Lekoil brings GE unit onboard in $1bn deal for Ogo field development

Lekoil Ltd has signed a deal with General Electric’s oil and gas subsidiary towards the development of Ogo field, in OPL 310, offshore Nigeria billed to cost around $1 billion.

 

After a successful completion of the appraisal phase, and subject to the fulfilment of a number of conditions including positive well result, GE Oil & Gas, through a consortium SPV, and Lekoil through its funding partners intend to invest funds towards the full filed development capital of the project.

Lekoil estimates the full development of the field will cost US400m for full field oil development and US $600m for subsequent upstream gas field development.

According to MoU signed by both companies,  GE Oil and Gas is expected to receive a percentage of Lekoil’s future cash flows from the Ogo field, as well as the ability to supply its products and provide technical expertise throughout the life of the project.

Lekoil will keep its initial 40 per cent participating interest in OPL 310 in the deal, even as it approaches other potential partners for the financing of the OPL 310 appraisal well, which is expected to spud by year-end 2017 or in early 2018.

Lekan Akinyanmi, CEO of Lekoil says of the deal, “We are pleased to announce this MOU with GE Oil & Gas which marks the first step in our aim to fully develop the Ogo field.”

“This agreement brings a world cass resource to OPL 310 and significantly reduces Lekoil’s cost of capital to bring the field into production

“As we have previously announced, we are still in the process of securing ministerial consent for the remainder of the OPL 310 acquisition and we remain confident that we will receive all the necessary approvals prior to the start of the appraisal programme.”

Last week, Lekoil announced that its subsidiary Lekoil Oil and Gas Investments Limited, has agreed an advance payment facility of $15 million with Shell Western Supply and Trading Partner Limited, a subsidiary of Royal Dutch Shell group of companies.

Analysts say this the company is reaping the benefit of a great value proposition which is gaining attention for investors and a it is also a growing indication that confidence is coming back to the oil sector.

“These deals point to renewed interests which is based on increased confidence that this time, investments will be secure,” says Chuka Nwani, energy lawyer and vice president of PowerHouse International, an energy consultancy.

 

ISAAC ANYAOGU