Local banks in West Africa are playing an increasingly vital role in financing oil and gas projects.

Speakers at International Petroleum Week (IP Week) heralded the pace of the development some banks have undergone, most notably those in Nigeria. At a time when European banks are experiencing liquidity worries, the ability of Nigerian banks to step in and co-finance projects has been vital, bankers said.

Less international banks are willing to foot the cost of oil and gas projects independently. In some cases, such as that of BNP Paribas, European banks have almost completely withdrawn, instead mainly doing business in Africa through the large commodity trading houses, such as Glencore and Mercuria.

For those still working on trade finance deals, it’s become more common for them to do so on an even footing with Nigerian banks, with both parties contributing 50% of the required finance.

Five years ago, it was said, the guarantees required by Nigerian banks were off-putting for many borrowers. The sheer volume of international energy projects taking place in the country now has led to a realisation that international banking practices need to be adopted, if local financiers hope to capitalise on the boom.

Speaking of the typical guarantees western banks demand for financing energy activities in West Africa, one banker said that they work on quasi project finance terms, asking for access to cashflow and value of the company as security. It is thought that local banks will have had to do the same in order to co-finance deals with western banks.

The volume of projects has also led to a rise in the price of energy assets. Transactions that were previously done at a price of US$2 per barrel are now sometimes going for US$8 per barrel. And with the discovery of extensive oil and gas reserves across the wider West Africa region, it’s expected that competition will become fiercer still in the coming years.

While 86% of the region’s known reserves lie in Nigeria and Angola, the traditional energy superpowers, much has been made of discoveries in other countries, most recently Ghana and Mauritania.

Representatives of the banks and the oil industry alike spoke of their expectation for Angola and Nigeria to remain dominant for the foreseeable future, but reserved warm praise for the progress made by Ghana since the Jubilee oilfield began production a little over two years ago.

Tullow Oil, the project’s lead, has extracted approximately 55 million barrels to date and despite the hope that production would’ve been higher; investors have shown a great appetite for Ghanaian projects.

Ghana’s government was praised for being “well-run” and for having a positive attitude. As well as being determined to satisfy its local energy needs, it’s been willing to export to Benin and parts of Nigeria, and has set conditions suitable for investors too.

But speakers spoke of frustration at the delay it often takes to get government approval for project finance transactions across the region, even in the more developed oil economy of Nigeria, and especially in big deepwater projects.

Adam Shepperson, head of structured commodity and trade finance at Ecobank, told GTR that this situation should improve with time. In 2011, Ecobank introduced Chad’s first local currency bond, a process which took much longer than it would in a country more accustomed to bond issues. Generally, when a country has more experience with handling large scale financial transactions, the efficiency with which they are closed will improve.