NNPC secures $1.2bn alternative funding for 36 oil wells

project to add $5bn into Federation Account

The Nigerian National Petroleum Corporation (NNPC) has secured a $1.2 billion multi-year drilling financing package for 36 offshore/onshore oil wells under the NNPC/Chevron Nigeria Limited Joint Venture.

This is an arrangement geared towards supplementing the Federal Government’s Cash-Call commitment, according to a press release at the weekend by Ohi Alegbe, group general manager, group public affairs division, NNPC.

The funding package, being financed by a consortium of Nigerian and international lenders, is an integral part of the Accelerated Upstream Financing Programme initiated by NNPC to address the perennial challenge experienced by the Federal Government in providing its counter-part funding of JV upstream activities.

It also envisaged that the initiative, apart from supplementing the Cash-Call commitment, would help in the maintenance of current production levels in the short term as well as replacing depleting reserves.

Breakdown of the NNPC/Chevron JV deal, which was executed at a signing-ceremony in London over the weekend, indicates that the $1.2 billion is to be channelled into the development of 23 onshore and 13 offshore wells on OML 49, 90 and 95 in two stages over 2015- 2018.

Stage one comprising 19 wells is projected to deliver 21,000 barrels of crude oil and condensate per day alongside 120,000 million standard cubic feet of gas per day, mmscf/d, over 2015 and 2016.

Stage two, comprising 17 wells is projected to yield 20,000 barrels of crude oil and condensate per day alongside gas production of 7mmscf/d between 2016 and 2018.

It is envisaged that both stages of the project would generate $2 billion to $5 billion of incremental revenue to the Federation Account.

Beyond the contribution to the national treasury, the projected peak incremental gas production of 127mmscf/d, which is the electricity equivalent of 400 megawatts, would help boost the Federal Government’s domestic gas aspirations with expectant positive effect on power supply.

Speaking at the ceremony, Ibe Kachikwu, group managing director, NNPC, described the new alternative funding arrangement as the new contractual model in upstream financing, which would serve as a template for future initiative to supplement the Federal Government’s JV Cash-Call commitment.

While commending the NNPC/ Chevron Joint Finance Team and the Consortium of local and international lenders led by Standard Chartered Bank and UBA for a job well done, the GMD noted that the Corporation will not relent in the renewed effort to restore probity and transparency to the process of generation, collection and remittance of crude oil proceeds.

“I have always believed that issues of Federation Accounts must be left sacrosanct and not to be toyed with. The Accelerated Upstream Financing Programme is designed to help us achieve this objective,’’ he said.

Clay Neff, managing director, Chevron Nigeria Limited, pledged the readiness of Chevron to work assiduously with the NNPC to meet its set target in the project.

With the completion of its financing, Project Cheetah stands as the pioneer project under the Accelerated Upstream Financing Programme of the NNPC. The project is operated under the NNPC/CNL JV, which is owned on a 60-40 basis in favour of the NNPC.

The NNPC/CNL JV is reputed as the third largest producer in Nigeria. Project Cheetah is projected to achieve a peak incremental production of 61 million barrels of oil equivalent per day.