As war looms in the Middle East, oil groups appear to be ramping up their efforts in places such as Nigeria, but they are also looking further afield, into West Africa's new frontier zone. Bankers may be still glowing from the success of one of last year's deals of the year, the $1.06 billion Nigeria LNG-Plus project financing, but they are already thinking of follow up deals, with spin-off refinancing deals in the offing and syndication already launched for the associated Bonny Gas Transport vessel financing.

The sponsor of NLNG-Plus, the largest private sector financing project arranged in sub-Saharan Africa and the country's biggest non-recourse financing to date, is NLNG, a group 49% owned by the Nigerian National Oil Corporation, together with Shell, TotalFinaElf and Agip.

Michael Emery, at ABN Amro in London, says that Bonny Gas is benefiting from the success of NLNG-Plus. When NLNG-Plus closed in December last year, some 19 banks had joined lead arrangers BNP Paribas, Credit Lyonnais, Citibank, Mediocredito and WestLB to finance trains four and five of the project. They were attracted by the good structure of the deal as well as the previous performance of the plant. ?It was a mix and match of sweet and sour,? says Emery, whose bank was one of the eight sub-underwriters joining the deal ? the others being ANZ, Credit Agricole, Fortis, Hypovereinsbank, ING, KBC and SCMB.

And the deal was certainly a feat of ingenuity and careful coordination. The total project cost $2 billion. Of that some $1.06 billion is debt, split between an $800 million international tranche, a $160 million domestic tranche and a $100 million African Development Bank loan. The deal also brought in the export credit agencies US Ex-Im, ECGD, Sace and Gerling NCM.

According to Emery, the deal could pave the way for refinancings. Trains one to three were financed with sponsor equity but the recent financing for trains four and five has proven the huge level of appetite from international banks for a deal of this type. ?If I were Shell I now might think about refinancing the previous portions,? says another source close to the deal.

Leading on from NLNG is the Bonny Gas Transport financing, a deal to part-fund four newbuild LNG vessels at the Hyundai Heavy Industries shipyard in South Korea. The vessels will be used to transport LNG from the NLNG plant to offtakers in Western Europe under long-term sales and purchase agreements. Another four vessels will be leased.

NLNG already owns eight LNG tankers under time charterparty agreements, a ninth is chartered by NLNG from Shell Bermuda and a tenth is under construction.

Syndication for the $460 million term loan launched at the beginning of this year and was expected to close its senior level phase at the end of January, with the whole deal wrapped up by the end of March (for latest details, see Deals and Developments in this issue). ABN Amro and Credit Lyonnais are the joint bookrunners on the deal and arrangers together with Fortis, HVB Group, ING and WestLB. The deal is Bonny Gas's third foray into the international syndicated markets, having signed deal for three vessels in 1999 and 2001.

It is a 10-year post delivery financing, amortising to a balloon of 25%. Pricing details were not available but are likely to be similar to those on its previous deals.

Gilles Mouterde at Credit Lyonnais in Paris says that the deal is expected to attract project finance and shipping banks. ?Given the structure of the transaction and the success story of NLNG so far it should prove attractive,? he says. ?In addition, the market for LNG tankers is also booming.?

The deal does carry some Nigerian risk, in that the source LNG comes from the country. However, Bonny Gas, though a direct subsidiary of NLNG, is registered in Bermuda. Funds are paid in hard currency into an escrow account. On top of that, for most of the year, the vessels will be travelling in international waters.

Says Mouterde: ?The important aspect about this deal is that, besides the excellent structure, you are funding LNG tankers which are not only mobile assets but also state-of-the-art ships.?

But while the immediate focus is likely to be on Nigeria's well-established reserves, savvy bankers would do well to keep their eyes on the so-called frontier territories in West Africa, where oil majors are already doing battle to secure key concessions. Morocco, Mauritania, Equatorial Guinea, Guinea Bissau, Senegal and the Gambia are attracting a surprising level of interest from international oil groups, not least from US oil groups and contractors, with groups such as ExxonMobil, ChevronTexaco, Amerada Hess, Noble Energy, Kellog Brown and Root and Kerr McGee all keen to build up their interests in the area.

?US companies are all over western African like a rash,? says Peter Dolan of Fusion Oil & Gas in London, an AIM-listed holding company for a group of companies whose business is oil and gas exploration in Africa. Fusion has exploration licenses in Mauritania, The Gambia, Senegal, Guinea Bissau, Ghana and Gabon. ?There is no doubt that for the US this region is rapidly becoming more important geo-politically as a means of securing oil reserves that are not in the Middle East.?

It is little wonder that comparisons with the oil rush in the Persian Gulf in the 1970s are being made when governments in Nigeria, Equatorial Guinea and Angola all have plans to raise levels of production.

And this has spurred on attention from the US. Visits from high-profile US officials -most notably US secretary of state Colin Powell's visits to Angola and Gabon at the end of last year ? have highlighted the growing strategic role of this part of Africa for the US oil lobby.

Analysts say that for the US the region is seen as providing a very long-term alternative to the Middle East and that they are undeterred by political instability, levels of corruption and lack of corporate governance in the region. Instead the region can in many cases offer oil from countries that are outside Opec, the international price-controlling cartel of oil producers.

Says Emery: ?For the US groups it is more about diversification. It isn't that there is any less interest in the Middle East.? This is also reflected in the banking appetite in the region, where interest in deals remains high and pricing highly competitive ? albeit done with banks taking on a smaller level of underwriting.

However, looking ahead, the region offers some interesting prospects. Progress in drilling techniques means that deep water areas, that previously would not have been considered, are now more viable. Thus areas off the Gulf of Guinea, where the oil is of a high quality, are good prospects and more easily accessible for US companies than concessions in the Middle East.

But US groups in the region are playing catch-up. Says Fusion's Dolan: ?US companies were relatively slow to recognise West Africa as a significant opportunity. With a few exceptions, it was only in the early 1990s that some large US majors made a commitment to the area and since then the pace of activity by these groups has increased exponentially.? He says oil groups are looking at the region on the basis of its inherent prospectivity as well as a direct response of changing global security issues.

Kerr McGee of the US is known to be gathering seismic information off the coast of Western Sahara, a disputed area.

Meanwhile, in Equatorial Guinea, where ExxonMobil dominates, production is expected to rise to about 300,000 barrels a day. If this were achieved it would be a sixth of the existing production of Nigeria, itself the fifth largest supplier of oil to the US. Such figures are clearly turning heads.

Perhaps it is little surprise, then, that at the beginning of January the US said it would reopen its embassy in Equatorial Guinea for the first time since 1995, when the extent of the country's oil reserves were not realised. The move has attracted criticism, as the country is still considered politically repressed. But while US officials have acknowledged human rights concerns under President Obiang Nguema, they claim it is better that diplomacy will be constructive.

In December, Noble Energy of the US said that its liquefied petroleum gas expansion project had been approved by the government of Equatorial Guinea. Noble is working with Marathon Oil on phase 2B Alba field expansion project which is expected to be completed by the fourth quarter of 2004 and will increase gross production of LPG by over 13,000 barrels per day.

Noble says it is expected to fund its portion of the deal using its own equity but views the region as possessing ?some very attractive opportunities?.

Fusion is working with Amerada Hess on two blocks in the joint development zone known as AGC, an area previously the subject of a dispute between Guinea Bissau and Senegal. Fusion is also working with Agip on a third block in the same area. There has been no drilling at any of the blocks but high quality three-D seismic data is making the groups ?optimistic?, according to Dolan.

Meanwhile, Energy Africa, a South African-based exploration group controlled by Malaysia's Petronas, is also exploring in Equatorial Guinea. It also has prospects in Angola and successes in Mauritania and Morocco.

The group has been in the region for 10 years, moving into Equatorial Guinea in 1999. Rhidwaan Gasant, Energy Africa's CEO, says that his company expects to develop the northern block G fields in Equatorial Guinea over the next three to four years and is looking to raise limited-recourse financing for this development ?imminently?. Gasant says the group hopes to raise between $50 million-$100 million based on the group's existing production assets elsewhere in Africa.

According to Gasant, Energy Africa has already received a considerable level of interest from European, particularly French, and South African banks. ?Our preference is to finance the deal on a limited recourse basis to avoid exposing our balance sheet.?

Gasant says that over the past few years there has been an increasing appetite for this kind of risk and an increasing level of competition as US, Canadian, Australian and European groups race to grab the best exploration opportunities.

Nor do issues of political stability or security risk appear to be affecting appetite for the region. Gasant says working in Equatorial Guinea and the rest of Africa has not been a problem. ?Our experience has been that fiscal risk in the UK is actually higher than it is in Africa. And as most of our interests are offshore, that reduces any security risk issues.?

Gasant says that many of the big players have tended to move towards deep-water sites on multibillion-dollar deals. However, there is also room for smaller independents prepared to take a risk on exploration and bring in bigger players to share the risk at the upstream stage. ?For us our competitive advantage is our knowledge of west African geology so we are an attractive partner who leaves space for a big players.?

Elsewhere there are also some positive signals coming from Mauritania, where a consortium led by Australia's Woodside Petroleum has had some success at its Chinguetti find. According to Fusion, which has a 6% interest in the project, the past three years have been very positive. ?In May 2001 we made a discovery; in 2002 we followed that up with a second drilling campaign. The wells drilled in 2002 defined the size of the discovery and found another field with a three out of three hit rate; this is a dream result, says Dolan. He says the aim now is to start production by late 2005 or early 2006.

At a purely explorative level, such projects are unlikely to attract bank attention, as there is no revenue stream, but if the success continues this could be an area to watch in the next few years.

Says ABN Amro's Emery: ?As with any deal, if the structure is right there is no reason why banks won't look at the deal. We have already seen in the past few years in the Sonangol deal in Angola, for example, that there is appetite, particularly for pre-export finance deals. And if you can look at Nigeria or Angola there is no reason why you shouldn't consider other countries in West Africa.?