Finance Upstream

Afreximbank signs $2 billion in deals with Nigerian oil & gas companies

Photo: Afreximbank

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The African Export-Import Bank (Afreximbank) showed up for Nigeria’s oil sector this week in Durban, during the Intra-African Trade Fair 2021. The bank has signed three separate deals totaling almost $2bn with the state-owned Nigerian National Petroleum Corporation (NNPC), indigenous operator Eroton Exploration & Production and new Nigerian independent Mars Exploration & Production.

A $1.04 bn exploration deal with NNPC

The first agreement is a $1.04 billion facility with the NNPC to finance oil exploration in Nigeria. It notably notably comprises a pre-export/shipment finance facility underpinned by a forward sale agreement (FSA) and offtake contracts from the NNPC acting as the borrower and seller.

Under the terms of the contract, NNPC will enter into an FSA within which it shall deliver 35,000 barrels of crude oil per day (bopd).

The NNPC was represented by Umar I. Ajiya, Group Executive Director, Finance & Accounts while the Afreximbank was represented by Amr Kamel, Executive Vice President, Business Development & Corporate Banking.

A Second Lending Facility to Eroton E&P

The second agreement is a term-sheet that lays the basis for the approval of a $750m senior secured reserve-based lending facility with Eroton Exploration & Production, the Nigerian company that operates OML 18 with a 27% interest in the Niger Delta.

IIt was signed by Chairman Onajite Okoloko. Other parties in the deal are Shell Western Supply & Trading and Midwestern Oil & Gas Company Limited. Midwestern is an indirect owner of Eroton E&P through its 60% ownership of Midwestern Leon Petroleum, which in turns owns Eroton E&P’s mother company Martwestern.

Out of the full facility, $196m is expected to refinance Eroton’s current senior bank debt. The remaining is expected to help Eroton finance the acquisition of an additional 18% economic interest in OML 18 from Sahara Field Production Ltd (SFPL, 16.2%) and Bilton (1.85%).

Afreximbank and Eroton have been working together since the Nigerian company acquired Shell’s interest in OML 18 back in 2015. The bank had then provided a $663m syndicated reserve base lending facility to Eroton.

Financing AA&R’s Acquisition Spree

The third and last deal is a $274m senior secured reserve-based lending facility to Mars Exploration & Production, a subsidiary of Nigeria’s AA&R Group. AA&R is in the process of acquiring several offshore licenses in Nigeria and details on the transaction are available within the Hawilti+ research terminal.

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Ghana bets on higher oil revenues despite production decline over 2022-2025

Ghana made its 2022 Budget Statement this week, forecasting an overall GDP growth of +5.8% next year on the back of higher industrial and mining output and stronger commodity prices. This is slightly under the IMF’s own forecast of +6.2% for Ghana in 2022. Without Pecan, oil production will keep declining But the country is also coming to terms with its inability to boost oil & gas output in the short-term. It forecasts an oil production of 59.51m barrels next year, or a daily average of 163,044 barrels of oil per day (bopd). This contrasts with the 2021 benchmark revenue crude oil output, set at 65.86m barrels, equivalent to a daily average of 177,700 bopd. Ghana’s projections of crude oil production have actually been revised down until 2025. While its 2021 Budget Statement assumed that output would remain flat and around 60m barrels a year in the short-term, new assumptions released yesterday expects oil production to drop to 55m barrels in 2023 and 2024 and to under 52m barrels in 2025. Source: Ministry of Finance, PIAC (2016-2020 figures represent actual output) The development of the offshore Pecan field by Aker Energy is the only project that can boost output in the short-term, but first oil will not be achieved before 2024 at the earliest. Earlier this year, the Parliament of Ghana granted approval for its national oil company GNPC to acquire 37% stake in the Deepwater Tano Cape Three Points (DWTCTP) block from Aker Energy. Hopes are that the transaction could help fast-track the project that has a projected peak production of 110,000 bopd. “First Oil from the Pecan field is expected in 2024, with a ramp-up of production occurring the following year in 2025,” Ghana said in its 2022 Budget Statement. Production decline offset by higher oil prices However, stronger commodity prices will help Ghana increase its oil revenue despite lower output. Ghana now bets on a benchmark oil price of over $60/bbl for the coming years, up from previous estimates of $55. Source: Ministry of Finance As a result, and despite decreasing oil output, the country is expecting to collect over $1bn a year from the oil industry from 2022 to 2025. These projections are higher than previous estimates that set oil revenue projections at only about $900m a year until 2024. Source: Ministry of Finance For more on Ghana’s industry and the projects driving industry activity, please log into your Hawilti+ research terminal.

South Africa has received its first ever LNG shipment

South African LNG distributor DNG Energy has announced the arrival of South Africa’s first ever consignment of liquefied natural gas on Tuesday this week. The shipment arrived from Rotterdam and is a first for South Africa who has until now imported gas by pipeline from Mozambique. DNG Energy expects to commission a floating storage unit delivery in Q1 2022 in South Africa to support the country’s growing gas monetization agenda. The 8,000-ton LNG barge is currently being build in Durban by South African Shipyards. The company is notably working on providing gas to the road and maritime sector, especially for trucks, buses, and ships. In September this year, it partnered with Masana Petroleum Solutions to increase gas adoption within South Africa’s transport sector.