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Activating the Roadmap for Angola

By Gerard Kreeft

What can we anticipate in Angola for 2019 and beyond?

While optimism is in the air there is also a high degree of impatience. The strategy for determining the direction of Angola’s oil and gas industry—which is the piggy bank for economic diversification be that for basic education, housing, drink water and santitation, and stimulating the agricultural sector—must still be taken and implemented.

Oil and Gas Authority

Amadeu Correia de Azevedo, the Director of the Oil and Gas Authority, is quickly moving to assert it’s authority: originally the handover of Sonangol’s concessionaire role was scheduled to start in 2020; now that has moved up to January 2019 to ensure a timely handover.

The Authority is expected to be very busy from the outset:

  • Overseeing and Implementing the Gas Legislation
  • Monitoring and reviewing exploration plans and development plans
  • Encouraging new companies to participate in Angola’s oil and gas industry.

Certainly a key sign to watch are Angola’s production figures. The Authority’s immediate goal is to ensure that oil and gas production does not stagnate at the current level of 1.4MMBOPD,   but increase to at least 1.5MMBOPD as quickly as possible in order to send a  positive signal to the international investment community.

Less positive has been the news that Shell did not submit a bid for the former Cobalt Blocks. The reasoning: a difficult project and the company has better opportunities elsewhere. This highlights two major problems which the industry in Angola must face and solve:

  • Developing value propositions for current and new potential assets in Angola that will help stimulate production;
  • International companies face internally a strong debate where they will invest their exploration and development monies…and Angola is part of this competition.

Overseeing and Implementing the Gas Legislation

At the recent Africa Energy Summit organized by EnergyWise, Maria Figueiredo, Partner (Miranda Law Firm) explained the basis of the new gas legislation:

Oil companies are entitled to prospect, explore for, appraise, develop, produce, and sell natural gas either domestically or on the international market. Originally this was the monopoly of Sonangol.

Contractual terms and conditions can be agreed upon on a case by case basis.

Concessions and contracts may set periods and terms longer than those set typically for exploration of oil.

Deductible: costs incurred with development and production of associated gas and construction of relevant pipelines.

Present concession contracts for crude oil are subject to 70% Petroleum Transaction Tax (PTT), but gas projects are exempted.

Present concession contract costs not linked with exploration, development and production of crude oil not eligible for deduction for Petroleum Income Tax (PIT); for gas contracts costs linked with associated gas and non-associated gas in the context of a crude oil project become tax deductible for PIT.

For oil concessions the Petroleum Production Tax (PPT) is 20%, possibly reduced to 10%; PIT is 65.75% and for PSCs the PIT is 50%.

For gas projects the PTT is 5%; PIT is 25%, and possibly reduced to 15% for projects with certified with reserves greater than 2Tcf.

The gas legislation has been welcomed by the industry as a good start to incentivize a potential gas energy. As the industry moves forward it is anticipated that the necessary amendments and challenges will be addressed. Will the incentives extended to explore for natural gas be done at the expense of oil projects? Can the industry also anticipate that current and future oil agreements will also possibly be amended?

Nonetheless, as Qi Chen of Chiron AlkaTrans Technology outlined at Africa Energy, a gas roadmap should entail:

  • Long-term planning for gas development and Monetization
  • Guiding strategy document for national development in the gas sector
  • Well to wheel: reservoir to end users
  • Gas production, infrastructure, movement, and Monetization plants
  • Fit into the national energy development strategy

Monitoring and reviewing exploration and development plans

Speaking at the Energy Africa Summit, Ken Seymour, of African Oilfield Solutions(AOS) stated  that if project development was to move forward it is paramount that the following criteria be addressed:

  • Opening licencing systems with rapid churn of acreage;
  • Making data freely available;
  • All stakeholders must be aligned to solely profit from production of hydocarbons.

While exploration has been done in the pre-salt basins, the results to date have been left wanting…yet there is optimism that with additional geological modeling and exploration, hydrocarbons can be found. For example, Sebastian Kroczka, Industry Solutions Advisor, Halliburton, visualized the following:

  • Application of smart connectivity between subsurface and surface data from field/FPSO to the office with automated and optimized workflows;
  • Faster data visualization, data analytics, machine learning, pre-processing and data integration.

Angola’s largest cash cows, the offshore Blocks 15 and 17, are fast becoming  mature  and innovation is needed  to ensure that the life cycle of these projects can be extended. The majors involved here—BP, Chevron, ENI, ExxonMobil, Statoil and TOTAL, are interested in further developing their businesses and open to innovative ideas and business propositions, varying from  enhanced oil recovery to natural gas production.

Encouraging new companies to participate in Angola’s oil and gas industry

More regional international co-operation can lead to more increased activity.  For example at Energy Africa, Namcor presented its Kudu Gas to Power Project. An example of how a small dedicated gas project can be developed and monetized. A precedent for Angola and also a stimulus to establish more regional co-operation.

With the majors taking up more stakes in Nambia, additional co-operation will be sought. For example rig-sharing. A major exploration cost. With increased exploration in both Angola and Nambia time-sharing of rigs is one example of co-operation.

Certainly it should not be ruled out that new players will start to look at the regional developments in South-West Africa. New players can be engines of change and can help speed along new business developments.

Gerard Kreeft, MA (Carleton University, Ottawa, Ontario, Canada) is founder and owner of EnergyWise.  The company has since 2001 managed and implemented oil and gas conferences, seminars and master classes in Angola on an annual basis.

Mr. Kreeft wrote this specifically for Africa Oil+Gas Report and the piece was earlier published in the November 2019 edition of the magazine.

 


Rumours That Buhari Refuses To Renew Some Licences Are Exaggerated

The president isn’t a terrific economic manager, we agree, but this thing about licences is untrue..

The Africa Oil+Gas Report has been inundated with requests by its subscribers to confirm or repudiate stories flying around about the Nigerian President, Muhammadu  Buhari, using licence renewal as a tool either to deal with critics and the opposition or to pacify the States.

Our checks with sources in both the regulatory and executive arms of the Ministry of Petroleum Resources indicate that the President is not keen about anything about license allocations.

People in the ‘Villa’ and ministry officials may play games using the Presidency, but the man himself is not necessarily aware and the only acreage sanction he has personally appended to, has been the transfer of OPLs which used to make up OML 13, onshore eastern Nigeria, from private companies that won the three acreages in the 2007 bid round, back to NNPC, which claimed they were wrongly taken from it.

Africa Oil+Gas Report has published, in the last six editions of the last six months, stories which explicitly stated what expiring acreage licence was renewed or revoked.  Just to indicate that these rumours are all hot air: Elcrest Petroleum, which is on the list, has had its acreage (Oil Mining Lease (OML) 40), renewed for 20 years. Seplat’s OMLs 4, 38 and 41 are on the list of acreages that will purportedy not be renewed. But these licences are already renewed for the next 20 years.

Let’s take other examples on the list. The Government had, before June 2018, revoked the licence awarded to Alfred James for Oil Prospecting Lease (OPL) 302 as well as that for Sunlink for OPL 238.

It was clearly stated to Africa Oil+Gas Report, at that time, (and we have reported it) that Sunlink never paid signature bonus for OPL 238 since it was awarded in the early 1990s.

As for the Optimum Petroleum held OPL 310, a case concerning Ministerial consent for a company which bought 40% of the equity in the acreage has been in court since May 2018.

Buhari has not been a terrific manager of the economy, we agree, but this thing about licences is untrue.

 

 

 


Acreage Renewal Issue Clears Up: Shell Announces International Tenders for Bonga SW Project

Partners in the Bonga South West Aparo field Development, in deep water off Nigeria, now have certainty that the licences of acreages hosting the fields will be renewed for a period covering the life of the project.

The field straddles Oil Mining Leases (OMLs) 118, 132 and 140.

That the government had not expressly given assurance on the renewal of these acreage licences, was a sticky point in the determination of release of bids for tender, leading to  Final Investment Decision on the $13Billion project.

With this issue cleared up with the Nigerian President Muhammadu Buhari, who is also the Minister for Petroleum Resources, the project promoters can go ahead with FEED, Technical and Commercial Bids and possibly Financial Sanction by the end of 2019.

Shell and its co-venturers have now invited prospective bidders to tender for the project.

“Following the Oil Mining Lease (OML) 118 Heads of Terms (HOT) agreement, we are pleased to announce the release of BSWA Invitation to Tender, where Nigerian and international companies on the agreed bid list are requested to bid for the various contract packages that make up engineering, procurement and construction of the BSWA project. This is an important step that will allow ourselves, government and investing parties to understand the cost of the project and if within expectation, take the project to a Final Investment Decision (FID)”, a statement from SNEPco, the Shell Nigeria subsidiary operating OML 118 said.

Development discussions around the Bonga South West Aparo project has been on the drawing board  before 2010. The field holds estimated recoverable reserves of over 650Million barrels (P1) and could deliver 150,000BOPD at peak (according to ExxonMobil ‘s 2017 annual report). If the Final Investment Decision is taken at the end of 2019 or early 2020, first oil could kick in by early 2023.

 


German Indie Back to Exploration in  Egypt

The Egyptian Natural Gas Holding Company (EGAS) has finalised the award of a new licence it made to DEA in its 2018 Bid Round The East Damanhour exploration block (originally offered as Block 10) covers 1,418 square kilometres and is located west of the Disouq development leases, where DEA is the operator with a licence share of 100%.

Sameh Sabry, DEA’s General Manager in Egypt, says the block is located in DEA’s core region in the Onshore Nile Delta, “where we successfully explore the Messinian and Pliocene plays as operator since 2004”. The extensive knowledge and experience the company has gained over the years, the right set of skilled experts “and our nearby infrastructure will offer us very good conditions to continue this exploration efficiently”, Sabry adds.

“The proximity of DEA’s Disouq central processing plant and infrastructure provides us with an operational edge, which would enable accelerated development of any discovered volumes as well as considerable synergies and cost optimizations. In addition, the block offers significant potential in pre-Messinian structures, which is in line with our ambition to further grow in Egypt”, underlines Sameh Sabry.


World Bank is Unimpressed with Mozambique’s Growth Prospects, despite the Gas Boom

The World Bank has continued to warn Mozambique about its debt-to-GDP ratio, despite the country’s creeping growth for the immediate term.

….And in spite of the looming gas boom.

The country’s debt-to-GDP ratio has increased by nearly 50 percentage points since 2013, reaching 102% last year, with interest payments rising from 2.6% of state revenue to 16.5%.

So the Bank’s increasingly higher growth forecast for the country: 2018 – 3.3% ; 2019 -3.5% and 2020 -4.1% does not mitigate the crippling debt challenges.

Two large sized LNG projects are to take Final Investment Decisions in Mozambique this year, and the country’s state hydrocarbon firm is looking for money to pay its share of the cost of investment, which will reach $50Billion at peak. (New details on the projects are in Africa Oil+Gas Report’s February 2019 edition).

Still the World Bank is not in a rush to declare Mozambique a well run economy.

“The deterioration of the depth to GDP ratio profile was accompanied by increasing deficits – with fiscal policy remaining unconstrained in a scenario of lower raw material prices and reduced growth – and was exacerbated by the inclusion in 2016 of previously undisclosed commercial debts,” the World Bank reports.

By the end of 2018, Mozambique was ranked in the debt sustainability index of the World Bank and International Monetary Fund as a country in debt stress, alongside countries like Zimbabwe, South Sudan, and Gambia.


TOTAL Makes “Significant” Condensate Discovery offshore South Africa

French major TOTAL has described, as significant, its gas condensate discovery on the Brulpadda prospects, located on Block 11B/12B in the Outeniqua Basin, 175 kilometres off the southern coast of South Africa.

The Brulpadda well encountered 57 metres of net gas condensate pay in Lower Cretaceous reservoirs. Following the success of the main objective, the well was deepened to a final depth of 3,633 meters and has also been successful in the Brulpadda-deep prospect, the company said.

Kevin McLachlan, TOTAL’s Senior Vice President Exploration, said the French major had “opened a new world-class gas and oil play” with this well, “and is well positioned to test several follow-on prospects on the same block.

Mr. McLachlan’s talk of several follow up prospects, is echoed by an enthusiastic statement by Africa Energy, one of TOTAL’s smaller partners on the lease. “The success at both the Brulpadda primary and secondary targets significantly de-risks four other similar prospects already identified on the existing 2D seismic. The Block 11B/12B partners plan to acquire 3D seismic this year, followed by up to four exploration wells”.

The Brulpadda well was drilled in approximately 1,400 metres of water by the Odfjell Deepsea Stavanger semi-submersible rig. The two primary objectives were in in a deep marine fan sandstone system within combined stratigraphic/structural closure and was deepened after successfully testing those objectives. Core samples were taken in the upper reservoir, and a comprehensive logging and sampling program was performed over both reservoirs.


Seadrill Starts A new joint venture with Sonangol

Seadrill Limited has entered into a 50:50 joint venture with Empresa de Serviços e Sondagens de Angola Ltda, an affiliate of Sonangol E.P), the Angolan state hydrocarbon firm. The new joint venture, Sonadrill, will operate four drillships, focusing on opportunities in Angolan waters.

Each of the joint venture parties will bareboat two drillships into Sonadrill. The Seadrill drillships will be from our existing owned or managed fleet. The Sonangol drillships, Libongos and Quenguela, both 7th generation high spec ultra deepwater drillships, are currently under construction at DSME shipyard in Korea and expected to be delivered in the first half of 2019. Seadrill will manage the delivery and mobilization to Angolan waters under a separate Commissioning and Mobilization Agreement with Sonangol.

Seadrill will manage and operate the four drillships on behalf of Sonadrill which will have an initial term of 5 years.

Anton Dibowitz, CEO, commented: “We are excited to have been selected by Sonangol to manage their newbuild drillships and to partner with them in pursuing opportunities in this important deepwater basin. Sonadrill will give us the opportunity to gain incremental access to a market that is expected to show significant growth over the next years, further strengthen our relationship with key customers and provides an attractive opportunity to continue expanding our fleet of premium ultra-deepwater rigs.”


Helen Clark Is the Next EITI Chair

Helen Clark, former Prime Minister of New Zealand and UNDP chief, has been confirmed as the chair nominee of the Extractive Industries Transparency Initiative (EITI)

She will take over from Fredrik Reinfeldt, former Swedish Prime Minister who will conclude his term at the EITI’s Members’ Meeting on 17 June in Paris. EITI is the global standard to promote the open and accountable management of oil, gas and mineral resources.

Clark served three successive terms as Prime Minister of New Zealand from 1999 – 2008. While in government, she led policy debate on a wide range of economic, social, environmental, and cultural issues, including sustainability and climate change.  She then became UNDP Administrator for two terms from 2009 – 2017 and was the first woman to lead the organisation. She was also the chair of the United Nations Development Group, a committee consisting of the heads of all UN funds, programmes and departments working on development issues.

“It is a great honour to be nominated as the next chair of the EITI,” Helen Clark said. “I am convinced that enhanced transparency and accountability in the management of the extractives sector can contribute to real improvement in people’s lives, notably in the form of economic growth, access to energy and better infrastructure, and diminished corruption. I am very much looking forward to working with governments, supporting companies and civil society organisations to ensure that the EITI delivers on its mandate, which will contribute to the accomplishment of the Sustainable Development Goals.”

EITI chairs are appointed for three-year terms. Former UK Secretary of State for International Development Clare Short and founder of Transparency International Peter Eigen have served as previous chairs.


Ogbele Refinery Phase 2 for Commissioning Next Month

By Prospect Mojido

The Niger Delta Exploration and Production NDEP will be commissioning the second phase of the Ogbele Modular Refinery in March 2019.
The unit, installed near the first phase, will have the capacity to utilise 5,000Barrels Per Day of Crude, which means five times the capacity of the first phase.

The first phase, commissioned in 2011, has produced over 124.5Milliion Litres of Diesel since, mostly sold to offtakers in the Eastern Niger Delta area.

Train 2, as the second phase is called, will produce five (5) different products, including more Diesel, (AGO), Dual Purpose Kerosene, DPK, where the company aims to meet the quality specification for Jet Fuel. The train will also produce Marine Diesel, which is a grade of diesel for the marine industry; Heavy Fuel Oil as well as Stabilized Naphtha.
Train 3 of the Ogbele Refinery will be commissioned before the end of the third quarter 2019 but the unit that would enable it to add Gasoline to its products would only be commissioned in 2020.

The Ogbele oil field itself produces, at most 6,500BOPD, so the company would have to bring in crude from other nearby fields if it is to fully utilise the plants. But NDEP is about to develop the Omerelu field, its second marginal field, in the neighbourhood of Ogbele.
Layiwola Fatona, Group Managing Director of NDEP and its subsidiary companies, has always argued that Nigeria should not export a single drop of oil. “Process every barrel in the country”, he has said at various conferences. NDEP is apparently doing its bit.


WAIPEC: Confab Makers Pull in the African Muscle

By Fred Akanni

The Organisers of the West African International Petroleum Exhibition and Conference WAIPEC, delivered a second edition with a very Pan African feel over the course of two days last week.

The first of the nine panels of the conference featured Omar Mitha, Chief Executive of the Mozambican state hydrocarbon company Empresa Nacional de Hidrocarbonetos, or ENH; Ibrahima Diaby, CEO, PetrocI, which is Société Nationale d’Opérations Pétrolières de la Côte d’Ivoire; Michael Nkambo Mugerwa, General Manager, Uganda Refinery Holding Company Ltd, a subsidiary of the Uganda National Oil Company.
The second panel featured, among others, Elike Mawuli, Engineering Manager, Tullow Oil Ghana. It was the second time Tullow Oil was appearing at an oil and Gas conference held in Nigeria, in three years, but it’s a rare appearance all the same.

Even more remarkable, in other panels, there were Jereh Barrow, Petroleum Commissioner, Republic of Gambia, Andrew Adu, a commercial manager at Ghana National Gas Company, Carmena C. Yeke, General Counsel of the National Oil Company of Liberia NOCAL and Jessica Kyeyune, National Content Expert, Uganda National Oil Company (UNOC).

A frequent contributor at oil and gas conferences in Nigeria is Juliette Twumasi-Anokye who was, as far back as seven years ago, the face of Local Content in Ghana, around the time that the Petroleum Commission, the country’s upstream regulator, was being built from scratch.
Now a private legal practitioner, Twumasi-Anokye moderated a panel on Service providers, but she was also a persistent contributor from the floor.

The conversations, as they involved several intra African challenges, were much broader in scope than the regular exchanges that have marked petroleum conferences in Nigeria and which have made oil summits become so repetitive, especially in the context of no new sanctions of upstream projects. The Pan continental aura of the WAIPEC conference made the topic of regional collaboration and regional content, as a step up from national content, less abstract to imagine and therefore, to tackle.

For PETAN, the Nigerian engineering contractors group which organises WAIPEC, a Pan African confab is a product of enlightened self-interest. If you have succeeded as a contractor iin the Nigerian sector, where new projects are dwindling, why not look in the neighbourhood for new opportunities?

Still, it is not always easy to pull off a successful regional hydrocarbon conference of this type in Nigeria.
An example of such difficulty was the failure of the organisers of the Offshore West Africa Conference, (OWA), now defunct, to run, despite its name, anything but a Nigeria-centric conference, whenever it held in Nigeria.

Another example was the Nigerian International Petroleum Summit, which ended earlier this week. A session of African energy ministers opened the summit, true, but the Pan African discourse suggested by that session did not flow through the veins of the summit, anywhere close to what WAIPEC did. Reason; it was high level, one session engagement.

What WAIPEC did was to ensure that not a single panel/session was an entirely Nigerian session. It was clearly a tough call; moderators and the audience had to keep reminding themselves that the Panels were of a mixed constituency.

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