…To Mitigate Shocks from International Financial Institutions
Stakeholders in the oil and gas industry have advocated that companies in Nigeria should go back to the traditional financing sources as international financier institutions are turning their back against them, because of climatic change.
According to them, this is the only way operators can mitigate against the current funding challenges the industry is facing. They stated that operators must plan their works, just as they must fund their operations adequately.
The stakeholders who spoke at a Centre for Petroleum Information( CPI) Energy Finance Forum stated that traditional finance sources such as Bonds, Equity Funding, Private Equity. Venture Capital,
Public Equity Markets, Debt Financing, Bank Loans, Bonds and Other Debt Instruments Syndicated Loans, Project Bonds can be used to finance the projects on ground.
Others are Government Funding: Direct Budget Allocations Grants and Subsidies Government-backed Loans and Credit Facilities, Tax Incentives Investment Funds
According former managing director Seplat Energy Plc, Austin Avuru, he said by now operators must know that access to international institutions for financing projects are very slim. He said what this means is that hey must run their operations very prudently
On whether Nigeria is prepared to absorb the shocks from the hostilities of international banks, they advised Nigerian companies to have proper structuring of their financing scheme.
Collaboration among the operators both domestically and internationally, they stated is key if they would find financiers for their projects. They also stated that Corporate governance, compliances and regulations are important.
They are of the view that with the 25% of the $5billion raised for African Energy Bank, ‘BRICK is they way to go.’
Okechukwu Okoro from ElIAS Law Firm, in his contribution stated that there are structure options such as the
Forward Sale of Crude [e.g. ExxonMobil NGL]This involves contract for the sale of future or unascertained
goods (crude oil, condensate, NGLs) to be produced or delivered in future.
He stated that It is important that the documentation reflects a “true sale” rather than a charge – World Bank “negative pledge”, tax,disclosure and insolvency priority burdens.
He said “Carrying on business in Nigeria” can also be a challenge, but Legislation and regulation calling for National Assembly, Federal Executive Council, Ministerial or DMO approval is increasingly less of a challenge.
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He also mentioned some of the “Traditionally ” Forward Sales Debt – based structure options to include
❑ Barrels-for-Services [e.g. NNPC/FE&PJV /SLB].This involves provision of services by services companies in
exchange for delivery of crude, Assignments of gas sales and/or transport receivables [ e.g. NGC]
Here proceeds from sale and transportation of products are assigned by way of “true sale” to lenders as security for loan.
❑ Euro bond offerings
