BP AMOCO Case Study

Brij Mohan Giri 2013D15 Jasjeet Singh Gill 2013D02

Main Issues

To work out financing policy for

Consortium
Policy for Full Field Development Project
Re-assess financing strategy of Early Oil

Project

Early Oil Project: Financial Strategy

AMOCO: External Financing BP : Internal Funding

MIG of five companies, IFC and EBRD were primary lenders Project was carried out in politically volatile area, hence financing option was preferred

Six companies of consortium opted for internal funding Companies aimed at business expansion opted for internal funding

Problems

Whether to refinance Amocos project loan from early oil project

Benefits: Refinancing may lead to lower cost of funds Demerits: Negative signal to MIG members and may hamper AIOCs relations with IFC and EBRD.

Problems
Financing options for Full Field Development project Project Finance Benefits: Allowed leveraging of investment through outside funds Reduced political risk Demerits: High debt cost

Financing options for Full Field Development project Corporate Finance Benefits: Lower cost of funds Easy mobilization of funds Demerits: May lead to higher cost of funds for other members

Financing options for Full Field Development project Dual Financing Strategy Benefits: Relatively lesser cost of funds Relatively lesser time to gather funds Demerits: Higher interest rates for other members in group Difficulty for other members in raising internal funds

Financing Model for Full Field Development Project

Corporate Financing Project Financing Combined financing model for AIOC

Benefits of both funding options Easy mobilization of funds Increased borrowing capacity and risk management tool

Thank You