The financial challenges faced by smaller indigenous companies trying to get oil and gas programmes off the drawing board in Nigeria have prompted an animated debate that was re-echoed at a recent oil and gas Council convention in Paris.
Nigeria needs over $20bn in new financing to ramp crude oil production to 2.5million barrels per day (bpd) but with local banks exhibiting a low appetite for lending to the sector due to high non-performing loans estimated last year to constitute about 40 percent of banks NPLs, local players say they are being forced to task their brains for new solutions.
The issues seem complicated by a dearth of debt finance for gas projects; in particular, say industry sources who do not want to be identified.
“We had good producing acreage, line-of-sight to first oil together with innovative technology, but the oil price crashed in early 2016,” says First E&P’s managing director Ademola Adeyemi-Bero, who also chairs Nigeria’s 25-strong Independent Petroleum Producers Group (IPPG).
With liquidity sucked out of the market and local banks laden by debt, First E&P still had assets in the 2P+2C range topping 180 million barrels of oil and 600 (billion cubic feet of gas) and a development plan for Anyala-Madu that was believed was bankable. “We tried everything, but Nigeria without liquidity was a tough place,” Adeyemi-Baro said.
The Anyala and Madu fields are located in oil mining leases (OML) 83 and 85 in shallow waters of the Niger Delta, approximately 40km offshore the Bayelsa State, Nigeria.
FIRST Exploration & Production (FIRST E&P) holds 40 percent stake in the leases and is the operator, while the Nigerian National Petroleum Corporation (NNPC) holds the remaining 60 percent stake. Chevron Nigeria earlier held a 40 percent interest in the licenses, which was acquired by FIRST E&P in February 2015.
The offshore field development project is planned to be developed in two phases with a combined investment of $1.08bn. The final investment decision on the project was made in July 2018, while the first oil is expected in 2019.
In June 2018, NNPC, FIRST Exploration & Production (First E&P) and Schlumberger signed a tripartite agreement for the development of the Anyala and Madu fields at a cost of over $700m.
Under the agreement, Schlumberger will contribute the required services in kind and capital for the project development until first oil. The joint project team will leverage the technical expertise of Schlumberger and the extensive local knowledge of the partners.
Nigerian oil companies are counting on alternative funding schemes including contractor financing, insurance funds, private equity, pension funds among others to get financing for new projects in an industry where lenders have become weary and wary.
In exchange for some of the funds, operators say they have been offering equity participation, profit sharing and various crude for payment schemes supported by the Nigerian National Petroleum Corporation (NNPC) which provides guarantees that give the lenders confidence.
