By Josephine Shillito
LONDON, March 15 (PFI Energy Finance Briefing) – Major
European oil companies are increasingly offering corporate
financing to small- and mid-cap oil producers, using the loans
to effectively lock up supplies of crude.
Sources say oil giants like BP, Glencore and Vitol have
filled the void left by eurozone commercial banks, which have
pulled back from lending due to the debt crisis and new capital
requirements.
While advancing capital in exchange for production volumes
is nothing new in the energy sector, the majors are said to have
become more aggressive of late, as the civil war in Libya and
the threat of a conflict over Iran have roiled the supply chain
and driven up prices.
Sources say the oil majors are specifically targeting light
sweet crude, and are coming on board early in a project’s
development with the smaller companies, many of which have been
struggling to obtain direct lending from banks.
“What we are seeing is a change in timing. Oil majors are
offering capital pre-production, and sometimes even
pre-drilling, because they have the technical expertise on board
to assess the exploration and production risk,” one source said.
“Most importantly, a knowledge of both the physical and
paper markets allows them to correctly price this risk.”
One recent example was a $50m 23-month unsecured corporate
facility between Nigeria-focused oil independent Afren and the
Azerbaijani state oil company Socar.
Continued…
