NDEP Leads the AOGR Top Ten - Africa’s premier report on the oil, gas and energy landscape.

NDEP Leads the AOGR Top Ten

Nigerian Indies: The Talented Tenth Annual 2022

COMPANIES TO WATCH: 2022-2027

Africa’s growth as an industrial marketplace is going to be determined by its exceptional companies

By the Editorial Board of the Africa Oil+Gas Report…

PREFACE TO THE PROLOGUE

It has been a bruising 24-month period for most Nigerian owned Exploration and Production companies, the object of The Talented Tenth, our annual ranking.

2020 was the year of the epidemic, which impacted every sector of the global economy and from which the hydrocarbon industry recovered in 2021. But 2021-2022 proved to be a season of crude evacuation disruptions in Africa’s largest economy. The 539,000Barrels per day (BPD) drop in the country’s output (from 1.676MillionBPD of crude oil and condensate in January 2022 to 1.137 MMBPD in September 2022), is largely related to the turmoil in the scores of hydrocarbon assets that these companies manage across the length and breadth of Nigeria’s Niger Delta basin.

No one is spared. The best corporate governance, the most carefully wrought environmental and community engagement ethics, could only go some distance in mitigating the Nigerian challenge.

Four grid length crude evacuation pipelines lay mostly prostate in the three months between August and October 2022, imperiling the possibility of exporting over 400,000BOPD of crude. The NPDC operated TransForcados pipeline in the western Niger Delta had, at the time, less than 80% uptime in the year. The ENI operated Beniboye to Brass pipeline has performed even worse. Shell’s Trans Niger Pipeline (TNP) has been out of work since March 2022 and the AITEO managed Nembe Creek Trunk Line (NCTL) hardly functions. So that export operations in six Nigerian owned E&P companies, with oil producing fields onshore eastern Nigeria, were effectively shut down from February to August 2022.

Five Nigerian owned companies, with oil producing fields onshore western Nigeria had essentially zero hydrocarbon output in September 2022.

Luckier are five Nigerian owned companies, whose main producing assets are in shallow water. They have had, unlike their peers, uninterrupted access to production.

This is the context in which this fifth edition of the Talented Tenth, is determined.

PROLOGUE

Nigeria is the main playground of Africa’s homegrown independents.

Nowhere else on the continent provides the ready breeding ground for this unique species of Exploration and production companies.

But what do we mean by the term Independent?

When a non-state-owned E&P company, holding one or several oil and gas permits, and exploring and or producing them, is not large enough to be considered a Major, producing, in excess of 1Million Barrels of Oil and Gas Equivalent per day, then it is an independent. The world has only six majors: ExxonMobil, Shell, Chevron, BP, TOTAL and, to a lesser extent, ENI. All other E&P companies, the largest of them being ConocoPhillips, are ranked as Independents.

Over 25 private Nigerian owned, indigenous independents produce oil and gas from the bowels of their hydrocarbon rich country. In February 2022, their total, operated crude oil output capacity averaged slightly less than three hundred thousand barrels of oil per day (300,000BOPD). That’s a significant contribution from the private sector in any petrostate in the world.

Some of these companies are leading the charge on in-country beneficiation of hydrocarbon resources. Some are keen champions of the industrial society. Yet many-and justifiably so-are just about the extraction: “to win and carry away”.

At the Africa Oil+Gas Report, we understand that a continuous evaluation of the context of growth and challenges of the Nigerian independent provides a clear line of sight to opportunities for investment in Africa’s hydrocarbon properties.

 

THE TALENTED TENTH ANNUAL, of which this article is the fifth edition, is an intelligible ranking of the top 10 progressive, indigenous Nigerian E&P Independents.

This is where we publish, in few hundred words, efforts of those Nigerian indies, who show the most willingness and ability to grow; who are keen on operatorship and not content to be mere partners. Those firms whose choice of projects help catalyse the industrial economy and who exhibit old fashioned aggressiveness that is not contaminated by the rentier instinct.

While corporate governance shines bright on our radar, we take more than a cursory look at the debt profile. We have a soft spot for companies who are angling to diversify into midstream, even downstream segments, to help tackle the country’s industrial challenges. We are, of course, passionate about healthy focus on community development.

We acknowledge that a company’s emphasis on everything but profit will not guarantee its survival.

We are reviewing, in this fifth outing, an earlier declaration that this list will exclude companies who become operators by default. Operatorship of E&P assets is a long work in progress and as more enterprises learn to manage and optimise output of oil and gas fields, the quality of the management is as important as the process through which they become managers.

THE RANKING

No 1- NDEP

Niger Delta Exploration and Production (NDEP) retained the lead, for the second consecutive time, among the top ten progressive, indigenous Nigerian E&P Independents.

The company reported 26,000Barrels of oil Equivalent Per Day (26,000BOEPD) net in 2021. This is constituted of 11,000BOPD and 82Million standard cubic feet of gas per day from both its 100% owned Ogbele field in eastern Nigeria and the 18.75% owned Oil Mining Lease (OML) 34 in the west of the country.

The OML 34 investment provided a firm mooring for First E&P, as it strived to develop the Anyala (OML83) and Madu (OML85) fields.

The cash register has also been ringing. Revenues increased by 41% from $91.3Million in 2020 to $128.7Million in 2021 and Profit after Tax leaped by 68% from $43.3Million in 2020 to $73.1Million in 2021.

It’s always time for work. NDEP had moved a rig to site on the Ogbele field, its flagship asset, as of the time of writing this report. It’s the second campaign in two years. The current programme is to drill four wells, one of them a gas probe and the other three intended “to arrest decline and reset our production capability higher than what it currently is”, the company’s management says.

NDEP has been producing crude oil from the Ogbele field for 17 years, exploiting what was called a marginal field whose recoverable reserves was estimated at 5Million Barrels at the time it was acquired.

The visioning process to diversify into several aspects of the hydrocarbon value chain is trending among Nigerian E&P companies, but NDEP has been an integrated energy player for the last 10 years and remains the most diversified among Nigeria’s independents. It has always produced crude oil,; it runs a sizeable gas processing plant (100MMscf/d) through which it has eliminated routine gas flaring since 2012, and has expanded its refinery from a 1,000BPD topping plant it installed in 2011 to three modular trains with optimum input capacity of 11,000BOPD to deliver Diesel, Marine Diesel, DPK, Naphtha and High Pour Fuel Oil. NDEP’s wish to introduce Premium Motor Spirit (Gasoline) has been so far discouraged by the government’s insistence on controlling the price of this particular product.

Ogbele field’s crude oil output capacity growth of 2018 to 2021 (6,500BOPD to 9,000BOPD to 12,000BOPD) has been curbed by the acute challenges of evacuation in 2022 (although that story is still evolving). And it is not always a given that every barrel of crude stranded for export can be refined.

NDEP has been working on the alternative to barge its crude in the last nine months.

Still, the integrated scope of NDEP oilfield practice calls for an evaluation outside conventional upstream product output analysis.

The volume of refinery products sold to the market has doubled from 37Million litres in 2020 to 74Million Litres in 2021, the annual report says. “Between the end of 2021 and the end of third quarter 2022, we have produced 110Million Litres”, declares Gbite Falade, NDEP’s Chief Executive Officer. ”Now we are on course to reach 150Million Litres by the end of 2022”.

Behind those numbers are significant logistical issues. A case in point is the commercialisation of Naptha, which was originally intended as a feedstock for gasoline. As gasoline production is a non-issue for now, the produced Naptha has always been spiked into the crude stream and exported. But the five-month long outage of the TransNiger Pipeline in 2022 meant that there was no market for the Naptha as it is not in demand in Nigeria. “We had to work with regulators and standards agencies, for the licencing for storage and export of Naptha, satisfying very stringent requirements”, Falade explains. In the event the company has one petroleum product, outside of raw crude and gas, that is a foreign exchange income earner.

NDEP’s refining growth is set against the background of the unproven nature of the crude oil refining landscape.

Unlike upstream work, which teems with activity and skills that can be hired round the corner, the refining landscape lacks a robust technical workforce.

State owned NNPC, with combined nameplate capacity of 445,000BPSD, has been the only warehouse of refining skills in the country, but it has been chronically inefficient and hasn’t produced anywhere close to 15% of its capacity in 15 years. “Local support from a technical and operational point of view is lacking”, Falade says. Which is why the company has always had to bring in Original Equipment Manufacturers (OEM) personnel to ‘put out fires’, in a manner of speaking. The company has been investing in upskilling and ensuring that OEM personnel adequately pass on the skills.

Other challenges have tested the capacity to deliver. Falade recalls the vigorous work of lowering the pour point of the High Pour Fuel Oil, one of the refinery’s top revenue earners. “At atmospheric pressure, the product was congealing, such that offtake was complicated”, he explains. He is happy to conclude that the resolution of every one of these complications has aided the improvement of the refining ecosystem. “There’s a curve we are passing which anyone who comes after us would not need to navigate”.

Since 2011, NDEP has operated a 100Million standard cubic feet per day (100MMscf/d) gas processing plant from which it pipes 35MMscf/d to the NLNG system at Bonny. But crude oil evacuation issues have forced the company into a force majeure mode with the NLNG as the bulk of the supply to NLNG is associated gas.

Those hitches haven’t killed the vision “to position Ogbele as an emerging gas processing hub, in the Eastern Niger Delta region”.

The company started acquiring additional capacity build-up for the gas processing plant in 2019. Early in 2020, it took a Final Investment Decision (FID) to increase the processing capacity to 400MMscf/d. “Investments in this project will continue, with completion projected before the end of Q4 2024”, NDEP explains in a report.

The project is being held up by delays in securing the assets to provide the feedstock.

Apart from the Ogbele field and the OML 34, which it doesn’t manage, NDEP operates the Omerelu marginal field, still undeveloped. Offshore, it manages the Oil Prospecting Lease (OPL) 227, an exploration acreage. NDEP extended its upstream operational footprint in 2019 by drilling an appraisal well in OPL 227, with disappointing results. It deployed a rig on the Omerelu structure and encountered gas in the sidetrack hole, as prognosed.

NDEP is more a Pan African hydrocarbon upstream player than any of its peers. It is in a joint venture with NilePet, the South Sudanese state hydrocarbon company. It won a lease in the Ugandan 2015/2016 bid round but dropped the asset as a result of governance concerns. It has since ceased conversation with the Mozambican government, for a licencing award for onshore natural gas development.

NDEP is a nimble enterprise that started life as Midas Drilling Fund in 1992 with the idea of having more than a handful of shareholders pooling resources, a contrarian thinking to the concept that created most Nigerian independents. The company holds a regular, annual, well attended General Meetings, and publishes an annual report, going back to 2013, on its website. It has a non-executive chairman and the board, filled with representatives from as far afield as Petrolin, the Geneva headquartered international petroleum group. None of the company’s founders is a member of the current board.

NDEP is proud of its partnership deal with the host communities around the Ogbele field which involves a clause that allocates 5% of the annual profit to the communities. It is one of the most generous partnerships that any Nigerian independent has initiated with its neighbouring constituents.

NDEP is a smart, highly technically resourced company that is continually looking forward.

No. 2 –SEPLAT

NDEP CEO Gbite Falade: “The resolution of every one of these complications has aided the improvement of the refining ecosystem. There’s a curve we are passing which anyone who comes after us would not need to navigate”.

Seplat Energy’s net production of 43,337Barrels of Oil Equivalent Per Day (BOEPD) year to date (by end September 2022) is the largest of any Nigerian founded, non-state-owned operator. The split is almost equal parts for gas and oil, and while it is the lowest since 2018, despite the inclusion of the volumes from Eland Oil & Gas, which the company acquired in 2019, the figures run in inverse proportion to the scale of the ambition.

Seplat dreams big and it is always on an acquisition mode. But its story of transaction hitches and project delays in the last two years reminds us of a 1980s quote in the Nigerian daily, The Punch by the columnist Tunji Lardner: “Nigeria, desperately wants to be great…but some Nigerians won’t let her”.

Seplat’s revenue leapt by 38% from $530.5Million in 2020 to $733Million in 2021. Gross profit was even higher; a 129% hop from $124.6Million in 2020 to $285.2Million in 2021. The 2020 loss before tax of $80.2Million was turned into a profit before tax of $177.3Million in 2021.  But Seplat’s 2021 annual report doesn’t indicate Profit After Tax, which is curious.

Seplat could have grown larger in asset holding since the last ranking but for the intervention of the state hydrocarbon company, NNPC, which held up its bid to conclude the purchase of the entire share capital of the Nigerian unit of Exxon Mobil Corporation – Mobil Producing Nigeria Unlimited (MPNU) for a consideration of $1.28Billion. The asset is the entire offshore shallow water business of ExxonMobil in Nigeria, producing 95,000BOEPD in 2020 (92% liquids). Based on 2020 pro forma working interest volumes for Seplat and MPNU, “the transaction would deliver 186% increase in production from 51,000BOEPD (capacity) to 146,000BOEPD; 170% increase in 2P liquids reserves, from 241Million barrels ( MMbbls) to 650MMbbls; 14% increase in 2P gas reserves from 1.501Triillion cubic feet (Tcf) to 1.712Tcf, plus significant undeveloped gas potential of 2.910Tcf (JV: 7.275Tscf); and 89% increase in total 2P reserves from 499 MMboe to 945 MMBOE.”

A Period of Waiting…

As it waits out NNPC’s stalling of the ExxonMobil purchase, Seplat’s portfolio comprises eight oil blocks- direct interests in seven blocks in the Niger Delta area, four of which (OMLs 4, 38, 41 & 53) SEPLAT operates, and one further (OML 55) revenue interest.

Seplat has had to wait in other areas. The company is involved in the Assa North-Ohaji South project (ANOH), aimed at monetising 4.3 Trillion cubic feet (Tcf) of and 215Million barrels (MMbbls) of condensate, one of the largest greenfield gas condensate development projects under construction in Nigeria. ANOH will develop Ohaji South gas and condensate field located within the license the Seplat operated block OML 53 and the Assa North field in Shell operated license block OML 21. The Seplat promoted part of the project will develop 50% of the reserves, while Shell will develop the other 50%. The two fields are together expected to produce 600Million standard cubic feet per day (Mscfd) of lean gas. Seplat expects to produce 300MMscf/d, 22,000Barrels Per Day of condensate and 38,000 Tonnes of Liquefied Petroleum Gas (LPG). This Seplat part of ANOH project will cost $650Million. The updates

are cheery: ▪ Mechanical completion expected in H2 2022 ▪ all fabricated equipment now in Nigeria with over 90% delivered to the project site ▪ All static process equipment foundations and most rotating equipment foundations completed. ▪ Overall completion for foundations at circa 90% ▪ Installation phase underway. – Installation of pipe racks, inlet manifolds, compressors, gas turbine generators, E-House in progress.

ANOH is held up and cannot be commissioned in 2022 largely because the evacuation pipeline for the gas is not in place. Gas is meant to be pumped into the grid length Obrikom-Obiafu -Oben (OB3) pipeline through a 23 kilometre Spur line, en route to the market, but neither the OB3 pipeline, nor the Spur line from the field to the OB3, are completed. NNPC has been constructing OB3 for over 15 years. It is also constructing the spur line.

Leader in domestic gas market

Seplat Energy is a key player in the domestic gas market (a high mark in the ranking criteria). It’s gas output has turned back up, cruising to 260MMscf/d in 2022 after dropping from 291MMscf/d in 2019 to 220MMscf/d in 2020,

….and contributor to local crude refining: Seplat commits to the Ibigwe Refinery by supplying, uninterrupted, 2,000BOPD to the refinery in the last one year. (Seplat’s contribution of feedstock to the refinery is higher than the owner, Waltersmith’s own contribution (See below).

Seplat is on the brink of a huge transformation:  Takeover of 95,000BPD MPNU, and commissioning of a 300MMscf/d plant, will be significant achievements. But even if you insist that these two have remained: “to be delivered”, what about the completion of the Amukpe-Escravos Pipeline which has provided the company an alternative evacuation route, to the TranForcados Pipeline, for 35,000BPD of crude oil?

Seplat, like NDEP, is a transparently governed E&P independent.

In 2020, it welcomed a new Chief Executive Officer, taking over from a man who co-founded the company in 2009. Between 2021 and 2022, it saw off, from its board, the two founders of the company. Basil Omiyi, the company’s new chairman, was the first Nigerian to be appointed CEO of Shell E&P in Nigeria. this kind of open court running of one of the largest enterprises in the land, counts for a lot. As we have indicated here before, whereas The Talented Tenth Annual has to rely on its own intelligence gathering skills for accessing the production figures and operational challenges of most Nigerian independents, this dual listed company (London Stock Exchange, Nigerian Stock Exchange) has its data laid out bare in public, even when the details are not entirely-in the slang of the social media-likeable.

SEPLAT started business as a Special Purpose Vehicle for the acquisition of Shell/TOTAL/ENI’s 45% in OMLs 4, 38 and 41 and rapidly grew production from 20,000BOEPD (gas + liquids) in 2010 to 51,183BOEPD in six acreages including Oil Prospecting Lease (OPL 283) and OMLs 40, 53 in 2020. These figures are net to SEPLAT.

Seplat has been more aggressive with the drill bit since 2021, fulfilling its 2020 promise to “return to a level of drilling and development activity not seen since 2015”. The Sibiri -1 well, drilled in OML 40, was the only exploratory probe in the Niger Delta in 2021.

Despite the daunting Nigerian risk, SEPLAT looks sure to prevail and grow in the next five years, with its corporate governance structure, its constant watching its pocket with ratio of spending and debt to production revenue and its ability to manage its relationship with all the state hydrocarbon companies it works with, including the NPDC (with which it has a Joint Venture operations in OMLs 4, 38 & 41, the Nigerian Gas Transmission Company (with which it has formed an Incorporated Joint Venture midstream gas company) and NAPIMS, the investment arm of NNPC which runs the JV relationship in OML 53.

No 3- NDWestern

NDWestern Ltd has a large, vivid dream: to acquire the entire shares of Shell Petroleum Development Company (SPDC) Nigeria, operator of the Shell/TOTAL/AGIP/NNPC Joint Venture. That joint venture manages 19 Oil Mining Leases, all located on the shelf (onshore and shallow water), and the cost of acquisition could be up to $3Billion. For a company described by its own CEO, Eberechukwu Oji, as understated, the statement that NDWestern will make if it takes over Shell in Nigeria, would be thunderous. NDWestern is on the final lap of the competition for that acquisition, racing with two other companies who could clinch the prize.

But the proposed takeover of Shell has not reached the stage that could pull it in the scope of this article, unlike the Seplat deal with ExxonMobil. What is compelling about NDwestern is that for the last seven years, it has been the largest, non-state-owned indigenous producer and supplier of natural gas into the domestic market.

That is enough to be among the top three in the Talented Tenth ranking. The building of an industrial state matters. Gas in the domestic economy is a key plank.

The company co-operates the Oil Mining Lease (OML) 34 with the NPDC, the upstream jewel of the NNPC group. NDWestern has no publicly available annual report like NDEP or Seplat Energy, but field data available to Africa Oil+Gas indicates a gross output of 14,000Barrels of oil and condensate per day and 323Million standard cubic feet per day of gas in the first nine months of 2022. The gas is sold to the country’s largest electricity plants in Ughelli, Egbin, and Olorunsogo. Off takers also include Dangote Industries (for the fertiliser plant) and N-Gas, the NNPC-Shell-Chevron owned company that delivers gas to Benin, Togo and Ghana through the West African Pipeline.

NDWestern wants to do more: to build a 10,000BPSD capacity crude oil refinery and facilitate an industrial park in OML 34, supplying gas and petroleum products and power to companies which locate their activity in the Utorogu Industrial Park, to be cited in the vicinity of the gas processing plant. “We share a lot of benefits in co-locating”, Oji tells Africa Oil+Gas Report. “We are working on an export route. There is a rail line if you need to transport the products from the industrial park inland. There is a case to be made to extend a very short portion of the rail line to Warri wharf so that the export-oriented manufacturing firms in the park would have the option of a rail line to take their products straight to the port and then straight for export. But before that infrastructure is built, with the road, a very short road trip, you can get to Warri wharf and then you can export your product”.

NDWestern benefits from the technical strength of NDEP, the top performer in the Talented Tenth ranking. The 11-year-old company is majorly owned by NDEP (42%), Petrolin (40%), First E&P (10%) and Waltersmith Petroman (8%). It was formed as a Special Purpose Vehicle for the acquisition of the 45% stake owned by Shell/TOTAL/ENI in OMl 34, the gas and condensate rich asset in the Western Niger Delta. This company is a joint operator, with state firm NPDC, of OML 34.

 

Headwinds: NDWestern has been unable take a Final Investment Decision on the 10,000BPD refinery. “We have been on a bit of a lengthy commercial negotiation with our JV Partner, NNPC on the split of investment and responsibilities for the modular Refinery (led by ND Western) and the Condensate Refinery (led by NNPC), 10,000bbls per day each”, Oji explains. “Once the discussions are concluded, we will make a joint public announcement”.

NDWestern does not see the delay in the go-ahead on the refineries as stalling the Industrial park project. “The Park has many segments including the Gas Based Industries sector, the Eco Park, the Agro Park which are making progress at their different pace”, Oji explains. “Our particular model recognizes that industrialization does take time and we are here for the long haul”.

NDWestern is also not worried that the Nigerian government has dusted off the plan for the Ogidigben Park (which has similar aspirations to Utorogu Industrial Park and is not a far distance away). “If you think about it, the Niger Delta needs as many of these Parks as we can get to speed up industrialization of the region. We must domesticate jobs in the Niger Delta to combat the attractiveness of criminality and crude theft in particular. I see an opportunity to supply gas to Ogidigben Park due to their proximity to Utorogu Plant”.

If there’s any surefooted Nigerian company which has a solid future, at least in the near term, NDWestern is one.

No 4- PLATFORM

Platform Petroleum, also a marginal field producer, makes the Talented Tenth for the second time in its five editions.

Thirteen years after the company commenced production of condensate, exported as crude oil, from the Egbaoma field, in Oil Mining Lease (OML) 38 in the north west of the Niger Delta basin, it started, in 2020, to supply lean natural gas to the Nigerian domestic gas market, through the Nigerian Gas Company (NGC) operated Oben-Obiafu-Obrikom (OB3) pipeline. With a 10 year Gas Sales Agreement with the NGC, committing 10 – 30Million standard cubic feet of gas per day supply to the OB3, Platform becomes a local natural gas supplier of some reckoning, the only indigenous marginal field operator with that level of commitment of gas into the “national gas grid”. It’s a steep reversal from the situation in 2014 when, after installing a 30MMscf/d gas processing plant, the company faced commissioning hitches and had to bring in partners (Gas Train Limited/Capital Alliance Partners) to take financial and operational stake in the plant.

With a 10 year Gas Sales Agreement with the NGC, committing 10 – 30Million standard cubic feet of gas per day supply to the OB3, Platform becomes a local natural gas supplier of some reckoning, the only indigenous marginal field operator with that level of commitment of gas into the “national gas grid”.

Platform has repurchased the 30MMscf/d LPG/NGL Plant from Gas Train Limited/Capital Alliance Partners. With the completion of this transaction, Platform now operates a full-cycle gas/condensate business, producing and selling about 3kbd of oil/condensate, 50 MT per day of LPG Propane and 25MMscf/d of lean gas. The second set of compressors were commissioned at the end of June 2022, six months after schedule, but they achieved a key milestone in the annals of hydrocarbon production from small fields in Niigeria’s Niger Delta: gas flaring at the Egbaoma Field has been completely eliminated, the company says.

What qualifies Platform for the Talented Tenth, is that willingness for portfolio diversification, beyond a mere producer and exporter of liquid hydrocarbons in the first place.

Like other ambitious marginal field operators, Platform has been scouting around for opportunities for development assets that lie within a 25km radius of its facilities and has initiated discussions with Newcross (OML 152) and Seplat (OML 38) for this purpose.

It also participated in the 2020/2022 Marginal Fields bid round, where it was awarded a 28% stake in its bottom ranked field for a signature bonus that was higher than its bid for the entire field. It turned down the offer and went into the secondary market to farm into the stakes of two sets of winners – one who won a 40% stake in the Benin Estuary Field and two others who won the Kuri field. Platform paid their signature bonuses and will fund their respective share of development costs for an agreed commercial construct.

Platform has even bigger plans. It tried to participate in a Financial &Technical Service Agreement in OML 30, citing NNPC’s decision to buy out Shoreline Natural Resources’ 45% stake on account of the shoddy pace of development of the asset. Platform was working with NNPC’s selected FTSA contractor. The plan was to use her reach “to fully set up the structure and engage all the required resources to deliver a reliable, competent independent operator”, company sources tell Africa Oil+Gas Report. Platform planned to contribute some take-off funds and earn a tiny equity stake on the operating entity, but the deal fell apart.

Platform is also currently involved in the bid to purchase TOTALEnergies’ 10% equity in the 19 OMLs in the SPDC/TOTAL/Agip/NNPC JV. Indeed, the company, in a consortium with Pillar, is in the semi final lap of the race.

The overall intention is to move Platform’s working Interest daily production North of 10,000 boe per day in the next three years

Platform has been in continuous, uninterrupted output (except for the standard outage by vandals and militants) all these years. It has produced, on operated gross basis, an average of 3,000BPD for 2021. The company is the first of the 31 indigenous E&P independents, awarded 24 marginal fields by the Nigerian government in 2004, to reach first oil. It commenced production in September 2007, after 34 months of taking over what was then named Umutu/Asuokpu field (later renamed Egbaoma field). Platform reached this point with the help of Newcross, another Nigerian E&P firm, which provided some financing and took 40% stake in a Joint Venture. The partners constructed and commissioned a 48km crude export pipeline, from their field, eastwards to ENI’s export facility in Kwale. The pipeline to Kwale now serves other companies who operate marginal fields in the vicinity, called the cluster, including Pillar Oil (which produces the Umuseti field), Energia (which produces the Ebendo field) and Midwestern Oil&Gas (which produces the Umusadege field).

Platform is neither as diversified as NDEP (No 1 on this list), nor has it the scope of a SEPLAT (No 2), but it can take a large credit for the creation of SEPLAT in 2009. It was Platform’s search to grow beyond being a mere one marginal field producer that led it to request Shell to divest OML 38 to it. At the time Shell decided to respond, there was also a request by Shebah Exploration, another local producer, on the table. The two companies formed SEPLAT from their names and Platform today, still holds as much as 7.5% of SEPLAT’s entire equity.

Platform remains an independent company outside the arrangement and still has ambition to grow.

No 5 – WALTERSMITH

Waltersmith Petroman has maintained a presence on the top five positions on the Talented Tenth without the benefit of ownership of something that most of its peers have in relative abundance: Reserves. The company operates the Ibigwe field in OML 16 onshore eastern Nigeria. Its main claim to the ranking is that it advances the industrial economy on the back of a small hydrocarbon resource.

Apart from the Ibigwe field, which can produce at most 4,000BOPD today, Waltersmith has a 3.6% equity in OML 34, which translated to 576BPD and 11MMscf/d (or 2,376BOEPD) in 2021.

Yet the company has relentlessly pursued the idea of a phased refinery complex; a gas processing plant and gas fired power plant as centrepieces of an industrial park to service factories, and provide support to industries and other enterprises in a space spanning over 65 Hectares. When it commissioned the project’s first phase: a 5,000BOPD modular refinery in November 2020, it was clear that it was on course of delivering the hub it promised. That commissioning event doubled as groundbreaking ceremony for the next two phases, (a 25,000BPD Condensate Refinery and a 20,000BOPD Oil Refinery) leading to a 50,000BOPD refinery complex producing, by the company’s own estimates about 2.7BIllion litres of products per annum by 2024.

Will it deliver?

Waltersmith finalised a three well drilling campaign between 2021/2022 that assured it had the capacity to produce 3,500BOPD from the Ibigwe field, but as it is, only 30% of the crude output from the field can meet refinery spec. This indicates poor scoping in the design of the refinery. As the outage on the (evacuation facility) Trans Niger Pipeline was still 100%, alternative evaluation options for export are under discussion for most of the produced crude in Ibigwe. Most wells are shut in.

It’s not entirely negative. Seplat supplies 2,000BOPD to the Ibigwe refinery from its Ohaji field. Waltersmith supplies 1,000BOPD. With these two streams, the 5,000BOPD refinery is up and running every day.

Long before the commissioning of the facility, it had been clear that the reserves at Ibigwe were too low for the scale of Waltersmith’s ambition (The challenge of low reserves has been further exacerbated by the poor quality the off spec). The company started reaching out to other stakeholders to win oil and gas assets in the vicinity. “We are engaging the Presidency, Ministry of Petroleum Resources and NNPC to resolve the feedstock issue, including condensate in OML 53 on a wholistic basis”, the company said in a published brief in 2020.    “All our current partners and more (read Nigeria Content Development Monitoring Board NCDMB and Africa Investment Corporation AFC) are lined up for participation in the next phase”, which is the 25,000BPD Condensate refinery.

But the proposed expansion was being challenged by NNPC’s insistence that the condensate from the SEPLAT operated ANOH development in OML 53 was rightfully its own to offtake and it was going ahead with another partner to build a similar plant on the ANOH field.

Waltersmith has now won NNPC over. And it has won two other assets along the way.

The commissioning dates for the refinery’’s second and third phases may have shifted, but the project is on course.

  1. Waltersmith has won the right to use the condensate produced in the NNPC/Seplat ANOH field development project as feedstock for (what is now) a 20,000BSD condensate refinery, now planned to commence production by 2026; the second phase of its three phase refinery project
  2. Waltersmith was also awarded the Assa marginal field, located less than 20kilometres from the Ibigwe field, through a Presidential discretionary allocation by President Muhammadu Buhari  in April 2021. The company has paid the signature bonus, paid the Farmout bonus, concluded the agreements and commenced the process of asset takeover of Assa field
  3. Waltersmith is also finalizing a financial and technical service agreement (FTSA) with Shell Nigeria for the Egbema West and Ogada fields in Oil Mining Lease (OML) 20,

This is access to three upstream hydrocarbon assets all located in the 30kilometre radius of the Ibigwe Field, which Waltersmith has operated since 2004.

“We believe that by positioning ourselves and being supportive of domestic refining, we would be in a more advantageous position when we discuss with government about some of these assets and that has also turned out positively”, says Chikezie Nwosu, Waltersmith’s Chief Executive Officer.  “We have both a technical and financial sales agreement that was approved by the Group Managing Director (GMD) NNPC to take over the operations of the OML 20 assets. That’s the Ebema-Egbema West and Ogada. We are still waiting for some peace to reign in that area before we progress”.

So, how did Waltersmith convince NNPC to ditch the other partner with whom it had planned to build a condensate refinery on the ANOH project? The conversation had dragged over three to four years. Nwosu would not provide a very detailed response other than that, on the basis of cost, quality, and economics, the Waltersmith refinery won over the competition. “I know but the difference between us and any other companies is that we are tenacious; so even when it looked as if it wasn’t happening, we completed our FEED, did EPC Contracting, everything that was needed and then kept it aside and said let’s watch”, he said. “We’re now in a position where we’re about to conclude certain agreements between ourselves and other parties so that we can get condensate from the plants to do the refinery. Once those are concluded, we will start building the refinery”.

Created in 1996, Waltersmith was awarded the Ibigwe field (then located in OML 16 but now OPL 2004) in 2003 through the marginal field licensing round. It has had three field development phases, involving six successful wells, since it took up the licence. It started production in 2008, ramping up from an initial 500BOPD to the current optimum output of 7,00BOPD over a period of ten years. It also has 8% equity of NDWestern, which itself has 45% of OML 34. In 2016, Waltersmith won the Turaco acreage in Uganda, after a keenly contested bid round, but dropped the asset because of “unfavourable terms”.

In 2019, the company was awarded an 80% stake and operatorship in Block EG-23 in Equatorial Guinea’s Niger Delta basin. Its partners include Hawtai Energy (HK) Limited and GEPetrol (the National Oil Company of Equatorial Guinea), with whom a draft PSC has been successfully negotiated and awaiting execution with the Ministry of Mines and Hydrocarbons who doubles as the Concessionaire and the government of Equatorial Guinea. Block EG-23 has a total area of 592 square kilometers and located offshore in water depths of 50-100 metres. Waltersmith is still waiting to get the PSC signed for this lease.

Waltersmith is not an open company with a large pool of shareholders and an independent board like SEPLAT and NDEP. But in 2019, the company’s Executive Chairman ceded the Chief Executive position to Chikezie Nwosu, a technically honed, experienced industry hand who has worked at top levels at Shell and Addax.  The company also revamped its management and brought in a broad range of technical and managerial skills from key E&P companies in the industry. If there’s anything, Waltersmith gets the messaging right. And we are willing to believe it. The Talented Tenth gets the sense that, the large, ever attendant Nigerian risk notwithstanding, this company will continue taking a several steps forward, to enable Nigeria’s industrialisation, in the short to medium term.

NO 6-FIRST E&P

In OMLs 83& 85, which it operates, First E&P has averaged a net output 16,844BOPD (or gross production of 42, 109BOPD) year to date at the end of September 2022. That’s quite some volume for a Nigerian operator in the torrid business weather of 2021 to 2022. But the asset is in shallow water.

With the company’s 4.5% equity in OML 34 factored in, First E&P nets 19,896BOEPD, of which 14.53MMscf/d, (or 2,422BOEPD) is gas.

First E&P came to public consciousness in 2012, when it took a $67Million loan to acquire 10% stake in NDWestern, as the latter purchased 45% of OML 34 from Shell, TOTAL and ENI (Agip). That 10% of NDWestern is what becomes 4.5% of OML 34.

A full year later, First E&P convinced Chevron to sell its 40% stake in OMLs 83 and 85 for an amount slightly less than $70Million. First E&P was also Involved in Dangote subsidiary WAEP’s purchase of OMLs 71 and 72 from Shell/TOTAL/ENI for about $300Million.

The OML 34 investment provided a firm mooring for First E&P, as it strived to develop the Anyala (OML83) and Madu (OML85) fields. It took Anyala field to first oil, in October 2020, six years after it finalized the purchase of the assets from Chevron and it has been producing a gross average of around 40,000BOPD since January 2022. First E&P is the sixth Nigerian indigenous operator of an offshore acreage but only the third, after Conoil and Brittania U, who didn’t become an operator by default.  Anyala field is usually named as part of Anyala Madu fields (OMLs 83 & 85), as if they are twin fields, or straddle fields. But they are not. They are two different accumulations.

. As we went to press with this issue, First E&P had moved the rig Mentor, a jack o up owned and managed by Shelf Drilling to commence drilling of its first development well in the Madu field.

But OMLs 83& 85 lie in one of the most gas prone areas of the Niger Delta basin. So, what does First E&P want to do with its gas? What are its plans to contribute to the industrial state?

“First E&P has been sequestering the gas produced in association with oil in Anyala. It is using reservoirs in the Madu field as storage, as it invests in a large-scale gas processing facility and embarks on offtake negotiations”, company sources tell Africa Oil+Gas Report.

First E&P does not have a firmed-up offtake agreement, for the gas being produced in association with the crude oil it is producing, but company insiders talk of he lans for large gas processing plants..

One of the earlier gas monetization plans considered wasthat Madu and Anyala fields will supply a fifth of the 600MMscf/d targeted for the first phase of the East West Offshore Gas Gathering System promoted by Dangote Industries. The second of the plan is to pipe the gas to some yet-to be firmly defined gas commercialisation project hosted in OML 86. The Dangote gas gathering project is, for now, farfetched. It’s unlikely to be delivered. As for OML 86, Chevron has sold the asset, so it is not going to proceed with a gas infrastructure. Africa Oil+Gas Report believes that the associated gas accompanying the crude out of the subsurface is significant.

No 7-CONOIL

Conoil Producing, the country’s first real Nigerian independent operator of E&P assets, has been around for 30 years.

It has delivered on the original promise of ‘The Indigenous Thrust” of the Nigerian Military Government, which, in 1991, granted petroleum prospecting licences to “Nigerian Businesses who had performed well in other areas of endeavour”.

Conoil has maintained around 20,000BOPD output (net and gross) in the last t one year.

The challenges to maintain output at 20, 000BOPD and even double it, as is the plan, have far less to do with the subsurface than above ground issues and largely centre around leadership. Conoil has been haemorrhaging smart technical talent in the last five years, without durable replacement.

The company has seen off two managing directors since December 2015.

Conoil operates Oil Mining Leases (OMLs) 103, 59, 150 and 153. Five years ago, the company signalled aggressive drilling and comprehensive exploitation of these assets and targeted 40,000BOPD by 2019, at the latest.  But that enthusiasm has waned. Outside of the operated acreages, Conoil is not exploring the full benefits of the partnership it has with TOTAL, to allow the French major to operate the gas reserves in OML 136 and Oil in OML 257.

29 years since it made its first oil discovery and 31 years since it was first awarded an exploratory tract, Conoil has prevailed. But it doesn’t have a technical or managerial succession planning scenario, which is a disadvantage. It will likely be around in the next five years, most likely in its current form, but a higher production than 20,000BOPD should not be a struggle for a company that has been around for this long, with all the advantage of longevity and a wide pool of acreages to choose from. Conoil’s main risk to being an exceptional performer in the Nigerian environment is its own self.

No 8-10?

Editor’s note: This is work in progress.

This ranking was originally published five months ago; in the October 2022 edition of the Africa Oil+Gas Report monthly, delivered to paying subscribers.

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