NNPC signs $724 million oil financing deal with Schlumberger

The Nigerian National Petroleum Corporation NNPC has announced the signing of the final contractual agreement with Oil-giant, Schlumberger, for the Anyalu and Madu oil fields under Oil Mining Licences (OMLs) 83 and 85, offshore Nigeria.

The signing of the agreement took place in London over the weekend.

This is coming one year after signing the tripartite term sheet for the financing and technical services arrangement between NNPC/FIRST E&P JV and Schlumberger.

Speaking at the signing of the agreement, Group Managing Director of NNPC, Dr. Maikanti Baru, said in arriving at the innovative alternative funding package, the corporation was guided by the need to instill transparent and accountable processes.

He explained that the NNPC/FIRST E&P JV project financing formula came as a creative approach to funding JV operations in response to the realities of the prevailing operating environment.

In his words: “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 & gas reserves & production which also supports Government’s 7 Big Wins aspirations’’.

According to a release by the Group Public Affairs Division, Ndu Ughamadu, Schlumberger would provide $724.14 million out of the required project cost of $1.082bn while the balance of $358.79m is to be funded with cash flows generated by the project.

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

Apart from providing funding for the development of the fields, Schlumberger would also provide other oil field services to the JV on a limited exclusive basis.

A joint project team would drive technology transfer whilst leveraging on the global technical expertise of Schlumberger and the extensive local knowledge of the JV partners.

The new agreement with the oil-giant will help the country to generate $5.60 billion in taxes and royalties and $1.32 billion in net cash flows after Schlumberger’s cost recovery & compensation in line with the terms of the agreement.

The OMLs 83 & 85 are in shallow waters 40km offshore in the Niger Delta. NNPC holds 60 percent interest in the licenses while, FIRST E&P, the operator of the JV, holds the remaining 40 percent interest.

The two fields are 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 and 120 million standard cubic feet of gas per day.

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