Nigeria’s Oil Corporation, NNPC, disclosed Thursday that it has signed two sets of alternative financing agreements worth about $1.78 billion, for two Joint Venture projects with two of its JV partners, Chevron Nigeria Limited, CNL and Shell Petroleum Development Company, SPDC.
The MOU also involves a consortium of both local and foreign banks amongst who are Access Bank, Standard Chartered Bank, Union Bank and United Bank for Africa, UBA and some foreign financial institutions.
An NNPC statement in Abuja, put the Chevron deal, for the Sonam Project, also called Project Falcon, at $780 million, while the SPDC deal for Project Santolina, was valued at $1 billion.
While stating that the agreements were signed in London, NNPC noted that the agreement with Chevron on the Sonam Project, hitherto financed through cash calls, would lead to the development of incremental proven and probable oil/liquids reserves of 211million barrels and proven and probable gas reserves of 1.9 trillion cubic feet within in Oil Mining Licences (OML) 90 and 91.
It said 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 statement pointed out that 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.
At the signing ceremony, Group Managing Director of the NNPC, Mr. Maikanti Baru, explained that in the Sonam project, Chevron had already expended $1.5 billion, representing 97 per cent of the project completion costs.
He said the agreement would cover the remaining $780 million to complete the project’s scope.
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On 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.
He said $380million would also be required to reimburse the JV partners for the 2016 portion of the funds committed to lenders that had been cashed and paid for.
Continuing he said, 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.
Baru said 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.
He further stated that the development of project Santolina would be carried out in two phases, with the first phase focused on short term activities involving Oil and Gas Generation (STOGG) programme which comprising 128 rig less activities and 10 work-overs.
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.
Noting that 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, Baru said the total third-party financing for Project Santolina would cost $1 billion, inclusive of financing cost.
He added that co-lending amounted to $420 million with NNPC’s portion of $850 million in the deal.
He declared 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.
In his remarks, Mr. Andy Brown, Shell Global Upstream Director, stated that the alternative funding arrangement was an innovative financing plan that would enable SPDC commences exploration activities hitherto stalled due to funding challenges.
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