Narrative
Full Description
Project narrative
On June 2, 2008, the Government of Niger and China National Oil and Gas Exploration and Development Corporation (CNODC) — a subsidiary of China National Petroleum Corporation (CNPC) — signed a product sharing contract (PSC) for the Agadem Oilfield (‘Agadem Block’), which is situated in Termit Basin in the southeast of Niger, 1,200 km at the south end of the Sahara Desert to the east of Niamey (with a plot area of 27,516km2). CNODC won the PSC because the ExxonMobil-Petronas consortium had withdrawn from Niger in 2006 after 4 years of exploration. CNODC was also reportedly the only oil company that agreed to pay $300 million signing bonus (of which $180 million would need to be repaid at an interest rate of 3-month LIBOR plus a 3.5% margin) to the Government of Niger. Under the terms of the PSC, CNODC and the Government of Niger were given 85% and 15% participating interests, respectively, in the Agadem Oilfield. CNODC agreed to invest approximately $5 billion in Phase 1 of Agadem Oilfield Development and Oil Pipeline Construction Project. The PSC also allowed for the Government of Niger (as a 15 percent shareholder) to receive government revenue from Phase 1 of the Agadem Oilfield Development and Oil Pipeline Construction Project — via upstream and pipeline royalties, a share of ‘profit oil’ (which must be used to meet income tax obligations), and an additional share of ‘cost oil’ and ‘profit oil’. CNODC agreed to finance the Government of Niger’s 15% share of the total capital cost of the oil field exploration and exploitation and pipeline construction, and the Government of Niger agreed to forego its share of ‘cost oil’ to repay the financing of its 15% share of the total capital cost. This ‘carried interest’ arrangement was subject to an interest rate of 3-month LIBOR plus a 3.5% margin. On July 1, 2008, CNODC and CNPC Niger Petroleum S.A. — also known as China National Petroleum Corporation (CNPC) Niger Petroleum S.A., 中国石油尼日尔项目公司, CNPCNP and CNPC-NP — signed a transfer agreement, which assigned all of the rights and responsibilities under the June 2, 2008 PSC to CNPC Niger Petroleum S.A. Then, on August 19, 2010, the Government of Nigeria assigned CNPC Niger Petroleum S.A. the rights and responsibilities to the exclusive exploitation area (EEA) for the Goumeri, Sokor and Agadi oil deposits. On April 6, 2011, the Government of Niger and CNPC Niger Petroleum S.A. signed on oil pipeline (transportation) agreement. On September 29, 2011, CNPC Niger Petroleum S.A. agreed to sell a 20% participating interest in the Agadem Oilfield to Taiwan’s CPC Corporation (also known as Overseas Petroleum and Investment Corporation or OPIC). Then, on August 23, 2013, OPIC transferred its 20% participating interest to a wholly-owned subsidiary known as OPIC Niger. In November 2013, the Government of Niger a second exploration permit -- known in French as ‘l’autorisation exclusive d'exploitation (AEE)’ — to CNPC Niger Petroleum S.A. for another 59 wells (deposits) in the Agadem oil block. The project was developed and constructed in two phases. China Petroleum Engineering Co., Ltd. SARL (CPE) was the EPC contractor responsible for Phase 1 and Phase 2. Phase 1 was expected to cost $5 billion (with $1 billion earmarked for the construction of the SORAZ oil refinery in Zinder, $2 billion earmarked for the construction of a 462.5 km pipeline from the Gouméri station at the Agadem oil field to the SORAZ oil refinery in Zinder), and the remainder ($2 billion) earmarked for oil exploration activities and oilfield surface facility construction activities). Construction of Phase 1 surface facilities for the Agadem Oilfield began in October 2009 and concluded on April 15, 2011. The construction of the 462.5 km Agadem-Zinder pipeline commenced on May 1, 2009 and concluded on December 31, 2011. The SORAZ oil refinery in Zinder, which was constructed with an $880 million from China Eximbank and CNPC Niger Petroleum S.A. (as captured via Record ID#73319), signed an oil supply agreement with CNPC Niger Petroleum S.A. in September 2011. Then, on November 28, 2011, the SORAZ oil refinery in Zinder was officially inaugurated. Phase 1 oil extraction operations commenced on the same day, which allowed for the production of 20,000 barrels of crude oil per day (or 1 million tons of crude oil per year) at the SORAZ oil refinery. Phase 2 construction activities commenced on September 17, 2019 and they were originally expected to reach completion on October 1, 2023. Phase 2 was expected to cost $6.1 billion: $4 billion for oil field development and $2.1 billion for the construction of the Niger-Benin crude oil export pipeline and the Port of Seme export terminal. On November 1, 2023, Phase 2 was completed and put into operation, allowing for an increase in the production of crude oil from 20,000 to 110,000 barrels of crude oil per day. The CNPC shareholder loan that supported Phase 1 of the Agadem Oilfield Development and Oil Pipeline Construction Project is captured via Record ID#2137. The CNPC shareholder loan that supported Phase 2 of the Agadem Oilfield Development and Oil Pipeline Construction Project is captured via Record ID#104711.
Staff comments
1. For loan and debt rescheduling records with variable interest rates, AidData calculates the all-in interest rate at T0 based on the reference rate (such as LIBOR or EURIBOR) on the loan start date, plus any known margin. Please see the methodology for additional details. Per the terms of the PSA, the interest rate of 3-month LIBOR plus a 3.5% margin applies both to ‘exploration carry’ and the ‘development carry’. 2. This project is also known as Phase 1 of the Agadem Oil Field Surface Facilities Development Project and the 462.5 km Agadem-Zinder Pipeline Construction Project. The Chinese project title is 阿加德姆二期 or 中石油在尼日尔的阿加德姆油田二期开发地面工程及管道建设一体化项目 or 尼日尔的阿加德姆油田二期开发地面工程及管道建设一体化项目 or 尼日尔油田二期目 or 尼日尔阿加德姆上下游一体化项目 or 尼日尔油田地面设施维护项目 or 尼日尔AGADEM第一阶段油地面工程项目 or 尼日尔输油管道工程PMC项目 or 尼日尔阿贾德姆油田原油管道工程. The French project title is le projet pétrolier Agadem. 3. CNPC Niger Petroleum S.A. is a special purpose vehicle legally incorporated in Niger and a joint venture of CNPC (85% ownership stake) and the Government of Niger (15% ownership stake) that is responsible for the upstream-midstream-downstream integrated project. 4. CPC Corporation is a state-owned petroleum, natural gas, and gasoline company in Taiwan and is the core of the Taiwanese petrochemicals industry. 5. The June 2, 2008 PSC can be accessed in its entirety via https://www.dropbox.com/scl/fi/t0fm655v60xkdtlh2yqa1/5759-china-national-oil-gas-exploration-and-development-corporation-psa-200....pdf?rlkey=se13vc0j23tbh5x8butq3hiri&dl=0. Amendment #2 to the PSC, which was signed on December 12, 2011, can be accessed in its entirety via https://www.dropbox.com/scl/fi/wgn824u0uudav16iaxvnp/5762-china-national-oil-gas-exploration-and-development-corporation-amendme....pdf?rlkey=4nu0qr78veeoaxj33kks2si98&dl=0. Amendment #3 to the the PSC, which was signed in January 2012, can be accessed it its entirety via https://www.dropbox.com/scl/fi/r1h7t2w4uq0txp7x42glr/5761-china-national-oil-gas-exploration-and-development-corporation-amendme....pdf?rlkey=79yoty5xin2oh1mqf3xrtshzq&dl=0. Amendment #4 to the PSC, which was signed on June 20, 2018, can be accessed in its entirety via https://www.dropbox.com/scl/fi/1e2vlta3z5mn9ph0we17g/5760-china-national-oil-gas-exploration-and-development-corporation-amendme....pdf?rlkey=m0lihd21cw1qn29f01qbsibfh&dl=0. 6. SORAZ and CNPC Niger Petroleum S.A. signed an oil supply agreement can be accessed in its entirety via https://drive.google.com/file/d/1G9s24JJPj5Y3J3k6i_mEseWvIenWHGxA/view. 7. The Government of Niger estimates proven reserves (2P) of oil in the Agadem block at 815 million barrels. 8. One source claims that $4 billion of pre-financing from CNPC was provided for Phase 2 of the Agadem Oilfield Development and Oil Pipeline Construction Project (http://french.xinhuanet.com/2018-09/06/c_137450059.htm). This issue warrants further investigation. 9. CNPC and China Eximbank financing for the SORAZ Oil Refinery Project, the Petroleum Road Project, and the Niger Section of the Niger-Benin Oil Pipeline Construction Project is separately captured via Record ID#58435, #31046, #73319. 10. The Phase 1 production facilities at the Agadem oil block consist of one (1) main crude oil processing center, CPF (Central Processing Facilities), at the Gouméri field, and one (1) secondary crude oil processing center, FPF (Field Processing Facilities), at the Sokor field. Four (4) fluid collectors (OGM: Oil Gathering Manifold) were built on the Gouméri field, and one (1) OGM on the Sokor field. Crude oil from the Sokor field is transported to the CPF in Gouméri in 12” diameter pipes, over a length of 58 km. In the opposite direction, 6” diameter pipes transport natural gas from the CPF in Gouméri to the site. of Sokor, for energy production needs. 11. The Agadem-Zinder pipeline was designed to exclusively transport crude oil from the Agadem block to the Zinder refinery (SORAZ). It has a capacity to transport one million tons of crude oil per year. With a length of 462.5 km and a diameter of 12”, it is made up of five intermediate pumping stations, in addition to the initial station in Gouméri, and the terminal station in Zinder. 12. In order the estimate the face value of the shareholder loan that CNPC provided to the Government of Niger to cover its 15% share of the total capital cost of Phase 1 (oil field exploration and exploitation and pipeline construction) activities, AidData starts with the total estimated cost ($5 billion) of Phase 1 and deducts the $1 billion estimated cost of constructing the SORAZ oil refinery in Zinder (since this financial commitment is separately captured via Record ID#73319). It then multiplies the remaining cost ($4 billion) by 15%, which results in an estimated shareholder loan of $600 million. In order the estimate the face value of the shareholder loan that CNPC provided to the Government of Niger to cover its 15% share of the total capital cost of Phase 2 activities, AidData takes the total estimated cost ($4 billion) of Phase 2 (exclusive of the $2.1 billion cost of constructing the Niger-Benin crude oil export pipeline and the Port of Seme export terminal) and multiplies it by 15%, which results in an estimated shareholder loan of $600 million. 13. There are some indications that CNPC Niger Petroleum S.A. may have secured additional Chinese loans for Phases 1 and/or 2 of the Agadem Oilfield Development and Oil Pipeline Construction Project According to the IMF’s Coordinated Direct Investment Survey, Niger owed FDI debt of $2.5 billion to Chinese residents in 2019 and $5 billion in 2020 (https://data.imf.org/regular.aspx?key=60564261). This issue warrants further investigation.