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Questions Linger Over BG’s Lamu Probe

Sunbird Prospect

BG’s wildcat well Sunbird-1, off the coast of Kenya, was found to contain a hydrocarbon column in the primary target, a massive reef of Miocene age. However, extensive losses of drilling fluid into the reservoir restrained the UK independent from determining the hydrocarbon footage in the deep-water well, its first probe in L10A, an acreage in Kenya’s Lamu basin.

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German Operator Improves On Gas Production In Egypt

Seismic Shoot

51MMscf/d NWK Field Gets A Boost
By Mohammed Jetutu

German minnow RWE Dea reports successfully flowing 16Million Cubic Feet per day (16MMscf/d) in its most recent appraisal of the North West Khilala (NWK) gas field.

NWK-1-4 is the fourth well to be drilled in the NWK structure and reached a total measured depth of 3,175 metres in the Abu Madi Formation.

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Platform Sells Egbeoma Gas Plant For $21Million

Egbeoma Plant

Pipeline construction from Egbeoma To Oben starts 3rd Quarter 2013

Nigerian gas developer, Owei-Linkso, has agreed to pay $21Million to the Platform/Newcross Joint Venture for the purchase of the 30Million Standard Cubic Feet Per Day (30MMscf/d) Gas Processing Plant on the Egbeoma Field in the Western Niger Delta.

The agreement calls for Owei-Linkso to revamp the plant, which was constructed for $39Million, but had struggled with commissioning hitches, as a result of flawed design. Egbeoma field produces 1,600BOPD of oil, but has a high GOR, resulting in significant flaring, a reason for which the plant was constructed in the first place.

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Seplat Starts Trading First Week In April

ABC Orjiakor

Roadshows in Abuja, Singapore, London, Capetown, Johannesburg, New York
By Fred Akanni, in Lagos

Nigerian independent Seplat plans to start trading on the London and Nigerian stock exchanges by April 3, 2014.

The company is hoping to have raised $500Million through the Initial Public Offering (IPO). The four year old E&P operator gave notice it was listing on the two exchanges on Tuesday, March 11, 2014.

Seplat’s analysts are currently marketing the product to investors round the world.

The company’s full management, however, embarked on the Nigerian leg of the roadshow in Abuja on Monday, May 17, 2014. By March 20, it starts on the road to the major investment hubs around the world, including London, Singapore, Johannesburg, Capetown and New York.

One African investor on the radar is the Public Investment Corporation (PIC), South Africa’s biggest fund manager, which only recently invested $270 million inCamacEnergy Inc, the Houston based E&P independent also founded by Nigerians.

Seplat’s schedule anticipates the ‘books to be closed’ by April 2, 2014, by which time it would have known how much has been raised from institutional investors and the market would have determined the starting share price. By April 4, 2014, the company should be trading, simultaneously on the main market of the London Stock Exchange and the Nigerian Stock Exchange. Seplat is trading 25% of its shares in each of these two bourses. The share price will be the same on both exchanges at any point in time.

Seplat’s listing on the LSE is not premium listing , the company will remain incorporated in Nigeria and as such would not be eligible to join the benchmark FTSE 250 index. Seplat acknowledges the commentaries on these in the international media, which sometimes come across as misgivings. “Some people will think we opted for the standard listing because the rules re not rigorous, but that’s not true”,  Seplat spokespersons insist, “all our corporate governance rules are in line with premium listing.” To be  premium listed, the company has to become a UK company. “We want to establish that we are a Nigerian company, create that identity. We don’t want to start by being a UK company operating in Nigeria”.

Seplat says that the money it raises will be used as follows: (i) $[48] million to repay in full all outstanding amounts under its shareholder loan from MPI S.A. and (ii) the remainder of the net proceeds to be available for acquiring and developing new acquisitions, and/or pay down any additional debt raised in connection therewith, of both onshore and shallow offshore acreages, assets or joint venture farm-ins. The main source of acquisitions is expected to come from divestitures by various international oil companies.

Seplat is in the running to acquire the 45% stake held by Shell, TOTAL and ENI, in one of the four Oil Mining Leases (OMLs) 18, 24, 25 and 29, that the three European partners have put up for sale. Shell, which is managing the transaction, is expected to announce the winners by April 2014.

Seplat Chairman, Ambrosie Bryant Chukwueloka Orjiako says: “Our company was founded by Nigerians for the purpose of investing in Nigerian oil and gas opportunities and we are proud to have been the first Nigerian company to acquire and become operator of onshore oil and gas assets from international oil companies”.


Wintershall boosts income in spite of Libya

Wintershall

New European assets compensated for decreased oil production from the troubled, North African country
By Toyin Akinosho

German independent Wintershall reported an increase in net income by close to 50% in 2013, despite the fact that it has not had production in Libya for close to half of the year.

The company calls its net income of 1.8 billion ($2.5Billlion) “a new record”. The previous year’s net income was 1.2Billion ($1.67Billion), on sales of 14.8Billion ($20.6Billion).

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The “DISCOVER THE DIFFERENCE“ Event Was a Success!!!

Ofserv Event

The first of its kind “ Discover the Difference “ Technology event held in Lagos on Friday March 7th, was highly commended by attendees. There were 39 delegates from 18 organizations in attendance at the event. They were top drilling and geological personnel from International Oil Companies (IOCs) as well as the Nigerian independent (marginal field) operators. Delegates included representatives of the NCDMB, DPR & NAPIMS.

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Spaniards Spud A Well In The Precambrian

Repsol

Spanish operator Repsol, has spud the first exploration well in Licence Block Ta10 in central Mauritania.

The well is being drilled in rocks of Precambrian age, the oldest epoch in geologic history. It is the period of time that extends from about 4.6 billion years ago (the point at which Earth began to form) to the beginning of the Cambrian Period, 542 million years ago..

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Cluster Companies Allege Foul Play In Agip’s Loss Sharing Formula

Umusadege Cluster Lact

By Fred Akanni

ENI subsidiary, Nigerian Agip Oil Company(NAOC) has been dragged to the Department of Petroleum Resources (DPR) by four Nigerian companies claiming it is cheating them vide a formula it uses for crude theft losses in its export pipeline.

The “Cluster Group”, including Midwestern Oil and Gas, Energia, Pillar Oil and Platform Petroleum, collectively export around 20,000 Barrels of Oil Per Day(BOPD) through the NAOC flowstation at Kwale, from which the fluid goes to the export terminal at Brass in the Eastern Niger Delta. The companies are not happy that the Italian major imposes restriction on the volume of fluids they export, but even more they complain that whenever NAOC claims there’s theft in its pipeline, “the company distributes the losses in a way that is not equitable”, says a CEO of one of the companies who opts not to be named.

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FIX IT: NIGERIA’S POWER SECTOR IS TOO EXPOSED TO GAS

Power Outage

By Adedamola A. Adegun
Nigeria’s electricity mix still ranks as most imbalanced amongst the MINTs.

The electricity supply situation in Nigeria has evolved considerably in the last decade, so much that an observer has aptly named it the ‘decade of power’.By 2002, the incessant power shortages, inefficiencies of a government monopoly, a rapidly growing economy and a dearth of investments in the sector had brought the electricity supply industry to its knees. Infact, from 1990 – 2001(a whole decade), not a single mega watt of generating capacity was added to the electricity grid while the available capacity dwindled rapidly.

However, after a return to democracy, a splurge of investments bygovernment and a comprehensive reform programme was established, installed generation capacity1has been scaled up from about6000 MW (4 Gas Fuelled & 3 Hydro Powered)2in year 2002to about 13,700MW(25 Gas Fuelled & 3 Hydro Powered) in 2013 – a very significant growth in gas fired generating capacity.

Given the circumstances as at then, government’s focus on developing gas fired generation capacity was a no-brainer. An average gas plant can be constructed and commissioned relatively quickly – within three (3) years, construction costs compared to other fuel sources are quite competitive, gas flaring would be considerably reduced and the long term availability of gas were guaranteed. But these advantages have now created a different challenge for the country. We have built an electricity mix that is mono-fuel dependent and a fragile energy infrastructure system which Nigeria considering its security and political peculiarities cannot afford.

THE GAS PROBLEM

Hardly would any day pass since the conclusion of the Phase I privatization without the problem of gas supply being recanted by government and its agents. There seems to be a real challenge with getting the power plants around the country to run due to gas supply issues. About 20% of gas fired generating capacity is ‘left on the table’ due to gas availability. Gas pipelines and infrastructure are being continually sabotaged.Several power plants are down because of gas supply constraints and other technical faults.There are uncertainties and increasing regulation around gas prices. The whole eastern part of the country gets a dismal 300MW of electricity because of gas supply constraints.  The consequence of all of these is a significant drop in power supply far worse than the PHCN days.

By now in other climes, a ‘state of emergency’ would have been declared on the issue of gas supply security because it has morphed into a serious danger to the nation’s economy. Moreover, it would be naïve to ignore the core underlying challenges which include the lack of a robust energy policy, an unreliable/inflexible gas infrastructure (pipelines, underground gas storage) and a disproportionate dependence on gas for electricity generation. Infact,if the major arterial gas pipeline, the Escravos – Lagos Pipeline is sabotaged today, at least seven (7) major power plants (mostly located in the high demand centers of the south west) with installed capacity of about 3500MW would be knocked out of the grid completely. Nigeria’s electricity supplyis too exposed to gas.

ELECTRICITY MIX: NIGERIA AND OTHERS.

The challenge of finding a balanced energy mix is universal and very germane for every country’s economic prosperity. Various governments try to enact laws and establish policies around the natural resources available, the variety of energy needs and the economic, social, environmental and geopolitical situation. The overarching aim is to achieve a useful balance and control over energy security and also limit exposure to a mono-fuel and its attendant risks. Most developed/emerging countries have succeeded and continue to evolve and Nigeria must follow suit. The current narrow focus on gas fired generation even with the abundance of natural gas must be carefully balanced.

It’s noteworthy that other nations with bigger gas resources than Nigeria have pursued a balanced electricity mix. The chart below shows the current electricity mix of Nigeria and other very populous member nations of the Gas Exporting Countries Forum (GECF), the ‘OPEC’ of gas exporters.

Source: Wikipedia (List of Power Plants) & Enipedia

Note that Russia is the most developed of the quartet and also has the biggest gas reserves in the world but it has the most balanced electricity mix – gas, hydro, coal and nuclear contributing adequately. Iran, also arguably the more developed of the remaining trio has managed to achieve a better balance of its electricity but Egypt just like Nigeria has a disproportionate dependence on gas for its power supply. Egypt is suffering badly from this imbalance.Power cuts and rationing is now the order of the day due to gas supply/production constraints just like Nigeria. The government has resorted to draconian diversions of gas meant for export by International Oil Companies (IOCs)3.Qatar, a smaller country and ally  is sending ‘LNG bailouts’ to Egypt4. It’s a crisis. Infact, the government of Mohamed Morsilost the people’s confidence and was easily overthrown by the military because of the acute power shortages that hit the nation especially during the hot summer months5.If Egypt had managed to diversify its electricity base earlier, the impact of gas shortages would have been minimized. The lessons for Nigeria is, no matter how abundant your resources are; don’t depend on it solely for your electricity. Establishing a balanced energy mix is a matter of national security.

Let’s take a further look at our economic ‘peers’, the MINT countries’ (Mexico, Indonesia, Nigeria & Turkey) energy mix.

Source: Wikipedia – List of Power plants.

Nigeria’s electricity mix still ranks as most imbalanced amongst the MINTs, underscoring the humongous work ahead for the nation’s energy policy makers. It is very critical.

Many other developed nations have very susceptible electricity generation mix but the protection the energy sources get from government is usually enormous. France is a good example as the country is just one nuclear accident away from possible electricity emergency. The country has about 60 nuclear power plantsgenerating about 80% of its electricity needs. Protecting the nuclear industry means that France will continue to invest and risk lives in Uranium rich countries like Niger and fight wars to protect its supply lines (Mali).Little wonder some government officials are campaigning vigorously for ‘clean fracking’6 despite adverse public opinion. South Africa also generates about 95% of its power through coal. But there is a possibility that baring very extensive investments in infrastructure, the cheap coal resources left would only be enough for just about half a decade7. In reaction, government is planning to amend the country’s mineral and petroleum law to constrain the export of certain ‘strategic’ resources’ like coal. Truly, many are the challenges of a mono-fuel dependent country.

THE EBEANO – MAMBILLAALTERNATIVES

If diversification of the electricity mix is imperative and essential for economic growth and prosperity, then what are the options?

HYDRO POWER

Hydro power currently supplies about 16%8of worldwide electricity needs and is the most popular of all ‘renewable’ energy sources. Hydro power is well understood, is clean energy, has longer economic lives and less susceptible to sabotage. Nigeria used to be keen on hydro power and was a key element in the old days of ‘National Plans’ but over time we seem to have abandoned this very important resource. It is time to return.

By world standards, the existing hydro power stations in Nigeria are just medium sized. The total installed capacity of all the three operational hydro stations (Kainji, Jebba & Shiroro) is less than 2,000MW (with far less available capacity) while the biggest dam in the world, the Three Gorges dam located in China is 22,500 MW. Its high time Nigeria re-energized its hydro power strategy to deliver on the much needed megawatts and also diversify the electricity mix. The Zungeru & Mambilla hydro power stations are huge projects that have been in the pipeline for almost three (3) decades. Infact, both projects were an integral part of the 1982-2002 national plan. The world has changed a lot since then but these projects have now become more critical than ever.

Funding models and environmental expectations could have changed over the years but China with over 2,000 dams is still very much in the business.To ramp up hydro capacity, urgent and decisive measures must be taken to remove the usual policy, commercial and technical encumbrances that frustrate projects in Nigeria. It won’t be out of place if we generate about 25 – 30% of our electricity from hydro in the near future.

COAL

  • There are 2300 coal fired power plants worldwide. About 600 are in the US, 620 in China. – World Coal Association.
  • China & India builds four coal fired power plant every week.9
  • In 1973, about 38% of worldwide electricity was generated from coal but it has increased to 41% in 2011 – International Energy Agency.
  • South Africa, the biggest economy in Africa generates about 95% of its power from coal.

It’s inconceivable that Nigeria would ever fulfill its economic potentials without adopting coal as part of its electricity generation mix. The only coal fired power plant in Nigeria today is a derelict 10MW power plant in Oji River, Enugu State. Coal has a ‘brand deficit’ and is usually discouraged by the many supranationals and aid agencies that swarm the developing world but it is still one of the most important energy resources in the world. It is cheap, abundant and very reliable for base load electricity. Without much delay, Nigeria urgently needs to establish a sound commercial and environmental framework to support the growth of coal energy.I am aware that NERC has licensed some coal power plants but the body language of the commission’s CEO in recent times does not imply that coal will be taken seriously.

To address the environmental issues, it’s important to note that we have a ‘late mover’ advantage because building our coal plants in this generation gives us the opportunity to accept only cleaner and more environmentally friendly coal plants. Its also noteworthy that at the peak of indiscriminate gas flaring in year early 2000s, we were not even among the top 40 countries emitting CO2 in the world. Nigeria emits less carbon per capita than countries like Germany, Pakistan, Venezuela, Canada, France, even the United States. Infact, the UK (Population –63 Million) emits CO2 six (6) times ofNigeria. If Nigeria targets a 10 – 15% range for coal power, it definitely would hardly increase our carbon footprints.

The inclusion in the 2014 budget proposal of a proposed feasibility studies in various parts of Nigeria is thus a welcome development.Coal resources are abundant in Nigeria, construction of a typical plant can be done in reasonable time and the operating costs are relatively cheap. What are waiting for?

SEQUITUR

There is no universal standard for a country’s electricity mix but diversification and balance considering the availability and cost of energy resources is key.Proper planning and the awareness that achieving the most appropriate electricity mix takes time is key for Nigeria’s energy policy makers. Furthermore, the commercial, legal and technical framework must be continually attuned to stimulate and sustain investment in diverse energy resources. Without such, our hopes of becoming a great and prosperous nation might never be realized.

1This article will focus on installed capacity because of data reliability. Data for available capacity is too dynamic and unreliable.

2 Source: Presidential Task Force Presentation at Investors Forum, Wikipedia.

3http://africaoilgasreport.com/2014/01/in-the-news/egypt-diverts-1bcfd-of-gas-from-lng-to-domestic-market/

4 http://www.reuters.com/article/2013/08/20/qatar-egypt-energy-idUSL6N0GL0N820130820

5 http://www.ft.com/intl/cms/s/0/5aabd292-52c1-11e3-8586-00144feabdc0.html

6http://www.upi.com/Business_News/Energy-Resources/2014/02/03/French-minister-supports-allowing-clean-shale-gas-fracking/UPI-25851391403720/

7 Forbes AfricaMagazine – November 2013 Edition

http://www.iea.org/publications/freepublications/publication/name,31287,en.html

http://www.thegwpf.org/china-india-building-4-coal-power-plants-week/


Seplat Lists On The LSE, Looks To Raise $500Million

Austin Avuru

Needs cash to expand gas production to 390MMscf/d by 2017, crude output to 100,000BOPD..
By Fred Akanni

Nigerian independent Seplat Petroleum has won a three year struggle to list on the main board of the London Stock Exchange.

The company, with operated gross daily production of 60,000BOPD of crude and 90MMscf/d of natural gas, intends to use the platform to raise about $500Million, in part for debt repayment, in part for prime acreage acquisition and in large part for aggressive increase in hydrocarbon output, to 100,000BOPD by 2017 for crude and 390MMscf/d by 2017 for natural gas (gross).

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