Oil & Gas News

‘Stanbic Has Money To Lend To Oil Industry’

Stanbic's Mweheire (R) and Proscovia Nabbanja, CEO, Uganda National Oil Company (UNOC)

Stanbic Bank says it has financial packages specifically designed for businesses looking to participate in Uganda’s oil and gas industry.

Patrick Mweheire, the regional managing director, Standard Bank Group, East Africa, also noted that the Ugandan subsidiary had been planning to serve the oil and gas industry for more than five years.

“There are several lessons that we have learned elsewhere in Africa that we will bring with us here. It’s actually beyond just lending. At the end of the day we need to take solutions that have worked elsewhere,” says Mweheire.

Stanbic, Uganda’s largest commercial bank, says it intends to draw from its group experience in working in the oil and gas industries of countries such as Angola, Nigeria, Mozambique and Ghana, to package financial solutions for businesses investing in Uganda’s nascent petroleum industry.

On April 11, 2021 Uganda moved a giant step closer in its journey to First Oil with the conclusion of key agreements, marking the launch of key projects, including the East African Crude Oil Pipeline Company (EACOP). Subsequently, the main Engineering, Procurement and Construction (EPC) contracts are now being awarded, opening up substantial opportunities for Ugandans and local companies to provide goods and services.

However, many local businesses continue to complain that they have few, if any, cheaper options for shoring up finance to participate in the oil and gas sector. At one point, some local players asked the government of Uganda to put in place an oil fund, from which they could borrow cheaply.

To plug this financial gap, Stanbic says it will sign tripartite agreements with the contractor and the oil company to de-risk the project financing. This means the contractor does not need a lot of cash from the onset to start working, but only some initial capital. And as they work, they get paid.

“The oil companies have been very welcoming and productive to the idea of signing up tripartite agreements with them in order to de-risk and provide liquidity to the contractors and subcontractors,” said Mweheire.

Although Stanbic’s single obligor limit (the money it can invest in one project) stands at about $60 million, its largest shareholder, the Industrial and Commercial Bank of China (ICBC), has also “demonstrated appetite to invest in this sector in Uganda,” according to Mweheire.

“But it is important to keep in mind that debt is not the only solution; there are several ways to skin a cat, including equity or mezzanine debt. I would encourage that we have some conversations around this. My colleagues in the banking sector are equally prepared and we are just waiting to do business,” he added.

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