FCP To Approach Banks After The Summer To Finance Algeria’s MLE Project
Canada’s First Calgary Petroleums (FCP) intends to seek financing after the summer for the development of its Menzel Ledjmet East (MLE) project in Algeria’s Berkine Basin, MEES learns. Originally the company had expected to approach the bank market for funds in early 2Q08 for the natural gas and NGLs project, but activities were delayed when shareholder Waterford Finance and Investment raised concerns about the leadership of the company’s President and CEO Richard Anderson, triggering a proxy contest. This was subsequently settled in April, resulting in the appointment of a new board of directors, which included nominees from both FCP and Waterford, and the replacement of Mr Anderson as President and CEO by Shane O’Leary, who was formerly the Chief Operating Officer.
FCP said that the MLE field will come on-stream in 2010, producing 200mn cfd of gas and 20,000 b/d of liquids, with the Central Area Field Complex (CAFC) coming on stream in 2011. Production in the Block 405b MLE field will then be ramped up to a level of 300mn cfd of gas and 60,000 b/d of liquids in 2013. To draw up the commerciality of CAFC and the ZER structural areas, FCP had secured a two-year extension of its production-sharing contract (MEES, 31 March). To complete the MLE development, which calls for the construction of a gas processing plant and field gathering system, bank debt being sought will total $750mn, while CAFC will need $250-300mn, said the company. The funding will be sought in two stages with MLE hitting the market first, and CAFC to follow, although a timetable has not been agreed for the latter because the development must first receive approval from the Algerian authorities.
The MLE project is expected to cost a total of around $1.3bn to develop, with FCP’s costs pegged at $1bn, and state oil and gas company Sonatrach to fund the remainder. While FCP will formally approach banks in a few months’ time, a new round of meetings with lenders will take place this month, MEES understands. FCP, which is being advised by Citi, will use reserve based project debt financing for 75% of its project costs, with the remaining 25% coming from a $267mn convertible bond issued in December 2007 (MEES, 11 February). Sonatrach is expected to fund its share from its balance sheet. However, MLE project costs are estimates at this stage and will not be pinned down more accurately until the award of the engineering, procurement and construction (EPC) contract. EPC bids are expected to be submitted in the next month in a two-staged process comprising first technical and then commercial bids. EPC contractors competing for the project include JGC, Petrofac, Saipem and SNC Lavalin, MEES understands.
Algeria’s First Upstream Oil And Gas Project Financing
FCP’s MLE project could be the first project financing in the upstream oil and gas sector in Algeria. It will also include international banks, unlike the greenfield ammonia/urea plant near Arzew being developed by Sonatrach and Egypt’s Orascom Construction Industries (OCI), and the Bahwan/Sonatrach granulated urea plant. These were considering international bank participation, but earlier this year a decision was made to use domestic banks. The government has been keen to use local lenders, which are currently awash with liquidity. However, Ciment Blanc Algerian (owned by OCI’s cement division, which is owned by Paris-headquartered Lafarge), which is a solely private sector project, received in June funding in Algerian dinars from both international and local banks for construction of a cement plant. Project financings were conducted several years ago in US dollars, but these were also in cement and other non-oil sectors such as telecoms and desalination.
Copyright MEES 2008.
