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B N W: Biafra Nigeria World News |
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NNPC signs N171 trillion loan pact with three banks
THREE Nigerian banks are breaking the ice in the financing of offshore operations of oil companies. The offshore unit is shunned by local banks because of the high content of foreign exchange required.
The initiative, described as a plus for the Federal Government's push for increased local content in the exploration and production of oil and gas in the country, is being spearheaded by Union Bank of Nigeria (UBN) Plc, United Bank for Africa (UBA) Plc and Standard Trust Bank (STB).
Together with some foreign banks and investment outfits, they are committing N170.9 trillion ($1.275 billion) to finance the East Area Natural Gas Liquids (NGL II) project.
The gas project will be executed by the Nigerian National Petroleum Corporation (NNPC) and Mobil Producing Nigeria Unlimited (MPN).
The loan package was signed at the weekend in London by all the stakeholders and participating banks.
About 20 per cent of the loan will be used to engage Nigerian engineering contractors for over 9,200 tonnes of fabrication and 350 kilometres pipe coatings. The contractors will put in over five million hours of construction labour at both onshore and offshore locations before the project is completed.
The gas expansion project when completed will also facilitate Nigeria's drive to achieve zero gas flare by 2008.
The NNPC's Group Managing Director, Mr. Funso Kupolokun, said at the ceremony that the project will be financed with loans from the local banks while the loan guarantee is being provided by the United States (U.S.) government's Overseas Private Investment Corporation (OPIC) and Investment Bank, Credit Suisse First Boston.
Kupolokun explained that another loan was also structured alongside the senior debt, Credit Suisse First Boston (LLC) which served as exclusive financial advisor to NNPC and MPN on the venture.
The loans are supported by a (N43.5 billion) ($325 million) guarantee by OPIC.
He said the project is part of the NNPC/Mobil joint venture being operated by MPN, a subsidiary of ExxonMobil in Nigeria and would produce about 180 million barrels of NGL during the life of the project; contribute to the reduction of gas flaring and associated carbondioxide emission; and generate more foreign exchange for the country through the monetisation of natural gas reserves in Nigeria.
"By gathering and processing natural gas, the project will contribute to the reduction of gas flaring and related carbon-dioxide emissions in our operations, in addition to creating about 700 construction-related jobs in the Niger Delta region. We in NNPC are delighted to participate in this landmark project", he stated.
Kupolokun signed for the NNPC, while Mr. John Chaplin, Managing Director of MPN, stood for his company. The Managing Director of STB, Mr. Tony Elumelu, represented his bank.
Kupolokun added: "This project is effectively an expansion of the Joint Venture (JV) existing successful NGL's facility, which was commissioned in 1998 and now produces approximately 38, 000 barrels of NLG's per day. This is equivalent to gross revenue of approximately $330 million per year for the JV, depending on the spot price of NGLs."
The project, tagged NGL II, is owned 49 per cent by the NNPC and 51 per cent by Mobil. It involves the construction and operation of an offshore NGL extraction platform, undersea pipeline infrastructure, and onshore fractionation and storage facilities.
He said construction is expected to begin in November this year and would be completed in three years in (late 2007 or early 2008).
According to him, when completed, the project will produce about 42,000 barrels of NGL daily, thereby doubling NGL production from the JV's operations.
Also, the project will generate gross revenue of over $360 million (N48.2 billion) yearly for the JV , which represents combined gross revenue from NGL I and II of over $690 million (N92.5 billion) per year, Kupolokun explained.
At the event, Elumelu said the participation of Nigerian banks is a sign of good things to come in future."
Elumelu said that there were several other projects in both downstream and upstream sectors of the Nigerian oil and gas industry that STB is involved, stressing that with the Central Bank of Nigeria (CBN) directive on N25 billion base for local banks, more banks would be able to participate in the oil business in the country.
The bank chief said: "We have come a long way, you know in oil and gas sector, you have the upstream and downstream. We do a lot in the downstream. Last week alone, we opened letters of credit of $32 million for one of our customers. We are one of the main bankers to the NNPC, we do a lot with the local oil producers but for the producing, that is where you required mega capital, all in foreign currency. And we are happy to be part of the project."
Chaplin stated that both parties in the joint venture were committed to the realisation of the project aimed at strengthening the operational base of the company in Nigeria.
The Nigerian National Petroleum Corporation and Mobil Producing Nigeria, a subsidiary of ExxonMobil, are committed to increasing Nigeria's NGL reserves, production level and revenue, while at the same time reducing gas flaring from our offshore operation" he said.
The NGL II is an expansion of the JV's successful NGL I project, which started production in 1998. The NGL II project covers the engineering, procurement, construction, start-up and commissioning of an offshore NLG extraction platform, undersea pipeline infrastructure and expansion of the JV's existing onshore fractionation and storage facilities at Bonny River Terminal.
"With the on-going East Area Additional Oil Recovery (AOR) project, the NGL II scheme will commercialise associated gas now being flared. Natural Gas Liquid will be recovered and lean gas will be re-injected for pressure maintenance/artificial lift in support of additional oil recovery. The start-up date for the NGL II is slated for 2008.`
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