Investment in the Oil and Gas (O&G) industry is capital-intensive and associated with high degree of risks. This has made it absolutely necessary for players in the industry to adopt efficient means of managing the risks and pooling resources to maximize the accruable benefits. Typically, there are four main contract arrangements in the O&G industry and they include the following:

1) Joint Venture agreement (JV) - Each party pays its participating interest share of all costs & expenditures for the joint account.

2) Production Sharing Contract (PSC) - The concession belongs to Government. The Operator Company bears the cost of exploration, development and operations. When oil is found, the Operator company is compensated by receiving a share of the produced oil after cost recovery and payment of statutory obligation has been met.

3) Service Contract – the Operator provides contractual services to the government.

4) Sole Risk – Applies to marginal field operations where the operator is solely responsible for funding. He bears all the risks and all reward.

However, the scope of this discuss is the Funding Mechanism of a Joint Venture arrangement referred to as CASH CALL. Cash Call is a demand for funds made by the Operator on the other Joint Venture Partner to meet joint business obligations within the purview of the Joint Operating Agreement (JOA).

Summary of steps involved in the Cash Call Process

1. Operator submits cash call briefs to NAPIMS Subcoms/ CashCom for review

2. Cash Call secretariat collates sign-offs and send to Finance & Accounts for payment
processing.

3. NAPIMS, through the GED E & P, obtains the GMD’s approval, after which GFAD
issues payment instructions/ mandate letter to CBN to credit the Operators account.

4. CBN credits the Operator’s account on the due date.

In order to meet the relevant aspect of the JOA, which provides that Parties in the JV must pay their relevant Cash Calls into the joint bank account not
later than 1st day of the Cash Call month, NAPIMS has made efforts to initiate better ways of handling Cash Calls. In this light, the Calendarized
Cash Call process was introduced. This process enables NAPIMS to pay the Operator a Calendarized portion of the Budget on a monthly basis with
performances reviewed at the end of each quarter.

The Calendarized process has to a good extent recorded some successes. However, the process is not without the usual teething problems which are
being addressed accordingly. However, it is expected that Cash Call will take a different dimension with the passing of the Petroleum Industry Bill
(PIB) into law, given the introduction of the Incorporated Joint Ventures (IJVs).

Summary of Risk and Reward of Main Contract Types.