*Stakeholders say move is good investment strategy
The Nigerian Liquefied Natural Gas company (NLNG) is receiving proposals for a $1 billion syndicated loan that will enable it purchase new LNG tankers. ExxonMobil and NNPC’s $1.5 billion loan to back the development of offshore oil fields is expected to close by the end of this month, while negotiations for NNPC’s second $1.5 billion deal are under way.
They join a string of African borrowers looking to tap the international syndicated loan market in early 2012, with active deals across the continent, totaling $6 billion, according to bankers familiar with the development.
NLNG is getting the loan with potential sponsorship from the Nigerian National Petroleum Corporation (NNPC), ENI, Shell and Total, a banker close to the deal said.NLNG declined to comment.
Nationwide protests following President Goodluck Jonathan’s decision to cut the country’s fuel subsidy have not derailed NLNG’s hopes, nor has it damaged state oil firm NNPC’s efforts to generate $3 billion worth of loans.
Industry analysts said the move was a good investment strategy for the country, even though NLNG’s loan syndication is not a sign of expanding the company’s main projects such as Train 7, which has been on the drawing board for more than three years now. They said the move was a good one to replace some of its aging tankers, to effectively service its customers.
Commenting on the development, managing director, Seplat Petroleum Development Company Limited, Austin Avuru, said the Exxon Mobil loan syndication was an investment that would lead to high volume of crude oil production which would ultimately increase the nation’s crude oil production.
He further observed that it was a signal that existing stakeholders in the oil and gas industry were tired of waiting for the Petroleum Industry Bill (PIB) which the National Assembly had refused to pass into law.
Abiodun Adesanya, managing consultant, Degeconek Nigeria Limited, said it was a sign of confidence in the economy, that despite the challenges and negative comments, some investors were still ready to put their money into the Nigerian economy. This would certainly have positive impact on the economy, he said.
According to Diran Fawibe , chief executive officer of International Energy Services( IES)the loan would generate economic activities in the industry and improve the level of investment. He however advised that NNPC should state the specific projects it wants to deploy the money into. “The project the money would be deployed into must be a stand alone project that people could see and monitor.”
As for the NLNG, tanker have formed a major sour of the company’s revenue even when the projects they are suppose to serve are yet to come on stream, he said.
The Nigeria LNG project is one of the most important economic projects being carried out in Nigeria . The project is a vital part of the Federal Government’s diversification programme and has already generated significant revenues and foreign exchange for the nation.
NLNG executed Sales & Purchase Agreements with five buyers located in Europe and Turkey for the Base Project volumes: Enel of Italy, Gas Natural of Spain, Botas of Turkey, Gaz de France of France, and Transgas of Portugal.
The first LNG cargo produced at the company’s Bonny Island plant was loaded on October 9, 1999 and delivered to Enel at the Montoir de Bretagne LNG receiving facility in France.
The company’s Train 3 Expansion Project offered an opportunity to further commercialise Nigeria ’s extensive gas reserves and also develop new offshore and onshore oil reserves. SPAs were executed with Gas Natural and Transgas. The Train came on stream in December 2002.
In 2000, NLNG commenced discussions with prospective buyers of the LNG volumes expected from the NLNGPlus. The marketing effort was successful. The off-takers of NLNGPlus volumes are Shell Western LNG, Total, Iberdrola ( Spain ), Transgas, Eni, BG and Endesa ( Spain ). The first contract cargo from Train 4 was loaded in January 2006 and from Train 5 in February 2006.
Total and Shell Western signed SPAs for LNG from the NLNGSix Project and from which production commenced in the fourth quarter of 2007.
Similarly the company has marketed its Train 7 volumes (8.0 mtpa), with SPAs already signed and only awaits Foreign Direct Investment (FDI).
NLNG’s buyers are spread across the fast growing LNG markets of Europe, North America and Turkey , with roughly a 50:50 split between Iberia and North America.
“There is certainly more activity coming out of Africa than there has been for a while,” one European banker told Reuters.
A large portion of the loans this year are expected to be new money, propelling telecom, infrastructure and commodity developments.
While Europe struggles with a debt crisis, lenders’ optimism over Africa ‘s potential in 2012 is built on the continent’s 2011 volumes of $23.76 billion, its second highest total ever.
In a rare sovereign deal, Kenya is aiming to secure its $600 million, two-year loan by early February, Glencore Exploration’s $400 million loan for an oil and gas development in Equatorial Guinea is poised to launch into general syndication.
Ghana Cocoa Board (Cocobod) and South Africa’s FirstRand Bank are looking to close their $200 million loans within a fortnight, while Africa Export-Import Bank (Afreximbank) is considering a $350 million equivalent plus loan, and MTN Ghana is seeking a $300 million deal.
Africa, however, is not immune to Europe ‘s financial woes. Although quarterly volumes are expected to grow, lenders’ straitened positions are expected to influence deal structures in coming months.
“Pricing is turning a corner in Africa and may need to move upwards. With tenors, lenders may not be as charitable, with a possible return to three-year facilities,” a second European banker said.
Growing expertise and confidence among African borrowers will make such negotiations across the continent easier.
“They understand the issues, so it’s becoming a fairer relationship between borrower and lender,” a third European banker said.
