One year after signing the tripartite term sheet for the financing and technical services arrangement between NNPC/FIRST E&P JV and Schlumberger for the Anyalu and Madu fields under Oil Mining Licence, OML 83 and OML 85, offshore Nigeria, a final deal was sealed in London over the weekend.
According to the agreement, 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.
The Anyala and Madu 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.
Speaking at the signing ceremony which was also attended by chief executives of the other parties to the deal, 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 added that NNPC 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 a greenfield project.
Baru further 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.
“Apart from aligning wholly with government’s aspiration of increased crude oil and gas production, reserves growth and monetization 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,’’ the GMD said.
He said the Schlumberger financing package covers pre-Final Investment Decision (FID) funding, 100 percent of capital expenditure for three years and pre-production operating expenses, adding 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 & compensation in line with the terms of the agreement.
The OMLs 83 & 85 are in shallow waters 40km offshore in the Niger Delta where NNPC holds 60 percent interest in the licences while FIRST E&P, the operator of the JV, holds the remaining 40 percent interest.
Apart from providing funding for the development of the fields, Schlumberger would also provide other oilfield 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.