Africa and ECAs remain at the heart of big oil strategy despite oil export debt

(Energy Intelligence Finance, New York, 30 September 2020) French TNC Total's CEO Patrick Pouyanne has emphasized that Africa will be at the "heart" of the company's long-term energy transition plans. Africa has long been a rich source of cash flow for Total (EIF Feb.19'20). In 2019, the continent generated around $10 billion of Total's $26 billion cash flow from operations, and 30% of its oil and gas production (900,000 barrels of oil equivalent per day). In July, Total and its partners secured $15.8 billion in project financing. The Export-Import Bank of the US and seven other export credit agencies provided loans, guarantees and insurance for Total's Mozambique LNG project alone (EIF Aug.12'20). Meanwhile, the Train 7 expansion of Nigerian LNG is another key African LNG project for Total (EIF Aug.26'20). Train 7, a joint venture between the Nigeria National Petroleum Corporation (NNPC) and international oil majors Royal Dutch Shell, ENI and Total, will be financed by a combination of NLNG's internally generated cashflows and US$3 billion of debt raised from a broad range of financiers, with the international and Nigerian banks and the DFIs providing US$1.5 billion of debt on an uncovered basis, and the South Korean and Italian ECAs directly funding or covering the remaining US$1.5 billion. An October report from Dutch ECA Atradius notes that the risk of sovereign default is growing across Africa because of higher debt levels and currency risk, with the shock hardest felt in oil exporting countries such as the Republic of the Congo and Angola, where oil accounts for more than 90% of the exporting revenues”.