UK export credit agency ECGD has formally signed an agreement to provide guarantees worth £133mn for the expansion of the liquefied natural gas (LNG) plant at Bonny Island in Nigeria.
The expansion will add two new production trains to the three already in place. This means that more than 86 million cubic metres of gas being flared into the atmosphere every day during the production of oil creating fires bright enough to be seen by satellite from space will now be converted to LNG for use as fuel and sold.
ECGD is providing cover for UK process engineering company MW Kellogg Limited ensuring that there will be significant UK involvement in this £1.24bn Nigeria LNG project, known as NLNG Plus. BNP Paribas arranged the financing on behalf of ECGD.
International Trade Minister Baroness Symons says: “NLNG Plus will make a major contribution to the reduction of gas flaring and will help Nigeria meet its Kyoto undertaking to halt the practice by 2008. The project will also generate substantial hard currency income for Nigeria, while improving the country’s infrastructure through works associated with the plant expansion and job creation.
“The NLNG project has a good record of community relations and is taking steps to ensure that local communities share in the benefits of the operation, including a scheme that allows towns near the plant to receive free water and electricity.
“During the process of approving this guarantee ECGD carried out a thorough and far-reaching scrutiny of the environmental and social considerations attached to this project and is satisfied that the highest standards have been met.
“This is a good example of sound financial judgement going hand in hand with ECGD’s Business Principles.”
The loan is the largest ever project finance deal in Sub-Saharan Africa, with £384mn of the total £632mn financing facilities supported by four ECAs ECGD, US Ex-Im, Sace, and Gerling NCM. ECGD has also been working with the African Development Bank, which is providing £62mn to NLNG Plus. Nigeria’s banks have put up £99mn, a boost for their local banking industry.
The LNG produced by the new trains will be transported to Europe for use in generating electricity, replacing older coal-burning power stations and helping European countries to meet their Kyoto undertakings. This will also help Europe diversify its energy supplies, especially important given the run-down of North Sea supplies.