NNPC Finalises $724m Oil Finance Deal with Schlumberger

Chineme Okafor in Abuja

The Nigerian National Petroleum Corporation (NNPC) on Sunday disclosed it had finalised a crude oil production financing deal it negotiated with Schlumberger for the Anyalu and Madu oil fields under Oil Mining Licences (OMLs) 83 and OML 85, offshore Nigeria.

It said the nod on the deal was given over the weekend in London with the execution of the final contractual agreement between it and the company under a joint venture agreement it has with First E&P.

According to a statement sent to THISDAY in Abuja by the corporation’s Group General Manager Public Affairs, Mr. Ndu Ughamadu, the approval came one year after a tripartite term sheet for the financing and technical services arrangement was signed between the NNPC, First E&P and Schlumberger.

Under the agreement, Uggmadu, said Schlumberger would provide $724.14 million out of the required project cost of $1.082 billion while the balance of $358.79 million would be funded with cash flows generated by the project.

He said the Anyala and Madu fields were projected to have 193 million barrels of crude oil and 0.637 trillion cubic feet of proven gas reserves with production plateau of 50, 000 barrels of oil per day (bd) and 120 million standard cubic feet of gas per day (mmscuf/d).

Ughamadu’s quoted the Group Managing Director of NNPC, Dr. Maikanti Baru, to have said at the signing ceremony that in arriving at the innovative alternative funding package, the corporation was guided by the need to instill transparent and accountable processes.

Baru, he explained, added that NNPC also followed strict compliance with all extant laws, regulations and established governance protocols as well as overriding national interest and drive to achieve competitive market pricing for such greenfield project.

Additionally, Baru, explained that the NNPC/First E&P joint venture project financing formula came as a creative approach to funding joint venture operations in response to the realities of the prevailing operating environment.

He said: “Apart from aligning wholly with government’s aspiration of increased crude oil and gas production, reserves growth and monetisation of the nation’s enormous gas resources, the model is in tandem with one of the corporation’s 12 Business Focus Areas (BUFAs); ramping up crude oil and gas reserves and production which also supports government’s 7 Big Wins aspirations.”

He said the Schlumberger financing package covers pre-Final Investment Decision (FID) funding, 100 per cent of capital expenditure for three years and pre-production operating expenses.

He added that the package would enable the country to generate $5.60 billion in taxes and royalties and $1.32 billion in net cash flows after Schlumberger’s cost recovery and compensation in line with the terms of the agreement.

NNPC explained that the OMLs 83 and 85 were located in shallow waters 40 kilometres offshore in the Niger Delta, adding that it held 60 per cent interest in the licences while, First E&P, the operator of the joint venture, held the remaining 40 per cent interest.

Apart from providing funding for the development of the fields, NNPC also stated that Schlumberger would provide other oilfield services to the joint venture on a limited exclusive basis.

It explained that a joint project team would drive technology transfer whilst leveraging on the global technical expertise of Schlumberger and the extensive local knowledge of the joint venture partners.