Otakikpo JV Agrees With Schlumberger and Shell, on a $170Million Deal for Five Wells, Terminal Infrastructure and Export Pipeline

In a nutshell, Shell will be funding the field development expansion of Otakikpo field. As well as a new export terminal

LEKOIL has announced a Memorandum of Understanding between the Otakikpo JV (itself and Green Energy) other one hand and Schlumberger and a subsidiary of an unnamed major international oil company on another, ‘on a comprehensive infrastructure sharing and drilling programme around a group of marginal field assets in OML 11’.

The company says that Standard Chartered Bank is to act as the lead financial advisor for the Project and perform financial advisory, security and banking services required for the Project.

Africa Oil+Gas Report believes the unnamed Major Oil Company in LEKOIL’s press release is Shell, the Anglo Dutch major, largely because it was the company that farmed out Otakikpo to Green Energy seven years ago and more, its crude oil trading subsidiary is involved in exporting Otakikpo crude.

LEKOIL says the “phased development plan of the project consists of drilling up to five new wells in Otakikpo, expanding processing infrastructure to comprise an onshore terminal to be located outside the Otakikpo field operations area, construction of an export pipeline connecting the onshore terminal to an offshore buoy to handle Otakikpo and other fields in OML11”.  It adds that “the Otakikpo Joint Venture will partake in the costs of its field development with funds provided for such participation by the development consortium Project management and associated asset management costs provided by Schlumberger will be shared between the Otakikpo Joint Venture and the operators and owners of other marginal fields participating in the Project.

“Capital expenditure to be incurred by the Otakikpo Joint Venture is expected to be approximately $170Million covering new wells and processing infrastructure, of which LEKOIL is expected to fund $68Million.   The anticipated costs consist of debt repayment to financing parties, including the Major Oil Company, in addition to a project implementation fee paid to Schlumberger. Repayment of the facilities anticipated to be provided to the Otakikpo Joint Venture pursuant to the project will be made from production revenues from Otakikpo, in priority to any existing lending facilities (subject to agreement with existing lenders), future CAPEX and returns to equity holders”.

Under the terms of the MOU, the Major Oil Company will provide funding to the Otakikpo Joint Venture alongside the other funding partners, subject to due diligence, project economics, entry into definitive documentation and final investment decision.  The Otakikpo Joint Venture will enter into an exclusive offtake agreement with the Major Oil Company for the sale of crude produced pursuant to this project. Schlumberger will act as technical and project execution partner to provide oilfield services and project management services to assist in ramping up production and long-term field management. The Consortium will also form multidisciplinary project management teams from LEKOIL and Green Energy.

Due diligence will be undertaken and the financial terms and cost of capital will be finalized following final investment decision.  The final investment decision is subject to the satisfaction of customary conditions precedents, including the credit committee approval of financing parties and the execution of definitive project agreements. Site mobilisations are tentatively scheduled for late Q3 2019.



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