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Nigeria: NNPC signs $1.69b deal with Shell

The Nigerian National Petroleum Corporation (NNPC) yesterday in Abuja signed a “Modified Carry Agreement’’ to the tune of $1.69 billion with Shell Petroleum development Company, (SPDC), TOTAL and Nigeria Agip Oil Company (NAOC) designed to finance their Joint Venture Upstream project in Gbaran-Ugbidie, in Bayelsa state.

Modified Carry Agreement is a financing agreement whereby the International Oil Companies (IOC’s) will advance loan to NNPC for the purpose of investing in upstream projects. The Three oil giants are operating in Nigeria under a Joint Venture arrangement with NNPC, in the NNPC/SPDC/TOTAL/NAOC Joint Venture.

The financing agreement signed is a modification of the existing Carry Agreement. The “Modified Carry Agreement’’ (MCA) introduces greater level of transparency and accountability with repayment and compensation being on “Cash-basis’’ not oil.

In the deal, the NNPC would allow the three companies to take capital allowances as allowed by the Petroleum Profit Tax (PPT) to recover 85 per cent of the principal loan. By taking the allowance, the IOC’s are reducing the taxable profit that they ought to have paid.

The remaining 15 per cent plus eight per cent interest would be paid in cash from the increased production from which the investment was made. If for any reason, the oil field where the investment was made could not produce, then payment of the 15 per cent plus the eight per cent interest would be stopped.

The signing of the agreement was as a result of a successful negotiation between the four oil giants involved, that is the NNPC, SPDC, TOTAL and NAOC.

NNPC Group Managing Director, Mr. Mohammed Sanusi Barkindo signed on behalf of NNPC, while Mr. Mutiu Sunmonu Managing Director, SPDC endorsed the deal on behalf of the three companies “The deal is a welcome development and a right step in the right direction and very strategic in the nation quest to develop its various LNG projects,” the GMD said.

The GMD said the agreement also provides a sound structural financing framework for all future upstream activities which the NNPC believed was the way forward.

The GMD said the agreement also provides a sound structural financing framework for all future upstream activities which the NNPC believed was the way forward.

“This signing ceremony is coming at a very opportune time when the global economy is under stress. We are happy that the terms and condition of payment are fair to all parties,” Barkindo said.

According to him, the MCA which cover between 2007 and 2010, is a project of sustainable development that is billed to generate significant amount of wealth and employment to the people of Bayelsa and the Niger Delta at large.

Speaking on behalf of the IOC’s, Sunmonu, said the deal represented a great accomplishment which allowed both parties to continue to develop their joint venture projects in the interest of their stakeholders.

He described the deal as a unique milestone that would add value to the nation’s hydrocarbon resources and that all parties would do everything humanly possible to achieve the goal of the projects. “It is a demonstration of the IOC’s commitment to the federal government towards generating wealth and employment to the citizens,” Sunmonu said.