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LEKOIL Looks For Partner to Take Over Disputed 23% Stake in OPL 310

LEKOIL has agreed with Optimum, its partner in Oil Prospecting Lease (OPL) 310, in deepwater Nigeria, to use its 22.86% equity stake in the Block as a potential funding and security vehicle for the accelerated development of the Block by an industry partner or a third party that elects to farm-in to the Block to fund field development.

The AIM listed LEKOIL has a 17% equity on the lease that has been authorised by the Nigerian authorities, but has been unable to get the consent of the government for another 22.86%, equity, which it purchased with $13Million from Afren in 2015, mainly because Optimum, the holder of the licence (who sold the stake to Afren in the first place), disagrees that LEKOIL had legitimately bought the equity from Afren.

“This dispute has been the principal reason that development of the Block has been delayed”, LEKOIL says in a release.

LEKOIL had taken the President of Nigeria (who is the Minister of Petroleum) to court over the non-granting of consent for that equity for four years. It lost the case and decided not to appeal.

“Rather than pursue this matter further, the Parties have agreed to recourse to sourcing a third party that will bring money to fund the appraisal and development of the field”, LEKOIL explains.

The resource estimates of the Ogo field, the undeveloped discovery in the licence, is 750Million barrels of oil equivalent. The two probes on the structure were not tested, so the volumes could be less. But they also could be more and there’s the perception that most of it is natural gas, which now has a growing market in Lagos, the nearest city inshore of the field.

The potential Funding Partner may be sourced by either LEKOIL or Optimum. The agreement does not address the recovery of the $13Million consideration previously paid by LEKOIL with respect to the acquisition of the shares of Afren Oil & Gas (Nigeria) Limited (“AOGNL”) in 2015 (which held the 22.86% participating interest in OPL310). The idea is that this money will be part of the farm in consideration to be taken care of by the incoming funding partner.


‘They Don’t Want to Pay Taxes’, Ugandan Government Asserts

By Toyin Akinosho, Publisher

FID for basin-wide development likely to be postponed far into 2020

The termination of Tullow Oil’s farm down from the Ugandan oilfield project was essentially about disagreement with the authorities on Tax payment.

The press release by TOTAL is vague on this specific detail, only saying that “no agreement on the fiscal treatment of the transaction has been reached”.

Tullow’s statement is more pointed about the issue: “this transaction is a result of being unable to agree all aspects of the tax treatment of the transaction with the Government of Uganda which was a condition to completing the Sale and Purchase Agreements SPAs”.

The British minnow then goes on to exonerate itself:

“While Tullow’s capital gains tax position had been agreed as per the Group’s disclosure in its 2018 Full Year Results, the Ugandan Revenue Authority and the Joint Venture Partners could not agree on the availability of tax relief for the consideration to be paid by TOTAL and CNOOC as buyers”.

Meaning that the two huge firms: the French supermajor and the Chinese behemoth didn’t consent to the tax that the Ugandan government wanted from them.

Ugandan authorities flatly debunk this exoneration.

“Tullow sought transfer of its interest without payment of any capital gains tax arising from the sale and also on condition that certain tax deductions, not ordinarily transferable to the buyers, be transferred to the buyers”, says Robert Kasande, Permanent Secretary at the Ugandan Ministry of Energy and Mineral Development.

Kasande’s statement declares that the Government of Uganda had drawn the line clearly since over a year now, but the private parties simply didn’t come to the party.

Following several engagements with the partners (TOTAL, Tullow and CNOOC), “Uganda Revenue Authority communicated its tax assessment on 10th August 2018. Government’s position is that the assessed tax should be paid in line with the laws of Uganda and tax reliefs are treated in accordance with the laws of Uganda”.

Tullow will now initiate a new sales process to reduce its 33.33% Operated stake in the Lake Albert project which has over 1.5Billion barrels of discovered recoverable resources and is expected to produce over 230,000BOPD at peak production.

Ugandan authorities are hoping that this termination does not unduly delay a Final Investment Decision for the project, but Tullow warns: “The Joint Venture Partners had been targeting by the end of 2019, but the termination of this transaction is likely to lead to further delay”.

 


TOTAL Terminates Ugandan Agreement with Tullow

French major TOTAL has terminated its agreement to purchase stakes belonging to British minor Tullow in the Ugandan oilfield project.

TOTAL cites inability to reach common ground on the farm in/farm out, with the Ugandan authorities.

“On January 9, 2017, TOTAL and Tullow entered into a Sale and Purchase Agreement (SPA) whereby TOTAL would acquire 21.57% out of Tullow’s 33.33% interest in the Lake Albert licenses. CNOOC exercised its right to pre-empt 50% of the transaction. As a result, TOTAL and CNOOC would have each increased their interest to 44.1% while Tullow would have kept 11.8%”, TOTAL explains in a release today.

“Since 2017, all parties have been actively progressing the SPA.

“However, despite diligent discussions with the authorities, no agreement on the fiscal treatment of the transaction has been reached.

“The deadline for closing the transaction has been extended several times, clearly demonstrating the endeavours of the parties to find an agreement. The final deadline will be reached at the end of today, August 29, 2019, and as such, the Acquisition Agreement will be automatically terminated”.

TOTAL further avers that “despite the termination of this agreement, TOTAL together with its partners CNOOC and Tullow will continue to focus all its efforts on progressing the development of the Lake Albert oil resources. The project is technically mature and we are committed to continuing to work with the Government of Uganda to address the key outstanding issues required to reach an investment decision”.

In that release, Arnaud Breuillac, TOTAL’s President Exploration & Production declares: “A stable and suitable legal and fiscal framework remains a critical requirement for investors”.

TOTAL says its interest “will therefore remain at 33.3% on blocks EA1, EA2 and EA3 prior to the 15% national company back-in, TOTAL being operator of the block EA1 which contains the largest part of the reserves”.

The company “keeps the right to pre-empt any future transactions, in case any party divests part or all of its interest”, it maintains.

 

 


Shell Gets Positive Judgement on OML 11

By Fred Akanni, in Lagos

The Federal High Court in Abuja, Nigeria on Friday, August 23, 2019, ordered the Minister of Petroleum Resources to grant the renewal of the Oil Mineral Lease (OML) 11 to Shell Petroleum Development Company of Nigeria for 20 years.

Justice Taiwo Taiwo, in his judgment delivered in a case tabled by the AngloDutch company, ruled that renewal would be for 20 years and not 30, as requested by Shell.

Shell’s prayers to the court were against the Minister of Petroleum Resources and the Minister of State. President Muhammadu Buhari doubles as the Minister of Petroleum Resources.

Abba Kyari, President Buhari’s highly powerful chief of staff had, in a letter dated March 1, 2019, written the Group Managing Director of the state hydrocarbon company NNPC to note that President Buhari had “Directed the NNPC/NPDC to take over the operatorship, from Shell Petroleum Development Company, of the entire OML 11, not later than 30, April 2019 and ensure smooth re-entry given the delicate situation in Ogoniland”.

At the time the order was given, Shell was still processing the renewal of the OML 11 licence.

Shell was also, at the time, in negotiations with the Nigerian multi-sectoral company Transcorp, to sell its stakes in the lease to the latter, in the event of the renewal. Some other Nigerian and international companies were considering raising the $1Billion invoice that Shell had presented to Transcorp, for its stakes in OMLs 11 and 17, until Mr. Kyari laid down the gauntlet.

Mr.Kyari’s letter did not contain the word “revoke” and since it only talked about NNPC taking over “operatorship”, a consensus grew that Shell had been granted renewal, but not operatorship.

The arguments in the suit that was decided last Friday, have proved the contrary.

If the government does not appeal the court case, Shell would likely proceed to sell the 45% belonging to it and TOTAL and ENI, in those two acreages.

A secondary lease sale market has grown large in Nigeria in the eleven years since Oando acquired stakes in two Shell operated deepwater leases, in 2008. The market is fed by the lacuna caused by the absence of licencing round in the country since the end of President Olusegun Obasanjo’s tenure in 2007.

The Nigerian treasury itself has not exactly benefited from these sales, as had happened in farm-ins and outright asset sales in Uganda, Angola and Libya in the course of the last 10 years. When the Department of Petroleum Resources staked a claim, for the first time, to 10% of the transaction money, in the last Shell-led bid round, (2014-2015), which grossed $4.6Billion, it discovered a clause in the transaction that said that any payment to government from the deals had to be made by the buyers of the assets. And since the buyers are “poor” Nigerian companies, the DPR found itself on the back foot.

 


Savannah Gets Buhari’s Nod to Take Over Seven Energy

The British independent Savannah Petroleum PLC, says that President Muhammadu Buhari has approved the transfer of the ‘Seven Assets’ (Seven Energy International Limited (SEIL)’s entire interests in Seven Uquo Gas Limited, Universal Energy Resources Limited and Accugas Limited), to Savannah Petroleum.

The notification came from the Nigerian Department of Petroleum Resources.

The Consent is subject to the payment of all taxes due in relation to the Transaction within 90 days of the receipt of the approval letter conveying the Consent.

“The receipt of the Consent represents the satisfaction of a significant condition precedent for the Transaction”, Savanah Petroleum explains.

“The principal remaining conditions precedent for the Transaction relate to the execution of long-form documentation in relation to the Accugas debt restructuring and the Frontier Swap, following which the Transaction completion process is expected to commence”.

This completion process will follow pre-agreed steps as set out in the legally binding Implementation Agreement which was signed in February 2019.

The Seven Energy Transaction refers to the planned acquisition by Savannah of the Seven Assets and the restructuring of Seven Energy’s existing indebtedness, specifically relating to the gas for oil swap with Frontier Oil Limited, the buy-out of minority shareholders in Universal Energy Resources Limited, the acquisition of an additional 55-60% interest in Accugas as well as the sale of a 20-25% (less one share) interest in Seven Uquo Gas Limited SUGL and Accugas to African Infrastructure Investment Managers AIIM.

 


Chinese Grab A Chunk of Svenska in Guinea Bissau

Chinese behemoth CNOOC is set to acquire 55.55% interest from Svenska Petroleum in Block 2, the Sinapa Licence, and Blocks 4A & 5A, the Esperança Licence, offshore Guinea Bissau.

Under the terms of the farm-out agreement, CNOOC will be assigned a 55.55% participating interest in the acreages, with the obligation to fund 55.55% of all expenditures under their respective Agreement for Joint Venture Participation (AJVP) and Joint Operating Agreements (JOAs).

CNOOC’s interest will convert to a 50.0% participating interest in each of the licences in the event of a commercial discovery.

Subject to receiving regulatory approvals, the transaction is expected to close in the third quarter of 2019.

The Swedish based player Svenska will retain a reduced 23.03% participating interest and shall continue to act as operator while CNOOC, upon conclusion of the upcoming offshore drilling campaign, may elect to assume operatorship. FAR, the Australian explorer, continues to hold its 21.42% participating interest in each of the licences.

Completion of the farm-out agreement is subject to approval from the Government of the Republic of Guinea-Bissau and customary Joint Venture consents which, under the AJVP, is not subject to pre-emption rights.

Svenska will continue to operate the exploration licences as the JV prepares to drill the first ever deepwater exploration well offshore Guinea-Bissau in the first quarter of 2020.

“Drill planning is on target to test Greater Atum Prospect (471MMbbls*, 100% basis, best-estimate prospective resource) in Q1 2020”, says FAR. “Greater Atum is a shelf-edge combined structural-stratigraphic play analogous to giant SNE oil discovery offshore Senegal”.

Past offshore exploration in Guinea-Bissau had initially concentrated in shallow waters less than 200m, targeting a variety of salt diapiric-related features. “Drilling to date has encountered excellent quality reservoir sands across multiple intervals exhibiting abundant oil and gas shows”, FAR indicates in a report. The Sinapa permit has two discoveries, with light oil having been recovered to surface from both those locations. The more significant of the two is the Sinapa discovery with contingent resources of ~13.4MMbbls* of recoverable light oil (unrisked, 2C case, 100% basis).

The Greater Atum will be the first offshore exploration well drilled since 2007 and the first ever deepwater exploration well offshore Guinea-Bissau.

CNOOC Limited, (together with its subsidiaries) is the largest producer of offshore crude oil and natural gas in China and one of the largest oil and gas exploration and production companies in the world.


The Lead Hunter Exits the Jungle

By Toyin Akinosho

Anadarko has led the hunt for elephant size oilfields in the African frontier for a good part of the last two decades.

By this time next year, the company would have ceased to exist, with its entire shares purchased by Occidental Corp., which in turn would have sold the African portfolio to TOTAL, the French major.

What we will be left with are only memories of how the Texas based independent foraged the jungle, opening up basins long deemed un-prospective and inaugurating a class of American/European headquartered independents who have come to consider Africa as their primary heartland.

Anadarko has had a longer presence in Africa’s high profile hydrocarbon economies than Apache Corp, Tullow Oil, or any of the leading western independents currently on the prowl for game on the continent. It drilled its first well in Algeria in 1991 and made its first oil discovery in 1993.  In 1995, SONATRACH approved the first development plan, and production began in 1998. It is also  more of a wildcatter than the other leading Western independents operating in Africa.

Anadarko leads any other foreign company in Algerian hydrocarbon output, with 24.5% participating interest and operatorship of blocks 404a and 208 (Hassi Berkine, Ourhoud and El Merk fields) in the Berkine basin.  These fields represented a gross production of three hundred and twenty thousand barrels of oil equivalent per day (320KBOEPD) in 2018.

Anadarko was on the foundation floor of Ghana’s joining the ranks of the world’s sizable oil producers. In 2007, it funded, largely, the drilling that led to the discovery of the Jubilee field in Ghana and proceeded to “decode” the deepwater Sierra Leone-Liberian basin with two discoveries (2009/2010). These outcomes re-awakened the global earth science consciousness of the West African Transform Margin.

The company led the way into Mozambican deepwater, in 2010, when it opened the Rovuma Basin with discoveries of three large gas fields: Windjammer, Barquentine and Lagosta, back to back. ENI drilled its own prospects in the same deepwater Rovuma Basin, a year later, and for those efforts, Mozambique is on its way to become the fifth largest exporter of LNG, by 2025.

Anadarko chased the opportunities it sighted in Ghana into neighbouring Cote d’Ivoire, where it discovered the Paon field in 2012.

But even the most talented super hunter sometimes returns home empty handed.

The attempt to find the onshore extension of the Rovuma fairway in Mozambique ended in a cul de sac. In 2015, five years after the discoveries of those large tanks offshore. The American independent h finalised the drilling of two wells, in the space of two months, without commercial success. Kifaru-, the second well, was even more disappointing than Tembo-1, which encountered relatively thin gas footage.

Nor could Anadarko go any further than wildcat drilling in the Sierra Leone-Liberian Basin. The Venus B-1, with 14 metres net hydrocarbon pay and the Jupiter-1, with 30 meters of hydrocarbon pay, did not indicate sufficient commerciality for the company to proceed to appraisal.

Anadarko also failed in Kenya, where its Kubwa-1 well, in the L-07 Block offshore Lamu Basin, encountered non-commercial oil shows in reservoir-quality sands.

In Cote D’Ivoire, after two promising appraisals, the Paon structure, its satellite prospects and other plays in Anadarko’s other operated blocks in the country, began to act up. The Paon-6A appraisal well, an up-dip appraisal of the South Channel, did not encounter hydrocarbons. And Anadarko could not find commercial quantities of hydrocarbons in the Colibri-1X exploration probe, which had looked so promising on seismic.  After further evaluation of the well results, in the last quarter of 2017, the Company withdrew from all blocks in the country.

The oil price crash of 2014 affected Anadarko, like most of its peers. In that year it reported a loss of $1.75Billion.

Anadarko has, for most of the last five years averted its gaze from wildcatting in Africa and focused, mostly, on the Shale belt in the United States, as well as on the value that could be generated from its largest asset on the continent: the 75Trillion cubic feet of gas nestled in less than 1,7000metres of water in the Indian Ocean.

That is the biggest haul that any company buying Anadarko’s African Portfolio would be harvesting.

 

 


ENI Farms Down A Little in Deepwater Kenya

Italian explorer ENI has concluded an agreement with Qatar Petroleum (QP) that will see the Qatari national hydrocarbon company acquire a 13.75% share in the exploration blocks L11A, L11B and L12, in deep offshore Kenya. The proposed deal is pending subject to the approval of the Kenyan authorities.

Blocks L11A, L11B and L12 are located in water depths ranging between 1,000 and 2,700 metres, cover a total surface of about 15,000 square kilometres and hold high exploration potential. ENI and TOTAL currently hold 55% and 45% interest share in the blocks respectively, with ENI acting as the operator. QP would acquire 25% interest share in each of the blocks, of which 13.75% from ENI and the remaining from TOTAL. Accordingly, the composition of the joint venture should become ENI 41.25%, TOTAL 33.75% and QP 25%.

ENI has been present in Kenya since 2014, through its subsidiary ENI Kenya, but has not drilled a single well on the blocks.


We Were Wrong: OML 11 Renewal Isn’t Concluded

By Fred Akanni, Editor in Chief

Anglo Dutch major Shell has not concluded negotiations with the Nigerian Government regarding the renewal of its licence to Oil Mining Lease (OML) 11 for the next 20 years.

NNPC, the state hydrocarbon company, has also not taken over operatorship of the asset as directed by President Muhammadu Buhari.

The status update is simply: Shell, (ENI and TOTAL)’s combined 45% stake in the asset has not been renewed.

The very widespread assumption that the companies’ licence to the acreage was renewed stems from the widely distributed copy of the March 4, 2019 letter from Abba Kyari, President Buhari’s Chief of Staff, directing the NNPC to take over operatorship of the entire OML 11, “and ensure smooth re-entry, given the delicate situation in Ogoniland”.

Bouyed by comments from NNPC Public Affairs that Shell had not lost the lease outright but had only lost operatorship, public assumption grew that the company’s 30%, as well as the 15% belonging to TOTAL and ENI, had been renewed. But Shell officials, reacting to an Africa Oil+Gas Report story last Friday, noted that the true status of OML 11 wasn’t reflected in that story. “Please NOTE that OML 11 renewal discussions are still ongoing”, wrote Bamidele Odugbesan, the company’s Media Relations Manager.

The issue has dragged for long.

In 2017, Shell made an early application for renewal of licences of 17 onshore acreages that were due to expire in 2019. By mid-2018, t h e company had succeeded in getting 13 of them approved by the DPR for renewal, including OMLs 17, 20, 21, 22, 23, 25, 27, 28, 32, 35, 43, 45 and 46. OMLs 31, 33 and 36 were denied approval, while the Department of Petroleum Resources DPR, the regulatory agency, recommended to President Buhari, who doubles as the Minister of Petroleum, that OML 11 needed to be cut up into three because it was too large.

A new regulation, introduced after Shell had been awarded the acreage in its present form in 1989, instructs that no acreage should be larger than 1,260 square  kilometres (sq km). OML 11 is a sprawling property occupying 3,036sq km, which was why the DPR wanted to carve it up into three parts. Shell contested the DPR’s decision, arguing that “the proposal would unduly punish” the company, which had conducted operations in the asset “legally and in full compliance with the law”. DPR officials sent their proposal to the President anyway, and the regulator was granted the request to cut up the acreage. It was in the week that the agency was expected to submit the proposed new acreages that the NNPC received the instruction to take over operatorship of the entire acreage.

After the initial refusal by DPR, the renewal of licences of OMLs 31, 33 and 36, had been effected, which means that Shell has had licences to 16 of the 17 acreages renewed. Only OML 11 remains.

 

 


First E&P Wins the Most Contested Acreage in Ghana’s Licencing Round

The Nigerian Independent, First E&P, has pulled ahead in Ghana’s keenly contested first licencing round, winning Block GH_WB_02, or Block 2, one of the three blocks available for competitive bidding.

The other winner so far announced has been the ENI/VITOL partnership for GH_WB_03 or Block 3. The winner of GH_WB_04, or Block 4 has not been announced.

The remaining two of the five blocks on offer are expressly for direct negotiations.

Ghana’s Ministry of Energy received 15 applications for Block 2, the highest number for any block.

First E&P and its local content partner Elandel Energy (Ghana) Limited have been invited for negotiations on the detailed terms of the Petroleum Agreement.

First E&P is one of the smallest four out of the 16 companies that submitted 60 applications, in a list which features ExxonMobil, ENI, BP, TOTAL, Cairn, Equinor, Tullow, Kosmos, Sasol, CNOOC, Qatar Petroleum, Harmony Oil and Gas Corporation, VITOL, Global Petroleum Group, Aker Energy.

If it finalises the Petroleum Agreement, this eight year old company will be the fifth Nigerian independent with interests in an acreage in Ghana. The four others are operators: Amni, Oranto, Brittania U, Sahara. None has advanced much in their work programmes even though they’ve held the assets for more than five years.

First E&P holds a 10% of NDWestern, which in turn has 45% of the Oil Mining Lease (OML) 34, in Nigeria’s Western Niger Delta basin. It is the operator of OMLs 83 and 85 and is in partnership with Dangote’s West African E&P, in OMLs 71 and 72.

The two Blocks for direct negotiations in Ghana’s ongoing licencing round are (GH_WB_0S and GH_WB_06), or Blocks 5 and 6, both located in ultradeepwater (>2,500metre water depth).

All the five blocks are in the offshore Western Basin.

 

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