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Standard Bank London as mandated lead arranger, together with HVB Group and International Moscow Bank as arrangers, have completed the first borrowing base loan for a Russian oil producer. The US$40mn loan for Khantymansiyskneftegazgeologia (KMNGG) uses a “present value” approach to model a security value of their oilfields, which in turn is used to determine the borrowing capacity of KMNGG. This gives independent Russian oil producers access to term loans repaid over as long as three years. Although borrowing base loans have been used extensively in the

  • US, their use in other countries has only recently begun in earnest. Standard Bank has pioneered their use in a number of jurisdictions, and the specific complications of the Russian market were overcome by leveraging the experience and capabilities of all three participating banks. KMNGG’s extensive quality reserves and tight management control structure made it a prime candidate for the first deal of this type in the Russian Federation. The funds will be used to further develop KMNGG’s reserves and output infrastructure.

    “This type of financing can benefit majors and non-majors alike and provides them with a unique ability to secure long-term funding for development of oilfields. We see a big future for this type of finance in Russia and other oil producing countries of the former Soviet Union,” says Andrew Bartlett, head of Standard Bank’s energy finance team.