Zenith, 3 Others Move to Fund $1.2 bn Gas Project
FG plans new incentives for investors
By Mike Oduniyi
The rising profile of Nigerian banks in financing oil and gas projects is to take a further leap as Zenith Bank and three other banks have begun talks with the Nigerian National Petroleum Corpora-tion (NNPC), to participate in the funding of a Natural Gas Liquid (NGL) project estimated to cost $1.2 billion.
THISDAY checks revealed that the four banks, which include Union Bank of Nigeria Plc, United Bank of Africa Plc, Standard Trust Bank, are into talks with the NNPC for the provision of about $100 million loan to finance the construction of the NGL plant to be located offshore Rivers State.
The NGL is a joint venture project between the NNPC and Mobil Producing Nigeria Unlimited. NNPC holds 49 percent equity in the plant and Mobil, the remaining 51 percent shares.
The project is the second phase of the Oso NGL project, and is to process about 300 million cubic metres of gas.
Financing of the project will be on third party basis, following funding constraint on the part of the Nigerian government. Sources said the partners are also into negotiations with foreign credit agencies including US-based Overseas Project Investment Credit Agency (OPIC), for the provision of the remaining $1.1 billion loan.
"The Nigerian banks are keenly interested in participating in the loan financing. At least it will boost their prospect for future oil and gas funding," an official said, adding that the parties are hoping to wrap up negotiations before the end of this year.
If the negotiations scale through, it will be the second major gas project Nigerian banks are funding. A consortium of six local banks led by First Bank had earlier provided $160 million for the funding of the expansion of the Nigerian LNG plant.
The NLG plant comes under a major oil and gas recovery project being undertaken by the NNPC/Mobil joint venture known as the East Area Additional Oil Recovery (AOR).
The project will re-inject gas to improve oil recovery from multiple reservoirs in the Joint Venture area and eliminate routine flaring. The development is expected to increase production by approximately 110,000 barrels per day and ultimate recovery in the NNPC/MPN Joint Venture area by more than 500 million barrels.
Meanwhile, the Federal Gov-ernment is soon to put in place fiscal terms that will provide incentives to encourage rapid development of the gas sector.
Towards this end, the NNPC is engaging foreign consultants that will develop fiscal policy to guide investments in the sector.
Government is aiming to raise revenue from gas to as much as the income from crude oil. The Group Managing Director of the NNPC, Engineer Funsho Kupolokun, said at the weekend that already, gas production has now increased to 1.5 billion standard cubic feet per day from 197 million in 1999, or about 600,000 barrels per day of oil equivalent.
In monetary terms, Federal Government income averaged about $24 million (N3.19 billion) per day from gas.
Kupolokun said by the time the sixth train of the expansion of the Bonny LNG plant as well as the West African Gas Pipeline project and the Brass LNG projects among others are completed, gas production in the country will rise to 5.8 billion standard cubic feet per day or 1.0 million bpd of oil equivalent.
"It is not only for the economic benefit of the country but also an important contribution of Nigeria to the shift towards more environmentally friendly fuels," he said.
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