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Nigeria: JV Funding - NNPC Signs $3.1bn Pact With Shell
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Vanguard (Lagos)
28 May 2008
Posted to the web 28 May 2008
Hector Igbikiowubo
Lagos
The Nigerian National Petroleum Corporation (NNPC) has sealed a $3.1 billion financing agreement with Shell Petroleum Development Company (SPDC) in furtherance of efforts to seek alternative funding for the development upstream Joint Venture projects in the oil and gas sector.
This was contained in a statement by Dr. Levi Ajuonuma, Group General Manager in charge of the Corporation's Group Public Affairs Department.
Under the agreement, SPDC will finance NNPC up to the tune of $1.3 billion which will cover the shortfall in government's equity contributions in the 2008 operations of the
NNPC/SPDC/NAOC/EPNL JV, while a "bridge loan of $1.8 billion will finance NNPC's outstanding payments for 2006/07 JV cash calls. This money will mostly be used to settle payments due to local contractors and suppliers."
Nigeria, through NNPC, has 55 per cent interest in NNPC/SPDC JV, with SPDC, NAOC and EPNL having interest of 30 per cent, 10 per cent and 5 per cent respectively.
The signing of the financing agreement between NNPC and SPDC brings to three agreements signed between NNPC and its JV partners, the first two having been signed between NNPC and EPNL and Mobil Producing Nigeria (MPN).
The development also brings to $6.1 billion the total amount in alternative funding secured by the corporation for its joint venture operations.
Abubakar Lawal Yar'Adua, NNPC Acting Group Managing Director (GMD), signed the deal on behalf of NNPC, while Mr. Mutiu Sumonu, Managing Director SPDC, appended his signature on behalf of his company.
In November last year, NNPC management presented the oil and gas industry budget for upstream operations for the year 2008 to the President for review and consideration by government. The estimated budget presented to government was $15.2 billion with an expected government contribution of $8.8 billion.
Having considered the proposal, the President directed that of the expected government contribution of $8.8 billion, government would provide the sum of $4.9 billion through the 2008 budget allocation while the balance of $3.8 billion should be sourced by NNPC and the Ministry of Finance from NNPC's Joint Venture Partners and the commercial banks, including the sum of $2.9 billion outstanding for 2006 and 2007 performance.
In carrying out the above directive, NNPC management set up a committee to negotiate the required funding gap with NNPC Joint Venture partners and the commercial banks. This in-house team has engaged the respective Joint Venture partners in negotiating the required funding in the last few months.
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Partner financing through Carry Arrangements between NNPC and its Joint Venture Partners is not new. However, the scheme has been modified to make the compensation to the Joint Venture carrying party a "cash-based transaction" as against the current arrangement where repayment and compensation are based on oil.
please who is the group managing director of nnpc? WE WANT TO KNOW, B/4 WE MAKE OUR COMMENT. THANKS. gc.
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