CPFHK provides loan for Niger Section of the Niger-Benin Oil Pipeline Construction Project (Linked to Project ID#2137, #31046, #58433, #73319)

On September 20, 2018, the Government of Niger and the China National Oil and Gas Exploration and Development Company Ltd. (CNODC) — a subsidiary of China National Petroleum Corporation (CNPC) — entered into a framework agreement for the construction and operation of the cross-border crude oil export pipeline from Niger to Benin. Through this agreement, CNODC/CNPC pledged to provide $4 billion (about CFA 2 billion) of pre-export financing (PxF) to the Government of Niger for the Niger Section of the Niger-Benin Oil Pipeline Construction Project. Then, on January 23, 2019, the Government of Niger and the Government of Benin signed a bilateral agreement on the Niger-Benin Oil Pipeline Construction Project. Approximately four months later, on April 26, 2019, the West African Oil Pipeline (Niger) Company S.A. [WAPCo-Niger; 中油国际尼贝管道公司 or 西非石油公司) in Chinese] — a special purpose vehicle and joint venture of CNPC (85% ownership stake) and the Government of Niger (15% ownership stake) — was legally incorporated and made responsible for the financing, construction, operation, maintenance and management of the Niger section of the Niger-Benin Oil Pipeline. Then, in September 2019, the Government of Niger and CNPC signed a transport convention on the pipeline, following a similar agreement between the Government of Benin and CNPC. The convention set third-party access rules, minimum local content shares, and transportation (transit) fees. The total cost of the Niger Section of the Niger-Benin Oil Pipeline Construction Project is $1.3 billion and it is being financed according to a debt-to-equity ratio of 80:20. CNPC Finance (HK) Limited (CPFHK) — a subsidiary of the China National Petroleum Corporation (CNPC) — issued a loan worth an estimated $1.04 billion to WAPCO Niger for the Niger Section of the Niger-Benin Oil Pipeline Construction Project. The loan’s estimated interest rate is 8.05%. The other borrowing terms of the loan are unknown. The borrower reportedly plans to repay CPFHK with the proceeds from crude oil sales. The purpose of the project is to construct the 1,293 km Niger section of the 1,980 km Niger-Benin Oil Pipeline, which connects Niger's Agadem Rift Basin to the Port of Sèmè export terminal in the town of Sèmè-Kpodji. The first station of the crude oil export pipeline in Niger is located at the Koulele origin station beside the Koulele Centralized Processing Station (Agadem Koulele CPF) of Agadem Oil Zone in Diffa in southeast of Niger. The pipeline then passes through the southwest part of Niamey, Niger’s capital. Upon completion, the pipeline is expected to have a capacity of 90,000 barrels per day (bpd). China Petroleum Planning and Engineering Institute (CPPEI) and the China Petroleum Pipeline Engineering (CPPE) are the contractors responsible for project implementation. Construction began in Niger on September 17, 2019 and the pipeline was originally scheduled for completion in January 2022. However, the COVID-19 pandemic led to implementation delays. As of November 9, 2021, the Dibeilla-Koulele section of the pipeline in the Dibeilla block of Niger had completed a 40 km pipeline alignment. The Dibeilla-Koulele pipeline section alignment work started on October 27, 2021. The Dibeilla-Koulele pipeline section has a total length of 80 kilometers, a diameter of 35.56 millimeters, and wall thickness of 9.53 millimeters. Starting from the Koulele CPF station, it passes through the FANAS-1 and FANAW-1 valve chamber, and ends in the Dibeilla degassing station. As of October 10, 2022, the project had achieved a 30% completion rate and 600 km of pipeline had been laid. Then, on October 14, 2022, Chinese state-owned broadcaster CGTN referred to the Niger-Benin Oil Pipeline Construction Project as ‘an integral part of China’s Belt and Road Initiative’.

Additional details

1. This project is also known as Phase 2 of the Agadem Oil Project. The French project title is Le Projet Pétrolier Agadem II or Projet Pipeline d'Export Niger-Bénin or Projet de Pipeline d'Exportation Niger-Bénin. The Chinese project titles are 尼日尔二期一体化项目 and 尼日尔-贝宁原油外输管道项目 or 阿加德姆二期项目 or 尼日尔阿加德姆上下游一体化项目 or 西非跨国输油管道项目 or 尼日尔―贝宁油管项目 or 尼日尔-贝宁原油外输管道工程 or 阿加德姆二期油田及外输管道建设项目. 2. Phase 1 (captured in Project ID#73319) was supported by a $880 million China Eximbank loan that was issued in 2008 to the joint venture established between China National Petroleum Corporation (CNPC) and the Government of Niger, Société de Raffinage de Zinder (SORAZ), to process oil from CNPC’s Agadem block in Niger (captured via Project ID#2137). It involved the construction of the Soraz oil refinery in the village and rural commune of Ollelewa within Tanout Department and Zinder Region. The refinery, which was inaugurated on November 28, 2011, was designed to have a 20,000 barrel-per-day production capacity and to be fed entirely by oil from the newly-launched Agadem oilfield a further 700 km east. China Eximbank restructured the loan for Phase 1 in 2011 (see Project ID#58433), and CNPC spent $210 million in 2013 on a road that leads to the Soraz Oil Refinery (see Project ID#31046). 3. The CNPC Finance (HK) Limited loan is not captured in the Chinese Loans to Africa Database developed by SAIS-CARI and maintained by the Global Development Policy Center at Boston University. 4. The face value of the CNPC Finance (HK) Limited loan is unknown. However, given that the total cost of the Niger Section of the Niger-Benin Oil Pipeline Construction Project is $1.3 billion and CNPC Finance (HK) Limited agreed to finance 80% of the project cost with debt, AidData assumes that the face value of the CNPC Finance (HK) Limited loan was roughly equivalent to $1.04 billion. This issue warrants further investigation. Further research is also needed to determine if the CNPC Finance (HK) Limited was supported by any credit enhancements. 5. Africa Energy Intelligence identifies CNPC Finance (HK) Limited as the lender. 6. A feasibility study for the Niger-Benin Oil Pipeline Construction Project — undertaken by the China Petroleum Planning and Engineering Institute (CPPEI) and the China Petroleum Pipeline Engineering (CPPE) — recommended that CPFHK lend at an interest rate between 7.9% and 8.2%. As such, AidData has estimated the loan’s interest rate by taking the midpoint of this range (8.05%). 7. The precise financial commitment (loan signing) date is unknown. For the time being, AidData assumes a commitment year of 2019 since this was the first year of project implementation. 8. 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). 9. Relevant project contacts include Kabirou Zakari, the Director of Hydrocarbons at the Nigerien Ministry of Oil and Nafiou Issaka, the Deputy General Manager of WAPCo-Niger. 10. According to an April 2022 World Bank publication (https://documents1.worldbank.org/curated/en/099605105092251771/pdf/P17725409626890c00921f0697c07bec87e.pdf), the Government of Niger holds a 15% ownership stake in WAPCo-Niger (worth 2.4% of GDP or approximately $372 million). An earlier IMF report (from January 2020) noted that the pipeline ‘will be majority owned by CNPC with the state of Niger having the option to buy into its equity. Such participation would entitle the state to a revenue stream in foreign currency that could be used to service any foreign debt that may be contracted to finance its investment.’ 11. A pre-export finance (PXF) facility is an arrangement in which a commodity 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. 12. The January 23, 2019 bilateral agreement between the Government of Niger and the Government of Benin on the Niger-Benin Oil Pipeline Construction Project can be accessed in its entirety via https://www.dropbox.com/s/2jdcbk00xhwynim/Accord%20Bilat%C3%A9ral%20Niger-B%C3%A9nin.pdf?dl=0.

Number of official sources

22

Number of total sources

55