A $3.15 billion financing and technical services agreement that is being described as an oil and gas project financing game changer in Nigeria has been signed between Sterling Oil Exploration and Energy Production Company Limited (SEEPCO) and the Nigerian Petroleum Development Company (NPDC), the exploration and production arm of the Nigerian National Petroleum Corporation (NNPC).
The financing and technical services agreement is for the development of the oil mining lease (OML) 13 located in the eastern axis of the Niger Delta and covering a total area of 1987 square kilometres.
Over the next 15 years during the life of the project, Nigeria will earn $10.2 billion in royalties and taxes, with the NNPC earning $5 billion after payment of the entire financing would have been made, it has been computed.
The signing of the agreement will, indeed, add to the push by the state-owned oil corporation to raise the country’s crude reserves and daily oil production to three million barrels (mbpd), a statement issued by Ndu Ughamadu, group general manager, group public affairs division, noted.
The mining lease is wholly owned by the NPDC which has been showing strength in recent years after a number of years of false starts in the Nigerian production space where international oil companies (IOCs) hold sway.
But it was Mele Kyari, NNPC’s group managing director, who is quoted in the statement as describing the new funding arrangement as “a game changer to oil and gas project financing in Nigeria,” signposting the big break the agreement represents.
Approval for the deal was given by President Muhammadu Buhari, who doubles as minister of petroleum resources for the country.
Represented by Roland Ewubare, the corporation’s chief operating officer, upstream, Kyari expressed gratitude to President Buhari for the approval, and added that OML 13 held strong potentials both for the petroleum industry and the nation’s economy.
At the signing ceremony Kyari advised the management of NPDC to develop a strong community engagement strategy to forestall any crisis that could hinder operations.
According to Ughamadu’s statement, Kyari disclosed that the acreage boasts of over 926 million stock tank barrels (mmstb) and 5.24 trillion cubic feet (tcf) respectively of oil and gas reserves, adding that the agreement was for a period of 15 years while the $3.15bn ceiling funding would be provided by SEEPCO with a 10-year capital investment period and five years for cost recovery.
First oil of about 7,900bpd is expected from the project by 1st April, 2020, while production is expected to peak at 94,000bpd and 542mmscfd within four years.
On local content, the project is expected to enhance participation by indigenous companies in the industry by providing over 2,000 direct and indirect job opportunities.
The statement also noted that Tony Chukwueke, chairman of Sterling Oil Exploration and Energy Production Company Limited, expressed delight at the opportunity offered the company to support the production and reserves growth aspiration of the Federal Government.