Differences in Financing the Field System and the Export System

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The 3.7 billion USD was planned to be developed in two parts: the Field System – 1,5 billion USD used to extract oil in Chad and a Export System – 2,2 billion USD – to trasport the oil to the coast. The sponsors agreed to buy all of the output at market prices in proportion to their ownership shares. Corporate financing would be used to finance the Field System and project finance was decided for the Export System. This structure facilitated equity participation by the host governments and issuance of limited-recourse debt by the pipeline companies (the sponsors would guarantee debt repayment only until completion of the project). An unincorporated joint venture known as the Upstream Consortium would own and finance the Field System. The proposed structure included 2,3 billion USD of equity of which 2,2 billion USD would come from the private sponsors. The IBRD (member of WB) would lend 77 milion USD and EIB would lend 42 million USD to the host countries in order to finance their equity stakes. The 1,4 billion USD of the project debt would come from three sources: IFC, two credit agencies (Coface and US Exim)and the capital markets (in bonds). IFC would grant 2 loans – one of 100 million USD for its own account and second one of 300 million USD for syndication to other institutions. The two ECA’s would arrange a bank financing of 600 million USD. COTCO and TOTCO would issue 400 million USD in bonds with leverage ratios of 62% and 64% respectively. Production would end by 2032 and the project would end. The returns were driven by the oil price and volume assumtions. Even based on the assumtion of reduced price than average (due to acidic, corrosive nature of the Doba Basin oil), the price was well above the project costs of 5,2 USD per barrel. The revenues distribution to Chad, Cameroon and private sponsors would come in form of royalities, taxes and dividends. Chad's returns are basically dependent from project revenues, while Cameroon's returns are function...
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