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Oando Shells Out $0.625 Billion On A Huge Bet

After  a bid in which two of China’s largest oil firms participated and failed, a small, ambitious Nigerian independent won Shell Nigeria’s 49.8%stake in two deepwater leases.

For the Anglo Dutch oil major, who had been forced by militants to shut in close to 500,000barrels of oil (gross production) every day for much of the last two years, it was money sorely needed.

What was not immediately clear was whether the minnow who paid the cheque was getting a good deal for the investment. PetroChina aborted its bid for the two acreages: Oil Mining Leases (OMLs) 125 and 134, a few months after offshore specialist CNOOC withdrew its bid for the blocks. Both companies were told that their offers, at around $300 million to $400 million, were too low. Then Oando, a Nigerian energy company, stepped up to the plate, offering $625Million. There was jubilation on national television as the company, a ranking member of the Nigerian Stock Exchange, announced its winning. With a net ownership of 9,000 barrels of oil per day (BOPD) of Agip operated Abo field in OML 125, it is clear that this acquisition marks a significant entry into the Upstream sector for Oando, which has succeeded in venturing into almost everything except crude oil production, in the last five years. Oando has run a petroleum marketing enterprise, acquired rigs, distributed natural gas, won a non producing prospecting lease, holds a partnership in an undeveloped discovery and gotten a foothold in oilfield services, but all of these pale into insignificance, in the minds of its management, if the company doesn’t have a drop of oil to its name. The question is: Is a 9,000BOPD from a declining oil field and a mining lease with no established oil production enough value for $625 million? Part of the answer came by way of Anne Pickard, Shell’s Executive Vice-President, Africa, commenting on the divestment on the week of the sale “We have a maturing asset, which is operated by Eni (Agip), which is offshore. When things get mature, we tend to sell them.” But the answer only breeds more questions. Such as: Is Oando shelling out money far in excess of half a billion dollars to buy an asset that Shell considers maturing? Does the word “maturing” merely refer to the Abo field, or does it also refer to the so called upside potentials in OML 125 and the undeveloped prospects in OML 134? The answer lies in looking at the portfolio. The leases OML 125 and 134 were carved out from OPLs 316 and 211, which Agip won in the 1993 bid round. The company established production in 2003, a clear seven years after discovering Abo (1996) in OPL 316 and converted the producing half of the lease into OML 125.  Abo production peaked at 30,000BOPD and started falling, reaching 19,000 BOPD last year.  Initial drilling in OPL 211 (Udoro, Engule) were unsuccessfiul. In 2003 however, Agip drilled a well in a prospect located in the south east of the lease. Uberan- 1 encountered commercial footage of oil. In anticipation of development of this field, Agip sought permission to convert half of the oil prospecting lease (OPL) 211 into a mining lease OML and got the name OML 134. Geoscientists in Shell and Agip are both excited about the potentials of Uberan, which they consider the real juice in the two blocks. Even though the discovery well was not tested, company sources say the field could be at least 200MMBO. An $80million appraisal well, to be drilled (tested, cored, etc) later in 2008, will confirm the field potentials.

Nor is Abo field a low vaklue asset. Agip plans to increase production here to 25,000BOPD by drilling and hooking up two wells later in 2008. These wells are targeting deeper reservoirs. There are some other prospects around Abo, which are quite small, but can be hooked up relatively cheaply. One of these prospects will be probed by a well later this year. While the divestment of Shell interests in OMLs 125 and 134 is clearly for reasons of cash flow, Oando’s enthusiastic buying may be justified in the near term. But the real challenge is not in the finances. It is how Oando utilizes this entry to build capacity. Oando already has a corps of technically honed petroleum engineers and earth scientists, who develop its burgeoning oil services business, manage its upstream joint ventures and help to evaluate assets. But with the cash it is able to play with it can afford to build a sizeable pool of technical professionals, paid competitive wages, who take on projects from geologic leads through prospects to drilling and production. Nigerian companies don’t get the opportunity to be equal partners with experienced majors in acreages. When they hold the assets, they rarely have the cash and more often, a technical operator is also the financier. Oando is an equal partner with Agip. It must get everything it can from this partnership.


GAZPROM SIGNS MOU WITH SONAGAS

Gazprom, the Russian state gas company, has signed a Memorandum of Understanding with Equatorial Guinea’s state gas company Sonagas. The deal also involves privately owned Suntera. It is for the development of future gas projects in the country. A Gazprom delegation, in Equatorial Guinea, met with Teodoro Obiang Nguema Mbasogo, President of Equatorial Guinea, Atanasio Ela Ntugu, Minister of Mines, Industry and Energy, Gabriel Nguema Lima, Vice Minister of Mines, Industry and Energy, and Juan Antonio Ndong Ondo, Director General of Sonagas. Discussions focused on potential joint involvement of Gazprom and Suntera in gas infrastructure, power generation and LNG projects. Suntera is half owned by Russian gas producer Itera.


BG Sells Mauritanian Property

BG Group has completed the sale of Mauritania Holdings BV to Kuwait Foreign Exploration Company (KUFPEC) for a total consideration of $128 million. The agreement marks the disposal of all BG Group’s current interests in Mauritania. The company has increased its worldwide exploration acreage significantly in the last 18 months and believes that its Mauritanian assets no longer fit strategically within its exploration portfolio. BG Group purchased Mauritania Holdings BV from Hardman Resources Limited in 2004 for an aggregate cash consideration of $132 million. Mauritania Holdings BV operated as a wholly-owned subsidiary ofBG Group managing its interests in Production Sharing Contracts (PSCs) A and B covering blocks 3,4 and 5 offshore Mauritania, West Africa. These interests were – 13.084% equity in PSCA, 11.630% equity in PSC B and 10.234% equity in the Chinguetti Exclusive Exploitation Authorisation (EEA). PSC A covers Block 3 and shallow waterBlocks 4 and 5. A gas field (Banda) has been discovered in PSC A. PSC B covers deep water Blocks 4 and 5. Five oil discoveries have been made in PSC B (Chinguetti, Tiof, Tevet, Tevet Deep and Labeidna). The Chinguetti field commenced production in February 2006. Development studies on the Tiof field are ongoing.


African Gas For The African Economy

IN THE CONVERSA11ON AROUND THE DEVELOPMENT OF AFRICAN GAS, the continent’s needs and capacity to power its economies with the resource is often at the bottom of the agenda. Angola is kickstarting a Liquefied Natural Gas project without much of a say about its chronicelectricity shortage. Equatorial Guinea is stuck in pre-industrial darknessand yet it is about to import Nigerian gas to make up for a second LNGscheme.

Uganda and Kenya could do with an east African power pool, fuelled by gas from Tanzania and perhaps, Sudan. Are these pipe dreams? They don’t look so anymore. From 2007, Nigerian gas-militant insurgency willing-is set to flow to Accra, Cotonou and Lome, to energise those dormant economies. Mozambique has been feeding South Africa with gas and the latter’s power utility (Eskom)’s plans for a first gas fuelled power plant is banking on Namibia’s gas resource.

North of the Sahel, half of Egyptian gas production is committed to domestic use, which is good, even though some western investors find it problematic. Algeria also powers its economy with its gas and has a robust internal utilization scheme that is unmatched in the resource-rich countries to the south.’ Still the major news is about export. Huge projects abound from Algeria (Gassi Touli) to Nigeria (OK LNG). This edition is meant to provide you a document of these activities for reference. We wish all our readers a happy new year.

Cairo had a very old-fashioned literary culture, with cliques and salons.  The City’s most endearing characteristic was that all this socializing was accomplished through word-of-mouth.  Raymond made a call and found out thata certain time Mahfouz would be in a certain hotel in a certain district near the Nile.

We arrived at the place at the same as Nahguib Mahfouz, who was being guided, a burly man on each side of him, steering him to an upstairs lounge, for he is somewhat enfeedled, and almost blind, and nearly deaf; he is sallow and diabetic, yet looked much healthier than the last time I had, supine in the intensive care unit of the Military Hospital


Addax Wins Operatorship Of OPL 291

The Swiss independent, Addax has bought a stake in Nigerian independent Starcrest’s OPL 291 for $35MM. Addax will operate the deepwater lease, adjacent to Chevron’s billion barrel Agbami field, with 72.5%. Addax and Starcrest have signed a production sharing contract with Nigeria National Petroleum Corporation (NNPC) in respect of the license. 0PL291 is located approximately 130 kilometers off the Nigerian cost, where the water depth ranges from approximately 1,000 to 2,300 meters and covers a gross area of 1,287 square kilometers (318,000 acres).

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