OT22062 - Interest and Financing

Lending Practice. Untouchables.

It is understood that bank finance for a project is only likely to be available when full appraisal has been accomplished and a mature development plan has been agreed with partners and the DTI. This would be subject to the lender being satisfied in a number of other areas eg length of loan, rate of interest, repayment period etc. In the case of gas, in addition to a development plan, the potential lender would also probably look for a long term sale contract. Exploration and appraisal activity is normally considered much too risky for banks to touch. Statistics maintained over many years by the DTI and also by independent sources demonstrate that the percentage of exploration wells which find oil, gas or condensate which result in commercially viable production is considerably less than 50%. The traditional banking view is that exploration has to rely solely on self financing.