NNPC Finalises $724m Oil Finance Deal with Schlumberger

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•  Accuses governors of inciting public against corporation
 

By Chineme Okafor in Abuja    

The Nigerian National Petroleum Corporation (NNPC) 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 at 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, Ughamadu 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 (bpd) and 120 million standard cubic feet of gas per day (mmscuf/d). 

Ughamadu 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 instil 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 green field 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.

NNPC Accuses Governors of Inciting Nigerians against It

Meanwhile, the NNPC Sunday took a swipe at the 36 state governors over their stance on oil revenue remittance to the Federation Accounts Allocation Committee (FAAC).

The state oil corporation said the governors were reluctant to pay the monthly salaries of their workers and so using the claim that it had not remitted enough funds to the FAAC to excuse themselves of their obligation to their workers.

It also explained that it was not the custodian of all crude oil revenues accruable to the country, but the Central Bank of Nigeria (CBN) which it claimed has an account where such sales proceeds are deposited.

Ughamadu, in a phone conversation with THISDAY in Abuja, said the corporation was disappointed with the governors whom he explained approved its plan to exit the joint oil venture cash call framework by paying off its outstanding obligations therein.

“The governors under the umbrella of the Nigeria Governors’ Forum (NGF), antics of rushing to the press at the earliest opportunity of FAAC meeting is most unfortunate, using this as an unfortunate excuse not to pay salaries. It is a ploy to set the public against the NNPC,” said Ughamadu.

He further stated: “Yet, it is the same NGF that approved the cash call exit to restore investors’ confidence and boost crude oil production thereby generating more revenue for them to share,” adding, “All crude oil sales proceeds go straight into the CBN and not NNPC accounts.”

The governors recently claimed the NNPC had not remitted the amount of funds it was reportedly supposed to remit to the FAAC for sharing between the three tiers of government in the country. 

This, reportedly led to the postponement of the FAAC last week, with the Minister of Finance, Mrs. Kemi Adeosun, also stating that NNPC’s claims on cost of its operations were outrageous, unacceptable to FAAC and needed to be clarified.

However, the corporation in return alleged that the governors made requests on it to transfer an extra N40 billion for them to share in the FAAC, despite its remittance of N147 billion to the FAAC in the month under consideration for sharing by the three tiers of government.

NNPC equally noted that the extra request by the governors was against the terms of an agreement it had with them on the matter. 

Ughamadu said in a statement in this regard that both parties reportedly reached an agreement that the NNPC would make a monthly remittance of N112 billion to FAAC subject to sufficient funds from sales of domestic crude oil allocation for the corresponding month after meeting cash call obligations on joint venture operations, as well as deductions of petrol-cost under recovery and pipeline maintenance. 

He noted that for the remittance under contention, the NNPC was able to surpass the terms of its agreement with the governors, and paid the monthly funds over by N35 billion.

He nonetheless explained the corporation’s decision to make the excess payment above the agreed sum was based on the postures of the governors, adding that the extra N35 billion was sourced from the sum meant for settling its joint venture cash call obligations.

According to him, the corporation regretted the governors’ additional request of N40 billion, adding: “It was unfortunate, given the fact that NNPC is set to exit the cash call phenomenon.”