In a historic milestone in oil and gas financing in Nigeria, the United Bank for Africa plc (UBA) is leading a consortium of Nigerian banks including Oceanic Bank, Standard Chartered Bank, Skye Bank, Zenith Bank, Bank PHB, Access Bank and Union Bank plc, in a $265million supplementary refinancing deal for ExxonMobil and the Nigerian National Petroleum Corporation (NNPC).
This follows the successful underwriting by UBA of the first 100 percent local funding of an ExxonMobil/NNPC Joint Venture Project in 2008, when $220 million was raised for NGL Funding Limited; a special purpose vehicle created for the project’s Natural Gas Liquids and Additional Oil Recovery Programme.
The deal, which was closed in London last week, marked a further sign of the increasing leadership role of Nigerian banks in oil and gas financing, where until recently they had largely played a more limited role.
Present at the meeting were the Group Managing Director and CEO, UBA plc, Tony Elumelu, Group Executive Director Finance NNPC, Abiodun Arokodare, Chief Finance Officer, Mobil Producing, Cyril Odu and J. H. Courtenay, head, Global Project and Trade Finance, representing Standard Chartered Bank.
UBA, a leading participant in the funding of capital-intensive upstream oil and gas projects, provided the underwriting for the new facility to bridge receipt of cash subscriptions from other Nigerian banks.
Unlike previous funding arrangements of this nature such as the original NGL II, US$1.2bn deal, in which Nigerian banks took only $50million, this transaction illustrates the further coming of age of African banks, as exemplified by UBA, in offering international banking and underwriting solutions as well as their increased capacity resulting in the full subscription of the $265million 3-year facility.
The success of the NNPC/Mobil project will provide crucial validation for the Federal Government’s commercial approach to funding of its oil and gas JV projects, rather than dependence on budget provisions. It is also expected that this new approach will help overcome the current limitations and negative impact on project implementation associated with the historic dependence on the Federal budget.
Commenting on the deal, Arokodare, group executive director, Finance and Administration, NNPC, said this commercially-oriented financing arrangement “represents a new independent and modern investment model that will see the JVs loosen the strings to the FGN budget and the attendant implications for limited crude oil/gas replacement projects.”
For Tony Elumelu, group managing director/CEO, UBA plc, this deal demonstrates “that UBA, and other participating Nigerian banks with similar aspirations, have the capacity to play leading roles in financing this critical sector of the Nigerian economy.”