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Shell Plots A Return To Angola

By Moses Aremu, Editor

Anglo Dutch major Shell is keen on purchasing the operator stake in Angola’s Blocks 21/09 and 20/11, two very prospective acreages in the deepwater Kwanza Basin. These are the assets that Cobalt Energy, the US minnow, operated in the country until 2015, when it sought to sell its 40% stake in them to Sonangol, the state hydrocarbon company, for $1.75Billion.

That transaction fell apart in 2016, and Cobalt took Sonangol to international arbitration over its failure to extend the licence deadlines. The two companies reached a settlement-Sonangol reported in December 2017- which called for Sonangol paying $150Million by February 23, 2018 and a further $350Million by July 1, 2018.  

Sonangol has now put up, for auction, Cobalt’s 40% stake and operatorship of these assets.

Observers see Shell’s interest in the blocks as a way of re-entering the country. Cobalt’s 2016 annual report indicated that it made seven discoveries in the blocks with a total of 750Million gross barrels of oil equivalent. A significant part of the volume is natural gas, the hydrocarbon fluid type that Shell is most interested in trading with.

Shell went to Sonangol’s data showroom in Houston on early June 2018, with a delegation of about a dozen officials and the company was widely speculated as the leading contender for the assets.

Shell was one of the earliest entrants into the deepwater activity in Angola between the early and late 1990s. Its Bengo-1 well, drilled in Block 16, tested 1,780BOPD in one reservoir, the first discovery in deepwater Angola. The company’s initial enthusiasm about the structure was restrained by the well’s high gas cap and pancake thin reservoirs, but Shell was willing to risk an early production. The enthusiasm waned when Bengo-2 turned out to miss even the thin bed that was of such fascinating interest in Bengo-1. Then the more it drilled, the less fortunate the company got.  Whereas other operators: TOTAL, Chevron, ExxonMobil, even BP, went on to make discovery after giant discovery, Shell got trapped in a run of ill luck, drilling nine wells in Block 16, most with marginal results. This is curious, because Block 16 is located between the two most successful leases in the country: ExxonMobil’s Block 15 to the north and TOTAL’s Block 17 to the south. The last well Shell drilled in Block 16 was Chiluango-1 which was abandoned in early November 1998 as a dry well. In 1999, the company packed out of Angola and shifted its gaze to Nigeria where, by 1996, it had become sure of the deliverability of its huge Bonga structure, located in the upper slope of the deepwater Niger Delta.


Austin Avuru: Three Hard Knocks in The School of Life

By Toyin Akinosho

Austin Avuru, Chief Executive of Seplat, Africa’s largest homegrown E&P firm, most vividly remembers the day the company lost the bid for Oil Mining Lease (OML) 29 in eastern Nigeria.

“That was one of our lowest points in this company because the acreage was going to be a company changing asset for us: it was going to give us the size that we seek”, Avuru reflected, in his office in Lagos, Nigeria, recently, as he prepared to celebrate a milestone that ties his own personal growth with Nigeria’s 60 year trajectory as an oil producing nation.

OML 29 is a sprawling, highly valuable property, spanning an area of 983 square kilometres (or 242,550 acres) onshore and holding some 2.2Billion barrels of oil equivalent, in proved and probable (P1+P2) reserves, in nine fields, according to a 2013 Competent Persons Report by NNS .

To put some context to the figures: Seplat, today, produces, on a gross basis, slightly higher than 60,000Barrels of crude oil and condensates and 400Million standard cubic feet of gas from five acreages, whereas OML 29 alone produces over 80,000BOPD, when there is no vandalism of evacuation pipeline.

“We had the cash on the table but we did not win OML 29. We were only a hundred million dollars away from Aiteo’s bid (to Shell, which was leading a divestment of itself, TOTAL and ENI from the tract). It was insignificant because we were talking about a $2.4Billion bid and $100Miilion was less than 5% of that, so it was insignificant”.

Avuru wonders whether the inability of Seplat to clinch OML 29 wasn’t due to “the politics of who Shell figured would more easily get the approval for the purchase” from the Nigerian government. “Otherwise they” (the company which won the asset) “couldn’t pay for one year after they got it, while we were going to write our cheque immediately because we had our money ready”.

It was the loss of OML29 that made such acreages as OMLs 25 and OML 55 important to Seplat, Avuru noted. “All these issues about OML 25 and OML 55 came because we lost the big fish”.

His disappointment about OML 29, Avuru explained, pales in comparison with a particular challenge he had faced when he was building Platform Petroleum, a marginal field operator. This was before he helped bring Platform, Shebah Exploration and M&P together to create Seplat.

“The biggest setback was the day I woke up and found out that cellar of the appraisal development well that we were drilling in Umutu had collapsed. We borrowed $10Miilion to drill that well and supplemented with our cash and in the end, the well cost us $19Million. We borrowed $20Million for the gas processing plant and our production was declining and we couldn’t borrow more. We were almost in the throes of death. This was in 2009 and that was when I scratched my head and thought ‘this is it’. The only thing that came to our aid eventually was the pipeline network that we had built all by ourselves to the cluster”, he recalled, referring to  a cluster of four oil fields in the Western Niger Delta, which evacuate their crudes into Platform’s facility. “The Ase River Pipeline was generating about $2Miilion in gross revenue in tariff every year. So that revenue stream was enough to negotiate a revolving credit facility with Skye Bank for $5Million. It was that money that we eventually used to work our way back to life”.

Not all of the huge regrets of Avuru’s life in the last 15 years were business related.

“One of the biggest potholes I have had was the day I lost my wife in 2005 after the two of us had inspected the site where we (Platform Petroleum) were building our flow station in Umutu and so on”.

Avuru remarried, several years later, and then this:

“And then the day I had to open my kitchen door to inform my wife that her 57-year-old father, who had been accidentally shot by a police man and was in the hospital, had died.

“I think those were probably my lowest points in the past 15 years”.

Otherwise, much of the path Avuru had travelled, since he left the NNPC in 1992, had been strewn with gold.

At least, so it seems.

Since he left NNPC as a star geoscientist (by his own account), Avuru had worked for Kase Lawal’s Allied Energy (which became Erin Energy, and has since ceased to be a going concern) and moved on to set up Platform Petroleum, from which platform he became the Chief Executive of Seplat, the only African indigenous E&P Company to be listed on the main board of the London Stock Exchange.

In the last 12 years he had been nominated by two successive Nigerian Ministers of Petroleum for the position of the Director of Petroleum Resources and had come terribly close to being appointed to the position of Group Managing Director of the NNPC, the hugely influential state hydrocarbon company. “I had a one-on-one interview with (President) Yar’Adua”.

To mark his 60th birthday on Friday, August 17, 2018, Seplat Petroleum’s management wove a theme around the fact that Avuru was born in the year that Nigeria first exported crude oil. An industry stakeholders lecture, at a princely venue overlooking the Atlantic, entitled 60 Years After: Preparing For A Nigeria Without Oil, was attended by over 300 people, a glittering gathering featuring the country’s top business brass, C-Suite level petroleum executives, energy bureaucrats and ranking politicians.

Full details of Austin Avuru’s career trajectory, his misses and hits, as well as blinding insights into how the world of petroleum E&P works in Africa’s largest hydrocarbon producer, is published in the August 2018 edition of the Africa Oil+Gas Report. Please click here…

This publication wishes him many more fruitful years in the service of his country.

 


Africa On A Three Year Rig Activity Surge

Africa On A Three Year Rig Activity Surge

Africa’s rig activity is at a three year high, even while the total number of rigs active on the continent was slightly down to 108, in September 2012, from 111 in August, according to the latest figures from Baker Hughes Incorporated. The small decline follows global trend, but Africa is on a roll.

The highest rig count for the continent in 2011 was 94, in February of that year. By December 2011 it was down to 79. The average rig count for 2011 was, indeed 78, which means that February 2011 figures were a spike. Baker Hughes figures also show that Africa’s average rig count for 2010 was 83, which was higher than 2011.

→   Read the rest of this entry


FDI Dries Up In South Africa

Foreign direct investment (FDI) to South Africa slumped 87% to $1,3-billion in 2010, according to a United Nations report. Some of the country’s economists believe that the decline could be linked to South Africa’s sluggish productivity, owing to the degradation of the country’s education and training system, together with the threatening monopolistic-like union movement. One key argument is that a large concentration of business was in corporate hands and that not enough small businesses and entrepreneurs were being encouraged to thrive. By some estimates, South Africa only shows entrepreneurial activity of about 5%.


Isreali Expelled For Zim Blood Diamonds

Israel’s Diamond Exchange says it has expelled a long-time member for attempting to smuggle illegal Zimbabwe blood diamonds into the country.

Spokesman Assaf Levin said Tuesday that the bourse expelled David Vardi after he was arrested at Israel’s airport last week with about $200,000 worth of illegal Zimbabwe stones. Levin said his organization “will not tolerate dealing in blood diamonds.”

Zimbabwe is banned from exporting diamonds under the Kimberley Process, the 75-nation regulatory group that seeks to end the trade of so-called blood diamonds which fund violence in Africa.

The Israeli Tax Authority said customs officials randomly selected Vardi for inspection at the airport and found his pockets full of diamonds.

Israel currently chairs the Kimberley Process.


Multilinks Implicated In Telkom Graft Report

A whistle-blowing report on alleged breaches of corporate governance at Telkom, the South African telecoms company, include a list of contraventions of the company’s processes and the country’s Public Finance Management Act, along with nepotism, bribery and corruption.

A key highlight was wasteful spending at Multi-Links, Telkom’s loss-making Nigerian subsidiary, such as the use of a third party to buy a SAP licence despite Telkom holding a universal contract with SAP, which entitled it to a discount. International tax, assurance, transaction and advisory services firm Ernst & Young is also mentioned in the report.

Among the other allegations are that several large contracts, which include those of Blue Label Telecoms and Altech West Africa, were not reviewed and approved by Telkom’s legal services in line with its governing structures, delegation of authority and procurement processes.

Most of the contracts were allegedly initiated and concluded under former chief executive Reuben September without the knowledge of the management at Multi-Links, except for its chief executive at the time, Thami Msimang, and its chief financial officer, Hasnain Motlekar. They allegedly allowed the payments to go through knowingly. The South government holds  a 39.7 percent stake in Telkom.


Tunisian Turnaround

By Toyin Akinosho

Why an uprising in Tunis, of all places?

Tunisia, under the ousted president, Zine el-Abidine Ben Ali, was the most competitive economy on the African continent. In the World Economic Forum 200812009 Global Cornpetitiveness -Report, the country ranked first in Africa and 36th globally for economic competitiveness, well ahead of Portugal (43), Italy (49) and Greece (67).

Ben Ali’s country had been one of the three which had jostled for that Number 1 position for the past 10 years, The others are Botswana and Mauritius.

The irony is that Africa’s high achieving states are some of its least populated. Which means that however prosperous the country is, the wealth doesn’t translate into huge economic engines as noticeable as South Africa, Egypt or Nigeria. Botswana hosts two million people. Mauritians are fewer; they are 1.2Million. Tunisia’s population is much larger than these two, combined, but even with 10 million people, it is still les populated than many countries in Africa.

It is however, the one country where significant value is added to raw materials and turned to competitive exports.

By 2000, Tunisia had averaged 6% growth rate for eight years and become, perhaps, the most rapidly industrializing nation in Africa. As the 21st century arrived, Tunisia was boasting of mechanical and electrical industries expanding at 7% per annum, textiles at 6%. “There is one scientific technician per 2,000 inhabitants of the country”, declared one government report, released in 2000, “a rate comparable more with an Asian tiger like Malaysia than any African country, with per capita income leapfrogging from $30 in 1956 to $3000 in 1998”. The report claimed that poverty levels had been crunched from 33% in 1967 to 6.2% in 1997. Life expectancy had risen from 50years in 1956 to 73years at the end of 2000. Infant mortality dropped from 60 to 30 per thousand in the same space of time, the report claimed.

The former president, who escaped to exile after angry crowds took over the capital, was working, in his own words, ‘to move Tunisia up from “emerging economy” status to “developed nation” status by 2008’.

It didn’t happen. The global economic crisis, among others, slammed the brakes on his ambition. At the end of 2009, GDP growth had slowed down to 3%. Tunisia had 13% of the work- force unemployed. Yet, in comparison with the rest of the continent, this percentage of people out of work wasn’t a dramatically high rate. Afterall, South Africa, the continent’s  engine room, has 25% of its workforce unemployed.

Tunisia’s inflation was also a modest 3.5% in 2009 and the population below poverty line by 2005, the latest that the World Bank could come up with, was 3.8%, a good figure, by African standards.  Despite the 3% GDP growth in 2009, Tunisia’s growth rate for the ten years between 1999 to 2009  averaged 5% per annum and its GNP/capita level was the third highest in Africa.

 “Tunisia is the best organized country in the Mahgreb’ the Swedish export trade council proclaimed in 2009, using data from the IMF and the CIA fact book. “It had the region’s highest development index”.

The biggest export industry is the mechanical sector, especially automotive components, which maintained a strong and steady growth averaging 20 % between 2004 and 2009. The textile and clothing industry sector is the largest employer of the manufacturing industries employing more than 200,000 persons. Tunisia is the 5th supplier of clothing of Europe, exporting trousers, jeans, business trousers, women lingerie, and work clothing, The food industry’s share of value added remained constant over the period between 2004 and 2009, representing 27% of the production. Exports of agro-food sector increased from 1 227 million dinars in 2004 to 1, 592 million dinars in 2008. Still, it was a tidal wave of angry youths, protesting rising food prices,  that forced Ali to resign and flee.

The overall media analysis of the crisis, which had left a hundred people dead, had expectedly focused, not on the economy, but on the politics, with the perception of corruption of Ben Ali’s immediate family being shown as one of the triggers of the mass riot that forced the president out of the palace.

Ben Ali came to power in 1987 after ousting Bourguiba, then president- for- life, in a coup. He installed himself as prime minister. He was elected president with 99% of the vote in the elections he conducted in 1989, two years after coming to power. Six opposition parties participate on this occasion. His party, the RCD, wins all 141 seats in the national assembly In 1994, Ben Ali again called for elections. He polled 99.9% of the vote in an election in which he was the only presidential candidate, drawing international condemnation. Five years later, in 1999, he again received 99.44% of the votes in the general election to win a third spell as the country’s most powerful person.

Three years later Ali amended Tunisia’s constitution to allow a president to stay in power until the age of 75 and be re-elected unlimited times. Two years after that he was re-elected once more, again receiving an unlikely 94.5% of the votes. Opposition party the Democratic Progressives withdrew two days before the vote) branding Tunisia’s political system “a masquerade of democracy”.

Mr Ben Ali has delivered one of Africa’s most robust economies in his twenty three year rule, but has been less than sensitive in handling the politics of his country. Tunisia has not been immune from the hardline Islamist influence threatening to sweep the Maghreb. Attacks from groups allied with Al Queda have grazed the security infrastructure in the last four years. In 2006 a dozen hardline lslamists were killed in shoot-outs with security forces in the capital, Tunis.

Yet the anger on the streets in the Tunis, with everything about the ousted president, including his economic achievements considered trash-able, allows the possibility of the emergence of a far right Islamic group which may not necessarily continue the progressive economic development.

Western Europe has been keen on trading with Tunisia, Europe’s northernmost neighbour, because of its openness to investors and, more crucially, its ability to rein in terrorist groups. As Tunisia expands the space for democracy, will its economic fortunes turn around?


NATIONHOOD: Sudanese Priest Accuses China Of Selfishness

An influential Sudanese priest has accused China of pursuing a damaging policy of economic gain in Sudan, at the expense of optimum quality of life in the large central African country.

“China is looking only for minerals, they are looking for economic benefit. That is all”, Archbishop Daniel Deng, leader of the Episcopal Church of the Sudan said during a visit to Lambeth Palace in London in mid January 2010. “That is damaging the country”, he said. “They are not even making peace.”

Deng said that the Chinese  “are not interested in whether Sudan goes to war or not. That is not their mission, that is not their problem,”

Deng was joined by the Archbishop of Canterbury Dr Rowan Williams, who recommended a single high level figure to act as a mediator between the feuding parties and called on China to play a “positive” role in peace efforts. The Archbishops later expressed their concerns in a meeting with the British Prime Minister Gordon Brown.


Orascom Appeals Against Algerian Tax Charge

Egyptian Telecom company Orascom has filed an appeal against Algerian tax authorities for allegedly overcharging it. The company says it has paid about $120 million (against back taxes that Algeria says it owes), in order for the appeal to go through.

The Algerian tax authority alleged, in November 2009, that the mobile telephone operator owed $596.6Million in back taxes and penalties for 2005-2007. “In order to file its appeal… Algerian law requires OTA (Orascom Telecom Algerie) to pay 20% of the taxes and penalties alleged to be owing,”, Orascom said in a statement. It said it had made the payment.

Orascom shareholders agreed to an $800Million rights issue to make up for lost dividends from its Algeria unit, which operates under the brand name Djezzy, until the tax issue is resolved.

Djezzy, which had revenue of $1.8 billion in 2007, provides Orascom with more than 50 percent of its cash flow.

Orascom runs mobile phone operations from North Africa to North Korea, and earlier this month won approval in Canada to go ahead with a start-up wireless operation called Glob alive, in which it owns an indirect stake.


Counterfeiting Is Hampering Trade In The Mahgreb

The Agadir Free Trade Agreement (AFTA) has overcome some initial obstacles to increase trade among Tunisia, Egypt, Morocco and Jordan, but further success hinges on intellectual property rights (IPR), according to the proceedings of a workshop held in Tunis.

“Industrial intellectual property and patents are … central to ensuring trade,” the head of Tunisia’s National Institute for Standardisation and Industrial Property, Aymen Mekki told workshop experts from AFTA member states and the European Union.

AFTA, which Morocco, Tunisia, Egypt and Jordan signed in Agadir in 2004 with EU support, aims to boost the integration of southern Mediterranean countries into the European policy sphere. The agreement took effect in January 2007, but by 2008, member countries were still mulling arbitration to end long-standing trade disputes. Nevertheless, workshop presenters said AFTA had enabled the signatories to increase trade among themselves by 45%.

Still Intellectual Property Rights remain a pan-Maghreb concern. A 2008 report by Tunisia’s Trade Ministry, for example, notes 54 complaints in a single year by Tunisian industrialists claiming damage due to counterfeiting of goods, mainly food, cleaning supplies and cosmetics. And IPR violations remain a regional plague affecting Algeria and other countries.

“Protection of intellectual property is typically of the utmost importance,” Mekki said at the workshop, which was organised by Tunisia’s Trade Ministry and a body set up to boost AFTA’s implementation, the Agadir Technical Unit (ATU), in collaboration with European and Maghreb experts.

“[AFTA] can’t be developed unless all parties involved are assured that their respective rights are protected, especially given that the agreement includes the Agadir member states on the one hand and the EU states on the other,” added Mekki.

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