UBA, Access, Union, StanChart to part finance Nigeria’s state oil company’s $1.8bn deal with JV partners
Nigeria’s state oil company, the Nigerian National Petroleum Corporation (NNPC) has unfolded details of the two sets of alternative financing deals, worth about $1.78 billion, it signed with two of its joint venture (JV) partners, Chevron Nigeria Limited (CNL) and Shell Petroleum Development Company (SPDC).
The NNPC in a statement said the deals involved a consortium of both local and foreign banks, including Access Bank, Standard Chartered Bank, Union Bank and United Bank for Africa (UBA) and some undisclosed foreign financial institutions.
According to the NNPC, the Chevron deal for the Sonam Project, also code-named Project Falcon, is valued at $780 million, while that of the SPDC, Project Santolina, is put at $1billion, adding that agreements were signed in London.
Speaking at the signing ceremony, Maikanti Baru, group managing director of the NNPC, said Chevron had already expended $1.5 billion in the Sonam project, representing 97 percent of the project completion costs, adding that the financing deal would cover the remaining $780 million to complete the project’s scope.
On his own part, Jeffrey Ewing, Chairman and Managing Director of CNL, said Chevron Nigeria Limited was committed to supporting Nigeria’s aspirations of sustaining oil and gas production through innovative strategies as typified by the alternative financing arrangements over which agreement was executed.
The NNPC boss put the total third-party financing for Project Santolina at $1 billion, inclusive of financing cost of which, he said, co-lending amounted to $420 million with NNPC’s portion of $850 million, while Project Sonam would require $380 million to reimburse the JV partners for the 2016 portion of the funds committed to lenders that had been cashed and paid for.
Giving a breakdown of the expected funding requirements of the Sonam Project, Baru said $400 million is to fund the development of seven wells in the Sonam field, Oil Mining Lease (OML) 91, the Okan 30E Non-Associated Gas (NAG) well (OML 90), and associated facilities including completion of Sonam NAG Well Platform.
The Sonam Project, hitherto financed through cash calls, would lead to the development of incremental proven and probable oil/liquids reserves of 211 million barrels and proven and probable gas reserves of 1.9 trillion cubic feet within in Oil Mining Licences (OML) 90 and 91.
On the other hand, the agreement with SPDC, would facilitate the development of the NNPC/SPDC JV Project Santolina, which comprised of 156 development activities across 12 OMLs — OMLs 11, 17, 23, 25, 27, 28, 32, 35, 43, 45, 46 and 79; as well as 30 different fields in the Niger Delta.
The NNPC stated the two projects are expected to generate incremental revenues of about $16 billion within the assets’ life cycle including a flurry of exploratory activities that would generate employment opportunities in the industry, boost gas supply to power and rejuvenate Nigeria’s industrial capacity utilization.
According to Baru, the Sonam Project alone, on fruition, would net the Federal Government cumulative incremental earnings of $7.3 billion over the project’s life and is expected to begin to bear fruits between the next three and six months, adding that that the project is envisaged to achieve an incremental peak production of about 39, 000 barrels per day of liquids and 283 million standard cubic feet of gas per day (mmscf/d) of gas respectively over the life cycle of the asset.
For Project Santolina, the NNPC boss said the development of the project would be carried out in two phases, with the first phase focused on short term activities involving Oil and Gas Generation (STOGG) programme, comprising 128 rigless activities and 10 work-overs, while the second phase would focus on medium term activities that would involve further development of EA/EJA fields by drilling 14 new well and three work-over ones.
He said the first phase of the project is estimated to deliver incremental liquid reserves of about 202.9 million barrels of oil and 161.8 billion cubic feet on Proven and Probable (2P) basis.
He maintained that Project Santolina would generate about $9 billion of incremental revenue to the Federation Account over the project’s life cycle and a Net Profit Value (NPV) of $5.2 billion over the loan life at eight per cent discount rate. Baru explained that NNPC’s objectives in securing third-party financing for the two sets of projects aligned with government’s aspiration to increase reserves and crude oil and gas production as well as monetize the nation’s enormous gas resources.