Nigeria and Total sign $1 billion oil deal

Reuters

Nigeria and Total sign $1 billion oil deal

Fri May 16, 2008 3:46pm EDT

ABUJA (Reuters) – Nigeria has signed a $1 billion deal with French energy group Total (TOTF.PA: Quote, Profile, Research) to help resolve the chronic funding shortfalls that have delayed some of their joint venture projects, Nigeria’s state-run oil company said on Friday.

President Umaru Yar’Adua has been keen to bridge the funding gap in Nigeria’s mainstay oil industry through private sector financing since he took power about a year ago.

Under the agreement signed in the capital Abuja, Total will loan the money to the Nigerian National Petroleum Corp. to fund its portion of the 2008 upstream operations, while the NNPC will pay back in cash and not with crude oil as was the case in the past, the state-owned firm said in a statement.

The funding agreement is the first between Nigeria, the world’s eighth-biggest oil exporter and any of its five joint venture partners. Total is Nigeria’s number four oil producer.

“The funding will be judiciously used to finance major oil and gas upstream development projects in the NNPC/EPNL (Total’s local unit Elf Petroleum Nigeria Ltd) JV projects,” NNPC group managing director Abubakar Yar’Adua said.

Yar’Adua said the deal provided a sound structural financing framework for future upstream activities and would also help Nigeria, Africa’s top oil producer, achieve its gas production target to feed power plants now under construction and supply local industry.

A similar deal is being finalized with Royal Dutch Shell (RDSa.L: Quote,Profile, Research), once Nigeria’s biggest oil producing company before its output was significantly slashed by militant attacks in the Niger Delta, officials said.

Nigeria’s other joint venture operators are Chevron (CVX.N: Quote,Profile, Research), Exxon Mobil (XOM.N: Quote, Profile, Research) and Agip (ENI.MI: Quote, Profile, Research).

Energy Minister Odein Ajumogobia said last month Nigeria also planned to raise cash on both the international and local capital markets to help fund the joint venture projects and avoid future shortfalls.

The 2008 budget for joint ventures, in which NNPC holds a 55 percent equity, stands $15.2 billion, out of which Nigeria will provide $8.8 billion. The government has provided $4.9 billion as cash call in this year’s budget, while the balance of $3.8 billion will be privately sourced, officials said.

Funding shortfalls and militant attacks on the oil industry have depressed Nigerian output by a fifth since 2006.

(For full Reuters Africa coverage and to have your say on the top issues, visit: africa.reuters.com/ )

(Reporting by Camillus Eboh, writing by Tume Ahemba)