June 22, 2024

NNPC relies on ‘Project Santolina’ to cover its $595 million debt obligation


Olubunmi Martins

The Nigerian National Petroleum Company Limited has outlined arrangements to defray outstanding debt obligations to Shell Petroleum over cash call arrears amounting to $595,105,467.

The debts were incurred overtime and accumulated before 2016 because of the company’s inability to fulfill its share of financial commitments on asset developments held jointly with Shell Petroleum

In a document published by the NNPC and sighted by EnergyDay, the state-owned oil giant disclosed that it has offloaded $777,400,000 of the original debt of $1,372,505,467 owed and is now progressing to finish up on the repayment of the outstanding balance.

The new repayment plan, which is already in progress, according to official reports by NNPC Limited, is tied to collective income from 12 producing onshore asset developments embarked upon in 2017 and code-named Project Santolina.

EnergyDay checks reveal that the assets, co-incidentally, are owned jointly by Shell Petroleum and the NNPC and comprise OMLs 11, 17, 23, 25, 27, 28, 32, 35, 43, 45, 46, and 79.

These assets are altogether located in about 30 different fields in the Niger Delta and span over 156 development activities leading to full developments,

NNPC, in separate explanatory notes, said that Project Santolina, which was kicked off in 2017, will deliver short- and long-term benefits and is expected to generate about $9 billion of incremental revenue over its life span.

Immediate gains from the project, which started in 2018, are delivering incremental liquid reserves of about 202.9 million barrels of oil and 161.8 billion cubic feet on a Proven and Probable (2P) basis.

EnergyDay gathered that funding for the asset development was arranged through a consortium of local and financial institutions in third-party lending agreements.

NNPC Limited said it has completely paid off the alternative funding loans incurred for the development of the 12 onshore assets.

Nasir Usman, Chief Financial Officer of the NNPC Limited, disclosed in the signed document that ” repayment is from price balance distribution on Project Santolina”.

The spike in crude oil prices on the international market is a major booster for NNPC Limited in these circumstances, considering the price differential between the price benchmark at the time that the project started and the current surge in price.

OML 11, 17, 23, 25, 27, 28, 32, 35, 43, 45, 46, and 79 remain on the market shelf with Shell Petroleum divesting its equity interests from all the assets, but conclusive details are still unconfirmed.

In the last couple of years before now, Shell Petroleum had found itself in troubled waters managing onshore assets in Nigeria, particularly OML 11, which transverses the Ogoniland where the Human Right Activist, Ken Sara Wiwa, was hanged by Nigeria’s military junta headed by Gen Sani Abacha.

Shell Petroleum, however,  is still under an obligation to clean up the Ogoniland environment following a judicial order compelling it to do so.

Engr. Segun Adebayo, an Energy Analyst, explained that the Nigerian National Petroleum Company Limited, with its new status as a Limited Liability Company, may want to pick up all the stakes that Shell is planning to relinquish.

Adebayo pointed out that the NNPC’s insistence on buying off such assets in the interest of the country has some merit.

The country’s Petroleum Industry Act recently passed into law is beginning to gain momentum and could reshape the future of hydrocarbon asset development in the country using gas as its transition fuel to cleaner energy.