NNPC, Chevron wraps up $1.7bn project finance deal

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By Sopuruchi Onwuka

Nigerian National Petroleum Corporation (NNPC) says it has concluded the second and final deal on the $1.7 billion borrowing deal with Chevron Nigeria Limited (CNL) to drive conclusion of two development projects in Niger Delta.
The funds would be deployed in enhanced oil, gas and natural gas liquids from Sonam and Okan fields hosted in oil mining leases (OMLs) 90 and 91 respectively.

The deal which was executed in London weekend would be the second and final phase of an Alternative Financing Agreement between NNPC and Chevron aimed at boosting oil production by some 39,000 barrels per day.
The agreement is also expected to boost gas production from the Chevron operated assets by some 283 million standard cubic feet of gas per day (mmscfd).

NNPC ‘s spokesman, Mr. Ndu Ughamadu, quoted the Group Managing Director, Dr. Maikanti Baru, as saying that the production boost from the two assets would be sustained till the 2045 projected field lifespan.
According to him, the project, which is about 92% completed, will cost about $1.7bn, with $780mn expected to be funded by third-party, while it will produce natural gas liquids and condensate extracted from the Sonam and Okan fields.

He said the project would also include the completion of the Sonam non-associated gas (“NAG”) well platform and Sonam living quarters platform; drilling of seven wells in the Sonam field and the Okan 30E NAG well; as well as the completion of the 20“ x 32Km Sonam pipeline and Okan pig receiver platform and development of the associated facilities.

“As we speak now, the facilities are 100% completed while wells are 40% executed,” Baru stated.
In carrying out the project, the NNPC/CNL JV adopted a 2-staged financing approach. While Stage 1 which provided $400mn sourced from Nigerian Commercial Banks (NCBs) achieved financial close on 1st August 2017, Stage 2, (signed today), is set to provide $380mn from International Commercial Banks (ICBs).

Out of the US$780mn total financing for both stages, Chevron’s Co-lending totals $312 million while NNPC’s portion of the total facility stands at is $468 million.

Speaking further on the Alternative Financing approach, Dr. Baru explained that it was aimed at plugging NNPC’s shortfall in funding JV cash call obligations including settlement of pre-2016 cash call arrears.
It will also enable full funding of NNPC’s JV obligations to restore investors’ confidence and stimulate further Foreign Direct Investments (FDIs) as we are beginning to witness, he noted.

Earlier in his remarks, the Managing Director of CNL, Mr. Jeff Ewing said his company supported the Federal Government’s aspirations to sustain oil and gas production.

“We know the important role gas supply to the domestic market plays in growing power generation. We also understand government’s need to seek alternative sources to fund profitable and bankable JV Projects,” Ewing added.

He expressed Chevron’s commitment to execute the programme safely, timely and deliver its expected values for all stakeholders.

It would be recalled that in August this year, two sets of alternative financing agreements on JV projects were executed between the NNPC/CNL JV (project Falcon) and the NNPC/SPDC JV (Project Santolina).

Both are aimed at boosting reserves and production in line with parts of the federal government’s aspirations for the Oil and Gas Industry.

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