Vitol, the world’s largest independent oil trader, will lead a $530m oil-for-loan deal with a Nigerian energy company as the commodity house helps to extend large financing facilities to private players as well as cash-strapped states.
The five year agreement with Shoreline Energy will give Vitol preferential access to physical cargoes, two people familiar with the deal said, amounting to at least 30,000 barrels a day of crude produced in the oil-rich Niger Delta.
These so-called pre-pay deals have become a major part of the oil trading industry since crude prices tumbled from a 2014 peak of around $115 a barrel to below $70 a barrel today.
Increasing traded volumes have been seen as a way to raise earnings and competition is fierce for pre-payment deals.
Vitol and Shoreline declined to comment.
Vitol, alongside rivals Glencore and Trafigura, have helped to funnel billions of dollars into oil producer nations such as Kazakhstan, Russia and semi-autonomous Iraqi Kurdistan, often standing in where banks are reluctant to extend conventional credit.
Vitol will put up funds alongside asset manager Farallon Capital Management and a syndicate of Nigerian banks — Union Bank, Ecobank, FCMB, Fidelity Bank.
The money will be used to refinance existing debt and enable the development of 65,000 b/d OML 30, an oil patch covering several onshore fields, of which Shoreline owns 45 per cent.
The rest is owned by a subsidiary of state-owned Nigerian National Petroleum Corporation (NNPC).
Vitol has had a long presence in Nigeria. It has bought petrol stations through a joint venture with local producer company Oando and private equity fund Helios and participated in government swaps deals delivering refined fuels in exchange for crude.
Shoreline and other indigenous players have had to turn to prepays with trading houses since prices crashed and pushed the African producer nation into recession for the first time in 25 years. NNPC is also seeking oil-for-loan deals.
The funding crisis for local companies was only made worse by militant attacks in the Niger Delta that damaged oil pipelines and other infrastructure that restricted flows and reduced lucrative exports.
Shoreline gained access to OML 30 as international oil majors sold off assets at huge costs to local companies as part of an indigenisation programme under the previous government.