Nigerian National Petroleum Corporatio (NNPC) and Chevron Nigeria Limited (CNL) have sealed a $1.7 billion Alternative Financing Agreement on the second and final phases of the project meant to increase crude oil production in the country by about 39,000 barrels per day.
The agreement, signed in London at the weekend, is also expected to achieve an incremental peak production of about 283mmscfd of gas.
Dr. Maikanti Baru, Group Managing Director of NNPC, who signed for the corporation, said the increment to be achieved by the agreement would spread “over the remaining life of the asset, until 2045.”
Baru stated that the project, which is about 92 percent completed, is expected to cost about $1.7 billion, with $780 million expected to be funded by third-party, while it will produce natural gas liquids and condensate extracted from the Sonam and Okan fields located in oil mining lease, OMLs 90 and 91 in the Niger Delta.
He described the deal as a step in the right direction which would grow the nation’s daily production and support the Federal Government’s strategic domestic gas-to-power aspirations, while aligning with NNPC’s 12 Business Focus Areas (BUFAs).
The managing director 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 percent completed, while wells are 40 percent executed,” Baru stated.
In carrying out the project, the NNPC/CNL joint venture (JV) adopted a two-stage financing approach. While stage 1 which provided $400 million, sourced from Nigerian Commercial Banks, NCBs, achieved financial close on August 1, 2017, stage 2 is set to provide $380 million from International Commercial Banks, ICBs.
Of the US$780 million total financing for both stages, Chevron’s co-lending totals US$312 million, while NNPC’s portion of the total facility stands at US$468 million.
Commenting on the Alternative Financing approach, 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.
Mr. Jeff Ewing, the Managing Director of CNL, 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 commended NNPC and other partners for backing the third party financing arrangement, which he said, would lessen cash call burden on the federation account.
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).
