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Standard Chartered leads $1.2b NNPC-Chevron’s JV financing

By Editor
13 October 2015   |   10:23 pm
Standard Chartered, the parent company of Standard Chartered Bank of Nigeria has brokered a $1.2 billion Joint Venture (JV) funding for the Nigerian National Petroleum Corporation (NNPC) and Chevron, which has a 60-40 per cent interest in the project respectively.

standardCharteredBankStandard Chartered, the parent company of Standard Chartered Bank of Nigeria has brokered a $1.2 billion Joint Venture (JV) funding for the Nigerian National Petroleum Corporation (NNPC) and Chevron, which has a 60-40 per cent interest in the project respectively.

The deal is aimed at enabling incremental oil and gas production from a total of 36 wells, under the Oil Mining Licence (OML) 49, 90 and 95, both onshore and offshore.

The project funding, which will be due from 2015 through 2018, was initiated by the NNPC, with Standard Chartered Bank as the global coordinator, while the United Bank for Africa and Standard Chartered would act as joint financial advisers.

The JV financing has been described as significant, given the current challenges of lower crude oil prices, which has substantially weakened the assets quality of banks, with oil and gas related Non-Performing Loans (NPLs) contributing an average of 12.7 per cent of the total NPLs across banks.

Other lenders in the deal include a number of international banks from Europe and Japan, while Nigerian banks are Union Bank, United Bank for Africa (UBA), StanbicIBTC, Zenith Bank, Access Bank and Standard Chartered Bank Nigeria.

The deal, tagged: “NNPC/Chevron Accelerated Upstream Financing Programme,” is expected to address the critical national issue of maintaining current production levels in the short term, as well as replacing depleting Nigerian reserves, which has been static at circa 35 billion in the last 10 years.

However, the project which has two stages, would first target 19 wells, with required funding of require $650 million to deliver 21kbpd crude oil and condensate and 120 Million Standard Cubic Feet per day (mmscfd) gas between 2015 and 2016.

The second stage comprises 17 wells and with a required funding of $550 million to deliver 20kbpd crude and condensate and seven mmscfd gas between 2016 and 2018

Speaking of the projects’ economic benefits, the bank noted that the projects would bring about incremental production in accelerated timeframe; achieve overall peak incremental production of barrels of equivalent per day; and enthrone a regime of maximum cost savings and value for money, reflecting current market realities.

Other benefits are the achievement of peak incremental gas production of 126 mmscfd and support Federation Government’s aspirations to increase domestic supply; and circa $5 billion of incremental revenue for the Federation account over the life of the project.

There is strong optimism that this is the beginning of a program of alternative financing models for the maintenance and growth of the Nigerian oil industry in an era of numerous, equally compelling and strong competing demand for government revenue utilisation.

In a time of increasing pressure on banks to prove their worth with productive industrial engagements and innovative structures, it is refreshing to see a bank with international footprints like Standard Chartered Bank, banking on Nigeria despite persisting low oil prices, dwindling reserves and a government in transition with project-financing type deals in successful collaboration with prominent international and local banks,” the bank added.

So far, Standard Chartered, has successfully led several project financing in Nigeria, including $1.5 billion drilling programme and a couple of $200 million to $600 million range projects for the ExxonMobil JV.
It also led the execution of $1.2 billion for Indorama Group, the recent acquisition by Oando Group of ConocoPhillips assets; and $800 million towers acquisition by IHS of MTN telecommunications towers, among others.

The financial institution has also led in general United States dollar syndication and bond facilities like the $750 million bond for African Finance Corporation; $200 million syndication for Ecobank; N26 billion issue for First City Monument Bank; and a $300 million syndications for Zenith Bank, among others.

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