Nigeria signs funding deal with Shell

By Camillus Eboh

ABUJA (Reuters) - Nigeria signed a $3.1 billion (1.6 billion pound) deal with the local arm of Royal Dutch Shell (RDSa.L) on Monday to plug a funding gap in their joint venture projects, the country's state oil firm NNPC said.

Under the deal, Shell would cover a $1.3 billion shortfall in NNPC's share of the 2008 joint venture budget and provide an extra $1.8 billion loan to cover outstanding payments from 2006 and 2007, NNPC said in a statement.

The agreement is the third such deal in 10 days between the world's eighth biggest oil producer and its joint venture partners to try to end chronic funding shortfalls in the industry which have delayed projects and depressed output.

"The money will be used to finance their upstream joint venture projects," the statement said. It said the $1.8 billion loan would mostly be used to settle payments due to local contractors and suppliers.

Shell operates onshore and shallow water oilfields in Nigeria as part of a joint venture called SPDC. Long the biggest producer in Nigeria, it has been overtaken by ExxonMobil (XOM.N), which has a higher proportion of facilities offshore.

A company spokeswoman in Nigeria confirmed the deal had been signed but declined to comment on the details.

"We can confirm that SPDC has signed two sets of agreements with the NNPC," the spokeswoman said.

"The agreements specify how to address the underfunding of the past through bridge loans, and the funding of ongoing projects and new developments with a modified carry agreement."