NNPC, Mobil Seal Deal on $1.27bn Gas Project
Union, UBA, STB to provide $50m loan
From Mike Oduniyi just back from London
The Nigerian National Petroleum Corporation (NNPC) and Mobil Producing Nigeria at the weekend, signed the financing documents for the Natural Gas Liquids (NGL) expansion project, expected to cost $1.275 billion.
The financial agreement sealed at the London office of Credit Suisse First Boston (CSFB), however, further confirmed the rising profile of Nigerian banks in energy financing, as three local banks led by Standard Trust Bank (STB) are providing $50 million loan as part of the total financing package.
Other local banks expected to raise the sum of $50 million loan for the project are Union Bank Nigeria Plc and United Bank for Africa Plc. The loan will be provided at an interest rate of seven percent.
NNPC and Mobil Producing will raise the sum of $650 million while CSBF will provide $575 million. All the loans to finance the project will be guaranteed by the Overseas Private Investment Corporation (OPIC), an agency of the United States government.
The project entails the expansion of the NNPC/Mobil NGL plant located in Bonny, Rivers State, covering the engineering, procurement, construction, start up and commissioning of offshore NGL extraction platform, undersea pipeline infrastructure and expansion of the joint venture's existing onshore fractionation and storage facilities at Bonny River Terminal.
Speaking at the signing ceremony, NNPC Group Managing Director, Engr. Funsho Kupolokun, said the project on completion, will raise revenue generated by the NNPC/Mobil joint venture from NGL exports, to $690 million (N91.8 billion) per year.
NNPC holds 49 percent equity in the project, with Mobil Producing Nigeria, a subsidiary of US oil major ExxonMobil, holding 51 percent shares.
All the NGL output are exported as it is not counted as part of the Organisation of Petroleum Exporting Countries (OPEC) quota. Already, the NNPC has nominated major oil trading group Vitol to export its share of the commodity.
According to Kupolokun, the NGL phase 2 will produce on the average 42,000 barrels of NGLs per day (bpd). Construction is expected to begin in November this year, to be completed in late 2007 or early 2008.
Apart from the revenue windfall, Kupolokun said other benefits to be derived from the project include the creation of 700 additional job opportunities, boosting the Federal Government's objectives of reducing gas flaring and associated carbon dioxide emissions.
"The Federal Government is committed to increasing Nigeria's NGL production levels from its operational areas, while at the same time improving health and environmental standards. This project will help Nigeria achieve both goals," said Kupolokun.
Speaking to THISDAY shortly after the signing of the loan, the Managing Director and Chief Executive of Standard Trust Bank (STB), Mr. Tony Elumelu, described the project as a land mark in the history of the participation of Nigerian banks in energy projects.
According to Elumelu, with the prospects that await Nigerian banks in the financing of energy projects, the N25 billion capitalisation directive to banks appeared to be in the right direction as it will deepen the financial capacity of the banks to be able to finance oil and gas projects.
"This is one of the reasons why Nigerians should support it because it is all about pooling resources together to have a strong capital base to do business, support the real sector, support oil and gas and lend long term," he said.
Also speaking at the occasion, the Managing Director of Mobil Producing Nigeria Unlimited, Mr. John Chaplin, said the project represents one of the measures to end gas flaring from the company's oil fields by 2006.
"The NNPC and Mobil producing Nigeria are committed to increasing Nigeria's NGL production levels and revenue, while at the same time reducing gas flaring from our offshore operations," said Chaplin.
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.
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