Glencore Energy UK, the British arm of the global resources production and marketing firm, has signed an offtake and prepayment agreement with US exploration and production company, Erin Energy, securing a market for the oil from Erin’s Oyo-8 well, offshore Nigeria.
Under the contract, Glencore would lift crude oil for a minimum of two years from the FPSO Armada Perdana, the vessel receiving oil from the Oyo-8 well.
According to Erin Energy’s press release, the prepayment element of the agreement is represented by two tranches of funding, and is subject to conditions, including legal documentation being completed. The first payment tranche, worth a total of around $50 million, to be paid in two equal drawdowns, is to become available when Erin Energy completes the next well on the Oyo field, Oyo-7. Access to this tranche is conditional upon Erin Energy meeting certain production targets. The second tranche, worth $100 million, would be a revolving inventory facility.
Erin would use these funds to further develop its activities offshore Nigeria. Chairman and CEO of Erin Energy, Kase Lawal, said, ‘This prepayment facility would provide us with additional working capital and is a strong endorsement of our offshore Nigeria assets.’
Oyo-8 is located in the OML 120 block of the Oyo field, which is around 75km off the Nigerian coast. Earlier this month, Erin announced that the well’s production is exceeding expectations, producing at a stabilized rate of 7,080 barrels of oil per day. It also stated that it expects to achieve first oil from Oyo-7 ‘in a few weeks’.