Bankers Urge Oil Licence Holders to Invest Equity Before Seeking Loans
Bankers have urged holders of newly awarded petroleum licences to invest their own funds in exploration activities to reduce risks and attract financing for assets yet to generate revenue.
They advised at an onboarding workshop organised by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) for licence holders on Tuesday in Lagos.
Mr Akintade Thomas-Owoseni, Executive Principal, Standard Chartered Bank Nigeria, said that financing unproven petroleum assets was difficult without existing cash flow.
He said that licence holders needed to demonstrate financial commitment and present clear plans for developing and commercialising their assets.
Thomas-Owoseni recommended that sponsors contribute between 20 and 30 per cent of project costs through equity to demonstrate commitment and improve their chances of securing loans.
He said that banks would be more willing to consider debt financing when projects had clear development plans, credible technical assessments, and defined revenue prospects.
Mr Emeka Nkemakolam, Assistant General Manager and Head of Energy and Power at Fidelity Bank Plc, said commercial banks were not structured to bear the full risks associated with early-stage exploration
He explained that lengthy appraisal periods could leave operators paying interest on loans for years before their assets began generating revenue.
Nkemakolam advised licence holders to pool their capital to fund initial activities and obtain reliable technical data before approaching lenders.
He also urged operators to consider re-entering existing wells as a potentially cheaper route to early production and improved access to financing.
Also, Dr Tominiyi Owolabi, Managing Partner, Olaniwun Ajayi LP, said investment structures should reflect the funding requirements of an asset and the capabilities of prospective partners.
He explained that technical partners could invest at the asset level, while other investors could provide funding at the holding-company level, depending on their objectives.
“One of the biggest challenges is partner relationship, and it’s not solved by contracts,” Owolabi said.
He identified disagreements over decision-making, funding obligations and responsibilities as potential sources of conflict among partners.
Mr Musa Usman, General Manager, Development, TotalEnergies EP Nigeria Ltd., said that access to capital and technical expertise alone could not guarantee successful petroleum development.
“Capital doesn’t guarantee anything. Technical excellence doesn’t guarantee anything,” Usman said.
He said that prospective partners needed adequate financial capacity, technical competence and a shared understanding of project risks, responsibilities and governance.
Sharing a practical example, Mr Valentine Ugbeide, Director and Board Member, Ingencia Energies Ltd., explained how five shareholders organised funding and decision-making to develop a petroleum asset.
Ugbeide said that the partners allocated work programme costs according to their equity interests and scheduled payments to manage their financial obligations.
He said the group established an operations committee to oversee decisions and adopted consensus among shareholders rather than majority voting.
“We own this asset. It has to succeed,” Ugbeide said, describing the shared commitment guiding the partnership.
Beyond funding, the experts stressed the need for suitable partners and clear governance arrangements to move petroleum projects towards production.
The workshop, with the theme “From Award to Production: Delivering Nigeria’s Upstream Petroleum Potential under the Petroleum Industry Act, 2021,” focuses on equipping licence holders to meet the financial, technical and regulatory requirements for developing petroleum assets. #Bankers Urge Oil Licence Holders to Invest Equity Before Seeking Loans# NUPRC Cautions Oil Licence Holders Over Dormant Assets
