Oil coys sign agreements to boost FG’s revenue by $16bn

The Nigerian National Petroleum Corporation (NNPC) says it has signed two Joint Venture (JV) alternatives financing agreements with its Joint JV partners to boost the nation’s oil production and reserves.

Mr Ndu Ughamadu, NNPC’s Group General Manager, Group Public Affairs Division said this in a statement issued in Abuja on Thursday.

According to Ughamadu, the JV agreements signed in London, was between the Corporation, Chevron Nigeria Limited (CNL) and Shell Petroleum Development Company (SPDC).

Ughamadu said that the two projects were expected to generate incremental revenues of about 16 billion dollars within the assets’ life cycle.

He said that the projects would also include exploratory activities that would generate employment opportunities in the industry, boost gas supply to power plants and rejuvenate Nigeria’s industrial capacity utilisation.

According to him, the agreement with Chevron will ensure development of the NNPC/CNL JV Sonam Project (Project Falcon), hitherto financed through cash calls.

This, he said would further result to incremental proven and probable oil reserves of 211 million barrels, proven and probable gas reserves of 1.9 trillion cubic feet in Oil Mining Licences (OMLs) 90 and 91.

“The project is expected to begin to bear fruits in the next three to six months“, he said.

The statement also quotd the Group Managing Director of NNPC, Dr Maikanti Baru as saying “the project is envisaged to achieve an incremental peak production of about 39,000 barrels of oil per day’’.

According to Baru, the project is also expected to result in the production of 283 million standard cubic feet of gas per day (mmscf/d) of gas over the life cycle of the asset.

The Joint Venture partner he said, had already expended 1.5 billion dollars, representing 97 per cent of project completion costs, adding that the agreement would cover the remaining 780 million dollars to complete the project’s scope.

On Sonam project, Baru said 400 million dollars would fund the development of seven wells in the Sonam field (OML 91), the Okan 30E Non-Associated Gas (NAG) well (OML 90), and associated facilities including completion of Sonam NAG Well Platform.

The GMD said that 380 million dollars would also be required to reimburse the JV partners for the 2016 portion of the funds committed to lenders that had been cashed and paid for.

He said that the Sonam project alone on completion, would net the Federal Government’s cumulative incremental earnings of 7.3 billion dollars.

According to him, the agreement with SPDC will facilitate the development of the NNPC/SPDC JV Project Santolina..

He said that the agreement comprised 156 development activities across 12 OMLs (OMLs 11, 17, 23, 25, 27, 28, 32, 35, 43, 45, 46 and 79) and 30 different fields in the Niger Delta.

He said development of the Sonam project would be carried out in two phases, with the first phase focused on short term activities involving Oil and Gas Generation (STOGG) programme.

Baru said that the programme comprised of 128 rigless activities and 10 work over, while the second phase would focus on medium term activities to further develop EA/EJA fields by drilling 14 new well and three work over ones.

He said the first phase of the project was estimated to deliver incremental liquid reserves of about 202.9 million barrels of oil and 161.8 billion cubic feet on Proven and Probable (2P) basis.

The GMD said the total third-party financing for project Santolina at one billion dollars, included the financing cost.

He said the co-lending amounted to 420 million dollars with NNPC’s portion of 850 million dollars.

The GMD said project Santolina would generate about 9 billion dollars of incremental revenue to the Federation Account and a Net Profit Value (NPV) of 5.2 billion dollars at eight per cent discount rate.

Baru explained that NNPC’s objectives in securing third-party financing for the projects aligned with government’s aspiration to increase reserves and crude oil and gas production and monetise the nation’s enormous gas resources.

He emphasised that the financing option underscored the realisation of one of the corporation’s 12 Business Focus Areas (BUFAs) of increasing crude oil and gas reserves production to support government’s aspiration.

Mr. Andy Brown, Shell Global Upstream Director, said that the alternative funding arrangement was an innovative financing plan that would enable SPDC to commence exploration activities hitherto stalled due to funding challenges.

Mr Jeffrey Ewing, the Chairman and Managing Director of CNL, said Chevron Nigeria Limited was committed to supporting Nigeria’s aspirations of sustaining oil and gas production through innovative strategies.

“Similar sentiments were expressed by the consortium of banks involved in the project,’’ Ewing said.