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$130m debts: Sell your assets, banks tell oil firms

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$130m debts: Sell your assets, banks tell oil firms

Skye Bank funded a number of marginal field projects such as the Platform Petroleum’s Gas Processing Plant and WalterSmith’s Production Boost Project

Worried by the continuous deterioration of their assets, lenders in Nigeria are putting pressure on debtors in the upstream oil sector to sell down on some of their assets or risk their assets’ being taken over as the recovery scheme for over $130 million loans ploughed into the marginal field operations between 2007 and 2011 took a new twist.

The lenders, who are enraged by seeming lackluster attitude of the debtors, resorted to this new move to save their huge financial exposures to the sector, which is threatening the survival of most tier 11 banks.

Head, Energy Research, Ecobank group, Dolapo Oni, who confirmed this development to New Telegraph, said the assets’ sale pressure on marginal field operators ensued after series of meetings on modalities to service their debts, which are already going bad.
He said : “They (marginal field owners) have been told to sell down on some of their assets,” he said, adding that the lenders have now realised that this step became imperative to save their investments.

Stating that some of the debtors have heeded to this advice, Oni said that those who oppose risks their being taken over.
The loans, which were accumulated during the fuel subsidy regime, the oil and gas analyst said, are now a major cause for concern for banks.
Noting that banks had since embargoed further exposure to tank farms and depots investments, Oni said that the marketers have also blamed the government for making them incur the loans.

In the downstream sector, he said banks exposure had hit 600 million mark.
Aside from this, banks have also, checks by this newspaper showed, issued caveat emptor on financing of forthcoming oil block bid round based on apprehension that the over $130 million loans ploughed into the marginal field operations between 2007 and 2011 might go bad.

A source at one of the prospective bidding companies, which is building a major private refinery in Africa, told this newspaper that his company and other prospective bidders have been pushed to source funds from foreign banks “when local banks are not forthcoming.” Multi-million dollar loans that these local banks granted for previous round remained the impediment.

Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, had declared that the bid round for the blocks would commence soon.
“The banks in Nigeria are more interested in recovery of over $130 million ploughed into the previous ones than to finance a new oil blocks’ round,” he added.

Long before banks commenced recovery processes for their N5 trillion credit facilities in the energy sector, signs of recession had begun to manifest on the over $4 billion marginal fields’ operations in Nigeria.

The books of many local oil operators were turning red, making many to also be on the cliff of bankruptcy.
While 17 out of the 24 marginal fields issued to 31 firms during the 2003 bid round could not produce, this newspaper gathered that the financial books of seven operating marginal fields are in red due to oil price rout and the renewed militancy in the Niger Delta. Banks and other lenders had earlier exchanged correspondence with the operators; expressing fears that over $130 million loans ploughed into the marginal field operations between 2007 and 2011 may go bad.

“It is not enough to stop the flow of new investment in the section, what happens to the investment already made is a major cause for concern as we speak. “It will interest you to know that between 2007 and 2011 alone, three banks in Nigeria invested $130 million in the marginal fields,” the manager at oil and gas investment section of one of the new generation banks told this newspaper.

Everyone; banks and other lenders who have invested in this industry, he said, is already fretting over the books of most of these indigenous producers that are turning red. The banker noted : “Skye Bank has funded a number of marginal field projects such as the Platform Petroleum’s Gas Processing Plant and WalterSmith’s Production Boost Project.” Skye Bank had also approved a loan facility of $18 million for Pillar Oil, to enable the company drill a well at an interest rate of 17 per cent per annum.

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