- Prospective bidders scramble for foreign lenders
The May date picked by the Federal Government for oil blocs’ allocation in Nigeria is being put in difficulty following the $130 million ploughed into the previous bid round by Nigerian banks, New Telegraph has learnt.
It was learnt that lenders have issued caveat emptor on financing of forthcoming oil block bid round slated for May following apprehension that the over $130 million loans ploughed into the marginal field operations between 2007 and 2011 might go bad.
A source at one of the prospective bidding companies, which is building a major private refinery in Africa, told this newspaper that his company and other prospective bidders have been pushed to sourcing funds from foreign banks “when local banks are not forthcoming.” Multi-million dollars loans that these local banks granted for previous round remained an impediment to their interest to finance these new prospects as their financial muscles have been weakened, the source said.
Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, had declared that the bid round for the blocks would commence in May. But the source said: “A few weeks to the schedule date, the project financing has become a major headache for prospective bidders. We as a company only take solace in the fact that the payment would be in phases “The banks in Nigeria are more interested in recovery of over $130 million ploughed into the previous ones than to finance a new oil blocks’ round.”
Long before banks commenced recovery processes for their N5 trillion credit facilities in the energy sector, signs of recession had begun to manifest on the over $4 billion marginal fields’ operations in Nigeria. The books of many local oil operators are already in the red, making them to be on the cliff of bankruptcy.
While 17 out of the 24 marginal fields issued to 31 firms during the 2003 bid round could not produce, this newspaper gathered that the financial books of some of the seven operating marginal fields are in red due to oil price rout and the renewed militancy in the Niger Delta. Banks and other lenders have, however, exchanged correspondence with the operators, expressing the fear that over $130 million loans ploughed into the marginal field operations between 2007 and 2011 may go bad.
A manager at oil and gas investment section of one of the new generation banks told this newspaper: “It is not enough to stop the flow of new investment in the section, what happens to the investment already made is major cause for concern as we speak.
“It will interest you to know that between 2007 and 2011 alone three banks in Nigeria invested $130 million in the marginal fields.” All those who have invested in this industry, he said, are already fretting over the books of most of these indigenous producers that are turning red.
The banker said: “Skye Bank has funded a number of marginal field projects such as the Platform Petroleum’s Gas Processing Plant and WalterSmith’s Production Boost Project.” Skye Bank, last year, approved a loan facility of $18 million for Pillar Oil, to enable the company drill a well at an interest rate of 17per cent per annum.
“The former Intercontinental Bank approved $6 million for Niger Delta Petroleum for the ‘work-over’ of Ogbelle 1, at an interest rate of 18 per cent per annum, a project that led to their crucial first oil. “Brittania-U received its initial funding of $23 million from Union Bank in 2007 for its project on the Ajapa field.
“By the time Brittania-U reached first oil, this loan had increased to $50 million. Brittania-U also received an additional $30 million loan facility from Union Bank, which the company used to buy-out its ‘troublesome’ foreign technical partners.”
Meanwhile, the Federal Government, last weekend, shored up for available oil blocks planned for bid round in May, even as threats on finance mount for prospective investors for the programme. Licensing rounds are a veritable avenue to raise quick funds for government, which awarded a large expanse of land/oil block to exploration and production companies while also expanding the country’s production capacities.
The last administration had tried to execute a licensing round, but could not pull it off due to lack of confidence in the process, as it was feared that the oil block usually awarded to oil drilling and exploration companies would end up in the hands of political cronies.
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