Nigeria signs 3-year oil deal with Schlumberger and will earn $5.60 billion in taxes and royalty

Nigerias state oil firm,

The oil financing deal will enable Nigeria to earn $5.60 billion in taxes and royalty.

Ndu Ughamadu, in a statement issued in Abuja on Sunday, July 1, 2018, said Maikanti Baru, Group Managing Director of NNPC, signed the deal in London.

According to the statement, Maikanti Maru said the package would also provide $1.32 billion in net cash flows after Schlumberger's cost recovery and compensation in line with the terms of the agreement.

Details of the Schlumberger deal

The NNPC had in 2017 signed 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.

The balance of $358.79 million will 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.

The OMLs 83 and 85 are in shallow waters 40kms offshore in the Niger Delta.

NNPC holds 60% interest in the licences while, FIRST E&P, the operator of the JV, holds the remaining 40% 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 while leveraging on the global technical expertise of Schlumberger and the extensive local knowledge of the JV partners.

How the deal was executed

The NNPC GMD said in arriving at the innovative alternative funding package, the corporation was guided by the need to instil transparent and accountable processes.

"NNPC also followed strict compliance with all extant laws, regulations and established governance protocols and overriding national interest and drive to achieve competitive market pricing for such a greenfield project."

He explained that NNPC, FIRST E&P Joint Venture (JV) project financing formula came as a creative approach to funding JV operations in response to the realities of the prevailing operating environment.

The Schlumberger financing package covers pre-Final Investment Decision (FID) funding, 100% of capital expenditure for three years and pre-production operating expenses.

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