Multinationals Delay Projects in West Africa while Local Banks Trusts and Invests Huge in Nigeria Oil and Gas

Multinational Oil and gas companies delay projects in Nigeria oil and gas, even as local banks thinks differently, trusts and invests heavily.

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Shell and Total have so far delayed multi-billion dollar offshore crude oil projects in West Africa, this is part of efforts by the oil majors and cost reduction strategy of the slump in crude oil prices since 2013.

Shell has proposed a unitil next year for a final investment decision (FID) on the offshore Bonga South West project in Nigeria estimated to require a whopping $12B of spending, on the other hand Total also is delaying the final investment decision of (FID) on an offshore satellite field in Angola called Zinia 2.

The two projects currently being delayed by the oil companies are hoped to be a major source of future crude oil production, however this delays is enough to revisit the cost and bring contractors to agree on lower contract costs this is as reported by the financial times.

Investment of $1.4B by Nigeria banks is clealy amazing and an indication that they have confidence in the industry and hopes it will continue to grow and be profitable in the long run.

As reported by Ventures Africa,  five Nigerian banks—United Bank for Africa (UBA), Zenith Bank, First Bank of Nigeria, Standard Bank and Stanbic IBTC Bank—pulled resources together to provide indigenous oil producer, Seplat, with a $1.4 billion loan. This implies that the Nigerian banking sector, despite rewriting loans benchmarked with a higher oil price value in 2014, still perceives the oil industry as very attractive.

One of the immediate effects of Nigeria’s local content development thrust was the empowerment of the local oil producers, further bolstered by the recent wave of divestments of oil producing assets by the International Oil Companies (IOCs) operational in Nigeria. However, access to funding has been an impediment for the indigenous players who are eager to consolidate their position in the Nigerian petroleum industry.

The facility includes a $700 million seven year secured term package with an option to upsize by up to another $700 million for qualifying acquisition opportunities. The financing is aimed at refinancing Seplat’s existing debt portfolio to ensure a robust capital structure and strategically position the Company for future oil and gas acquisition opportunities in Nigeria. For the same reason, a new $300 million three year secured revolving credit facility was also provided concurrently by international banks.

The deal was constructed such that FBN Capital acted as “Structuring Bank,” while UBA and Zenith Bank contributed the bulk of the funding. “This successful re-financing, which commenced several months ago, significantly enhances our already robust capital structure and underscores the quality of our asset base,” said Austin Avuru, CEO of Seplat.

The further empowerment of Nigeria’s indigenous oil producers will be pivotal to opening up the full potentials of the country’s oil and gas industry while making the nation’s oil wealth inclusive and accessible to more locals. The desirable effects will translate in more job creation, more revenues accruable to the Federal Government by way of taxes, and more investments flowing into the sector.

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