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Africa’s Onshore Production On The Decline

Per Magnus Nysveen, Head of Analysis, Rystad Energy

Conventional onshore crude oil production in Africa is on the decline. Although rising deep water production will help replace some of the decline onshore, overall production may be flattened by the trend, according to Rystad Energy, a Norweigian oil and gas consulting and business intelligence firm.

Per Magnus NYSVEEN, the company’s Head Of Analysis told a gathering in Lagos, that output of Hydrocarbon Liquids from South America and Asia may surpass that from Africa in the coming decade.

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Afren To Divest Its Shares In First Hydrocarbon Nigeria(FHN)

Femi Bajomo, FHN's Chief Operating Officer

Afren is willing to divest its 45% share in First Hydrocarbon Nigeria(FHN) and concentrate on growing its portfolio, as simply Afren, in Nigeria, the rest of Africa and Asia. A number of companies, including Seven Energy and Lekoil( both Nigerian independents), have expressed interest. First Hydrocarbon is partly owned by two leading Nigerian banks, GTB and FCMB, who have 10% each as well as a host of other Nigerian investors, including the businessman Dele Fajemirokun and Ken Etete owned Century Energy.

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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.

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Uganda Seeks Transaction Advisor For Refinery

Uganda Seeks Transaction Advisor For Refinery

The Ugandan Government has received expressions of interests from companies bidding to be its Transaction Advisor for the development of an oil refinery. The government will send out invitations to tender or to participate to selected candidates on Monday 22nd October 2012.

When selected the Transaction Advisor shall advise Government on structuring the refinery project, developing a feasible project financing structure, planning and securing appropriate investment partners, development plans for the Refining Company including, but not limited to, preparation of the necessary legal documents for formation of the Refining Company and further detailed agreements and contracts with crude suppliers and petroleum products offtakers.

This is the first formal step that Uganda has taken on its own, to go forward with talks with upstream operators in the country to set up a refinery has stalled several times. But the Ugandan government has been keen on getting a refinery on ground from the get-go of crude oil production.

Tullow Oil, the country’s leading operator, has argued that construction of export pipeline is a more bankable project. The government disagrees. “One of the key findings from a feasibility study (conducted by Forser Wheeler) was that development of a refinery presented better benefits to the country compared to the crude export pipeline”, the government said in the invitation for expression of interest for the role of transaction advisor.

Government’s plan is to develop a 60,000 BOPD refinery that will later be expanded to 120,000 BOPD and then 180,000 BOPD. The strategy is to develop the 60,000 BOPD refinery in a modular manner starting with 20,000 BOPD delivered within 3 years. The Government of Uganda has received a grant from the Norwegian Ministry of Foreign Affairs to contract services of a Transaction Advisor.

The Transaction Advisory Services, which are estimated to last one year,  are expected to be provided by a firm with extensive experience with a minimum of 10 years’ experience in providing similar services. The company should include most important projects of similar type executed during the last 3years including their value, execution period and client. Detailed description of relevant projects executed by the company involving development/planning/evaluation of Transaction activities related to complex petroleum projects in general and particularly in Africa should also be included.

The project team is expected to provide the following key expertise for the assignment:

  1. Experience in oil supply & refining contracts and agreements e.g. Joint venture/cooperation/ participation agreements, Crude oil supply contracts, Oil logistics (supply, transportation, trading and storage)
  2. Project management experience/competence in oil and gas
  3. Legal expertise and experience from international oil and gas
  4. Experience in valuation, incorporation and setting up manufacturing companies
  5. Experience/competence in financing of large investment projects

The ideal consultants should be qualified in their respective fields with a minimum of graduate qualification and with not less than 10 years of experience in the oil and gas sector.

Joint proposals are acceptable, but one company must undertake responsibility as Main Consultant and the others as sub-Consultants to the Main Consultant.


My Country Is Rich In Oil, So Why Am I So Poor?

By Toyin Akinosho

We were in the middle of a conversation on the above title in the city of Baku(on the Caspian sea), the birthplace of the oil industry, in late September 2012,when a side question came up.

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NDEP Sucks 7MMBO Out of Ogbele

The Nigerian independent, Niger Delta Exploration and Production (NDEP), had produced Seven Million barrels of oil (7MMBBO) from  its Ogbele field in Eastern Niger Delta as of July 2012. The field production commenced in October 2005. The company is hoping it can produce many times more oil in the short term. It is also working prove that the field has reserves of 100 million barrels of oil equivalent by 2015.

The Ogbele field oil and gas probable and proven reserves (P1+P2) “stood at 51.42 million barrels of oil, 39.06 billion cubic feet (bcf) of associated gas and 517.4 bcf of non associated gas”, according to Layiwola Fatona, Managing Director of NDEP. “This brings the total gas reserves to 556. 46 bcf and total hydrocarbon (oil + gas) of 144.16 million barrels of oil equivalent (BOE), the total proven (P1) hydrocarbon reserves (liquids and gas) for the Ogbele field; including developed and undeveloped oil, condensate and natural gas liquid reserves is currently 64.l6million barrels of oil equivalent.”

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Ugandan Businessmen Call For Local Content

Ugandan private sector interest group, the Association for Uganda Oil and Gas Service Providers(AUOGS), has called on government to include opportunities for local firms in the Petroleum Bills tabled before Parliament.

The country’s legislative arm is debating two bills – Upstream (Exploration, Development and Production Bill 2012) and Mid-stream (Refining, Gas Processing and Conversion Transportation and Storage Bill 2012). The Upstream bill instructs Exploration and Production companies as well as their agents to give preference to goods and services produced or available in Uganda unless they are more expensive or of inferior quantity and quality to those that can be imported. The AUOGS however argues that the provision could be interpreted to the disadvantage of indigenous companies. “Who determines whether the services by local firms do not meet the international specifications?” the lobby group contends. “There should be an independent body to scrutinize whether dealers meet the required standards.”

The AUOGS asks the Natural Resources Committee  of the Parliament-which  has been gathering views from the public to include enough clarity in the law to ensure that local firms benefit from local content opportunities set aside for them.

“Government needs to be clear what a Ugandan company is”, AUOGS Chairperson Bob Kabonro told the committee, “is it one registered in Uganda or one owned entirely by indigenous Ugandans?”  He declared that “there has been lack of enabling laws on the provision of goods and services”.

Emmanuel Baluyi, the lobby group’s lead counsel, requested that laws should give preference to indigenous contractors, encourage joint ventures between indigenous companies and foreign companies and ensure uniform financial and legal accounting standards for ll international oil companies that operate in Uganda.


South Africa Warms Up To Gas

First it was the National Planning Commission report. Then came the Cabinet’s lifting of moratorium.

Overnight, the mainstream thinking of the South African political and business elite has changed from “gas-is-not-on-the cards” to “its -okay-to-include-gas-in-the mix”.

The South African National Planning Commission’s revised plan, released in August 2012, repeated its cautionary note on the cost of nuclear power, the country’s preferred alternative to fossil fuels, and suggested a diverse mix of energy sources. The Commission said: “If gas reserves are proven, and environmental concerns alleviated, then development of these resources and gas-to-power projects should be fast-tracked.”

Several days after the Planning Commission’s report was aired all over the media, the government lifted a year- long moratorium on Shale Gas Exploration.

And then, the South African media went agog with discussions about the imperative of gas in the country’s energy mix.

South Africa’s energy policy has not always viewed natural gas, the world’s least polluting fossil fuel, as an important resource for its planned, massive increase in electricity supply capacity.

The Integrated Resource Plan (IRP) for the country, published as a government gazette in May 2011, envisages an addition of 42, 600MW of new build electricity generation capacity between 2010 and 2030, to all existing and committed power plants. The plan assumes a nuclear fleet of 9,600MW; 6,300MW of coal; 17,800 MW of renewable;  and 8,900 MW of other generation sources, which includes only 2, 400MW of close cycle gas turbine generated power.

The installed open cycle gas turbines currently generate 1,316MW, or a mere 4% of the country’s nameplate capacity. Two of these four gas plants-the 588MW Ankerlig plant and the 438MW Gourikwa plant- were commissioned only in the last six years. Before they were built, the country was generating just 342MW (171MW each) from two plants: Acacia and Port Rex. South Africa’s power utility Eskom currently supplies 45% of Africa’s power and 95% of its own country’s electricity, mostly from coal-fired plants. There’s limited space for more private sector generation in the medium to the long term.

We have argued, in this magazine, that even the 2,400MW of gas fired electricity in the IRP, a 20 year resource plan envisaging a build of  42, 600MW, is a mere after thought. The national conversation around energy issues in South Africa has involved every conceivable energy source but natural gas. The roll out for installation of renewable energy plants has kicked in; there’s a vibrant discussion of the possibility of scaling up nuclear power generation in the country, even if there are more skeptics than optimists; and the place of coal in the country’s energy future is assured.

But no one was, really, discussing gas until recently. The IRP had extensive input from a wide range of stakeholders in the energy industry.

A key reason for the aversion to gas utilization in S.A’s energy mix is that while the country doesn’t have much gas reserves, it considers the cost of imported gas as rather too high.  Take this liner in the plan:  “The import coal and hydro options are preferred to local options, but imported gas is not preferred to local gas options”. So, even while South Africa has the opportunity to benefit from the recent natural gas finds offshore Mozambique, one of the  most significant hydrocarbon discoveries  on the planet in the last 10 years.

The current upbeat mood about gas in the South African national conversation is driven largely by the optimism that Shale gas exploration would unlock trillions of cubic feet of shale gas in the Karoo.

The discussion still has not accommodated nuanced reviews of the opportunities afforded by gas pools in neighbouring countries.


Mart Resources Reports Sharp Drop in Revenue

Mart Resources, the Canadian minnow with keen interest in Nigerian production, reported a sharp drop in second-quarter 2012 earnings “due in part to lower oil prices and waning oil production”, according to the Energy Press. Bloomberg, the financial news periodical, said the company’s revenue “fell the most in almost seven months”. But the board, chaired by Founder and CEO Wade Cherwayko, declared a quarterly dividend of $.05 per share, to be paid out to its shareholders by October 2, 2012. Mart, which is listed on the Toronto TSX Venture Exchange, posted $0.88 per cent drop in profits of $2.34 million or $.07 a share, in the context of a net income of $20.81 million, or $.06 per share. Mart’s earnings declined to $28.2 million, down 41 per cent from $47.9 million.

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El Merk On Course For 2012 Date

Algeria’s El Merk oil and gas project is on course for commissioning in the fourth quarter of 2012. The El Merk central processing facility will serve as a production hub for the region, processing hydrocarbons initially from Block 208, operated by the Sonatrach/Anadarko Association, and from the unitised EMK field located on a portion of both
Block 208 and the Sonatrach/ConocoPhillips operated Block 405a.
The project will be operated by Sonatrach and Anadarko on behalf of the El Merk partners: Sonatrach, Anadarko, Maersk Oil, Eni, ConocoPhillips and Talisman. Block 208 is located 90 km south of the Sonatrach/Anadarko-operated Hassi Berkine South (HBNS) facility.

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