Latin America’s newest city has been rising unseen for several years. It’s not a secret, but this unexpected metropolis is several hundred kilometers off the nearly dry land along the coast of Guyana.
The impetus behind this new floating city is a vast oil deposit found under Guyana’s coastal waters by a consortium led by Exxon Mobile and including another U.S. company, Hess, and China’s CNOOC. More than 12 billion barrels of crude have already been discovered and much more could still be found.
“If you see what is going on offshore of Guyana, it is quite remarkable. We have two vessels operating and there are drilling ships and support vessels. It is like an offshore city,†says Jacco Bakker, treasurer of SBM Offshore, a Dutch company that builds and operates floating production storage and offloading (FPSO) units.
SBM is building a new FPSO, One Guyana, that will be installed alongside others as part of the Yellowtail development within Guyana’s Stabroek block. The new FPSO, one of five SBM currently has under construction, is the most ambitious to date – and when completed, will be the largest in the Caribbean.
The $1.75 billion project financing – the largest ever for an FPSO – was secured by a consortium of 15 international banks. The financing will become non-recourse once the FPSO is completed and the pre-completion guarantee has been released. The project loan is in line with the duration of the charter, with a two-year tenor post-completion and carrying a variable interest rate based on SOFR plus a 2.2% margin.
This transaction was also executed with remarkable haste – SBM received the contract in April 2022 and the deal was closed in July, a record for the company – and involving the coordination of lenders across three different time-zones in a challenging geo-political climate following Russia’s invasion of Ukraine amid resurgent global inflation and sharply rising interest rates.
The $1.75 billion loan is the largest project financing in SBM’s history, while the banking consortium was far larger than the company usually works with, including banks from China, France, Italy, Japan, Netherlands, Norway, Singapore, Spain and the US.
The vessel is currently under construction and will be ready for delivery in 2025. It will be capable of producing on a daily basis 250,000 barrels oil and 450 million cubic feet of gas. It will be able to store around 2 million barrels of crude.
An added challenge is the fact that financial institutions are more reluctant to have oil and gas projects in their portfolios, given concerns over carbon emissions. Bakker says SBM was able to overcome such obstacles thanks to its track record and robust environmental, social and governance (ESG) policies.
The project not only meets SBM’s own ESG standards, but also went through an extensive EGS due diligence with the banks, shipyard and client, he says.
“The energy transition and climate change add another layer of complexity to bring these deals together. We are going to need oil for some time, so there need to be realistic solutions. We are providing those solutions,†he says.
“One Guyana FPSO provides affordable energy at low break-even prices and at low emission intensity. It makes economic and carbon-resilience sense,†Bakker adds.
Sponsor: SBM Offshore N.V.
Banks: ABN AMRO, Bank of China, Caixa Bank, Citi, Clifford Capital, Credit Agricole, DNB, ICBC, ING, Intesa Sanpaolo, Mizuho, MUFG, SMBC, SMTB, Societe Generale
Financial Advisor: SMBC
Law Firm: Norton Rose
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