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EBRD: Senior lender in Polar Lights financing of US$ 200 million
The European Bank for Reconstruction and Development (EBRD) has signed its largest private sector loan to the Russian oil sector. The US$ 90 million EBRD loan is being made to the Polar Lights Company, a joint venture, formed by a subsidiary of Conoco Inc. (50%) and GP Arkhangelskgeologia (50%), a state-owned oil exploration and production enterprise.
At the same time, parallel loan agreements were signed with two other participants in the financing: International Financing Corporation (IFC) for US$ 60 million and Overseas Private Investment Corporation (OPIC) for US$ 50 million. The total cost of the project is approximately US$ 350 million.
The proceeds of the loan will be used to develop the Ardalin oil field in the Timan Pechora region of the Russian Federation. The work to be undertaken includes drilling 24 new wells, constructing a central production facility and laying a 40 mile pipeline. Peak production is expected to be around 26,000 barrels per day during the 20 year life of the project.
Anatoly Kazakov, General Director of Arkhangelskgeologia, emphasised "The funds generated from the sale of oil in the world's markets will finance growth and improvement in our communities. The revenue and profits will cause new projects to start, creating more jobs and extending outward the circle of influence from this venture."
During the construction period it is estimated that 800-1000 Russian jobs will be created with a further 200 provided during the drilling phase. It is anticipated that the joint venture will have a staff of about 200 people. Training programmes will be established in Russia and in the US.
"The Polar Lights Company will produce oil in a new area and create a stream of revenue that will strengthen the economic well-being of all parties involved," commented Billy Branch, General Director of Polar Lights. The Company, dedicated to completing the project on time, has already completed one-half of the pipeline work during the 1992-1993 winter construction period.
Ron Freeman, Acting President of the EBRD, said "The combination of the sponsors' technical and management expertise plus the Bank's funding leverage will have a real impact on boosting Russia's oil production. Stemming the severe decline in the country's oil production and generating hard currency for the Russian Federation are critical factors in the Bank's funding decision. This investment programme should send a positive signal to other foreign energy companies that investment in Russian energy development is attractive and that the necessary co-operation exists".
Archie Dunham, Executive Vice President of Conoco Inc., added "We are delighted with the collaboration between EBRD and the other important world financial organisations to bring this financing to completion. It is a significant signal to the world that the international financing community and Conoco are committed to the continued development of Russian oil infrastructure. The Polar Lights project will benefit the people of Russia and those who have invested in Conoco."
Note to editors:
- EBRD estimates show that for every dollar invested by the Bank, this project is expected to generate approximately US$ 9 in economic benefits to the Russian Federation.
- Conoco initiated discussions with the Russian authorities in 1989. In December of 1991, a 50-50 joint venture called Polar Lights Company was formed between Arkhangelskgeologia, and Conoco Timan-Pechora Limited, a 100% subsidiary of Conoco Inc.
- GP Arkhangelskgeologia is a state owned geological enterprise responsible for oil exploration and production in the Arkhangelsk region of north-eastern Russia.
- Conoco is a 100% subsidiary of the DuPont Company
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