Shell, banks seal deal on N790b contract financing
Five Banks have signed a Memorandum of Understanding (MoU) with Shell Nigeria Exploration and Production Company (SNEPCo), to provide $5 billion (N790 billion) financing loan for contractors in the country's oil and gas sector.
The MoU signed in Lagos Wednesday, will see the five financiers providing support to Nigerian contractors towards the actualisation of the country's local content aspirations.
The institutions involved in the financing deal are Fidelity Bank Plc, Access Bank Plc, First Bank of Nigeria Plc, Standard Chartered Bank Limited and DLR Integrated Services Limited.
The purpose of the financing arrangement, according to the financiers, is to alleviate funding challenges of Nigerian contractors, support their growth and aspiration of the Nigerian Content Act.
Speaking at the MoU signing ceremony and awareness session for the Shell contractors support fund, General Manager, Nigerian Content Development, Shell Companies in Nigeria, Igo Weli, explained that the contractors' support fund was a partnership for local content development between SNEPCo and five reputable financial organisations.
According to him, each of the banks is expected to provide $1 billion each for the fund, which is spread for five years period.
Weli hinted that Shell is committed to supporting the federal government's efforts to reform the industry especially through the local content policy.
'The partnership becomes necessary due to lack of access to affordable funds, which has been identified as constraint to contract performance and growth.
He noted that the scheme would address the issue of access to funds, which appears to be a serious nightmare to operators in the industry.
'Financing of projects has traditionally been a major challenge to contractors' growth and participation in the delivery of goods and services to the oil and gas industry', he said.
He explained that banks have committed themselves to relaxing the collateral security requirements, reducing interest rates and establish their competitive advantage and become global players.'
The Team Head, E&P/Projects of Fidelity Bank Plc, Emeka Nkemakolam, said during the presentation of the facility scheme to the contractors that the bank was fully committed to supporting the implementation of the Nigerian Content policy.
Nkemakolam stated that for the contactors to qualify for the facility, they must have a good banking history and a valid contract with Shell.
He said that before the programme was launched last year, Fidelity was already involved in a similar funding.
'To qualify for the fund, contractor must have successfully executed contracts of similar nature and value in the last 12 months and must have lodged such proceeds with a bank. We shall review and appraise credit request and inherent risks. We also liaise with Shell on confirmation of contract and domiciliation of proceeds. We are also responsible for the disbursement and monitory of the facility', he added.