Chevron, NNPC Agree to Fund Sonam
Nigerian state producer NNPC and Chevron have signed a deal to finance completion of the Sonam project, a joint offshore oil and gas development.
Chevron Nigeria managing director Jeffrey Ewing and NNPC group managing director Maikanti Baru signed the agreement August 1.
Baru said the joint venture partner (Chevron) had already invested $1.5bn, representing 97% of project completion costs to date. Their agreement would now cover the remaining $780mn required to complete the project's scope, he added, of which $400mn to fund the development of seven wells on Sonam (OML 91), the Okan 30E non-associated gas well (OML 90), and associated facilities including completion of the Sonam non-associated gas well platform and $380mn to reimburse partners for the 2016 portion of funds committed to lenders that partners had since repaid.
Chevron's website says that the Sonam field development is designed to use the Escravos Gas Plant facilities and to deliver 215mn ft3/d to the domestic gas market and produce 30,000 b/d liquids; its website says first production is expected 2H2017. Chevron is operator with 40% equity; NNPC has 60%.
The Paris-based International Energy Agency (IEA) had earlier named Sonam as one of the key gas projects in Nigeria that would likely be executed in 2017, also citing expected plateau production at 215mn ft3/d, but said that security risks in the Niger Delta area remain a factor why international oil companies slowed down their investment in recent years.
Creating a well-functioning domestic gas market for producers and consumers is easier said than done, especially given Nigeria's significant political, economic challenges, low production capacity and current focus on oil and LNG exports, Josh Holland, an analyst at IHS Markit told NGW recently.
Update August 4: Chevron Nigeria Limited (CNL), operator of the joint venture between NNPC and CNL, confirmed to NGW August 4 that it signed a loan agreement on August 1 of $400mn in conjunction with NNPC, for the first phase of the borrowing of a sum up to $780mn to fund the development and production of natural gas liquids and condensate from Sonam field and the Okan field in OML 91 and 90 respectively. CNL "commended NNPC for recognizing the strategic imperative to supplement funding of the NNPC/CNL JV operations to enable high-impact projects that can deliver near term production and bankable cash flow for the joint venture."