CNPC Finance (HK) Limited provides $203 million oil prepayment facility for 200 km Petroleum Road Construction Project (Linked to Project ID#2137, #58433, #58435)

On June 2, 2008, CNPC Niger Petroleum S.A. (中国石油尼日尔项目公司 or CNPC-NP or CNPCNP) — a special purpose vehicle and wholly owned subsidiary of CNPC — and the Government of Niger signed a production sharing contract (PSC). The contract granted exclusive exploitation rights to CNPC Niger Petroleum S.A. for Phase 1 and Phase 2 of the Agadem oil field (via Decree No. 2008-177/PRN/MME). Then, on November 28, 2011, the Government of Niger and CNPC Niger Petroleum S.A. signed an agreement (‘memorandum’) on the Niger Petroleum Road Project. Under the terms of the agreement, CNPC Finance (HK) Limited issued an oil prepayment facility — also known as a pre-export finance (PXF) facility — worth approximately $203 million to CNPC Niger Petroleum S.A. to support the implementation of the Niger Petroleum Road Project. The facility is a loan that provides cash advances in exchange for future oil sales. It carries an interest rate of LIBOR plus a 3.5% margin. However, its other borrowing terms (maturity, grace period, etc.) are unknown. The borrower is expected to repay the loan with the proceeds from oil sales derived from the June 2, 2008 production sharing contract (PSC). The proceeds of the loan are to be used by the borrower to finance a commercial (EPC) contract between CNPC Niger Petroleum S.A. and China Petroleum Engineering Co., Ltd (CPE). The purpose of the project is to support the development of a 185 km road (also known as the ‘Unity Road’ and ‘Oil Road’) connecting Diffa to N'Guigimi and the country’s border with Chad. The project has two main components: the rehabilitation of a 130 km road segment from Diffa to N'Guigmi (known as RN 1) and the construction of a 55 km road segment from N'Guigmi to the country’s border with Chad. China Petroleum Engineering Co., Ltd (CPE) is the general EPC contractor responsible for project implementation. A formal project commencement ceremony took place on July 3, 2012. At the ceremony, Niger’s President requested an expansion of the project scope to include the construction of 15 kilometers of urban roads and ancillary facilities in the two cities and towns of Diffa, N'Guigmi, and Mainé-Soroa. The request was approved, which resulted in additional project design work between July 2012 and November 2012. However, construction activities were suspended in February 2015 due to insecurity created by the jihadist group Boko Haram. Prior to the suspension of road works, CPE and its Chinese subcontractor — CNPC DAGANG Niger Engineering — had completed the 60 km Diffa-Kablewa section of the Petroleum Road. When construction finally resumed in October 2020, CPE made two Nigerien firms (EGBTP and MWazir) responsible for road construction. EGBTP was given responsibility for the Kindjandi-Kablewa-N'Guigmi section of the road and MWazir was given responsibility for a section of the road that connects N'Guigmi, Boula Birin and the Chad border. According to the Government of Niger's Aid Management Platform, the project’s originally expected implementation start date was May 1, 2013 and its originally expected completion date was December 31, 2015.

Additional details

1. This project is also known as the Development and Asphalting of the Diffa-N'Guigmi Chad Border Road and 15 km of Urban Roads in the Towns of Diffa, N'Guigmi and Mainé-Soroa Project. The Chinese project title is 尼日尔石油公路工程 or 尼日尔石油公路项目 or 尼日尔石油公路工程 or 石油公路项目. The French project title is La réhabilitation de la route Diffa-N'guigmi et son prolongement jusqu'à la frontière tchadienne or Route du pétrole or Prolongement de la Route de l'Unite or Aménagement et bitumage de la route Diffa - N'Guigmi - Frontière du Tchad (182km) et 15 km de voiries dans les villes de Diffa, N’Guiguimi et Mainé-Soroa. 2. Mr. Cheng Cunzhi CEO CNPCNP.SA Niger. 3. The ownership structure of CNPC Niger Petroleum S.A., which was legally incorporated in Niger in 2008, is described in Annex 16 of https://eiti.org/sites/default/files/attachments/rapport-itie-niger-2019-version-finale-301121.pdf. 4. The June 2, 2008 production sharing contract can be accessed in its entirety via https://www.dropbox.com/s/unte8cvls2wwgj1/Avenant%20Signe%20No3..pdf?dl=0. 5. The PSC equity arrangement was revised on August 23, 2013 such that CNPC Niger Petroleum S.A. has a 65% ownership stake, Taiwan’s China Petroleum Corporation (CPC) has a 20% ownership state, and the Government of Niger has a 15% ownership stake in the production sharing arrangement for the Agadem oil fields. 6. Some sources refer to the face value of the loan as EUR 152 million or CFA 99,801,900,000. This issue warrants further investigation. 7. A pre-export finance (PXF) facility is an arrangement in which a commodity (e.g. oil) producer gets up-front cash from a customer in return for a promise to repay the customer with that commodity (possibly at a discount) in the future. PXF funds may be advanced by a lender or syndicate of lenders to a commodity producer to assist the company in meeting either its working capital needs (for example, to cover the purchase of raw materials and costs associated with processing, storage and transport) or its capital investment needs (for example, investment in plant and machinery and other elements of infrastructure). PXF facilities are usually secured by (1) an assignment of rights by the producer under an ‘offtake contract’ (i.e., a sale and purchase contract between the producer and a buyer of that producer of goods or commodities), and (2) a collection account charge over a bank account into which proceeds due to the producer from the buyer of the goods or commodities under the offtake contract are credited. There are two key documents in prepayment finance transactions: a contract providing for the advance payment by the offtaker to the producer for the purchase of goods/commodities (the 'Prepayment Contract'), and a loan agreement between a lender and the offtaker (the 'Offtaker Loan Agreement') under which the advance payment is financed. 8. AidData has estimated the all-in interest rate by adding 3.5% to average 6-month LIBOR in November 2011 (0.681%). 9. On November 28, 2011, Phase I of the Agadem upstream and downstream integrated project was completed and became operational. In the first few years following the completion of Phase I, Government of Niger revenues from the integrated oil project slightly exceeded $100 million annually. 10. There are some indications that CNPC may have issued one or more additional loans — via oil prepayment arrangements — to CNPC Niger Petroleum S.A. for the first and/or second phase development of the Agadem oilfield 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). Phase II construction activities began in 2019 (http://news.cnpc.com.cn/system/2021/12/28/030054455.shtml and https://www.cnpc.com.cn/en/2014enbvfgrme/202007/02e6080b1729423c975cd6652a9272a8/files/8db982d1633d48608f9186e47d63b589.pdf).

Number of official sources

12

Number of total sources

48