Nigeria’s first FLNG project gets a boost
The African Export-Import Bank (Afreximbank) has executed a project preparation facility by financing the terms and conditions with UTM Offshore Limited (UTM), the bank said in a statement over the weekend.
As part of the agreement signed at the bank’s 29th annual meeting in Cairo, Egypt, last week, it will part-finance activities to move Nigeria’s first floating liquefied natural gas (FLNG) project. to bankability.
It marks the continued support of Afreximbank, which led UTM’s fundraising efforts to secure the investments needed to implement the project.
In line with the Nigerian Petroleum Industry Act (PIA) and global energy transition efforts, UTM Offshore Limited is developing Nigeria’s first floating liquefied natural gas (FLNG) project in partnership with the Nigerian National Petroleum Corporation (NNPC) and its subsidiary, LNG Investment Management Services.
Afreximbank regards this historically significant project as the first FLNG project developed by an African company on the continent.
UTM is undertaking the development, design and construction of an FLNG facility with a nominal liquefied natural gas (LNG) production capacity of 1.2 million metric tons per year and a storage capacity of 200,000 cubic meters, as well ancillary facilities located 60 kilometers from the shore in Akwa Ibom State, Nigeria.
Representing a “first” in the African FLNG sector for UTM ownership, this intervention aligns with Afreximbank’s strategic objective to advance the business, which boasts strong climate finance credentials and accelerating the development of energy transition solutions, in line with the reduction of carbon emissions prescribed at COP26.
The project has the potential for economic transformation – by establishing trade-enabling infrastructure, which will enable Nigeria to monetize its natural resources and transition from an economy based on the export of crude oil to an industrial economy of gas-based transformation.
“Specifically, the project will generate exports estimated at a minimum of $11.4 billion from Nigeria to the rest of the world, creating over 2,000 construction jobs and a minimum of 1,000 high-quality jobs,” said the Executive Vice President of Afreximbank, Mr. Amr Kamel said during a brief but colorful signing ceremony.
He added, “To support this project throughout its journey along the project finance value chain, Afreximbank is leveraging its diverse product line to provide end-to-end solutions. During the pre-investment phase, the project preparation facility will be deployed to de-risk the project and move it rapidly towards bankability.
“Furthermore, under the PPF, the bank will be named MLA and will lead debt raising syndication – with the ability to incorporate credit enhancements if needed. Through its financial advisory mandate, Afreximbank has played a active role in structuring the transaction to ensure optimal returns and debt sizing, as well as identifying equity investors to invest in the project on favorable terms.
Also speaking, the Managing Director and Chief Executive Officer of UTM Offshore Limited, Mr. Julius Rone, said that the bank’s involvement in the preparation phase of the project will play an important role in de-risking this historical activity promoted by UTM Offshore, fast -tracking the process of fundraising and project implementation.
“The project is well aligned with the bank’s strategy to support trade-enabling infrastructure that contributes to the monetization of its member state’s natural resources while diversifying their dependence on the export of crude oil,” said Rone, adding, “This intervention also serves to demonstrate the bank’s commitment to promoting climate finance and energy transition solutions that will reduce Africa’s carbon footprint, in alignment with COP26 and the global trend towards decarbonization.
The African Export-Import Bank is a pan-African multilateral financial institution mandated to finance and promote intra and extra-African trade. It deploys innovative structures to provide financing solutions that support the transformation of the structure of African trade, accelerating industrialization and intra-regional trade, thereby boosting economic expansion in Africa.
The bank has a rich history of intervention in support of African countries in times of crisis. Through the Pandemic Trade Impact Mitigation Facility (PATIMFA) launched in April 2020, Afreximbank has disbursed over US$6.5 billion in 2020 to help member countries manage the negative impact of financial, economic and health shocks caused by the COVID-19 pandemic.
A strong supporter of the African Continental Free Trade Agreement (AfCFTA), Afreximbank has completed the development of a Pan-African Payment and Settlement System (PAPSS) which has been adopted by the African Union (AU) as its platform payment and settlement to support the implementation of the AfCFTA.
Afreximbank is working with the AU and the AfCFTA Secretariat to develop an adjustment facility to help countries participate effectively in the AfCFTA. At the end of 2020, the bank’s total assets and collateral stood at US$21.5 billion and its equity at US$3.4 billion. Afreximbank disbursed over $42 billion between 2016 and 2020.
Based in Cairo, Egypt, the bank is rated by GCR (international scale) (A-), Moody’s (Baa1) and Fitch (BBB-).