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The State is Aware that Shell Will Sell Nigerian Acreages Upon Renewal

Officials in the Nigerian Ministry of Petroleum Resources are aware that the Anglo Dutch major Shell is inclined to divest from several of the 17 onshore acreages it asked the government to renew.

But they have gone ahead to renew most of the licences anyway, because they think it is unlawful not to do so.  The extant licences on the acreages were due to expire in 2019.

“By the regulations we are working with, all these assets we have renewed deserve to be renewed”, Ministry sources categorically tell Africa Oil+Gas Report.

“Shell can take us to court if we don’t renew”, say ranking government officials in the Ministry, who also argue that, with state sponsored bid rounds not having happened in the country in the last 11 years, the frequent Shell lease divestments since 2008 “have benefited Nigerian companies”, who have purchased the stakes belonging to Shell and other international companies in these assets.

As it is, even during the process of renewal between late 2017 and mid-2018, Shell was actively negotiating on the side, with several parties, its divestment from three of the acreages in the renewal basket: Oil Mining Leases (OMLs) 11, 17 and 25.

Shell was asked to pay $820Million for renewal of 14 of the 17 acreages it sought to renew, including OML 25, an acreage that Shell had put in a divestment round in 2014, but failed to sell because of a last minute NNPC invocation of its right of first refusal. Shell, NNPC and several parties have been involved in closing that transaction since that time.

Regarding OML 11 and 17, Shell has, for a while, been negotiating with buyers and has put a $1.2Billion invoice on the table.

It would seem that such asset should not have been renewed, since Shell had demonstrated that it was going to sell them. It would, ordinarily appear intriguing, that the state would renew the licence of an acreage to a company that had clearly shown it no longer wanted it.

Why don’t you put it in a bid basket so that the state gets the benefit of the licencing?, we asked.

But MoPR officials say that Shell has paid all it needed to pay on every asset in the 30 years since they were last renewed and had extensive work programme on each of the acreages, so it would have been illegal to say no to renewal.

Out of the 17 onshore acreages Shell submitted for renewal in late 2017, only three were revoked, at the provisional conclusion of the process in February 2018, “for lack of enough work done over the last 10 years”.

Shell requested for renewal of OMLs 11, 17, 20, 21, 22, 23, 25, 27, 28, 31, 32, 35, 36, 43, 45, and 46. It succeeded in getting everything renewed, but for four acreages.

OMLs 31, 33 and 36 were denied approval, while the government decided to cut OML 11 into three because it was too large. But Shell has contested the decision on OML 11, arguing that “the proposal would unduly punish” the company, which had conducted operations in the asset “legally and in full compliance with the law”.


Timing of the PIGB Assent Withholding Debate Is Worrisome

AOGR Editorial
The timing of the debate about President Muhammadu Buhari’s withholding of Assent to the Petroleum Industry Governance Bill suggests that Nigeria is hurtling dangerously close to not getting the Petroleum Reform legislation passed in the current dispensation.

The debate, spurred by a Reuters’ report late last week, is largely about whether the long awaited passage of the industry’s reform laws is going to happen now or not.

Whereas the letter of withholding of Assent was sent to the National Assembly as far back as July 29 2018; and whereas the letter may not contain arguments that are against the fundamental structure of the Bill, the fact is that, seven months to general elections, there is still work to be done on the first of four reform Bills, while the three others have not even been passed by the legislature.

The PIGB was passed by both Senate and the House of Representatives as far back as March 2018. The remaining Bills include Petroleum Industry Administration Bill (PIAB), Petroleum Industry Fiscal Bill (PIFB) and the Petroleum Host Communities Bill (PHCB), which complement the Petroleum Industry Governance Bill (PIGB) to ensure holistic reform of the petroleum industry.

The PIGB is an important, foundational legislation for the rest of the petroleum reform Bills, but passing it alone does not do the reforms. The pace of work on these reform Bills in the last three years of the Buhari led administration has encouraged many in and outside the Petroleum industry to feel optimistic that the reform legislation, first introduced in the National Assembly in 2008, will become acts of the National Assembly in this 10th year.

But the pitched battles between the executive and the legislature in the last three months don’t encourage any consideration that the two could work amicably together to agree on pieces of legislation, no matter how significant it is for the health of the economy. There is an argument that the All Progressive Congress (APC) government will be keen to use the legislation as an election tool. True, it should be a plus for the APC if they are the first to pass this “certainty of investment” laws out of three governments (two of which were PDP –led) that have been saddled with delivering these very crucial pieces of legislation.

But what if, as it often happens in Nigeria, a few people in power, who have the most influence to determine things, decide it is not in their personal interests to have these laws passed?
What if that is what is happening, only that it is being couched in safe, non-threatening letter of withholding of Assent?


PIGB: Assent Decline Didn’t Pass Through The Ministry of Petroleum Resources

The recommendations to President Muhammadu Buhari to decline Assent to the Petroleum Industry Governance Bill did not come from the Ministry of Petroleum Resources.

As of the morning of Sunday, 2, September 2018, three clear days since the Reuters story broke, Ministry officials themselves were still unaware of the full content of the letter addressed to the Senate and House of Representatives by Mr. President, in which he communicated decline of Assent to the Petroleum Industry Governance Bill, 2018.

President Muhammadu Buhari is both Nigeria’s Ministry of Petroleum Resources and the nation’s Chief Executive. The Bill is sponsored by the National Assembly, but the executive’s engagement with the bicameral house of legislature has been through the Ministry of Petroleum Resources.

What is clear is that the President himself either unilaterally took the decision, or was persuaded by the very close members of his circuit in the Villa, as the residence and office of the Nigerian President is called.

A cross section of industry stakeholders and observers are comforted by the fact that excerpts from the one month old letter of decline to Assent, published by Senator Ita   Enang, Presidential liaison to the National Assembly, do not suggest any fundamental argument against the structure of the Bill itself. “The letter does not seem to say that the NNPC should not be unbundled, that the Minister’s powers should not be whittled down and that an independent regulatory commission should not be created”, enthuses a very impeccable source that has been close to the Bill for the past three years. “What the communication seems to be saying is that we should tweak the legislation here and there”.

Senator Enang himself declares “None of the reasons for withholding Assent by Mr. President adduced by the media is true”, in clear reference to the Reuters’ report, which said that President Buhari withheld Assent because the Bill whittles down the Powers of the Minister.

Enang then states, in deference to the National Assembly, “very limited of the rationale communicated to the legislature, to wit: a) That the provision of the Bill permitting the Petroleum Regulatory commission to retain as much as 10% of the revenue generated unduly increases the funds accruing to the Petroleum Regulatory commission to the detriment of the revenue available to the Federal, States, Federal capital Territory and Local governments in the country. b) Expanding the scope of Petroleum equalisation fund and some provisions in divergence from this administration’s policy and indeed conflicting provisions on independent petroleum equalisation fund. c) Some legislative drafting concerns which, if Assented to in the form presented will create ambiguity and conflict in interpretation. d) Other issues therein contained.”


Shell Joins The North West African Rush

By Mohammed Jetutu, North Africa Correspondent

Royal Dutch Shell has joined other majors in the rush for hydrocarbon opportunities in the Northwest African segment of the Transform Margin.

The company signed two Production Sharing Contracts with the government of Mauritania, the only country so far in that geologic province, where crude oil has been produced.

The contracts are for the exploration and potential future production of hydrocarbons in the offshore blocks C-10 and C-19.
The two tracts are located offshore, in water depths ranging from 20 to 2,000 metres. The total area of two blocks is approximately 23,675 square kilometres. The new block C-10 consists of three previous blocks – C-10, C-28 and C-29.
BP, ExxonMobil TOTAL and ENI have taken positions in this part of the continent, mostly in Senegal and Mauritania. Chevron has interests in Morocco, which is in the northernmost flank of the margin.

Crude oil was discovered in Mauritania’s Chinguetti field in 2001 and brought on stream by Woodside in 2006. The rapidly depleted output forced out the Australian independent from the asset, barely a year after first oil.
But the point had been made; Mauritania was an oil producer,Senegal is the next country in the region to be an oil producer, that is if the development plan devised by Cairn Energy and Woodside comes to fruition, delivering 100,000BOPD, at peak from the SNE field, with 2023 as tentative date for first oil.

There has, however been only gas discoveries in the province, since the SNE field was discovered in 2014.
Shell, itself a net gas producer, will operate the exploration programme with a 90% interest. Société Mauritanienne des Hydrocarbures et de Patrimoine Minier, the national oil company of Mauritania, holds a 10%.

Following the customary government approvals of the contracts, Shell will set up an office in Nouakchott and begin exploration activities, starting with reprocessing and analysis of existing seismic data and acquisition of new data.

Shell and the government of Mauritania have agreed in a Memorandum of Understanding to jointly evaluate further offshore exploration opportunities, examine new ways of meeting the country’s domestic energy needs, and build capability in the energy sector.


TOTAL Exits South Sudan License Talks

•The Ministry of Petroleum of South Sudan has terminated negotiations with French international oil company TOTAL
•The French oil major has been working since 2013 with Tullow Oil and KUFPEC to enter a new petroleum agreement for blocks B1 and B2.
•The company formerly held an exploration agreement for Block B, which was split into three parts in 2012.

South Sudan’s Ministry of Petroleum announces that it has formally terminated negotiations with French international oil company TOTAL for exploration and production sharing agreements (EPSA) for oil licenses B1 and B2.

Prior to the country’s independence in 2011, TOTAL held a petroleum agreement for the 120,000-square kilometer Block B, but ceased activities in the area in 1985. In 2012 the government of South Sudan split the area into three licenses: B1, B2 and B3. Alongside Tullow Oil and the Kuwait Foreign Petroleum Exploration Company (KUFPEC), TOTAL has been negotiating with the Ministry of Petroleum for a new EPSA since February 2013. In 2017, the Ministry of Petroleum awarded the EPSA for Block B3 to Oranto Petroleum, as talks continued with TOTAL and partners on blocks B1 and B2.

Under Section 100 of the Petroleum Act of 2012, the Ministry of Petroleum is permitted to enter new petroleum contracts, at its discretion, with contractors that had concluded an EPSA with Sudan before secession. However, after more than five years of difficult negotiations, the parties have now reached a complete impasse. The Ministry of Petroleum of South Sudan has stated its willingness to proceed with the signing of a draft EPSA, but “TOTAL has insisted on an extremely long exploration period and on economic terms that are not viable for the government”, the Ministry says in a release.

“The Ministry of Petroleum regrets that negotiations with TOTAL have concluded with no deal, but looks forward to bringing new investors into talks for these licenses.” said Hon. Amb. Ezekiel Lol Gatkuoth, Minister of Petroleum. “South Sudan needs to move quickly to bring investment to blocks B1 and B2, and after a long period of talks Total has been unable to agree on economic terms and a timeline that work for the country. Without this cornerstone in place, the Ministry of Petroleum cannot continue to negotiate an EPSA with Total. We are keen to discuss the exploration of Blocks B1 and B2 with new parties.”

The Minister of Petroleum will speak at the Africa Oil & Power conference in Cape Town on September 5-7 and anticipates strong interest from international companies in the licenses. Following this event, the minister invites potential investors to attend the South Sudan Oil & Power 2018 conference in Juba on November 21-22, to learn about the Ministry of Petroleum’s development plans for its exploration and production acreage.

Contact: Mr. Steven Puoch Riek Deng, Executive Director, Office of the Minister, Ministry of Petroleum | guancajen@gmail.com | +211 950 800 039 / +211 922 555 344


Ghana Will Auction Three Blocks in 2018

By John Mac Tontoh

Ghana has mapped out nine (9) oil blocks in its offshore western Basin, of which six (6) will be allocated in the next 12-18 months.

The country will, for the first time, allocate blocks through open public competitive tender. That historic licencing sale will involve only three blocks.

The government wants to allocate another two blocks through direct negotiations and reserve one (1) for the state hydrocarbon company Ghana National Petroleum Corporation (GNPC), to explore in partnership with its chosen strategic partner with the view to developing its technical capacity and becoming an Operator.

In order to progress the proposed lease sale, Boakye Agyarko, the Energy Minister, inaugurated a Licensing Rounds Bids Evaluation and Negotiation Committee last May.

Ghana is proposing the  bid round for the last quarter of 2018.

The country had, hitherto, allocated oil blocks only through direct negotiations.

The 2016 Petroleum Exploration and Production Act, however, encourages a regular transparent, open auction of hydrocarbon acreages.

“Preparations for allocating more oil blocks in accordance with the Petroleum Exploration and Production Act (Act 919) has been put in motion”, Boakye Agyarko, the Minister of Energy, said at the launch of the Committee

“The remaining three (3) that will not be allocated this year, will form the basis of our second bidding round next year later. We are determined to identity further prospects in the Eastern, Central and the onshore Voltain Basins, to increase the number of blocks available for allocation”, the Minister highlighted.

“This will put to test all the allocation mechanisms prescribed by the Petroleum Exploration and Production Act (Act 919) in order to examine the efficacy of these mechanisms and to address any challenges that may emerge in the application of the law”.

 

Fuller details of Ghana’s Asset Sale going forward can be accessed here.

 

 


After so much Struggle, Petrofac Leaves Tunisia

Petrofac has agreed the sale of its entire 45% interest in the Chergui asset in Tunisia to Perenco.

Although the British company, which combines the roles of oilfield service contractor with E&P operatorship, claims the sale was part of the “strategy to transition back to a capital light business model by divesting non-core assets”, anyone who has followed events in the North African country knows that Petrofac has struggled and fought off above ground challenges on Chergui.

Petrofac had threatened in September 2016 to shut down operations entirely and leave Tunisia, but the government reached a deal with protesters demanding jobs and development.

Tunisian Energy Minister Hela Cheikh Rouhou, at the time, said the production stoppage had been expected because protesters “had not respected the deal signed weeks before”.

Ms. Rouhou told Mosaique FM radio, a private broadcast platform in Tunis: “Unfortunately, trucks have been blocked several times to force Petrofac to close the field.”

Petrofac had looked to sell the asset for the past one year. But in its release, it deliberately understated the problem.
Petrofac said Thursday, June 28m 2018, that the “sale marks another milestone in the Group’s and follows the recent disposal of the JSD6000 offshore pipelaying vessel project”.

All Chergui employees will transfer to Perenco, an aggressive French company, as part of the transaction, which is expected to conclude before the end of 2018. Petrofac is expected to book a small gain on the transaction.

Chief Financial Officer Alastair Cochran said: “This transaction demonstrates we are delivering on our clear strategy of focusing on our core and reducing capital intensity.”

The operations supply around 13% of Tunisia’s domestic gas needs. 55% of the share at Chergui is held by ETAP, the state hydrocarbon company.


Oranto Petroleum Farms into Zambian Oil Blocks

Oranto Petroleum will hold a 90% stake and ZCCM Investment Holdings will control a 10% share, on behalf of the Zambian Government
Oranto Petroleum, the Nigerian founded minnow with Pan African ambitions, is farming into two exploration blocks located onshore Zambia. Blocks 17 and 27 represent Oranto’s first investment in the country.

“Oranto Petroleum is committed to an aggressive work programme to increase the level of prospectivity in one of the world’s last true frontier markets,” said Prince Arthur Eze, Chairman of Oranto Petroleum. “Our specialty at Oranto Petroleum is discovering the vast potential of Africa’s frontier oil and gas markets, and we are very pleased to add Zambia to our extensive portfolio. We are committed to developing Zambia into an oil and gas producing nation, as we have many times with other countries on the continent.”

The company’s widely distributed press release claims that Oranto Petroleum and its sister company Atlas Petroleum International, comprise the largest African independent by acreage, with active exploration and production programs across the continent, including Benin, Equatorial Guinea, Ghana, Liberia, Namibia, Nigeria, São Tomé and Príncipe, Senegal, South Sudan and Uganda.

Under the agreement, signed Thursday, June 28, 2018, Oranto Petroleum will hold a 90 percent stake and ZCCM Investment Holdings will control a 10 percent share, on behalf of the Zambian Government. The company will be required to conduct geological and geophysical studies for first two 2-year sub-periods.

Current operators in Zambia include Tullow Oil and Bowleven. Though only marginal finds have been discovered, the under-explored market shares basins with Tanzania to the northeast and Angola to the west — both of which have hosted mega oil and gas discoveries.


Sonangol Launches Mini Bid Round For Former Cobalt operated Tracts

Sonangol, the Angolan state-hydrocarbon company, has called for bids for its share in two offshore oil blocks, Blocks 21/09 and 20/11, which were formerly operated by Cobalt Energy, the American independent.

“For this purpose, there will be held data showrooms (data consultation sessions), from April 24 to June 29 this year, at the headquarters building of the national oil company, in Luanda”, the company says in a statement, “and from May 28 to June 1, in a place to be announced in Houston-Texas, United States of America, for sharing technical, legal and contractual information of the abovementioned blocks”.

Please see Sonangol’s full announcement in this link.

Cobalt’s announcement of the Cameia-1 discovery in Block 21/09 in February 2012, suggested that predictions of significant reservoirs below the salt layer in deepwater Kwanza Basin were not exaggerated. There were a string of other discoveries and Cobalt announced, by 2016, that there was as much as 750Million barrels of oil equivalent in those two licences.

But development of these discoveries have stalled largely due to challenges that Cobalt faced about the early local content partners in the licences.
An agreement for Cobalt to sell the licenses to Sonangol for $1.75 billion in 2016 fell through, and Sonangol declined to extend the licenses. Cobalt, which has filed for bankruptcy, took Sonangol to international arbitration over the dispute. In December 2017, few months after President Joao Lourenco took power, Sonangol announced it was settling with Cobalt for $500Million.

Sonangol holds a 30% stake in Block 20/11, BP holds a 30% stake and Cobalt International Energy held 40%; in Block 21/09, Sonangol holds a 40% stake and Cobalt holds 60%

What was formerly Cobalt Energy’s stakes have now become Sonangol’s, and are included in what is on offer.


Deepwater PSCs Will Take A Hit in New Nigerian Law

Companies operating Production Sharing Contracts PSCs, in Deepwater will lose significant revenue, when all the several bits of Nigeria’s Petroleum Industry Bill (PIB) are passed.

The current Nigerian legislative houses of assembly have been far more forthcoming in the last two years to pass the bill, than any government has done since the bill was first introduced in parliament in 2008.

The incumbent House of Senate broke the PIB into four pieces of legislation, for easier passage.

There is, in both the executive and the legislative arms of Nigerian government, far more increased optimism than ever, that the laws will be passed, even as national elections are less than a year from now.

Some of the most contentious parts of the legislation have been the increase in the state’s take in deepwater licences.

Stakeholders broadly expect that there will be some loss of between 20 and 30% in the overall receipts from crude oil production by companies who are operating licences that were signed in 1993, which had very lenient financing framework in favour of operators.

“Royalties that were either close to zero or zero in some cases would now have clear values. From the day the law is passed, new royalty targets take effect”.

Overall, for acreages in shallow water and onshore, Taxation and Royalties will be generally in the same band as in the extant law and will favour Nigerian independents over International Companies.

A Fuller explanation of several implications of the PIB can be found in this link

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