Narrative
Full Description
Project narrative
In October 2019, NNPC Executive Vice President, Mr. Adokiye Tombomieye, announced the discovery of crude oil, gas and condensate in the Kolmani River region at the border community between Bauchi and Gombe states. This oil field was to be developed by Sterling Global Oil, New Nigeria Development Company and NNPC Limited and the development was expected to involve the construction of 120,000 barrels per day refinery, gas processing plant, power plant, and a fertilizer plant. Then, on November 30, 2022, Northern Hydrocarbon Funding Limited — a special purpose vehicle and joint venture between Nigerian National Petroleum Corporation (NNPC) Limited [60% equity stake] and Chevron Nigeria Limited (CNL) [40% equity stake]-- signed a $1.4 billion syndicated project finance (loan) agreement with 16 international banks (including Standard Chartered Bank UK, United Bank for Africa (UBA), Bank of China, ICBC, ICBC Standard, Societe Generale, Deutsche Bank, Union Bank of Nigeria, Nedbank, First Bank, Zenith Bank, ABSA, RMB, Standard Bank, Access Bank, and Guaranty Trust Bank) for Project Panther. The loan consists of two tranches (facilities): a $840 million commercial bank tranche (facility) and a $560 million Chevron co-lending tranche (facility). It carries a 7-year maturity and an interest rate of LIBOR plus a 5% margin. The interest rate, at some point prior to July 2024, transitioned from a LIBOR-based variable rate to a SOFR-based rate: the 3 month SOFR plus a 5.5% margin, plus a 1% liquidity premium. The loan was also secured by (i.e. collateralized against) the balance sheet and accounts of the SPV, as well as cash and the SPV itself. The proceeds of the loan are to be used by the borrower to monetize reserves, increase production by arresting the decline in the joint venture’s assets, and support the energy transition via producing gas for domestic supplies. As of July 31, 2024, $359 million had been disbursed from the facility and $0 had been repaid. Principal repayments were expected to begin after a moratorium of an unspecified length. The purpose of the Kolmani Oil Field Project is to increase oil production — across 10 fields in Oil Mining Licenses (OMLs) 49, 90, and 95 — in the Gongola Basin between Bauchi and Gombe states. The project scope covers 37 development wells, 31 oil producers, one gas well, and five water injectors spread across 10 NNPCL/CNL joint venture fields from 2022 to 2026. The gas well development project component supports Nigeria’s energy transition aspirations through increased use of gas resources for local commercialization. The project output is expected to include 40% for gas production, all of which will be sent to the local gas supply network. No-flare facilities are also expected to reduce the project’s carbon intensity. President Muhammadu Buhari attended a project commencement ceremony on November 22, 2022.
Staff comments
1. This project is also known as Project Panther and the Kolmani Development Project. 2. White & Case advised the lenders and Latham & Watkins the sponsors. 3. The Kolmani oilfield is located in the Gongola Basin between Bauchi and Gombe states. It will be jointly developed by NNPC Limited alongside Sterling Global Oil and New Nigeria Development Company. 4. On July 1, 2022, the Nigerian National Petroleum Company Limited was legally transformed into a company, whose operations and activities are regulated under the Companies and Allied Matters Act (CAMA). The Corporate Affairs Commission (CAC) on September 21, 2021, completed the incorporation of the NNPC Limited in accordance with the provisions of the Petroleum Industry Act, 2021, which was signed into law by President Muhammadu Buhari on August 16, 2021, following its passage by the National Assembly in July. Section 53(1) of the Petroleum Industry Act 2021 requires Nigeria’s Minister of Petroleum Resources to cause the incorporation of the NNPC Limited within six months of the enactment of the Petroleum Industry Act in consultation with the Minister of Finance on the nominal shares of the company. The landmark event officially changed the oil firm from a corporation (a wholly state-run entity) to a commercial oil company, limited by shares. The new entity is expected to become a commercially oriented and profit-driven national petroleum company independent of government, although government bodies remain its shareholders. It will be audited annually. 5. AidData has estimated the all-in interest rate by adding 5% to 6-month LIBOR at the time the loan was signed. 6. The size of ICBC Standard's contribution to the lending syndicate is unknown. For the time being, AidData assumes equal contributions to the $840 million commercial bank tranche across the 16 known members of the syndicate ($52.5 million). 7. The Nigeria Extractive Industries Transparency Initiative Oil and Gas Industry Audit in 2023 reported that 23,500 barrels per day had been pledged in association with Project Panther. It is not clear if there is an offtake agreement (or similar agreement) associated with this financing package that is unaccounted for, or if the 23,500 barrels were pledged by the borrower, Northern Hydrocarbon Funding Limited, to fulfill a separate forward sale agreement signed by NPCC with Eagle Export Funding Limited as described in NPCC's 2023 Financial Statements. This issue warrants further investigation.