The Nigerian National Petroleum Corporation (NNPC) on Tuesday sealed a $1.619 billion modified carry arrangement (MCA) deal with the Shell Petroleum Development Company (SPDC) of Nigeria joint venture for the expansion of the Gbarain-Ubie Gas Gathering project in the Niger Delta region.
The sealing of the deal, which is the third to be undertaken between the two parties, was consequent upon a presidential directive of December 2007 for major oil companies operating in the country to source for additional funding of their programmes and projects in the country through various alternative funding schemes.
The latest agreement brings to three the total number of MCAs signed with Shell valued at about $2.4 billion, including the $538 million bridge loan signed earlier last year.
Specifically, following the $3 billion shortfall in the government’s share of the $8.8 billion funding outlay for the joint venture for 2008, the NNPC and its partners were authorized to explore various arrangements to raise the funding.
After discussion on various schemes, including the carry arrangement, bridge loans, term loan and bank loans, the NNPC and Shell settled for the MCA to take care of the project, which has remained a strategic initiative, being the main supply of natural gas for the multi-billion dollar Nigeria LNG project in Bonny.
The terms and conditions of the deal, which will attract tax reliefs at the rate of about 15 percent, will cover the period between 2007 till 2012.
A breakdown of the package reveals that the sum of $219million will cover 2007; $481million (2008); $454million (2009); $257million (2010), and $281million for 2011 and 2012.
Signing the agreement on behalf of NNPC, its Group Managing Director, Mohammed Barkindo, said the deal is the best option for ongoing and expansion projects to help sustain operations in the oil and gas industry towards the full realization of national objectives.
Describing the deal as coming at the most opportune moment when the global financial system has come under serious stress, Barkindo said the expansion of the scope of the project to include gas feed, oil well and condensate development as well as gas supply to independent power projects (IPPs), gas pipelines and gas gathering systems, will help realize strategic national goals.
Managing Director, Shell Petroleum Development Company (SPDC), Mutiu Sunmonu, who described the deal as the single largest MCA to be signed with the NNPC, disclosed that the heads of agreement for the deal was signed last May as part of efforts to search for alternative funding for its programmes in the country.
He said prior to the latest agreement, a loan agreement for about $3billion was signed between the two partners, saying it epitomizes the joint ventures practical commitment to its partnership with the Federal Government to development of Nigeria’s oil and gas industry, as it will help generate significant wealth for the country in terms of employment, especially for the youths in the Niger Delta.
"It is a practical demonstration of international oil companies (IOCs) commitment to the growth of the industry. For Shell, there can be no practical way of demonstrating our commitment to the economy and the social development of the country than the deal to allow the project go on without any problem," he explained.