CONFIDEN TIAL DRAFT needs to be carefully examined for all agreements, to ensure that cost is reduced to the minimal necessary level. An immediate and comprehensive legal audit should be carried out with external counsel reviewing and standardising legal processes, protocols, contracts and contract administration methods. Legal audits should be carried out periodically thereafter.
8. Adequate funding of the Federation s investment obligations It would be cheaper for the country to avoid these alternative funding arrangements as the costs seem really high. The FGN should set aside adequate funds from the proceeds of crude oil sales to finance cash call obligations under the joint operating agreements, rather than entering into carry agreements.
Carry arrangements generate an additional cost over and above the interest on finance, which serves to reduce the federation s revenue. Therefore, where NNPC must have alternative funding, these should be entered into directly and not through carry arrangements. A market structured financing platform would support the strategic and financial objective of NNPC.
9. Create standard terms and conditions and uniform terms of contract agreements FGN should procure for NNPC the drafting, issuance and implementation of standard terms and conditions and uniform terms of contract agreements. These should be reviewed on a periodic basis to ensure uniformity in the interpretation of contracts and remove ambiguity.
10. Proper and realistic budgets and approvals should be prepared annually More emphasis should be placed by NNPC on the budget and work plan preparation and approval, under all contract types (JV, PSC and SC) to ensure that the budgets represent realistic estimates of costs of production. NNPC should maintain a database of benchmark costs that can serve as reference for the verification of budgets, work plans and costs.
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