*New project Gazelle II to gulp $7.5bn, ‘strike price’ below market price 

*As local refiners complain of unmet supply requirements

Emmanuel Addeh in Abuja

Forward crude sales by the Nigerian National Petroleum Company Limited (NNPC), have hit $21.565 billion since 2019, a document obtained by THISDAY showed yesterday, further buttressing why it’s almost impossible for the national oil company to meet its Domestic Crude Supply Obligation (DCSO) to local refiners.
The document obtained from impeccable sources indicated that since the controversial ‘Project Gazelle’ in 2023, the NNPC has gone into at least two other agreements, tagged ‘Project Leopard’ and ‘Project Gazelle II’, which will cost the company $2 billion and $7.5 billion respectively.

It’s unclear the quantity of crude oil that has been mortgaged, but the information available to THISDAY showed that 11 deals have been entered into by the NNPC since 2019, excluding the Dangote refinery’s arrangement, which it eventually opted out of.
However, aside from the vendor programmes of $750 million and $1.5 billion which expired in May 2023 and November 2024 respectively, the final maturity dates for the nine other projects continue to run.
Other extant facilities which have yet to reach maturity include: The $3 billion deal on NLNG Train 7, which matures in May 2029; the $1 billion ‘Project Eagle’ agreement which expires in June 2025 and the $300 million ‘Project Brogue’ which has a final maturity of January 2027.

Besides, ‘Project Bison’ which was entered into in 2021 worth $1.040 billion, expires in December 2026; ‘Project Yield’ which was sealed in 2022, valued at $1 billion, expires in June 2029; while a project codenamed ‘Offtake Financing’ costing $75 million expires in October 2029.

Furthermore, ‘Project Gazelle’, an oil swap deal valued at $3.4 billion, is expected to expire in 2032. The deal which led to serious public conversations on the transparency of such agreements was struck in 2023.
But since then, THISDAY gathered that the NNPC had entered into two more deals, namely: Project Leopard and Project Gazelle II, meant to be repaid fully in January 2029 and April 2034 respectively. While Project Leopard is valued at $2 billion, Project Gazelle II, will take the lion’s share at $7.5 billion.

Despite the closeness of Afreximbank to the actors, it was understood that the continental bank declined to participate in the new deals based on their own rule books and their current debt-for-oil exposure to the NNPC.
Afreximbank was said to have mentioned that they, at $4.5 billion, had reached their limit on granting PXF (Pre-export financing) resource-backed loans to NNPC.

PXF is a type of financing where a commodity producer gets upfront cash from a customer in exchange for a future delivery of the commodity, potentially at a discount. The producer uses the cash to fund their operations, and the buyer gains access to a future supply of the commodity.

“One of the pre-conditions for the 2023 Gazelle deal is that NNPC was not going to raise new USD financing until the principal with interest is fully drawn down.  Afrexim did not participate in the $2 billion Project Leopard deal raise,” the document stated.
It added that for the $7.5 billion deal, Saudi Aramco or Abu Dhabi‘s ADNOC will likely be involved, with the ‘strike price’, much lower than the market price of crude oil.
“Afrexim is unlikely to be an underwriter or a syndicate in the Gazelle II deal (that is most likely going to feature ADNOC or Aramco).

“The barrels are structured at a strike price that is below the open market rate, and is not only in complete variance of what it will cost to repay in principal plus interest, but the difference between the strike price and open market rate is actually credited to an offshore debt service reserve account that is neither subject to oversight or appropriated by the National Assembly into the CRF (Consolidated Revenue Fund).

“Resource-based PXF Loans are priced at SOFR (Secured Overnight Financing Rate) of 6 per cent plus CRP (Country Risk Premium) of 3-5 per cent, with an application of a demurrage charge priced at LIBOR (the global reference rate for unsecured short term borrowing) on a pro-rata basis,” the document added.
Recall that on August 16, 2023, the NNPC secured over $3.3 billion emergency crude repayment loan — a transaction it said was aimed at supporting the naira and stabilising the foreign exchange (FX) market.
Arranged by Afreximbank, the crude-for-cash loan was also targeted at supporting the federal government’s monetary and fiscal reforms.

Project Gazelle Funding Ltd (PGFL), a Special Purpose Vehicle (SPV), incorporated in Bahamas for the PxF, was the borrower while the NNPC was the “sponsor” and will pay with oil to the SPV to liquidate the loan.
Meanwhile, local crude oil refiners have always complained of getting less than what they are entitled to, despite several interventions by the Nigerian Upstream Petroleum Commission (NUPRC) to ensure compliance. However, the saying is trite that ‘You can give what you don’t have “.

Local refineries, including the Dangote refinery, continue to face challenges due to inadequate crude oil supply, forcing them to import crude and hindering their ability to reach full refining capacity.
The Dangote refinery has reported difficulties in securing sufficient crude oil feedstock from domestic producers, including International Oil Companies (IOCs), leading to reliance on imported crude.

This is despite the NUPRC having acknowledged the issue and working to ensure compliance with the Domestic Crude Supply Obligation (DCSO). In fact the commission  recently warned that it will deny export permits for crude oil cargoes intended for domestic refining if oil companies fail to meet their local crude supply commitments. 

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