Tuesday February 24, 05:35 PM
UPDATE 2-Nigeria signs $1.69 bln funding deal with Shell
By Camillus Eboh
ABUJA, Feb 24 (Reuters) - Nigeria's state oil company NNPC on Tuesday signed a $1.69 billion funding agreement with Royal Dutch Shell (Amsterdam: RDSA.AS -
news) to cover its share of investment in an integrated oil and gas project in the southern state of Bayelsa.
The Shell Petroleum Development Company (SPDC), the Anglo-Dutch giant's Nigerian unit, hopes the Gbaran Ubie project will produce one billion cubic feet of gas each day and more than 70,000 barrels of oil (bpd) once completed in 2010 or 2011.
'What we are signing today is the modified carry agreement (MCA) for the Shell (LSE: RDSB.L - news) /NNPC Gbaran Ubie project. NNPC's share is $1.69 billion and that is what we have come here to sign,' NNPC Managing Director Mohammed Barkindo said before the ceremony.
He said the deal brought to three the number of carry agreements signed with Shell, worth a total of $2.4 billion, to cover NNPC's share of joint venture projects from 2007 to 2012.
'We have one more MCA to sign with Shell. We are still waiting for the date of the signing,' Barkindo said.
He said the carry agreements were in addition to a $558 million bridge loan previously signed with the firm.
Chronic funding shortfalls at NNPC have hampered the development of Nigeria's ventures with foreign oil companies.
SPDC operates onshore and shallow water oilfields in Nigeria through a joint venture with NNPC.
U.S. oil firm Exxon Mobil (NYSE: XOM - news) and French energy group Total, like Shell, have all had to provide billions of dollars in bridge financing to NNPC to plug funding gaps.
The signing on Tuesday was part of a $3.1 billion financing agreement with Shell originally announced last May.
GLOBAL AND LOCAL DEMAND
Shell says the fields in the 650 square km area at the Gbaran Ubie project were first discovered in the 1970s but were not fully developed because they contained mainly gas, for which there was little demand in Nigeria.
But demand has risen sharply since then.
Liquefied natural gas (LNG) is seen as an attractive alternative energy supply by consumer nations as volatile world oil prices play havoc with their economies.
Power-starved Nigeria meanwhile wants to develop its domestic infrastructure so that it can use its gas reserves to help end chronic power outages, a major brake on growth in sub-Saharan Africa's second biggest economy.
Shell says the Gbaran Ubie project will drill more than 30 new wells and build a central processing facility to treat both oil and gas. It hopes the site will help Nigeria meet its targets to reduce gas flaring, provide more energy to local consumers and increase LNG exports.
Nigeria has estimated natural gas reserves of 180 trillion cubic feet, the seventh largest in the world. The West African nation already accounts for almost 10 percent of world LNG supply, much of it to Europe and North America.
Foreign energy firms are keen to exploit the potential.
Russian gas giant Gazprom wants to invest at least $2.5 billion in the development and production of Nigeria's natural gas reserves, a company source told Reuters this month.
The source said 90 percent of the investment would be in developing domestic production, processing and transportation.
(For full Reuters Africa coverage and to have your say on the top issues, visit: http://af.reuters.com/ )
(Writing by Nick Tattersall; editing by James Jukwey) Keywords: NIGERIA SHELL/FUNDING
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