The Nigerian National Petroleum Corporation, NNPC and its joint venture partner, Chevron Nigeria Limited, CNL, at the weekend executed the second and final phase of an alternative financing agreement, which the Group Managing Director, Maikanti Baru, said would help increase the country’s crude oil production by about 39,000 barrels per day.
Mr. Baru, who spoke in London at the formal signing of the agreement, said the arrangement would also help achieve ”an incremental peak production of about 283 million standard cubic feet per day, MMSCFD of gas.”
According to the GMD, the increased production capacity would spread “over the remaining life of the asset (until 2045).”
Out of the total cost about $1.7 billion, Mr. Baru said, the project, which is about 92 per cent completed, include a $780 million third-party funding.
When completed, the facility would produce natural gas liquids and condensate extracted from the Sonam and Okan fields located in oil mining leases OMLs 90 and 91 in the Niger Delta.
Mr. Baru described the deal as a step in the right direction, saying it would grow the nation’s daily production capacity and support the strategic domestic gas-to-power aspirations, while aligning with NNPC’s 12 Business Focus Areas (BUFAs).
He said the project would also include the completion of the Sonam non-associated gas, NAG, 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 inches by 32 kilometre Sonam pipeline and Okan pig receiver platform and development of the associated facilities.
The GMD said, ”the facilities at the moment were 100 per cent completed”, while the wells were 40 per cent executed.
In carrying out the project, the NNPC boss said the joint venture adopted a two-staged financing approach, involving the provision of $400 million in the first stage, sourced from Nigerian commercial banks, and financial closure achieved on August 1, 2017.
The second stage financing to provide another $380 million from International Commercial Banks, ICBs, was what was sealed at the weekend in London.
Out of the $780 million total financing deal for both stages, Chevron JV would be co-lending about $312 million, while the NNPC’s portion would be about $ 468million.
On the Alternative Financing approach, Mr. Baru explained that it was aimed at bridging NNPC’s shortfall in funding JV cash call obligations, including settlement of pre-2016 cash call arrears.
The arrangement would also enable full funding of NNPC’s JV obligations to restore investors’ confidence and stimulate further Foreign Direct Investments, FDIs in the industry.
Earlier in his remarks, the Managing Director of CNL, 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”, Mr. Ewing added.
He commended the NNPC and other partners for backing the third party financing arrangement, which he said, would lessen cash call burden on the federation account.
Mr. Ewing expressed Chevron’s commitment to execute the programme safely and timely, to deliver the expected values for all stakeholders.
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.