Global Processing

Nigeria close to jv funding deal with Shell

May 21, 2008
According to Reuters, Nigeria is finalising a deal with Royal Dutch Shell to help plug a funding gap which has delayed joint venture projects, and hopes to sign in the coming days, a source in state oil firm NNPC said recently.

The world''s eighth-biggest oil exporter has signed deals in the past week with two other of its five joint venture partners, including ExxonMobil and Total, in an effort to end chronic funding shortfalls which have depressed output.

Shell confirmed that talks were ongoing but declined to comment on when a deal might be reached.

Under the funding deals struck so far, the foreign oil partners loan money to NNPC to fund its portion of joint venture projects this year. The state firm will pay the loans back in cash and not with crude oil, as had been the case in the past.

But such agreements are only a short-term solution to the funding shortfalls, which are preventing the Nigerian industry from reaching its full output potential.

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.

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

Nigeria announced recently it was seeking $850 million from Shell which it says it is owed under the terms of the production sharing contract governing the 225,000 barrels per day Bonga offshore field.

The NNPC and the government are also seeking $414.6 million they say are owed from Bonga gas sales and taxes.

Yar''Adua had ordered NNPC to take "immediate steps" to recover the money as part of efforts to ensure Nigeria was not losing revenue from the multi-billion dollar contracts for its deep water fields, his office said.

Shell said the matter was part of ongoing discussions.