CNPC Finance (HK) Limited provides $203 million oil prepayment facility for 200 km Petroleum Road Construction Project (Linked to Record ID#2137, #58433, #58435)

$203M USD

Funder	CNPC Finance (HK) Limited
Recipient Organization	CNPC Niger Petroleum S.A.
Country	Niger
Start Date	Nov 28, 2011
End Date	Mar 08, 2027
Duration	5,579 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`31046`

Grant Description

CNPC Finance (HK) Limited provides $203 million oil prepayment facility for 200 km Petroleum Road Construction Project On June 2, 2008, the Government of Niger and China National Oil and Gas Exploration and Development Corporation (CNODC) — a subsidiary of China National Petroleum Corporation (CNPC) — signed a product sharing contract (PSC) for the Agadem Oilfield (‘Agadem Block’), which is situated in Termit Basin in the southeast of Niger, 1,200 km at the south end of the Sahara Desert to the east of Niamey (with a plot area of 27,516km2).

CNODC won the PSC because the ExxonMobil-Petronas consortium had withdrawn from Niger in 2006 after 4-years of exploration.

CNODC was also reportedly the only oil company that agreed to pay $300 million signing bonus (of which $180 million would need to be repaid at an interest rate of 3-month LIBOR plus a 3.5% margin) to the Government of Niger.

Under the terms of the PSC, CNODC and the Government of Niger were given 85% and 15% participating interests, respectively, in the Agadem Oilfield.

CNODC agreed to invest approximately $5 billion in Phase 1 of Agadem Oilfield Development and Oil Pipeline Construction Project.

The PSC also allowed for the Government of Niger (as a 15 percent shareholder) to receive government revenue from Phase 1 of the Agadem Oilfield Development and Oil Pipeline Construction Project — via upstream and pipeline royalties, a share of ‘profit oil’ (which must be used to meet income tax obligations), and an additional share of ‘cost oil’ and ‘profit oil’.

CNODC agreed to finance the Government of Niger’s 15% share of the total capital cost of the oil field exploration and exploitation and pipeline construction, and the Government of Niger agreed to forego its share of ‘cost oil’ to repay the financing of its 15% share of the total capital cost.

This ‘carried interest’ arrangement was subject to an interest rate of 3-month LIBOR plus a 3.5% margin.

On July 1, 2008, CNODC and CNPC Niger Petroleum S.A. — also known as China National Petroleum Corporation (CNPC) Niger Petroleum S.A., 中国石油尼日尔项目公司, CNPCNP and CNPC-NP — signed a transfer agreement, which assigned all of the rights and responsibilities under the June 2, 2008 PSC to CNPC Niger Petroleum S.A.

Then, on November 28, 2011, the Government of Niger and CNPC Niger Petroleum S.A. signed a memorandum of understanding (MOU) on the so-called Niger Petroleum Road Project.

Under the terms of the agreement, CNPC Finance (HK) Limited issued an oil prepayment facility — also known as a pre-export finance (PXF) facility — worth approximately $203 million to CNPC Niger Petroleum S.A. to support the implementation of the Niger Petroleum Road Project. The facility is a loan that provides cash advances in exchange for future oil sales.

It carries an interest rate of 3-month LIBOR plus a 3.5% margin. However, its other borrowing terms (maturity, grace period, etc.) are unknown.

The borrower is expected to repay the loan with the proceeds from oil sales derived from the June 2, 2008 production sharing contract (PSC).

The proceeds of the loan were to be used by the borrower to finance a commercial (EPC) contract between CNPC Niger Petroleum S.A. and China Petroleum Engineering Co., Ltd (CPE), which was signed on signed on June 21, 2013.

The purpose of the project is to support the development of a 185 km road (also known as the ‘Unity Road’ and ‘Oil Road’) connecting Diffa to N'Guigimi and the country’s border with Chad.

The project has two main components: the rehabilitation of a 130 km road segment from Diffa to N'Guigmi (known as RN 1) and the construction of a 55 km road segment from N'Guigmi to the country’s border with Chad. China Petroleum Engineering Co., Ltd (CPE) is the general EPC contractor responsible for project implementation.

CNPC DAGANG Niger Engineering SARLU (DGE) and Barka SA serve as subcontractors to CPE. A formal project commencement ceremony took place on July 3, 2012.

At the ceremony, Niger’s President requested an expansion of the project scope to include the construction of 15 kilometers of urban roads and ancillary facilities in the two cities and towns of Diffa, N'Guigmi, and Mainé-Soroa. The request was approved, which resulted in additional project design work between July 2012 and November 2012.

However, construction activities were suspended in February 2015 due to insecurity created by the jihadist group Boko Haram.

Prior to the suspension of road works, CPE and its Chinese subcontractor — CNPC DAGANG Niger Engineering SARLU (DGE) — had completed the 60 km Diffa-Kablewa section of the Petroleum Road.

On April 6, 2018, the Government of Niger, CNPC Niger Petroleum S.A., and OPIC Niger signed another MOU to agree upon the terms and conditions that would govern the completion of project (via subcontracting to local service providers).

CNPC Niger Petroleum S.A. agreed to finance the ‘residual costs’ of the Niger Petroleum Road Project (worth $93,560,000) through the PXF facility, and the he Government of Niger agreed to assume responsibility for the completion of the project (and any additional costs beyond the ‘residual costs’) on the last scheduled repayment date (January 1, 2020) under the PXF facility.

When construction finally resumed in October 2020, CPE made two Nigerien firms (EGBTP and MWazir) responsible for road construction.

EGBTP was given responsibility for the Kindjandi-Kablewa-N'Guigmi section of the road and MWazir was given responsibility for a section of the road that connects N'Guigmi, Boula Birin and the Chad border. As of 2022, the project had still not achieved completion.

According to the Government of Niger's Aid Management Platform, the project’s originally expected implementation start date was May 1, 2013 and its originally expected completion date was December 31, 2015.

📋 Staff Comments

This project is also known as the Development and Asphalting of the Diffa-N'Guigmi Chad Border Road and 15 km of Urban Roads in the Towns of Diffa, N'Guigmi and Mainé-Soroa Project. The Chinese project title is 尼日尔石油公路工程 or 尼日尔石油公路项目 or 尼日尔石油公路工程 or 石油公路项目. The French project title is La réhabilitation de la route Diffa-N'guigmi et son prolongement jusqu'à la frontière tchadienne or Route du pétrole or Prolongement de la Route de l'Unite or Aménagement et bitumage de la route Diffa - N'Guigmi - Frontière du Tchad (182km) et 15 km de voiries dans les villes de Diffa, N’Guiguimi et Mainé-Soroa.
Mr. Cheng Cunzhi is the CEO of CNPC Niger Petroleum S.A.
The ownership structure of CNPC Niger Petroleum S.A., which was legally incorporated in Niger in 2008, is described in Annex 16 of https://eiti.org/sites/default/files/attachments/rapport-itie-niger-2019-version-finale-301121.pdf.
The June 2, 2008 production sharing contract can be accessed in its entirety via https://www.dropbox.com/s/unte8cvls2wwgj1/Avenant%20Signe%20No3..pdf?dl=0.
The PSC equity arrangement was revised on August 23, 2013 such that CNPC Niger Petroleum S.A. has a 65% ownership stake, Taiwan’s China Petroleum Corporation (CPC) has a 20% ownership state, and the Government of Niger has a 15% ownership stake in the production sharing arrangement for the Agadem oil fields.
Some sources refer to the face value of the loan as EUR 152 million or CFA 99,801,900,000. This issue warrants further investigation.
A pre-export finance (PXF) facility is an arrangement in which a commodity (e.g. oil) producer gets up-front cash from a customer in return for a promise to repay the customer with that commodity (possibly at a discount) in the future. PXF funds may be advanced by a lender or syndicate of lenders to a commodity producer to assist the company in meeting either its working capital needs (for example, to cover the purchase of raw materials and costs associated with processing, storage and transport) or its capital investment needs (for example, investment in plant and machinery and other elements of infrastructure). PXF facilities are usually secured by (1) an assignment of rights by the producer under an ‘offtake contract’ (i.e., a sale and purchase contract between the producer and a buyer of that producer of goods or commodities), and (2) a collection account charge over a bank account into which proceeds due to the producer from the buyer of the goods or commodities under the offtake contract are credited. There are two key documents in prepayment finance transactions: a contract providing for the advance payment by the offtaker to the producer for the purchase of goods/commodities (the 'Prepayment Contract'), and a loan agreement between a lender and the offtaker (the 'Offtaker Loan Agreement') under which the advance payment is financed.
For loan and debt rescheduling records with variable interest rates, AidData calculates the all-in interest rate at T0 based on the reference rate (such as LIBOR or EURIBOR) on the loan start date, plus any known margin. Please see the methodology for additional details.
On November 28, 2011, Phase I of the Agadem upstream and downstream integrated project was completed and became operational. In the first few years following the completion of Phase I, Government of Niger revenues from the integrated oil project slightly exceeded $100 million annually.
Some sources refer to the EPC contract as China Petroleum Engineering Co., Ltd. SARL.
On September 29, 2011, CNPC Niger Petroleum S.A. agreed to sell a 20% participating interest in the Agadem Oilfield to Taiwan’s CPC Corporation (also known as Overseas Petroleum and Investment Corporation or OPIC). Then, on August 23, 2013, OPIC transferred its 20% participating interest to a wholly-owned subsidiary known as OPIC Niger.
Some sources suggest that the Petroleum Road Construction Project was financed through a CNPC shareholder loan rather than a PXF facility from CNPC Finance (HK) Limited (see Project ID#2137). This issue warrants further investigation.
The production sharing contract can be accessed in its entirety via https://www.dropbox.com/scl/fi/r1h7t2w4uq0txp7x42glr/5761-china-national-oil-gas-exploration-and-development-corporation-amendme....pdf?rlkey=79yoty5xin2oh1mqf3xrtshzq&e=1&dl=0

📚 Sources & References

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Avenant signed No 3
Bazoum relance la constrictipn de la 'Route du petrole'
Bazoum restarts construction of 'oil road' to Chadian border
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CNPC and Bazoum to negotiate government stake in Agadem pipeline project
CNPC Dagang Niger Engineering Sarl. (DGE)
CNPC kicks off construction of Africa crude pipeline
CNPC to invest in Niger's road infrastructure
CNPC ‘in $210m Niger investment’
CPRE
Dispositif National de Mise en œuvre de l’Initiative pour la Transparence des Industries Extractives au Niger (DN/ITIE-Niger)
Exports of AMP-Niger data and projects locations
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JOURNAL OFFICIEL NIGER
Le Niger débute les travaux de réhabilitation de la route Diffa – N’guigmi – frontière Tchad
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Niger : les autorités saluent les bonnes conditions de l’exploitation pétrolière par la CNPC
NIGER Bazoum relance la construction de la 'route du pétrole'
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Niger state radio says China's CNPC investing $200 mln on road project Read the original article on Theafricareport.com : Niger state radio says China's CNPC investing $200 mln on road project
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Niger-Benin Pipeline Will Kickstart Niger's Oil Sector
Though Security Risks Remain High
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Niger: le chinois CNPC va investir 210 millions $ dans la construction de routes
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中石油向台湾中油转让尼日尔阿加德姆项目20%权益
尼日尔油田二期及外输管道项目开工奠基仪式
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打造能源合作典范推动共建“一带一路” Loan applications and disbursements are still being received and processed as the projects continue to evolve. Ongoing monitoring and evaluation are in place to ensure project continuity.