introduce the Incorporated Joint Venture (IJV) model.
The Corporation had paid the $833.57 million to MPN to defray cash-call arrears within a period of five years, and with the new development, it is set to kick-start the IJV model in order to replace all the JV exploration and production projects in the country.
During a panel session at the Nigeria Oil and Gas (NOG) Conference in Abuja, NNPC Group Managing Director, Dr. Maikanti Baru said the IJV model was conceptualised out of the need to encourage healthy business culture and growth in the energy sector.
Baru, who was represented at the panel session by the Corporation’s Chief Operating Officer (CEO), Bello Rabiu, said the IJV model, when implemented, would make oil and gas business more productive and beneficial to investors.
Understanding IJV: As one may have thought, Incorporated Joint Ventures involve the creation of a new company through which the venture will be operated.
In this regard, the parties involved in the Joint Venture will be shareholders of the new company. Thus, will appoint its directors. The company will operate the business of the JV, and will usually own or at least licence the venture’s assets.
Practically, companies in this type of venture, create a separate corporation and divide their shares among one another as an equitable way to distribute income from the Joint Venture.
How laudable is this move for NNPC? Arguably, exploring the IJV model is a smart move for the Corporation. IJVs provide significantly better asset protection to the Joint Venture parties compared to the unincorporated ones. This is because the liabilities of the venture will usually be contained in, and limited to, the Joint Venture company, rather than being borne by the Joint Venturers directly.