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Shell Reports All Leases Were Renewed, But Omitted OML 11

Shell Nigeria has reported that the three blocks that Nigerian regulators indicated they weren’t going to renew were renewed, afterall.

In its 2018 annual report, the AngloDutch major noted: “The 20-year renewals of 16 oil mining leases (OMLs): 17, 20, 21, 22, 23, 25, 27, 28, 31, 32, 33, 35, 36, 43, 45 and 46 were achieved in December 2018. These OMLs expire in October 2038”.

This simply means that OMLs 31, 33 and 36, which were initially denied approval by the Department of Petroleum Resources, DPR, eventually got renewed after protestation by Shell.

In June 2018, Africa Oil+Gas Report had reported, based on ranking sources in the Ministry of Petroleum Resources, that renewals of those three leases were denied because regulators deemed the acreages were not optimally operated.

But the Shell annual report did not say anything about OML 11, which was among the acreages submitted for renewal.

OML 11, it is now known, was renewed, but unlike the rest, the operatorship was withdrawn from Shell and that decision, by President Buhari, was only made known in  February 2019, so it couldn’t make it to the Shell annual report.

NNPC Public Affairs officials have repeatedly argued that withdrawal of operatorship does not translate to withdrawal of licence. “Shell had prayed the government to renew OML 11”, they say. “Its prayers had been answered. But this renewal did not come with operatorship”.

 


NDPR Has Made Some Tidy Profit in South Sudan-Fatona

Its East African foray is turning into cash in the bank for Niger Delta Petroleum Resources NDPR, the Nigerian independent.

And the money is coming from the unlikeliest of places.

“If there was any place elsewhere in Africa where we could access opportunities and quickly develop those opportunities into the same kind of portfolios that we have had in the Niger-Delta, South Sudan was that place”, Layiwola Fatona, Chief Executive of NDPR, told Africa Oil+Gas Report in an exclusive interview.

“We have never regretted going into South Sudan”.

Asked if he wasn’t concerned about crippling security challenges in a country that has been in civil war since 2013, as a result of which its oil and gas production has plummeted, Fatona replies: “We have security challenges in Nigeria and I am here”. Then he says: “Juba (the South Sudanese capital city), is a growing town”.

Fatona contends that South Sudan produces about 160,000BOPD, “the economy is young and there is very low cost of entry. Stability is coming into the country and we have been there for over three to four years.

“For the first time last year, we actually made a little bit of a profit from our engagements there and we are very hopeful that indeed, everything that we have done in Nigeria, growing from a very small producer into a fully integrated entity can be replicated in South Sudan”.

NDPR was in Uganda before South Sudan. Indeed, it won a block in the last bidding round, “but not until we were forced to partner with another entity that we didn’t feel compatible with did we actually opt not to go further in exploring the opportunity in Uganda”.

“We have been looking at Zambia and Mozambique, not necessarily because of any big offshore gas development. We are driven essentially by low cost of entry; we will not be risking any of our shareholders capital in exploration. In other words, anything that we do will have the potential of generating cash flow at the shortest and quickest period of time”.

For the full, extended article: My Journey to Independence, by Olayiwola Fatona, please click here

 


Now It Is Possible to Complete a Well without Cementing

By Sully Manope, Coastal West Africa Correspondent

French major TOTAL and the Danish oil service company Welltec have jointly announced the first deployment of a cementless completion.

Building on the experience gained through the continuous deployment of the Welltec® Annular Barrier (WAB®) in the Moho North Albian field which was awarded the first quarter of 2017, TOTAL E&P Congo says it has pushed the boundaries of Metal Expandable Annular Sealing technology by deploying the world’s first cementless completion using the Welltec® Annular Isolation (WAITM) in open hole.

The job was done during the second quarter of 2019.

The Moho field is located in the Congo Coastal Basin, and the reservoirs are carbonates.

The WAITM uses multiple metal expandable packers to provide long length open hole zonal isolation to replace the functions of traditional cement, leading to significant gains in efficiency in the overall well construction process, Both companies say.

The method/process/technology significantly reduces the free annulus space between the liner/casing and the open hole which can be beneficial in highly layered reservoirs of varying permeability where selective production, stimulation or water shut off is required, Welltec explains. In addition to the efficiency gains, the simplified well completions operations enabled by the WAITM eliminated multiple operational risks associated with the cementing process in depleted and over-pressured reservoirs.

TOTAL says it plans to deploy the WAITM in subsequent wells – especially those identified as high-risk.”

“The WAITM technology will without doubt transform how future wells are constructed in the industry” explains ‘Gbenga Onadeko, Senior Vice President, Welltec Africa.

 

 


Otakikpo JV Agrees With Schlumberger and Shell, on a $170Million Deal for Five Wells, Terminal Infrastructure and Export Pipeline

In a nutshell, Shell will be funding the field development expansion of Otakikpo field. As well as a new export terminal

LEKOIL has announced a Memorandum of Understanding between the Otakikpo JV (itself and Green Energy) other one hand and Schlumberger and a subsidiary of an unnamed major international oil company on another, ‘on a comprehensive infrastructure sharing and drilling programme around a group of marginal field assets in OML 11’.

The company says that Standard Chartered Bank is to act as the lead financial advisor for the Project and perform financial advisory, security and banking services required for the Project.

Africa Oil+Gas Report believes the unnamed Major Oil Company in LEKOIL’s press release is Shell, the Anglo Dutch major, largely because it was the company that farmed out Otakikpo to Green Energy seven years ago and more, its crude oil trading subsidiary is involved in exporting Otakikpo crude.

LEKOIL says the “phased development plan of the project consists of drilling up to five new wells in Otakikpo, expanding processing infrastructure to comprise an onshore terminal to be located outside the Otakikpo field operations area, construction of an export pipeline connecting the onshore terminal to an offshore buoy to handle Otakikpo and other fields in OML11”.  It adds that “the Otakikpo Joint Venture will partake in the costs of its field development with funds provided for such participation by the development consortium Project management and associated asset management costs provided by Schlumberger will be shared between the Otakikpo Joint Venture and the operators and owners of other marginal fields participating in the Project.

“Capital expenditure to be incurred by the Otakikpo Joint Venture is expected to be approximately $170Million covering new wells and processing infrastructure, of which LEKOIL is expected to fund $68Million.   The anticipated costs consist of debt repayment to financing parties, including the Major Oil Company, in addition to a project implementation fee paid to Schlumberger. Repayment of the facilities anticipated to be provided to the Otakikpo Joint Venture pursuant to the project will be made from production revenues from Otakikpo, in priority to any existing lending facilities (subject to agreement with existing lenders), future CAPEX and returns to equity holders”.

Under the terms of the MOU, the Major Oil Company will provide funding to the Otakikpo Joint Venture alongside the other funding partners, subject to due diligence, project economics, entry into definitive documentation and final investment decision.  The Otakikpo Joint Venture will enter into an exclusive offtake agreement with the Major Oil Company for the sale of crude produced pursuant to this project. Schlumberger will act as technical and project execution partner to provide oilfield services and project management services to assist in ramping up production and long-term field management. The Consortium will also form multidisciplinary project management teams from LEKOIL and Green Energy.

Due diligence will be undertaken and the financial terms and cost of capital will be finalized following final investment decision.  The final investment decision is subject to the satisfaction of customary conditions precedents, including the credit committee approval of financing parties and the execution of definitive project agreements. Site mobilisations are tentatively scheduled for late Q3 2019.


Weatherford, Unable to Weather the Storm, Goes Under

By John Odigalu

Weatherford International, the oil services giant often compared with the likes of Schlumberger, Baker Hughes and Halliburton, has filed for Chapter 11 bankruptcy.

The Switzerland headquartered company, listed on the New York Stock Exchange until last May, caved in under the weight of its own growth. Since 1998, the company has acquired a string of companies, with the aim of competing either size for size or in oilfield solutions deployment as the top service providers. It added such brands as Energy Rentals, Whiting, Williams, Dailey, Orwell, to its product lines and pushed itself as the go-to well completions company when it snagged Petroline, Cardium, Nodeco, McAllister, Johnson Screens, Houston Well Screens, and a few others.

Weatherford swallowed Precision Energy Services and International Contract Drilling divisions from Precision Drilling Corporation in 2005 and in 2008 it took over V-Tech International, a top notch provider of mechanical power tong systems, well known in rig safety capacity in the North Sea.

In the last year and half, however, the company has struggled to assimilate the companies it bought during its growth trajectory, taking on debt and battling its way to recover from the 2014-2017 low price era. Weatherford has been in loss making territory since the third quarter of 2014. Its employee count of 67,000 at the beginning of 2014 had dropped to about 26,500 workers by June 15, 2019.

Created in Houston, Texas in 1941, Weatherford had become the fourth-largest oil field services provider in the United States by 2015. But as it filed for bankruptcy in a court in Houston, it reported having as much as $10Billion in liabilities, including $7.5Billion in unsecured bond debt. It also said it could not determine the value of the debt from its other largest creditors.


Kenyan, Ugandan FIDs are Up In The Air

By Boniswa Babazile, East Africa Correspondent, in Lusaka

The chances of final investment decisions (FIDs) on full blown crude oil development, in Kenya and Uganda, are still quite a stretch, despite all the optimism.

It still might happen that neither of the two FIDs is taken in 2019 and first (commercial scale) oil from either may not reach the market until 2024.

The projects are the two largest onshore African oil developments, with the Ugandan project expected to peak at 210,000BOPD and Kenyan development expected to plateau around 100,000BOPD.

Operators in Kenya are forecasting a late 2019 FID, “contingent on key Government of Kenya deliverables”.

Tullow Oil, the lead operator in that country, notes that a late 2019 FID “remains an ambitious target”. The company is finalising its FEED studies for both the upstream and midstream, and both the upstream and midstream Environmental Studies (ESIAs) “remain on track for submission to the National Environmental Management Agency at the end of the second quarter”.

The Government of Kenya, via the National Land Commission, has gazetted the land required for the upstream development in Turkana and, so far, approximately two-thirds of the pipeline. But even that fact remains contentious, as local leaders in the oil rich communities say that there wasn’t enough consultation. Tullow says, however, that “discussions with Government regarding key commercial agreements are making steady progress”.

In Uganda, the latest update is that “FID is planned for the second half of 2019” as the approval of the 22% stake farm down by Tullow is being finalised with the government. Negotiating the withholding tax around the farm down has taken all of 21 months. While technical and operational issues on the upstream and midstream are supposedly making progress, the commercial aspect remains the bottleneck.

Negotiations between the governments of Uganda and Tanzania, as well as between the companies TOTAL, CNOOC, and Tullow and the two governments have proven so tasking that FID date was shifted from first half 2019 to second half 2019 and looks likely to be shifted to 1st Quarter 2020. The Ugandan project has dragged from the get go, even before commerciality was declared in 2013.

This article was initially published in the May 2019 edition of the Africa Oil+Gas Report.


“IOCs in Nigeria Have Pursued a Harvesting Strategy over Reserves Growth”-Expert

By Toyin Akinosho, Publisher

Multinational Companies operating in Nigeria ceased to worry about reserves growth in shallow water and onshore acreages as far back as 25 years ago, it has been argued.

The companies reneged on the Memorandum of Understanding (MoU) they had with the state hydrocarbon company, NNPC, to invest in exploration, according to a ranking insider.

“Half-hearted response by the Multinationals were directed at less risky new fault blocks and inter-field area tests and these never produced the high impact reserve additions needed to give the near shore reserves a boost”, says Bayo Akinpelu, 73, a former president of Nigerian Association of Petroleum Explorationists (NAPE), and one of the most respected exploration managers to work for a multinational in the Niger Delta in the last 40 years. ”The security situations in the swamp and onshore areas provided all the excuses the Multinationals needed to renege on their MOU obligations”, says Akinpelu, who retired from Chevron Nigeria 13 years ago.

“These same companies that fretted over the possibility or rumours of Nigeria offering part of the NNPC’s equity in the JV blocks to the Chinese less than a decade earlier, now wanted to divest their own equity to any one with money, including the Chinese!”, says Akinpelu, whose talk, for which he flew into Nigeria from retirement in the United States, was largely about the future of the country’s crude oil export.

Noting that the rate of dis-investment in the country’s E&P space “had reached a feverish state”, he points out that “what started about two decades ago as reluctance to invest in resources growth through exploration subsequently mushroomed into full scale equity relinquishment”.

He admits that Nigeria’s home-grown independents “have benefited tremendously and successfully from the decision of the Multinationals to divest”, but he wonders whether there aren’t ”more subtle messages in the now open divestment activities?”

So he asks: “As the multinationals did not abide by the terms of the MOU work obligation, was hedging on their obligation a signal that they no longer care about reserve growth or further development in the onshore and nearshore areas? Was there a cue telling them “it’s time to close shop onshore and move on to the newly discovered deepwater”?

“We may never know, nor is it important to know. …..”, declares the founding chair of the Africa Division of the American Association of Petroleum Geologists (AAPG).

“We do not expect the companies to own up to misleading their host government”.

The 5,600 word paper was delivered as part of the month long series of activities marking the 70th birthday anniversary of Layiwola Fatona, the founding Chief Executive of Niger Delta Exploration and Production (NDEP) Ltd.

Akinpelu explains that Nigerian policy makers (to which he directs his most pungent criticism) don’t see any problem with the startling drop in output from what, for over 30 years, accounted for all the country’s average Two Million Barrels per day, “because of the success of deepwater exploration and production”.

“To our policy makers therefore “nothing spoil” as we say in our native English. No critical review of the causes and effects of the losses of the traditional shelf and near shore area were made nor sustainable correction proffered”.

He says that his presentation was “not to discount the heavy toll that violence and insecurity has taken on the operators, especially the heavy human and material losses”. His review, he submits, “is not a report card on the insecurity of the Niger Delta. However, no one would deny that the crises was never well managed from the beginning by all sides”.

He advises that “The shelf or near shore province of the Niger Delta basin could eventually see a resurgence and make more contribution to Nigeria’s crude oil production of the future if the lease administration is structured better and lasting peaceful coexistence found. On the technical side, new play types must be vigorously pursued because they are there”.

 


How the Oil and Gas Industry Can Engage the Energy Transition

By Gerard Kreeft

Two  recent, but separate incidents illustrate  the waning  power and prestige of the oil and gas industry and also illustrate  how little the industry is understood. Take the tanker crisis in the Straits of Hormuz. In the past, when there was a threat of closing off the Straits of Hormuz, the oil price would shoot up. Now the reverse is happening: As of June 10,  Brent crude  stood at $64.91; on 25 May, Brent stood at $70,64.

Recently Luminus Management LLC, which owns 5% of the entire shares of EnscoRowan(the rig operator) urged the Board to sell guaranted bonds to fund a special dividend of $2.5Billion to shareholders. As a result the stock sank 7%. Earlier EnscoRowan had decided to suspend regular cash dividends. If completed the company would take on a debt of approximately $10Billion.

The two incidents illustrate the two very different images that the sector has: an important waterway is blocked and the markets don’t seem to care. Then  there is the proverbial image of the industry having very deep pockets. For people working in the industry this should raise deep concerns. The first incident illustrates how the sector is viewed as being irrelevant; and the second example, the exaggeration of excess black oil wealth. How should the sector react? How can it position itself in the Energy Transition?

Where Did it Go Wrong?

Perhaps the best example of viewing the status of the industry is to examine the global reserve replacement of the last 20 years (see chart below). Never has the reserve rate been so low. In 2006 it was just under 200%; in 2018 it sunk to 7%. Is this a sign of a rebounding E & P industry?

There are, of course, signs of optimism:

Spending by 2025 is forcast to increase to $275Billion, up from $150Billion in 2018;

Global production is expected to increase to 179MillionBOEPD (barrels of oil equivalent per day) by 2025, up from 162MillionBOEPD in 2018;

54 rig years to be awarded, representing 75 programmes.

While E&P recovery is happening it is important that the industry change its transactional nature. In the good times the IOCs could afford to be generous; in the bad times contracts were draconic and people were sacked.  There is good reason to re-assess the sector’s value chain and encourage a spirit of solidarity if it is to survive.

Why? Though the recovery is taking place it is a very fragile recovery. Stock market prices of both Transocean and EnscoRowan are at historic lows; and Halliburton and Schlumberger stock market prices are suffering. Is this the sign of an oil  market recovery?

Competition on the Block

What the oil and gas sector must realize is that there is a new boy on the block and his name is ‘renewable energy’. Bill McKibben, the famed environmentalist and author,  writing in the New York Review of Books,  states that over the last five years insurance companies and sovereign wealth funds have joined in, raising the total value of  divestments of fossil fuels to over $8Trillion.

According to McKibben the inroads renewables are making is based both on the sharp fall in the prices of wind and solar. He states that in 2017 wind and solar produced just 6% of the world’s electricity but made up 45% of the growth supply. Moreover, the cost of sun and wind power continues to fall by about 20% with each doubling of capacity.

How can the oil and gas sector deal with this disruptive technology? There are enough historic examples: horses to car, sails to steam and land lines to cell phones. At present the only  way of opposing the  the oil and gas sector is simply boycotting it. There is a more reasoned and strategic way of dealing with depleting reserves.

Currently oil company reserves are only measured in fossil units (Reserve Replacement Ratio). All of the renewables –be that   wind or solar–that any oil company may have cannot be included in the reserve count which is monitored by the SEC (Security and Exchange Commission).

In other words there is no added value for the shareholder. No, renewables are at present a complete waste of shareholder money! If RRR could be measured in a basket of various fuels this could help propel oil companies to become energy companies. Even adding value to their oil and gas properties.  Such an approach would make the transition from oil and gas  to renewables measured and predictable.

In short many who predict the demise and death of the oil and gas sector should remember the famous words of Mark Twain “ News about my premature death are much exaggerated”. No the sector is not dead, and must continue redefining  itself so that it remains relevant within the Energy Transition.

Finally, The oil and gas sector has much to offer to the renewable energy sector:

  • Project Management Skills for taking on large and technically difficult projects;
  • Financial resources which can be used to kickstart new wind and solar projects;
  • Technology skills for developing innovative solutions;
  • Knowledge skills to train the next generation of energy workers.

Gerard Kreeft, MA (Carleton University, Ottawa, Ontario, Canada) is founder and owner of EnergyWise. The company is active within the energy transition as a knowledge player, i.e. through the conferences it organizes and manages throughout the globe. Kreeft also is a frequent writer on energy matters. He can be reached at g.kreeft@energywise.nl


Pan Ocean Shelves Plan to Unveil Assets in Revoked Licence Area

By McJohnson Mthembu, in Lagos

The Nigerian independent Pan Ocean Oil Corporation, dramatically shelved its plans to unveil three oil and gas projects at an event scheduled for Monday, June 10, 2019.

Reporters had earlier been advised to fly into Benin City, in Midwestern Nigeria, on Sunday June 9, for a scheduled June 10 2019 unveiling of (1) The NNPC/Pan Ocean Ovade-Ogharefe Gas Processing Plant Phases I & II. (2) The Oil Mining Lease (OML) 147 Early Production Facility (Flow Station) at Owa-Alidinma, Delta state and (3) the Amukpe-Escravos Pipeline, a 67-kilometre crude oil export facility.

But they were later told that the plans had been cancelled, on the instructions of the Department of Petroleum Resources (DPR), Nigeria’s petroleum regulatory agency.

The problem is that two of these three assets are located in an acreage (OML 98) whose licence has been revoked by the Federal Government of Nigeria.

“The so called unveiling of the projects is illegal”, sources at the DPR told Africa Oil+Gas Report.

Construction of the Amukpe-Escravos Pipeline was embarked upon by Pan Ocean, primarily to export crude oil from OML 98, but the company’s rights to crude production on that acreage had been revoked since April 2019. As of June 10, 2019, Pan Ocean had lost the right to those crudes. In the same vein, the company no longer has the permit of the Nigerian state to operate the Ovade-Ogharefe Gas Processing Plant Phases I & II.

In their invitation to the media, Pan Ocean’s Public Relations advisers had declared that the company wanted, by the unveiling, “to communicate Pan Ocean Oil Corporation as a company that has kept its word by delivering these three projects which have the capacity to create hundreds of jobs, lift local communities and contribute immensely to power supply and the Nigerian economy”.

Pan Ocean’s licence to OML 98 was revoked as a result of its negligence in paying Royalty to government on the licence.

DPR officials tell Africa Oil+Gas Report that only President Muhammadu Buhari can decide to undo the revocation, even when the company pays up what it owes.

 


Any Market for Nigerian Crude in the Next 20 Years?

An industry lecture to tackle the question of marketability of Nigerian crude, in the long term, will be delivered this morning May 30, 2019 at the Eko Hotel in Lagos.

A day after the inauguration of a new government in the country, after one of the most heated elections in 20 years, Bayo Akinpelu, industry veteran, will be addressing both professionals in the sector, as well as the general public, on the production, management and handling of Nigeria’s oil resources, in the context of the growing oil reserves around Africa.

Will the World Need Nigeria’s Oil in the Future?, his paper will ask. The talk is scheduled for 10.30am.It is open.

“My concerns about marketability of Nigeria’s crude has little to do with the rise of renewable energy and the challenges posed to the combustion engine”, Akinpelu explained over a telephone conversation.He wouldn’t allow spoilers, but he gave this much out: “How has Nigeria fared in the geopolitics of oil?”

Akinpelu, who flew into town from Houston, Texas, United States for the lecture, is a founding member and former President of the Nigerian Association of Petroleum Explorationists (NAPE), Africa’s largest body of earth scientists. Heretired from Chevron Nigeria in 2006 as Director –Government Relations with responsibility for representing the company’s business plans and strategic directions to the executive and legislative arms of the Federal government. Before then, he had been general manager for exploration with responsibilities for the company’s programmes in the Niger Delta Shelf, the Deepwater and Inland Basins. He variously held the positions of Development Geology manager, Exploration Evaluation manager and Exploration manager.

The event is the third talk shop in the two week long celebration to mark the 70th birthday anniversary of Layi Fatona, Chief Executive of Niger Delta Exploration and Production(NDEP). It will be chaired by Ben Osuno, former Chairman of NDEP, former Director of the Department of Petroleum Resources, (the Nigerian oil industry regulatory agency) and the first Nigerian earth scientist to be employed by Shell, the AngloDutch major.

The Eko Hotel is located a whistling distance from the south Atlantic ocean in Lagos, the hub of Nigerian commerce.

 

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