The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr. Maikanti Baru, at the weekend said that the execution of the final contractual agreement between the NNPC/FIRST E&P JV and Schlumberger had the potential of making the country earn substantial revenues from taxes and royalties.
Specifically, Baru projected that the deal could generate the country $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 deal, which was sealed in London one year after signing the tripartite term sheet for the financing and technical services, is for the Anyalu and Madu fields under Oil Mining Licence, OML 83 and OML 85, offshore Nigeria.
Under the terms of the pact, Schlumberger would provide $724.14 milion out of the required project cost of $1.082 billion while the balance of $358.79 million is to be funded with cash flows generated by the project.
In terms of their production capacities, 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 (scf) of gas per day.
Speaking during the signing ceremony the NNPC chief said that in arriving at the alternative funding package, the corporation was guided by the need to instill transparent and accountable processes.
Specifically, he confirmed the corporation followed strict compliance with all extant laws, regulations and established governance protocols and was guided by overriding national interest to achieve competitive market pricing for such a greenfield project.
The industry top shot explained that the NNPC/FIRST E&P JV project financing formula was a creative approach to funding JV operations in response to the realities of the prevailing operating environment.
He explained: “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 and gas reserves and production which also supports Government’s 7 Big Wins aspirations’’.
Baru hinted that the Schlumberger financing package covered pre-Final Investment Decision, FID, funding, 100 per cent of capital expenditure for three years and pre-production operating expenses.
The OMLs 83 and 85 are in shallow waters 40km offshore in the Niger Delta. NNPC holds 60 per cent interest in the licences while, FIRST E&P, the operator of the JV, holds the remaining 40 per cent interest.
In addition to providing funding for the development of the fields, Schlumberger would also provide other oilfield services to the JV on a limited exclusive basis.
Based on the agreement terms, 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.
