Nigerian state oil firm wants up to $5bn pre-payment to fund upstream projects
London — Nigeria’s state oil firm is looking to set up a $3.5bn to $5bn cash-for-crude pre-payment with some of the world’s top commodity traders to fund oil and gas upstream projects, as well as related infrastructure, sources with direct knowledge of the matter said.
Africa’s biggest oil producer and oil cartel Opec member was hit hard by the sharp drop in global oil prices in 2014 that pushed it into its first recession in 25 years. The country returned to growth-mode in the second quarter.
Already cash-strapped and weighed down by billions of dollars in old debts, the Nigerian National Petroleum Corporation (NNPC) has also been looking to bring in outside cash. The sources said Standard Chartered was hired to advise on the oil pre-payment and a request-for-proposal was issued a few weeks ago for a $3.5bn to $5bn loan to be repaid with crude over five to seven years, the sources said.
A spokesperson for Standard Chartered declined to comment, as did a spokesperson for NNPC.
The sources added that a decision was expected before the end of the year. About seven trading firms were still in the running, one added, with top trading houses Glencore, Vitol and Trafigura among the active contenders. They all declined to comment.
The country is seeking three off-takers, one of the sources said, against 70,000 barrels per day (bpd) of crude.
Vitol already has a major presence in Nigeria after buying petrol stations via a joint venture with local producer Oando and private equity fund Helios. Vitol is also among a list of majors traders, including Trafigura, that participate in a swap scheme to deliver refined products in exchange for crude.
Profit margins for trading firms have been slowly eroding over the past few years as transparency in oil markets has increased, reducing arbitrage opportunities, once based on privileged information. Increasing traded volumes is one way to raise profits and competition is fierce for pre-payment deals with state oil firms.
The NNPC has had cash-flow problems for years and has been chronically behind payments for its stakes in upstream joint ventures with Shell, Chevron, Total, Eni and ExxonMobil.
After project development began to stall following the collapse in oil prices, Nigerian oil minister Emmanuel Ibe Kachikwu reached a deal last year with its major foreign oil producers to repay $5.1bn over five years, interest free.
The NNPC has already leveraged more than 300,000 bpd of crude to cover current fuel imports via a crude-for-product swap scheme, as well as debts to traders dating back nearly a decade.