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Kosmos Grabs what SAPETRO Threw Away

By Toyin Akinosho

“The former Triton executives have returned home”

Kosmos Energy has added, to its basket of acreages in Equatorial Guinea, a block that SAPETRO walked away from.

It is the highly prospective Block W, located north of the Ceiba and Okume fields.

SAPETRO terminated the discussions with Pan Continental, operator of Block W, before June 2017. Sources in Malabo, the Equatorial Guinean capital, said that the Nigerian independent wasn’t comfortable with the Pan Continental’s capacity as a partner. The Equatorial Guinea government apparently shared the same sentiments. By September, it had effectively booted out the company from the acreage.

Kosmos was awarded Block W in the same month, along with its purchase of85% of the stake in Ceiba and Okume fields from Hess Corporation and its entry into Block EG-21 and Block S, making it a large acreage holder in the Rio Muni basin.

Equatorial Guinea authorities are excited. “Do you know why Kosmos is acquiring all these assets in Equatorial Guinea”?, Gabriel Obiang Lima, the country’s Petroleum minister, asked delegates at the Africa Oil Week Conference in Cape Town in late October 2017. “The guys who founded Kosmos are the former Triton Energy people who discovered the Ceiba field in the mid 90s”, he gushed. “They have come back home”.

The Equatorial Guinea Ministry of Mines and Hydrocarbons considers Kosmos’ takeover of ownership and operatorship of Ceiba and Okume, two legacy oil producing areas, as “landmark sale transfers”.

These entries make Kosmos the country’s biggest petroleum explorer by acreage and the sole producer in Equatorial Guinea’s Rio Muni southern maritime area.

Egypt’s Economic ProspectsBest Among Africa’s Top Three

Egypt’s growth rates suggests its economic prospects are better than Nigeria and South Africa, its peers in Africa’s three largest economies.

The country’s growth picked up speed during fiscal year 2016/17, with GDP rising by 4.2% compared to the projected 3.5%.

This contrasts with Nigeria just emerging from a recession and South Africa’s less than 1% growth.

The IMF is encouraged that Egypt’s current account deficit narrowed in dollar terms, “supported by the increase in non-oil exports and tourism receipts while non-oil imports declined”.

Portfolio investments into North Africa’s most populated country reached $16BillionIN 2017 and foreign direct investment rose by 13%, reflecting increased investor confidence.

Headline inflation appears to have peaked in July and has been declining since then, supported by the Central Bank of Egypt’s (CBE) prudent monetary policy stance.

“The budget performance was broadly in line with program projections with a primary deficit of 1.8% of GDP.
There’s a chink in the armour though.

“The overall deficit exceeded projections by 0.4% of GDP and reached 10.9% of GDP, mainly on account of higher than expected interest payments”.

Even then, the IMF notes:Reflecting the overall strong policy framework and credibility of the authorities’ program, foreign exchange reserves increased significantly to record levels.

Egypt’s African rivals, meanwhile, get some tongue lashing from the Fund.
An IMF team, which departed South Africa on November 8, 2017 “sees little improvement in growth outlook in 2018. The country’s authorities project 0.7%GDP growth in 2017;

“Despite South Africa’s institutional strength and favorable global conditions, increasing domestic political uncertainty and stalled reforms point to a challenging economic outlook. Some sectors, including agriculture and mining, are certainly generating growth, but other key activities have stagnated or declined, as investment decisions are being postponed or abandoned.
The team sees growth as recovering only gradually in the medium term, “unless the pace of implementation of structural reforms accelerates quickly enough to prompt a clear recovery in business and consumer confidence”.

The IMF is equally disappointed with Nigeria. “The economic backdrop remains challenging, despite some signs of relief in the first half of 2017”, said a team which concluded a visit to that country in August 2017. “Economic activity contracted in the first quarter of the year by 0.6%, mainly as maintenance stoppages reduced oil production. However, following four quarters of negative growth, the non-oil economy grew by 0.6% (year-on-year), on the back of a rebound in manufacturing and continued strong performance in agriculture. Various indicators suggest an uptick in activity in the second quarter of the year. Helped by favourable base effects, headline inflation decreased to 16.1% in June 2017, but remains high despite tight liquidity conditions.

“Preliminary data for the first half of the year indicate significant revenue shortfalls, with the interest-payments to revenue ratio remaining high (40% at end-June) and projected to increase further under current policies. High domestic bond yields and tight liquidity continue to crowd out private sector credit. Given Nigeria’s low growth environment and the banking system’s exposure to the oil and gas sector, non-performing loans increased from 6% in 2015 to 15% in March 2017 (8% after excluding the four undercapitalized banks)”.

Egina FPSO Finally Sails Away ..First Oil Now November 2018

By Fred Akanni

The Egina FPSO left the quay side in Geoje Korea at 7.18am Korean time on the 31st of October.

The vessel started its long anticipated journey to Nigeria, several months after the original schedule.

It will take 90 days to arrive at the yard of the Lagos Deep Offshore Logistics (LADOL) in Lagos, meaning either late January or early February 2017.

There, the six modules constructed by TechnipFMC, which are presently at the LADOL yard will, together with some other modules coming from Korea be integrated to the FPSO at LADOL yard, a process that will take about six months to complete. That is the key local content part of the FPSO integration.

The FPSO will then leave LADOL yard in Lagos to Egina location off the southeastern Nigeria, where the risers, offloading Buoy and other subsea cables will then be hooked up to the FPSO before Egina first oil in November 2018.

Shell Divestment Transformed NPDC into A “Major”

By Toyin Akinosho

The divestment from four western Niger Delta acreages by the AngloDutch major Shell and its European partners transformed the Nigerian Petroleum Development Company NPDC, into “a major company”, in the opinion of NPDC managers.

“Huge hydrocarbon resources became available to us”, Kareem Folorunso, the NPDC Manager in charge of the Oil Mining Lease (OML) 26, told a technical session of the Nigerian Association of Petroleum Explorationists (NAPE) in Lagos recently.

Shell, with 30% operatorship of OMLs 26, 30, 34, and 42, led its two partners, TOTAL (10%) and ENI (5%), out of the acreages by selling the combined 45% equity to Nigerian companies between 2011 and 2012. NPDC’s involvement in those assets was triggered by NNPC assignment of her 55% equity to her wholly owned subsidiary.

The NAPE lunch hour presentation was part of a series of attempts by the company to counter charges that its takeover of operatorship of acreages divested by Shell & Co was not a value-destroying enterprise. There are widespread misgivings that the acreages would have delivered much more in terms of output and value to the Nigerian treasury if they had been operated by the private companies who purchased the Majors’ 45% share.
Mr. Folorunso’s paper presented NPDC as a technically honed, well-resourced entity, which just happens to be hampered by bureaucratic challenges normally faced by state owned enterprises.

NPDC’s crude oil in place increased tenfold from 313Million stock tank barrels before the divestment to 3.17Billion stock tank barrels (STB) post-divestment; the company’s stock tank barrels of condensate in place increased more than fivefold from 60MMSTB to 330MMSTB, while the gas resources in place jumped nine times from two trillion cubic feet (2Tscf) to 18Tscf, Folorunso said.

“NPDC is the third largest oil company in Nigeria in terms of oil reserves and has the 4th largest gas reserves in Nigeria”, Folorunso told the meeting, a monthly lunch hour talk designed for knowledge sharing among petroleum geoscientists. “Countless opportunities for partnership and collaboration with other business entities also became available as a result of the divestment”, he testified.

The word ‘Major’ was rather loosely used by Mr. Folorunso. In the oil industry lexicon, only six oil and gas companies –Shell, ExxonMobil, Chevron, BP, TOTAL and ENI are described as Majors. None of them produces less than 1.75Million Barrels of Oil Equivalent per day (1.7MMBOEPD) on a net basis.
The highest producer, ExxonMobil, produced 4.053MMBOEPD in 2016, of which liquid hydrocarbons, mostly crude oil, was 2.365MMBOPD, much higher than Nigeria’s gross total production. Even ENI, the smallest of the group, is only described as a Major because of its unique place in the European industry. In the strictest sense of the term, ENI is really considered “a large independent”, in the same class as ConocoPhillips, Apache, Anadarko and Woodside Petroleum.

What’s more, the smallest of these majors has 7.7BillionBOE, as proven reserves and not Stock Tank Barrel (STB) in Place.
So it is a clear misnomer for Mr. Folorunsho to say that NPDC had transformed into major company. But the Nigerian state hydrocarbon company can be forgiven for being excited by its good fortune.

Ghana Wins

Cote d’Ivoire’s Claim on Oil Discoveries in the Cape Three Points Has No Merit

By Sully Manope

Ghana’s 4-1 beating of Nigeria in the West Africa Football Union (WAFU) Final last Monday (September 25, 2017) was an icing on a cake baked with a huge victory on the economic front.

The country had won a decisive win over Côte d’Ivoire at the Special Chamber of the International Tribunal of the Law of the Sea(ITLOS) two days before the WAFU Cup final match in Cape Coast, capital of Ghana’s Central Region.

It’s worth noting that Côte d’Ivoire and Nigeria are Ghana’s two most important economic and political rivals on the mid-African edge of the Atlantic Ocean.

Ghana had taken Côte d’Ivoire to ITLOS in September 2014, after negotiations with the latter broke down over who had rights to explore and exploit the resources in the Cape Three Points acreages as well as the surrounding fields.

In April 2015, ITLOS forced Ghana to suspend the drilling of new oil and gas wells in the disputed territory by ordering a number of provisional measures, pending the outcome of the litigation. That decision caused Ghana’s Twenaboa, Enyenra and Ntomme (TEN) cluster of fields to begin production with 11 of the planned 24 wells, as no new wells could be drilled until the dispute was settled.

Three years after ITLOS was approached by Ghana to arbitrate, the Tribunal ruled as follows in favour of the country: 1) That there had not been any violation on the part of Ghana on Côte d’Ivoire’s maritime boundary; 2) Determined a new boundary for the two countries (3) Dismissed Côte d’Ivoire’s legal argument that Ghana’s coastal lines were unstable and 4) Declared that Ghana’s oil and gas exploration activities in the disputed basin did not violate any other country’s sovereign rights.

NLNG Commits $200Milion for Bodo-Bonny Highway Construction

By Foluso Ogunsan, in Port Harcourt

The Nigeria Liquefied Natural Gas (NLNG) Limited has agreed to provide 50% counterpart funding, amounting to N60.3Billion(or $197Million) for the construction of Bonny Island-Bodo road, a project billed to cost N120.6Billion ($394Million).

The gas company signed an agreement with the federal government and Julius Berger, according to a Press release.

The road is expected to be transformative in that it would open up vast swathes of the Niger Delta basin, which is largely inaccessible.

“The 34 kilometre road will help address the twin challenges of poverty and unemployment as well as improve the lives of people of the region, especially those from Bonny, Ogoni, Okrika, Eleme, Andoni, and other communities in the Niger Delta”, the NLNG said.

The Bodo Bonny road will have to include at least four bridges, laid over significant bodies of water.

“The federal government’s efforts to build the road had been hampered for decades, largely by funding and contractor issues, causing NLNG to intervene especially because of the criticality of the road to residents of Bonny Island, who daily brave the vagaries of the sea to travel to the mainland, ” the NLNG statement said.

Tony Attah, NLNG’s managing director, Babatunde Fashola, minister of works, power and housing, and Wolfgang Goesh, Julius Berger’s managing director, signed the agreement.

“This for Nigeria LNG is part of our effort to contribute to the advancement of the Niger Delta. More importantly for us as a company, our contribution to the project will lead to the accomplishment of the dream of connecting Bonny Island to the rest of Rivers State by road and not only by sea,” Attah said.

South Africa’s Planned Gas To Power IPP Bid Round Is On Hold

By Boniswa Umtata, in Cape Town

And the proposed exploration in the Karoo won’t happen for a while

South Africa’s plans to roll out an Independent Power programme(IPP) for gas to power projects will be on hold for the time being.

The country’s Minister of Energy was to inaugurate the bid this year.

But the entire programme is going to be delayed around political succession (with implications for energy policy) and the general need to close the outstanding renewables deals before South Africa moves on to importing gas, according to ranking sources in the Ministry of Energy.

The LNG to Power IPP Programme aimed to identify and select successful bidders and enable them to develop, finance, construct and operate a gas-fired power generation plant at each of two ports, Ngqura and Richards Bay in South Africa.

The successful bidder would also be required to put in place the gas supply chain to fuel the plant with gas from imported LNG.

The LNG to Power IPP Programme will provide the anchor gas demand on which LNG import and regasification facilities can be established at the Ports of Ngqura and Richards Bay. This will provide the basis for LNG import, storage and regasification facilities to be put in place that can be available for use by other parties for LNG import and gas utilisation development.

Therefore, Third Party Access will be a fundamental aspect of the LNG to Power IPP Programme. This will enable the development of gas demand by third parties and the associated economic development.

Full story in Africa Oil+Gas Report Vol 18, No 7, Southern Africa 2017 issue; September 2017 edition. Will be distributed to paying subscribers as well as delegates at the Africa Oil Week in Cape Town in October. It can also be accessed here…

Why the “Digital Oil Company” Mantra Is Overrated

By Toyin Akinosho

There were hardly any computers on anyone’s desk when I arrived at Chevron Corporation as a trainee geologist in mid-1988.

The entire computing power in the company resided in an offsite location, seven kilometres from the main office.

A geoscientist’s desk was typically filled with several paper prints of two and three dimensional (2D and 3D) seismic reflection profiles. The table also hosted a printed base map or two. In a rack next to the seat were rolls of sepia and paper copies of more seismic reflection profiles, a handful of basemaps and several other maps.

Earth scientists painstakingly interpreted the profiles and transferred their “opinions” on the basemaps, usually of 1: 12,500 scale. What came out of the venture was mainly a structural map, a plan view of the top of a reservoir sand or seismic event several kilometres deep in the subsurface, which every interpreter pinned on a wall above his head.

The pinup was proof that he had completed the interpretation of a prospective sand reservoir or seismic “event”. Such a map prefigured the determination of the location of an oil well.

Full story of the earliest computerisation of oil and gas exploration and why the current advances are less a revolution than part of an ongoing evolution, is here..

Gabfest Galore: Nigerian Government to Start an Oil Conference in 2018

The Nigerian ministry of petroleum has concluded plans to add to the teeming market of oil and gas conferences in the country.

It has even picked a date which puts it in competition with one of the newest of such conferences and a venue that indicates a challenge to one of the oldest such shows.

The Nigeria International Petroleum Summit (NIPS), tagged the “First Federal Government of Nigeria’s official oil and gas industry trade show”will be held in Abuja in February 2018.
So there.

This trade show will happen in Abuja in the same month that the West Africa International Petroleum Conference (WAIPEC), has been scheduled to hold in Lagos. NIPS will be inaugurated in the same month as WAIPEC’s second annual outing.

It will take place at the International Conference Centre, the same venue that the Nigerian Oil and Gas Conference (NOG) has held court for most of its 18 years. NOG is also scheduled to run in February 2018!!

The question is: Is a government conference so necessary to crowd out the space for private initiatives?

There is an answer in the press release.

The organisers advertise what seems like targeting the continent: “This event will undoubtedly be the Africa’s largest and most important industry platform and linkage to the world where engineering and technological breakthroughs, bid rounds, bid sign-off, major contract signing and sites conferences would meet other developmental and economic diversification initiatives of the country”.

Indeed, Yemi Osinbajo, the Nigerian Vice President,“unveiled the official launch of Nigeria International Petroleum Summit 2018 in the presence of 19 African Ministers of Petroleum and delegates who attended the African Petroleum Producers Organisation (APPO) meeting in Abuja, Nigeria recently”, notes the release.

But then the same statement, two paragraphs later, pulls back the curtain and limits itself to Nigeria: The NIPS, it says “will be held annually as a platform to highlight Nigeria’s long history of oil and gas production, substantial reserves and status as a leading global player in the sector”.

Which is what NOG does, What WAIPEC did this year, What the various panels of the Society of Petroleum Engineers (SPE) do, and what the annual conference of the Nigerian Association of Petroleum Explorationsists (NAPE) does.

Indeed, there have been concerns that the SPE and NAPE conferences, organised by associations of technical personnel, have been focusing much more on the business and politics of hydrocarbon exploration and extraction, than on the technical programme that is their core remit.

They all want “key Nigerian political decision makers, government officials and industry’s specialists from the National Oil Company(NOC) and other relevant government bodies on the one part and Chief Executive Officers (CEOs) of National and international oil companies, multinationals and multilateral organizations, the academia and other relevant stakeholders et cetera”, as the NIPS statement says.

They all cite Nigeria’s petroleum industry as “the largest in Africa with proven Oil and Gas reserves of 37 billion barrels (bbl) and 192 trillion cubic feet respectively. The sector contributes about 10% to the country’s Gross Domestic Product and accounts for 95% of all exports”, as the NIPS press release notes.

Then again, “given that Nigeria’s Gas reserves have remained largely untapped, the country is expected to make a shift towards becoming a major producer and exporter of Gas which the summit provide with an excellent business environment to interact, cross-pollinate ideas and to make deals happen”.

Ha. What the country needs are subject specific conferences, even in the hydrocarbon sector. That way, you deepen the search for solutions to specific areas and participants not only network, but go away from summits with information they can translate immediately to business success.

Lekoil in OPL 310: One Down, One More to Go

LEKOILis expecting the second of the two consents of Nigerian authorities on the Oil Prospecting Lease (OPL) 310.

The current lease expiry date is February 2019. Lekoil has an understanding with Baker Hughes, a GE company, for technical partnership and investment in appraisal of the discovery, possibly leading to first oil. But it can’t proceed without ministerial consent. Optimum, which is the licence holder and Lekoil’s partner, is not a technically resourced company, so a work programme will not happen before expiry date if Lekoil doesn’t get the government’s nod.

But no one seems to be in a hurry at the Department of Petroleum Resources (DPR), the industry regulatory agency, to respond to Lekoil’s challenges.

The consent to complete the transfer of the original 17.14% participating interest that Lekoil acquired on the lease in February 2013 was granted by the Minister of state for Petroleum Resources in June 2017. This means it has taken four years and three months after it acquired the interest in the block to achieve this very important regulatory approval.

What now remains is the authorities’ consent for a second acquisition that the company made on the same block. In November 2015, Lekoil acquired Afren’s remaining 22.86% participating interest in the block. That acquisition remains conditional upon receiving Ministerial Consent.

The key challenge here is that Optimum feels it ought to have been consulted when Lekoil acquired the equity from Afren. Some of the regulatory officials at the DPR, who are in charge of preparing the documents for the Minister of state to sign on, want Optimum to give them a go ahead before doing the required Due Diligence and processing the consent documents. Lekoil, a listed company, argues that the law does not require Optimum’s nod before the Minister can give a consent. Indeed, Optimum is pushing for a renegotiation of terms and Lekoil is pushing back.

“We are trying to working through the process”, once lawyer close to both parties says, “although it’s not always clear what the process is”. This is clearly an issue highlighting how difficult it is to do business in Nigeria.

The delay in regulatory consent for Lekoil on this block stands in the way of the company’s plans for the development of a work programme for the Ogo field (the only discovery on the block) for which it has signed a Memorandum of Understanding with GE Oil & Gas, now Baker Hughes, a GE Company.

Lekoil says it is also in discussions with other potential partners for the financing of the appraisal programme, following which, and subject to the fulfilment of a number of conditions including a positive well result, Baker Hughes, through a consortium SPV, and Lekoil through its funding partners, intend to invest funds towards the full field development capital of the project. Lekoil estimates this cost to be US$400MM for full field oil development and US$600MM for subsequent upstream gas field development.

“When all the issues have been resolved” Lekan Akinyanmi, Lekoil’s Chief Executive Officer told Africa Oil+Gas Report’s Akpelu Paul Kelechi back in April 2017, “we hope to spud before the end of the year”.

In the first week of September 2017, Mr.Akinyanmi’s timeline is not looking very good.

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