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West African Ventures Not Affected By STG’s Liquidation

Sea Trucks Group (STG) Limited has gone into provisional liquidation, but its subsidiaries are not subject to insolvency proceedings, according to FTI Consulting, the firm handling the Liquidation.

“The management team remain in control of operations and it is business as usual for the Group”, FTI declared in a statement. “The provisional liquidation of the Company has no impact on the operations of the Group”. This is quite an odd sort of liquidation.

STG is an international group of companies offering offshore installation, accommodation and marine support services to the oil and gas industry worldwide. One of its key subsidiaries is the Nigerian based West African Ventures, which has always claimed to be an indigenous company. WAV’s corporate headquarters are in Lagos. It has a Marine Support Base and shipyard in Warri and Dry-dock and Fabrication facilities in Onne Oil and Gas Free Zone, in the east of the country.

The Eastern Caribbean Supreme Court in the High Court of Justice British Virgin Islands appointed, on May 5, 2017, Chad Griffin of FTI Consulting LLP and Ian Morton of FTI Consulting (BVI) Limited as Joint Provisional Liquidators. A statement by FTI notes that “the appointment is only to the Company, being the group holding company”. The underlying operating/asset owning companies (the “Subsidiaries”) are not subject to insolvency proceedings.

Griffin, Joint Provisional Liquidator of the Company, commented: “The Provisional Liquidation will provide stability and Court protection, to create a platform to maximise value. We will be working closely with the Group’s directors and management team to understand the affairs of the Company.”

Chevron’s Deepwater Production Overwhelms Its Shelf/Onshore Output

Chevron’s net daily production in the Niger Delta’s shallow water and onshore acreages averaged 56,000 barrels of crude oil, from 27 fields in 2016. This is less than half of the 148,000BOPD the company averaged (net) in two fields the deepwater in the same year.

Chevron Nigeria’s main provider is Agbami field, from which the American major had a net output of 120,000BOPD. The company averaged 28,000BOPD (net) from the Usan field, also in deepwater. But Agbami’s gross average for the year was 238,000BOPD, clearly the continent’s largest gusher of oil.

The dominance of deepwater production mirrors the country’s crude production profile in the last 10 years. In 2005, Chevron was operating about the same volume it does now, with nary a drop of oil from deepwater.
What Chevron is producing in abundance, on the shelf, is natural gas. In 2016, the company averaged, on a net basis, 142Million cubic feet of natural gas, most of it for the domestic gas market. It produced, for export, 4,000 barrels of LPG every day.

Chevron says it is continuing its efforts to monetize total potentially recoverable natural gas resources of approximately 17 trillion cubic feet in the Escravos area through a combination of domestic and export sales and use as fuel in company operations. That is close to 10% of Nigeria’s estimated natural gas reserves of 192Tcf. The company is the operator of the Escravos Gas Plant (EGP) with a total processing capacity of 680Million cubic feet per day of natural gas and an LPG and condensate export capacity of 58,000 barrels per day.

ExxonMobil Is Not Helping To Balance the Market

By Fred Akanni, Editor in Chief

American oil companies are pumping more crude into the global economy, just as OPEC is desperately seeking to balance the market with cuts in production by its members.

The poster company for the surge in output, notably from shale formations, is ExxonMobil, the world’s largest publicly traded oil company.

Although data from OPEC’s research unit indicates that shale oil output will ultimately begin a rapid decline in the 2030s by natural depletion, the production boost from this source, in the short term, is only likely to arrest the price increase that everyone thinks the market needs right now.

Western Analysts like DrillInfo argue that cut in production by OPEC countries will have to “be extended because the first cuts didn’t balance the market”. They say that if that doesn’t happen, “ prices won’t remain at this level” , meaning above $50.

But prices have not held steady above $50; indeed in the last week the price of the premium blends have dipped below $50.
DrillingInfo notes that, with American producers continuing to expand U.S. production as they become more efficient and produce at a lower cost, “they aren’t helping to balance the market.”
Such statement point fingers at a company like ExxonMobil, the largest of the aggressive Shale oil producers. The company, in its 2016 Annual report, is not bashful about how well it has done to increase crude oil output. “Approximately 350 new wells were brought to sales, mainly across the Permian and Bakken areas “(which are prominent shale basins), “during 2016. Our operating efficiency continues to improve. In the horizontal program in the Permian Basin, we have reduced cash field expenses to approximately $5 per barrel(1), a 46% reduction since 2014”.

“In 2016, unconventional development in the Permian Basin remained a key focus. One strategic transaction added approximately 3,000 acres in the Delaware Basin, supplementing our already strong unconventional Permian position across the Wolfcamp, Spraberry, and Bone Springs formations. At year-end 2016, we operated nine unconventional rigs in the Permian. Our net production grew 45 percent during 2016. In the prolific Wolfcamp formation in the Midland Basin, we have increased ultimate recoveries while substantially reducing drilling and completion costs. ExxonMobil holds 222,000 net acres in the Haynesville/Bossier Shale of East Texas and Louisiana, where we continue to capture benefits from drilling and completion improvements”.

ExxonMobil also boasts that The Bakken (Shale)”remained one of our most active unconventional programs in 2016, with production volumes again reaching all-time highs”. The company “currently holds 570,000 net acres of high-quality resource in this play”. With three drilling rigs in operation in 2016, net production in the Bakken increased 18%. In 2016, “we continued drilling at a measured pace in the liquids-rich Woodford Shale in the Ardmore and Marietta basins of southern Oklahoma.

We operated one rig on our 281,000 net acres. We continue to advance infrastructure projects to optimize production from this area”. ExxonMobil holds 492,000 net acres in the Marcellus Shale across Pennsylvania and West Virginia. It also hold 33,000 net acres in the promising Utica Shale in Ohio. it has continued “ to develop and maintain our leasehold of 190,000 net acres in the Barnett Shale play in North Texas. In the Freestone tight gas trend, where ExxonMobil holds 265,000 net acres, we remain focused on operating efficiently and making disciplined investments to offset decline”.

Nigerian Indies Get Their Barging Right

By Fred Akanni, Editor in Chief, in Warri

With the shut in of the Trans Forcados pipeline, their crude evacuation route, six Nigerian owned E&P companies faced the prospect of zero production for an inordinate amount of time.

Three of them opted to barge some of their crude through rivers and export through FPSOs.
But there were initial challenges.
Now those hurdles are clearing and the barging route has become a surer alternative for crude from Seplat’s Oil Mining Leases 4, 38 and 41; Elcrest’s OML 40 and Neconde’s OML 42.
Other companies are scrambling on this barging route as alternative to the pipeline route.
Read the full details in the OTC 2017 Edition of the Africa Oil+Gas Report, here

GE’s Proud of Its African Leadership

General Electric (GE), the American industrial behemoth, is proud of its Africa born managers who run its operations on the continent.

Jeff Immelt, the group’s CEO and Chairman of the Board, paid these managers an extraordinary compliment in the company’s 2016 annual report.

“ I recently returned from a trip to Africa, a continent where GE has experienced explosive growth and is winning, even in a tough economy”, Immelt began in a paragraph in the report .
“I was reviewing a huge pipeline of power deals with Lazarus Angbazo, Elisee Sezan, and Leslie Nelson, members of our African leadership team”, he continued.

“ I could remember eating breakfast with them in Ghana almost 10 years ago. At that time, we couldn’t sell a gas cooker let alone a complex gas-to-power project”, Immelt recalled.

“But, I have watched these talented individuals mature into capable leaders for GE and their countries. They have grown while we have grown”, he concluded.

Malabu Block to Take FID In Spite of Court Proceedings

ENI and Shell are proceeding to Final Investment Decision on a field in the Oil Prospecting Lease (OPL) 245, despite a pending court case in which they are charged with corrupt practices on the same asset.

The two European majors are on course to taking FID on the Zabazaba field, the bigger of the twin Zabazaba-Etan fields, with the NNPC, an agency of the same Nigerian Government which is prosecuting a case against them, before the end of the second quarter 2017.

The invoice for the development of Zabazaba, located in 2,000metre water depth, the farthest offshore of any field development in Nigeria, is $13.5Billion. The project will drain 560Million barrels of oil over the course of 15 years.
As there is no indication that the government, through the Economic and Financial Crimes Commission (EFCC), has withdrawn from the case, it is curious that petroleum sector agencies of the Nigerian government are going ahead with the planned FID. OPL 245, also known as Malabu Oil Block, has thrown up international, high profiled legal interest, involving lawyers in three countries.
As recently as two months ago, Italian prosecutors asked for Claudio Descalzi, ENI’s global Chief Executive Officer, to stand trial over alleged corruption in the Malabu Oil Block case, according to the news agency Reuters quoting judicial sources in Italy. The prosecutors also asked for 10 other people, including Paolo Scaroni, the predecessor to Descalzi, to be sent for trial along with the ENI and Royal Dutch Shell companies. In the same month, theEFFCC, sought and obtained a court order for the asset to the Nigerian state.

But the updates on field development activities in the media last week didn’t reference the court challenges. Simbi Wabote, the Executive Secretary of the National Content Development Monitoring Board NCDMB (an agency that ensures that in-country capacity is taken care of in any oil and gas project) , reportedly affirmed his board’s readiness to expedite national content approval for the Zabazaba field development, which has moved from technical bid tenders to commercial tenders. NNPC officials too are raring to go.

Whereas Wilson Uwajuoren, EFCC’s spokesperson declined to respond to our query about what EFCC thinks of the progress of the project, legal opinion is divided on the progress of the project. “If they go ahead it would mean that the government is even more dysfunctional than we thought”, says one highly ranked private petroleum lawyer who has served in the upper reaches of government.

JDR To Set Up Umbilicals Maintenance Base in Nigeria

Unlike Angola, country still does not manufacture umbilicals

JDR, supplier of subsea cables and umbilicals, has announced a partnership agreement with Proserv Instrumentation Nigeria Ltd.
Under the strategic alliance, JDR will establish a service and maintenance base in Proserv’s operations facility in Port Harcourt, Nigeria. Together, the two European companies will offer combined subsea solutions and local content support to the West African market. JDR’s offering will include maintenance and offshore installation services, product termination and testing and technical training.

“This alliance will enable JDR to increase local content support for projects in Nigeria and the wider region”, says Carl Pilmer, sales director for oil and gas at JDR. We’re proud to work alongside Proserv to better service our clients with integrated solutions and develop the local skills needed to execute projects. Almost every project in the deepwater basins off West Africa includes a JDR-supplied umbilical and this partnership marks the next step in our strategic plan to offer our customers high quality, reliable products and services on a global scale.”

Olu Phillips is Proserv’s country manager based in Lagos, while Tai Fadipe-Davids is JDR’s business development manager, appointed in 2016 to JDR’s strategic sales and marketing activities in the region.JDR has supplied intervention, workover control systems (IWOCS) to major developments including Egina, Kaombo and Moho Nord in Nigeria, Angola and Congo respectively. It also delivered a hybrid steel umbilical to the ABO 12 field offshore Nigeria, and has since invested in a technical test and repair container for umbilical and reeler management, but there is no in country manufacturing of umbilicals in Nigeria, unlike Angola .

Algeria Reduces Fiscal Deficit Despite Lower Oil Price

By Mohammed Jetutu, in Cairo

Overall economic activity was resilient, but IMF advises reduction in ‘costly’ energy subsidies

The International Monetary Fund (IMF) has praised Algerian authorities for achieveing a notable reduction in the fiscal deficit in 2016, despite the challenges of lower oil prices.

Algeria is the third largest crude oil producer in Africa and the continent’s largest gas exporter. But its economic indices are better than Nigeria’s and Angola’s, the two top oil producers.

In a March 21 2017 report, the IMF noted that Algerian authorities were seeking to reshape the country’s growth model, but the country “continues to face important challenges posed by lower oil prices” the World Bank institution noted.. While efforts to adjust to the oil price shock are underway, “fiscal . consolidation will need to be sustained as oil prices are expected to remain low”. 

The report is the product of an IMF staff team visitation led by Jean-François Dauphin.

Discussions focused on the appropriate mix of policies to adjust to lower oil prices. “Overall economic activity was resilient, but growth in the nonhydrocarbon sector slowed under the effects of spending cuts and is estimated at 3.4% in 2016,” Mr. Dauphin explained in the statement.

Inflation increased from 4.8% in 2015 to 6.4% in 2016 and stood at 8.1% year-on-year in January 2017. Unemployment increased to 10.5% in September 2016 and remains particularly high among the youth (26.7 percent) and women (20.1 percent). Despite some fiscal consolidation in 2016, the fiscal and current account deficits remained large, and public debt increased. International reserves, while still ample, fell by $30Billion to $113Billion (excluding SDRs).

“Efforts to adjust to the oil price shock are underway. The authorities achieved a notable reduction in the fiscal deficit in 2016 and have adopted an ambitious fiscal consolidation plan for 2017-19. They made progress improving the business environment and are working on a long-term strategy to reshape the country’s growth model to foster greater private sector activity and economic diversification. The central bank is adapting its monetary policy instruments to a tighter liquidity environment. This growing reform momentum is welcome.

“A key challenge at this juncture is choosing a policy mix that will help the economy adjust to the oil price shock in a way that is sustainable and the least costly in terms of growth and employment.

“Fiscal consolidation will need to be sustained as oil prices are expected to remain low and hydrocarbon reserves are exhaustible. At this stage, the consolidation should rely primarily on broadening the tax base, including through better tax enforcement and the rationalization of tax exemptions; containing current spending; gradually replacing costly energy subsidies, which mostly benefit the well-off, by direct support to the population most in need; and improving the efficiency of capital spending and reducing its cost. Investment in health, education, and well-targeted social safety nets should be preserved. These efforts should be supported by further strengthening the budget framework and closely monitoring growing fiscal risks.

“Too abrupt a fiscal deficit reduction, however, should be avoided to reduce the risk of a sharp slowdown in growth. In the mission’s view, given the relatively low level of public debt, Algeria could afford a somewhat more gradual fiscal consolidation than entailed in the current medium-term budget framework if it were to consider a broader range of financing options, including external borrowing and the sale of state assets.

“The mission strongly supports the authorities’ objective to decrease the economy’s dependence on hydrocarbons and unleash the potential of the private sector. This is not only needed to adjust to lower oil prices but also to ensure a sustainable source of job creation even beyond the horizon for proven oil and gas reserves. Achieving this goal will require wide-ranging structural reforms. Measures are needed to improve the business environment and access to finance, strengthen governance and transparency, make the labor market more effective, ensure that skills produced by the education system and sought by students match the needs of employers, foster greater female participation in the labor market, and further open the economy to foreign investment. The overall strategy should be designed and sequenced so that reforms reinforce each other and the burden of economic adjustment is shared equitably. Action should be timely as structural reforms take time to bear fruit.

“Exchange rate, monetary, and financial policies should support the adjustment. Further efforts to bring the dinar in line with fundamentals, combined with steps toward the elimination of the parallel foreign exchange market, would support fiscal and external adjustment. The Bank of Algeria is appropriately introducing open market operations, which should become its main monetary policy tool. The Bank of Algeria will need to stand ready to tighten monetary policy in light of growing inflationary pressures. Based on preliminary data, the banking sector as a whole remains adequately capitalized and profitable, but the oil price shock has increased liquidity, interest rate, and credit risks. It is therefore important to accelerate the transition to a risk-based supervisory framework, enhance the role of macro-prudential policy, strengthen the governance of public banks, and develop a crisis resolution framework”, the statement concluded.

GE Commissions Takoradi Facility

GE Oil & Gas is commissioning its new services facility in Takoradi, in Ghana’s oil rich western region, this Wednesday, March 22, 2017.

On hand will be Ghana’s top petroleum bureaucrats, led by the country’s Minister of Petroleum, and G.E’s African leadership.
The project will primarily support the ENI operated Sankofa-Gye Nyame integrated oil and gas field development, located in Offshore Cape Three Points (OCTP) block, in water depths ranging from 600 to 1,500metres.

For a duration of 15 years, the Sankofa-Gye Nyame development will drain about 400Million barrels of crude oil reserves at 50,000BOPD at peak. It will supply 180Milliion standard cubic feet of gas to the country’s burgeoning domestic market.
The crude oil phase of the development is expected to come on stream before the end of June 2017.

GE will deliver a total of 21 subsea trees (also known as Christmas Trees, or XTs) for the project –  18 for installation and three for backup. Their primary function is to control the flow – usually oil or gas – out of the wells.

The Takoradi facility received the first two XTs for the Sankofa-Gye Nyame development in the last quarter of 2016.
GE Oil & Gas will also, at this facility, support the customer’s aftermarket needs, with the facility largely responsible for site receival testing and providing support to ENI’s equipment installation campaign for the Sankofa-Gye Nyamme project. Site receival testing involves ensuring the safe arrival of equipment, flushing systems and replacing hydraulic fluids, and making sure there’s continuous, undisrupted communication between the control equipment after they have been deployed offshore.

Nigeria’s Newest Indies Produce Close to 200,000BOPD

By Toyin Akinosho, in Lagos

Three Nigerian independents Aiteo, Eroton and Newcross, collectively produced close to 200,000Barrels Per Day at peak, close to the end of 2016.

These companies, each of which emerged less than four years ago, are the newest beneficiaries of the divestment programme of the oil majors operating in the country.

Aiteo Eastern E&P, the operator of the Oil Mining Lease (OML) 29, reported gross production of 92,000BOPD in October 2016, figures in NNPC’s December 2016 report show. Eroton E&P, in OML 18, averaged 63,764BOPD gross output in the same month. There were no figures published for Newcross in October 2016 and November 2016, (the last months for which figures are officially available), but the company, operator of OML 24, delivered 30,213BOPD in September 2016.

These figures come to about 186,000BOPD, roughly 10% of the country’s average 2016 production and are less than half of what the 22 Nigerian owned producers of crude oil and gas are capable of delivering.

Indeed, the five similar Nigerian independents, including Seplat, Shoreline Natural Resources, NDWestern, Elcrest and First Hydrocarbon Nigeria, who have had up to 80% of their production shut-in for more than 12 months by the damage to the TransForcados pipeline, were collectively producing over 160,000BOPD before the bombing. Seplat and Neconde alone were averaging 115,000BOPD prior to the February 14, 2016 outage.

Analysts however say that Nigerian owned oil producing companies have not historically been consistent in maintaining, let alone increasing production. Conoil, which produced around 45,000BOPD in 2005, and now delivers less than 10,000BOPD, with four acreages, is proof of this assertion.

“Poor governance is part of the challenge”, says Sam Ojehonmo, an Africa focused energy consultant based in Cairo, “but these new breed of operators have a different challenge; they took huge loans to buy the assets; the earlier generation had the assets largely handed over to them gratis, and they were cash flush when they had to bid for another round of acquisitions”.

Aiteo, Eroton and Newcross took over their assets from the consortium of Shell, TOTAL and ENI between 2014 and 2015, paying a total of $4.1Billion for the consortium’s 45% share, with the state hydrocarbon company, NNPC holding the remaining 55%. “We are a strategically important Borrower to the Nigerian banking industry”, Chike Onyejekwe, Group Managing Director of Aiteo, told an industry summit a fortnight ago in Abuja.

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