Should Nigeria be worried that an increasing volume of its oil and gas production is being undertaken by home-grown independents?
As the yearly reports of the Nigeria Extractive Industries Transparency Initiative increasingly show, they are the more likely to default in payment of Taxes.
In the release of its 2017 audit report on the oil and gas industry, the agency identified the Nigerian Petroleum Development Company, NPDC, ND Western, Frontier, Dubri Oil, Newcross E&P, Platform, Pan Ocean, Shoreline and Yinka Folawiyo. NPDC, ND Western, and Frontier were fingered for underpayment of $11.585Million, $6.595Million and $1.807Million gas royalty respectively; while Dubri Oil, NPDC, Newcross, ND Western and Platform were also implicated for the underpayment of oil royalty of $228,569.87, $22.835Million, $13.715Million, $9.366Million and $529,430.87 respectively.
NEITI had disclosed earlier, in its audit report of 2016 that Pan Ocean, Shoreline and Yinka Folawiyo defaulted in payment of royalty in that year.
In the same 2016 audit report, Aiteo, Allied Energy, Belemaoil, Brittania U, Dubri Oil, Energia, Midwestern Oil and Gas, Pan Ocean, SAPETRO and Yinka Folawiyo were reported to have defaulted in payment of Petroleum Profit Tax.
What’s consistent is that international Oil Companies rarely show up on the list of tax defaulters.
As these companies divest their assets, a key challenge that the Nigerian state may grapple with, is recovery of taxes from companies that will soon become the largest crude oil and gas producers in the country.
But the biggest defaulter is a state hydrocarbon company, so the place that government needs to start from is itself. NEITI’s audit reports come two years late, and the agency claims that NPDC, the operating subsidiary of NNPC, accounts for 73% of a total underpayment of $677.087Million from seven revenue streams as at 31st December, 2017.
The Court Order sanctioning the acquisition of Eland by Seplat has been delivered to the Registrar of Companies.
Accordingly, the transaction has become Effective and the entire issued and to be issued ordinary share capital of Eland is wholly owned by Seplat.
It has taken two months and three days since the boards of Seplat and Eland announced that they had reached agreement on the terms of a recommended cash of the entire issued and to be issued ordinary share capital of Eland, to be implemented by way of a court-sanctioned scheme of arrangement under Part 26 of the Companies Act 2006.
A scheme document was posted to Eland Shareholders on 28 October 2019 setting out the terms of the Acquisition. On 12 December 2019, Seplat and Eland announced that the Court had sanctioned the Scheme.
“We welcome our new colleagues and Nigerian partners as we look forward to working together in this exciting phase of our development,”says Austin Avuru, Seplat’s Chief Executive Officer.
Delisting of Eland
Admission to trading of the Eland Shares on AIM will be cancelled with effect from 7.00 a.m. on 18 December 2019.
As a result of the Scheme becoming Effective, share certificates in respect of Eland Shares have ceased to be valid and of value and entitlements to Eland Shares held in uncertificated form in CREST will be cancelled.
Settlement
Scheme Shareholders on the register at the Scheme Record Time, being 6.00 p.m. on 16 December 2019, will receive 166 pence in cash for each Scheme Share. The consideration due to the Scheme Shareholders will be sent by no later than 31 December 2019.
Resignation of non-Executive directors
Each of the non-Executive Eland directors has resigned as a director of Eland with immediate effect.
Amni International Petroleum, the Nigerian operator of Oil Mining Leases (OMLs) 52, 112 and 117, is owned by two entities. They are Kapetrol, with 99.3% and Tunde Afolabi, 0.7%.
Britannia U, the operator of Ajapa field, is 35% owned by Uju ifejika and 5% owned by Emmanuel Ifejika. So who owns the rest? Mrs. Ada Kio actually owns 37%. And Alex Neyin has 1% of the company.
The two beneficial owners of Addax Petroleum in Nigeria have their nationality as British Virgin Islands. They are Addax Petroleum Holdings Limited (1%) and Addax Petroleum Overseas Limited (99%).
These bits of information are stored in the digital register of beneficial owners of mining licences in the country. The Nigerian Extractive Industry Transparency Initiative (NEITI)’s newly created Beneficial Ownership Portal has two sections: Oil & Gas and Solid Minerals.
A list of beneficial owners of operating licences is displayed on the portal and by clicking on the link, reveals the equity interest such entity or individual has in a particular mineral license as well as the beneficial size relative to total equity interest.
The new portal is meant to create greater transparency in the industry, allowing investors or interested parties to ‘lift the veil’ over companies or individuals who claim to own an equity interest in specific licenses. But the portal itself does not tell a full story, and, like any of NEITI’s report, is one of several tools for elucidating the extent of contribution of any player, in the overall value of hydrocarbon revenues to the country.
Tullow Oil’s board of directors saw off the company’s Chief Executive and its ‘legendary’ exploration director, then turned to shareholders to give a host of reasons why things were not working the way they should.
In just about every line in its statement, the company pleaded it had failed the market, with hardly any upbeat tone in the messaging.
With the benefit of hindsight, one can justifiably ask: Why won’t there be an immediate, headlong crash in the stock price?
Tullow Oil had known that production in Ghana, which had delivered for nine years, was not going to continue on the ascent. No drop of oil was coming from Uganda and Kenya, the next big projects, in the next four years.
The statement made too much fuss of the gas offtake in Ghana; it certainly is not one of Tullow’s main revenue earners.
But most importantly, The Board‘s statement struggled to show that what had happened in the course of the second to third quarter operations were very minor slips in an otherwise smooth journey.
It is curious that Tullow readily let go of Angus McCoss, the geoscientist who, since he came on board in 2006, had superintended discoveries in Ghana, Kenya, Cote d’Ivoire and had helped clarify the link between the West African cretaceous margin and the hydrocarbon fairways of the Caribbean Islands, including Guyana and Suriname (a concept that a big player like ExxonMobil has exploited for its own good). That this conceptual thinking had succeeded in practice, over and above the SouthWest Africa/Brazil conjugate link, should make Mr. McCoss something of a rock star in the geoscience community.
Even though none of the two executives, let off, were accused of graft, and Tullow’s debts had not yet reached unmanageable territory (no near-term debt maturities), there were some uncanny parallels between the several statements made by (the defunct) Afren Chairman Egbert Imomoh, in the course of his company’s fall in 2014, and the press release by Tullow’s Chair, Dorothy Thompson, who, like Imomoh, proceeded to take over the CEO function in the interim. Both leaders came across as begging on their knees, rather than come out boldly and assertively, to provide sunny optimism. Tullow’s story is far better than was painted in the December 9, 2019. The crash in stock price came about as a result of an unnecessary own goal. This is the view of AfricaOil+GasReport.
Ote Enaibe has taken the final bow from the stage as Chairman of Africa’s only Association of Hydrocarbon Drilling Professionals.
The Executive Committee that he led, handed over the baton to a new guard at the end of November 2019.
It was the third baton exchange since the Nigerian Chapter of International Association of Drilling Contractors (IADC) was launched in 2011.
Mr. Enaibe, whose daytime job is Group Sales Marketing Manager at the Nigerian drilling firm Depthwize, had a busy tenure, to go by his own telling at the 8th Annual General Meeting, his last conference as the top boss.
The Chairman attended the Drilling Africa Conference 20th-21st February 2018 in Portugal, where he canvassed for IADC Nigeria to host the next Drilling Africa Conference 2020. Visa provision difficulty and perceived insecurity issues led to IADC Committee recommending the closest option as Accra, Ghana (which does not have an IADC chapter). IADC Nigeria attended the Department of Petroleum Resources (DPR)-Rig Operators Conference in Port-Harcourt on October 10, 2018. The DPR’s 18th International HSE Biannual Conference held in Lagos from November 26-28 with IADC fully represented: the Vice-Chairman doubled as a panelist; and the chapter’s administrator and Treasurer were members of the Conference Planning Committee.
IADC held two Technical Sessions in the year 2018, starting with a Business Outlook seminar at its Secretariat in February, keynoted by Dolapo Oni, (then) Head, Energy Research at Ecobank. The second quarter of that year featured the annual Health Safety and Environment (HSE) Award, co-located with a technical session at which Ubong King, a motivational speaker, Moses Tsado of NipeX and Emmanuel Opaleye of the DPR addressed the proceedings. Cardinal Drilling won the HSE Award for the year 2017, presented at that event. Hisham Zebian, IADC Representative Middle-East and Africa, was present. The 7th Annual General Meeting took place on the 7th of December to wrap up the association’s business year with total attendance of 103 persons at all organised events.
New Guard Plus One: Left to Right, Vice-Chairman Valentine Iheasirim, Secretary-General Temitope Pitan, Treasurer Abioye Omoseni, Hisham Zebian, IADC Representative Middle-East and Africa and Chuks Enweriji, Chairman IADC Nigeria Chapter.
Mr. Enaibe told the general meeting that IADC Nigeria deepened its relationship with government agencies under his watch. DPR, the industry regulatory agency and NipeX, the arm of the state hydrocarbon company NNPC with responsibility for administering the contractors’ database, featured prominently at IADC Nigeria’s HSE Awards ceremony. Such is the depth of the IADC Nigeria/NipeX relationship that no service company can partake in bidding process in NipeX-for drilling- without an IADC Nigeria Local Certificate. Nor can any local company partake in rig bidding be it land, swamp, offshore or deepwater without possessing the IADC Nigeria Chapter Certificate.
Enaibe was also a magnet for new members. From 2018-2019, membership size increased, with 10 new members joining the fold, 4 Full Members joined with fees of ₦1,650,000 ($4,541) and six Associate Members joined with ₦650,000 ($1,789) only. The Full members are largely rig operators while Associate membership is open to non-rig operators.
ACTIVITIES BEGAN IN 2019 with set mandates and the sum of ₦23,625,000 (¬$65,000) approved as budget by the Board of Trustees (BOT) at the 2018 AGM to achieve the IADC Nigeria’s functions for the year. Technical session for the first half of the year was held in the same event with the HSE Award on June 11. The Chinese Consular-General in Nigeria presented a paper on Chino-Nigerian business relationship, after which Rotimi Ashely-Dejo (one time top drilling engineer with Chevron Nigeria Limited), delivered a talk on Well Control. KCA Deutag won the HSE Award for the year 2018.
The IADC Nigeria resolved in the year to
Be the “go-to” resource base for drilling contractor services in Nigeria, including monthly rig counts.
Participate on platforms that discuss topical industry issues affecting drilling and completions services such as the DPR- Rig Owners/Operators Workshop that took place October 2019 in the South-South city of Warri with Chairman Ote Enaibe delivering a paper.
Increase visibility within the oil and gas community and among Industry regulators.
Collaborate in resolving industry issues- Permits, licences, Offshore Safety Permits for rig workers, streamlining inspections-Category “A” licences and Rig Drilling Licences.
The association’s constitution dictates the Chairman’s position to be replaced by the Vice-Chairman who served with the former. The three elective positions are Vice-Chairman, Treasurer and Secretary. The voting process for Executive Committee members must have a member company recommending a person from their rank who’s then ratified by two member companies and if unopposed gets selected for the role.
With former Vice Chairman Chuks Enwereji (who works as Security Manager, West Africa at Shelf Drilling) taking over as Chairman from Enaibe, Valentine Iheasirim of OES Energy Services becomes the new Vice-Chairman, Abioye Omoseni of Aviam Offshore Services who was Acting-Treasurer, becomes the Treasurer while Temitayo Pitan, Depthwize’s Head of Legal Services, becomes the Secretary General.
Energy Works Technology (EWT) executed the first steel cut for the delivery of four major pressure vessels for the Ikike Oil Field development in the Oil Mining Lease (OML) 99, in shallow water south eastern Nigeria.
The first steel cut ceremony marked the commencement of engineering, procurement and fabrication of an Open Drain Vessel, Closed Drain Vessel, Pig Launcher and a Pig Receiver.
The project was contracted to EWT by TOTAL E&P Nigeria Limited.
The Ikike oilfield development is expected to add 32,000 barrels to Nigeria’s daily crude production. The field is estimated to hold 70Million barrels of crude.
“This project will surely deepen Nigerian local content implementation by creating huge job opportunities for thousands of people”, says Ernest Azudialu-Obiejesi, Group Managing Director, Nestoil, the parent company of EWT.
He adds that TOTAL’s decision to avail EWT another opportunity to demonstrate its sheer capacity as an industrial fabrication company is a vote of confidence on the local capacity of indigenous companies in the sector to deliver on complex projects at all times.
Modestus Nwosu, General Manager of the Ikike Project, for TOTAL E & P, comments that EWT won the contract strictly on its merit. According to him, “EWT shares the same values with TOTAL. We are safety conscious and work with companies that have safety standards; we don’t do business with companies that have poor safety records.”
Africa is a continent rich in energy resources, but poor in supply. For most Africans energy is either unaffordable, unreliable or inaccessible. Despite having 15% of the world’s population, the continent still only consumes 3% of the world’s energy, and population growth is likely to outpace even large investment into that economic area. Given that the primary purpose of energy is to promote a better quality of life and improve economic opportunities, the energy sector has so far failed to meet the needs and aspirations of African citizens.
Global energy markets are however undergoing a period of extraordinary change. While the changed supply picture is surely defined by the recent rise of American shale production, the gradual recovery of the oil price and the rise of exploration for the first time since the 2008 recession could both shape a positive outlook for Africa’s oil ambitions and its future energy landscape.
The recent dynamics of the global energy market is one of several years of oversupply and increasing demand amidst a weakening global economy. Against the backdrop of these long-term factors, there is also the reduction in investment in major new projects during the economic downturn to consider and the recent events developing in Saudi Arabia, which are still yet to be felt. It’s what many experts and consultants now think may lead the market into a long-awaited supply crunch. This will require oil companies to either increase production or rely on dwindling reserves. As the FT notes, some companies would need to raise investment into new production by as much as 20% to avoid a supply crunch. A challenge that is further exasperated by the necessary transition many companies are keen to make towards a cleaner energy portfolio.
The historical volatility of the market should therefore be considered as growth continues to move away from developed countries. There is often an overconfidence in the supply side of global energy, because the general public and even writers who cover the industry underestimate how much time is needed to address an under-supplied market. People outside the industry itself frequently overlook the reality that upstream development can take years even in areas with vast potential.
In the meantime, a host of new finds on the continent continues to stimulate debate about Africa’s emergence as a big oil and gas player. The scale of the discoveries in Kenya and Uganda had left Total, Tullow, and CNOOC considering investment in a multibillion-dollar pipeline on the east coast, although talks have recently been suspended over a tax dispute. Kenya did sell its first ever shipment of oil last month for $12 million, but full oil production isn’t expected to start until 2022, with a new oil pipeline planned to be built next year. After work stalled in Uganda, Wood Mackenzie’s Jon Lawrence told the FT that he believed there is “an over-optimism in the market both about the ease and time needed to develop east Africa’s big discoveries.”
Investing in local infrastructure and creating an appealing fiscal and regulatory regime that align with the long-term interests of private companies are not overnight ventures. This ability to execute across the entire value chain requires good governance and will remain the biggest challenge to the development of Africa’s energy market. Yet hosts of new finds across Ghana, Senegal, and South Africa to name a few, as well as the major energy producers Angola and Nigeria continue to eagerly present the case. Huge Chinese investment has now found its way into Niger and Chad.
The case is further strengthened by the abundant renewable energy that African countries have the potential to harness. An International Energy report has even suggested that by 2040 renewables could provide more than 40% of Africa’s power. Foreign investment into the continent and subsequent economic growth could provide a model that allows the region to remain a committed exporter to global markets without neglecting the energy requirements of the region itself.
As well as this, the new emission standards to be announced by International Maritime Organization in 2020 are likely to spark a demand for IMO-compliant products, curb the use of ships and disproportionately affect Middle Eastern crude oil which is high in sulphur. Comparatively, the high quality of Africa’s resources and its strategic location between all the major energy import markets of Europe, America, and Asia make it prime for exploration and production.
This has already attracted the supermajors to the African shores. BP has begun exploration off the coast of Cote d’Ivoire where Tullow has also been granted a licence, while ExxonMobil has entered Ghana, Namibia and set up an offshore site in Mauritania. After 9 years of presence in Africa, we have already visited 48 of the 54 countries. In our personal experience from operating across the continent we’ve found reliable and strong partners who have the knowledge, strategic vision, and appetite for foreign investment that can develop growth. If a supply crunch does emerge and keeps prices high, the rationale to invest in exploration and production will continue to shape the outlook for Africa’s energy market.
Ivanov is Founder and Managing Director of GPB Global Resources B.V.
Nigeria is currently taking action, under OPEC guidelines to curtail its monthly national production.
It is happening for the first time in a long while.
The country’s regulatory authorities have instructed some companies to dial down production from their largest producing fields.
One clear case is the TOTAL operated Egina, which averaged 203,000BOPD in August 2019. It would be expected to produce 180,000BOPD in October 2019 and 159,000BOPD has generally been exempted from OPEC quota.
There are likely to be implications for Nigerian budget expectations, which is deficit planning.
Uganda’s ruling party, The National Resistance Movement (NRM), emerged victorious in the by-elections in Hoima district for a seat specifically designated for a female member of parliament.
NRM’s Harriet Businge beat Forum for Democratic Change (FDC)’s Asinansi Nyakato by over 4,000 votes.
In what is considered by the country’s media as a close race, Businge received 33,301 votes against Nyakato’s 28,789 votes.
Douglas Matsiko, the Hoima Electoral District returning officer, declared Businge the newly-elected district Woman representative to Parliament.
Uganda’s Hoima district came to prominence on the global hydrocarbon map between 2006 and 2009, when a considerable amount of crude oil deposits, estimated now at between 2.5Billion to 3.5 Billion barrels (of stock tank oil in place STOIP), were discovered in Lake Albert and on the shores of the lake in Hoima District and the neighbouring Buliisa District.
An oil refinery, the 60,000BSPD capacity Uganda Oil Refinery, is planned in Kabaale Village, Buseruka Sub-county, Hoima District, approximately 35 kilometres west of Hoima town. The East Africa Crude Oil Pipeline (EACOP), is also planned to evacuate crude oil from Hoimato Tanga, the Tanzanian port town on the coast of the Indian Ocean, with the result that Hoimawill become a hub of economic activity.
In January 2018, SBC Uganda Limited, a joint venture company between the UK based Colas Limited and SBI International Holdings of Uganda,started construction of Hoima International Airport, at Kabaale Village, Buseruka sub-county, Hoima District,approximately 35 kilometres , by road, to the west-northwest of the city of Hoima. The first phase of construction, including the runway and cargo-handling facilities, is expected to be ready in 2020.
The Hoima seat fell vacant after MP Tophace Kaahwa Byagira opted to represent the newly-created Kikuube district.
Hoima has two counties, one municipality, 17 sub-counties and 69 parishes. The election was conducted at 266 polling stations.
The French supermajor will lead the largest greenfield LNG development project in Africa
TOTAL has closed the acquisition of Anadarko’s 26.5% operated interest in the Mozambique LNG project and will now be leading the development of the proposed 12.8Million Ton Per Annum (12.8MMTPA) facility.
The Mozambique LNG will valourise some 2Billion standard cubic feet of natural gas per day (2Bscf/d), making it the continent’s largest gas project currently in development.
The French major closed the takeover deal, which includes acquisition of Anadarko’s assets in Algeria, Ghana and South Africa, for a purchase price of $3.9Billion.
TOTAL says it has now received all requisite approvals by the relevant authorities and partners, for the transactions.
The purchase, which now makes TOTAL the largest E&P operator in Africa, commenced on May 3, 2019, when the Paris based firm reached a binding agreement with Occidental, which was about to buy up Anadarko, to take over all of Anadarko’s interests in Africa. On August 3, 2019, TOTAL signed the subsequent Purchase and Sale Agreement.
TOTAL is taking over the Mozambique LNG project after financial sanction.
The Final Investment Decision for the project was taken in June 2019. The announcement, by Anadarko and the co-venturers in Mozambique’s Offshore Area 1, “confirmed the Area 1 Plan of Development was now effective, with notice provided to the Government of Mozambique that all conditions precedent have been fulfilled, and the project can now advance to the construction phase”, Anadarko said at the time. It would monetise over 75Trillion cubic feet of natural gas in the Golf-Atinho fields in the deep-waters of the Indian Ocean.
The project had successfully secured in aggregate 11.1 MMTPA of long-term LNG sales (representing 86% of the plant’s nameplate capacity) with key LNG buyers in Asia and in Europe. Additionally, the project is expected to have a significant domestic gas component for in-country consumption to help fuel future economic development.
As the new operator take over Africa’s largest greenfield LNG project, Patrick Pouyanné, Chairman & CEO of TOTAL, says the company “will bring the best of our human, technical, marketing and financial capacities to further strengthen its execution. He says that TOTAL “will of course work on the strong foundations established by the previous operator and its partners, in order to implement the project in the best interest of all those involved, including the government and the people of Mozambique.”
