Petrofac is hoping to get as much of a market share in West African operations as it already has in North Africa. It is ready to spend money to finance oilfield development and has invested capital in infrastructure projects in the Gulf Of Guinea area. But it is also promising to back new asset development and discussing partnerships with government owned companies in the region, notably Nigeria.
The UK listed oilfield service company won a total of $3.4Billion worth of EPC (engineering, procurement and construction) contracts for a gas processing facility(El-Merk) and gas-field development(In Salah) project in Algeria between March 2009 and January 2011. In neighbouring Tunisia, its first foothold on the continent, Petrofac has had a presence for six years, executing a variety of conceptual/FEED work for the country’s developments as well as executing a major EPC project (Hasdrubal gas plant) and has ongoing operations at the Chergui gas field concession on the island of Kerkennah.
While not taking its eyes off North Africa, Petrofac has invested close to $175MM in Nigeria since 2010, attempted to get into Cote D’Ivoire and bravely announced, a month ago, a planned $500MM investment in tiny Cameroon.
Petrofac’s $100MM investment, to acquire a 15.0% interest (12.6% on a fully diluted basis) in the Nigerian independent Seven Energy, in November 2010, was highly publicized and announced the engineering firm largely to the West African oil patch. The company added $75MM in June 2011 to take its interest in Seven Energy to 24.5%.
In November 2012, Petrofac signed a strategic alliance agreement with Bowleven, to support the proposed development of the Etinde Permit, offshore Cameroon. Petrofac wants to provide engineering capability to Euroil, Bowleven’s Cameroonian subsidiary, to support the delivery of a Field Development Plan (FDP) for the proposed first phase of the development, pending satisfactory completion of Euroil’s appraisal of its asset. Prior to approval of the FDP, Petrofac will be remunerated by Euroil for the provision of its service capability. Petrofac will also invest up to $500 million as part of Bowleven’s financial commitment to develop the asset. Petrofac’s investment would be remunerated through a share of Bowleven’s production revenue. This is stretching the idea of an oil service engineering firm. But it’s still early days: an exploitation authorization application was only just filed with Cameroon authorities in September 2012.
But Nigeria may yet turn out to be the jewel in Petrofac’s West African crown. The company has a working agreement with First Exploration Petroleum Development company, which has a 10% working interest in the Niger Delta Western Consortium, itself a 45% equity holder in the Oil Mining Lease (OML) 34, in the western Niger Delta basin, currently producing 15,000BOPD of oil for export and 300MMscf/d of gas for the domestic market. Petrofac will provide engineering support to whatever projects First EPDC is able to come up with.
Petrofac is also talking with the state hydrocarbon company NPDC, to secure work in NPDC operated OML 119, currently producing, in excess of 70, 000BOPD, as well as the company’s other assets. It’s not clear what the eventual transaction with NPDC will be, but NPDC is targeting operated production of 250,000BOPD by 2015 and that is over 125,000BOPD equity production. An engineering firm stepping in to offer not just services, but financial back up for this propped up state hydrocarbon firm is looking at considerable upside.