My Life After Seplat

Section: Petroleum People · May 26, 2023 · 8 comments  | 

By Austin Avuru

In my last five years as Chief Executive Officer of Seplat I had an official, professional mentor resident in London, who acted as my sounding board on most critical decisions. As I was winding down, the issue of my post retirement plans came into stronger focus.

I was clear in my mind what I was going to do. In my planning, I started by isolating what I was NOT going to do….

  • I would not go into consulting
  • I would not run a contracting (Service) Company
  • I would not go into the Oil and Gas downstream business.

I decided that I was going to set up a Family Office – a family funded investment vehicle, through which I would incubate new businesses and manage any investments that I have. I zeroed in on four areas of interest that I would seek business opportunities….

  • Upstream Oil & Gas
  • Real Estate
  • Green House Farming
  • Investments in Nigeria listed equities.

I went ahead to set up an Isles of Man and Nigerian registered family trust, “Austin Avuru Holdings Limited” as the holding company for all my business interests. In the last two years of my service in Seplat, I held quarterly review meetings with my mentor and crystalized, both my succession plans in Seplat as well as my post retirement business plans. By August 2018, I started putting the building blocks in place.

I bought a piece of property on Oba Elegushi Road, Ikoyi, at the time occupied by a private primary school. There is an interesting story to the purchase of this property.

When my estate agents called me to inform me about the sudden availability of this property, I did not immediately have cash. The property cost ₦450,000,000.00 (Four hundred and fifty Million Naira only) and I could internally raise ₦150,000,000.00 (One hundred and fifty Million Naira). I called my GM Finance and the General Counsel in Seplat and asked them if they could arrange a short-term company loan of ₦300,000,000.00 (Three hundred Million naira only) which I would pay back as soon as dividends were paid in about six months. The General Counsel laughed out loud and announced to me that, that would amount to an insider loan to a director. She said it was a governance red flag and that it didn’t matter whether it was ₦3,000,000 or ₦300,000,000.00, the exercise was forbidden. I said to myself …. “So much for the monster I have created in the name of Corporate Governance”. But, so it was. The discussion didn’t go any further than that. Next, I put a call through to the MD/CEO of Platform Petroleum, my parent company where I was Vice Chairman of the board… “Are you guys able to advance me a soft loan of ₦300 Million. I will pay back within six months”. There was no hesitation in the answer . . . “Sure. When will you need it?” It did not surprise me; we had always run Platform Petroleum like a family and the compassionate requests of staff, directors and shareholders were always adequately attended to. The money was in my account in four days and subsequently I paid for the property. Of course, I paid it back within the promised time period.

We closed the transaction in November 2018 but because we could not disrupt the school calendar, we agreed to wait until July 3rd 2019 when the kids vacated for the summer holidays before taking possession. In the intervening period, we had concluded all the design work and processed the approvals for our proposed office building. Days after taking possession we moved in, demolished the existing buildings, and started the construction of our new office building.

In January 2019, I started the process of hiring the anchor staff for AA Holdings Limited. Working with a trusted HR Consultant, we went through a rigorous selection process to pick one out of four identified candidates for the position of Chief Investment Officer (CIO). We finally settled for a young, brilliant investment banker, Emeka Okolo, who assumed office on April 2nd 2019 in a rented office suite in Ikoyi. He quickly settled down to work, focusing on the following key assignments.

  • Supervised the construction, finishing, outfitting, and furnishing of the new office to top-notch standards. The office was finally ready at the end of November 2020, even though we moved in on September 1st, one month after my disengagement from Seplat.
  • Organised AAHoldings into a proper holding company with Professional Support Limited as a wholly owned subsidiary. All my shares in Seplat were transferred to Professional Support Limited while my shares in Platform Petroleum Limited were held by AAHoldings and Professional Support Limited. All my shares in listed securities on the Nigerian Stock Exchange were similarly transferred to AAHoldings. Two new subsidiaries, Professional Support Property Development Company Limited and Professional Support Farms Limited were created to warehouse our real estate and green house farming businesses respectively. A property which we owned, following our purchase of Nerine Properties Limited (part of Nerine Services Limited, a company ABC and I sold off due to pressures of RPT from Seplat) was transferred to Professional Support Property Development Limited.
  • Organised a beauty contest among four Communications Consultants for the design of our logo, letterheads, business cards and other stationery items. The chosen design from this exercise is what we use today.
  • Worked with Auditors and our retained external counsels to bring all statutory reports in respect of AAHoldings and all its subsidiaries to date. By the time I assumed duties on 1st September 2020 as Executive Chairman of AAHoldings, the audited annual report for all the companies for the year ended 31st December, 2019 (and all previous years as relevant) were ready and filed with the Corporate Affairs Commission (CAC). Similarly, tax returns had been filed with the FIRS for all the companies.

On September 1st 2020, one month into my retirement from Seplat, the AA Holdings office opened for business at 1C Oba Elegushi Road, Ikoyi. Apart from office support staff (security, maintenance, front desk, etc), there were four of us. . . . My executive assistant of eighteen years, the Chief Operating Officer, Mr. Johnnie Eni, who was the GM Business Integrity in Seplat, the Chief Investment Officer and myself. On October 1st, a Finance Manager, Mrs. Judith Alex-Oni joined us. When we prepared our 2021 Work Program and budget, the key highlights, which represented our four areas of investment interest were . . . .

  • Agriculture:

We decided to acquire a small parcel of land, about 1,500 square meters in the Lekki/Ajah axis of Lagos for a pilot project on greenhouse farming. Working with Dizengoff (a notable agricultural equipment supplier) we set up a greenhouse farm to produce pepper and tomatoes. After ten months of experiment, six of which was spent harvesting and selling products, we had enough data to start the planning of a larger scale farm. We acquired four hectares of land from the Lagos State Agric Scheme in Epe where we are now planning a proper, commercial greenhouse farm for Pepper and Tomatoes. We also have eight hectares of land in Delta State where we will expand into once the one in Lagos proves as successful as we envisage.

  • Real Estate:

Our first real estate project was the development of a service outlet for two anchor tenants on a 2,900sq meter plot of land we already owned in Ikota, Lagos It is a well-crafted building on four floors with one wing housing a restaurant chain and the other housing the film house cinemas (Imax). The second project, still at pre-construction stage, is an iconic 44-Unit luxury apartments complex on Alexander Road, Ikoyi. It is a huge project, and we are still twicking the design to achieve commercial cost effectiveness. To hedge our currency risk, we have also started acquiring (one piece at a time) commercial, residential real estate in the USA.

  • Equity Investing:

We have rationalized our holdings of Nigerian listed equities to three Nigerian banks which, in our view, consistently deliver above 7.5% dividend yield. We will continue to build on this portfolio to a point where our dividend income can support our Naira-based businesses and overheads.

The three sectors above represent our future areas of diversification away from Oil and Gas. To date, our big play still remains the Oil and Gas Sector.

Excerpted from My Entrepreneurship Journey, by Austin Avuru. Published in Nigeria by RADI8 LIMITED, Lagos, 2022.


NDEP Calls for Tenders for a Land Drilling Rig

Section: Tenders · May 26, 2023 · No comments  | 

1.INTRODUCTION

Niger Delta Exploration & Production PLC (NDEP) intends to hire a 1000HP 5KSI Land Drilling Rig for the completion, testing and workover of Land Wells with an anticipated starting date in June 2023 for a firm period of one year plus an extension option for an additional one-year.

NDEP therefore uses this medium to inform suitable and reputable Companies with the requisite experience, a Rig available in Nigeria and resources for the execution of this scope to submit their bids for consideration.

2.SCOPE OF WORK/SERVICE REQUIREMENT

The scope of work will comprise of Completion, Testing, Workover, De-completion, Recompletion and Suspension of Wells in NDEP concession areas OML 53 & 54 (both on Land) on a 24hours/7days basis.

The scope includes;

  • Mobilization from point of Origin to first Well site.
  • Demobilization of Rig from last operational location.

The requested Rig should be fully capable of working in Nigeria Land Operational conditions, with minimum negative impact on the environment and strict compliance to Health and Safety of all stakeholders impacted by the activities.

The Rig shall have a mandatory minimum requirement of the listed basic capabilities and equipment to qualify for consideration:

  • Rig shall be mobilized in Q2-2023
  • Rig Hoisting capacity: 500 Ton minimum
  • Drilling depth capacity with 3 ½’’ DP of 15000 ft
  • Drawwork of 1000HP
  • Rotary Table opening of 37 ½” x 300Ton
  • Top Drive System of 250Ton/WP 7500psi/38,000lb. ft output power.
  • Power capacity of 1000HP
  • 2 x 1600HP Mud pumps
  • Mud storage capacity of 2400bbls with ability for zero discharge facility in line with Nigerian Law and International standards.
  • Cementing lines and Manifold rated 5,000 psi Working Pressure
  • Well Control Equipment – 13 5/8” x 5,000psi BOP stack and accessories

3.MANDATORY REQUIREMENTS

To be eligible for this tender opportunity, interested contractors are required to:

  • Be registered in the NUPRC and NCDMB databases.
  • Indicated their interest through Rigbids@ngdelta.com within two working days of this advert to receive an Invitation To Tender (ITT).

4.NIGERIAN CONTENT

Bidders are invited to express complete understanding of Nigerian Oil and Gas Industry Content Development (NOGICD) Act, 2010 and Insurance ACT 2003, and their willingness and commitment to comply with same.

Consequently, bidders’ submissions shall be evaluated strictly with the minimum evaluation criteria defined in the NOGICD Act.

Bidders shall:

  1. Demonstrate that the entity is a Nigerian indigenous company by providing details of its Ownership Structure including submission of certified true copies of CAC form C02, C07, and its Memorandum and Article of Association.
  2. Provide evidence of completed registration on NCDMB’s NOGIC JQS portal.
  3. Provide a detailed description of the location of in-country committed facilities and infrastructure (assets, equipment, technical office, administrative space, storage, etc.) in Nigeria to support this contract.
  4. Provide a Nigerian Content Plan with detailed description of the role, work scope, man-hours and responsibilities of all the Nigerian companies and personnel that will be involved in executing the work.
  5. Provide evidence of what percentage of its key management positions are held by Nigerians and what percentage of the total work force are Nigerians.
  6. Disclose the overall percentage of work to be performed by Nigerian resources relative to total work volume.
  7. Ensure that all sub-contractors to the Drilling Rig Contractor have valid Category “SS” NCEC for Drilling Services & valid Category “DA” NCEC for other support services such as Catering, Housekeeping etc
  8. In line with the relevant provisions of the NOGICD Act, 2010 and the NCDMB approved rig utilization strategy, the bidder shall demonstrate substantial evidence of utilization and Nigerian ownership of Land Rig or Nigerian-equity acquisition in the nominated LAND RIG or any other drilling rigs (land/swamp, etc.), or provide MOA for a rig owned by a Nigerian 3rd party.  Bidders with NCDMB NC Rig Certification to support equity in or ownership of the rig should submit same as supporting evidence.
  9. Provide evidence of 1% NCDF payments (inclusive of subcontracts) for all past projects executed by the Bidders (and Rig owner) in the Nigerian oil and gas industry.
  10. Submit a detailed training plan which shall provide sustainable training and development (including certifications as applicable) for Nigerians in line with the Human Capacity Development Initiative Guideline of the Nigerian Content Development and Monitoring Board (NCDMB). The training plan shall include contract-specific training and estimated man-hours. Tenderer is required to submit MOA with Oil and Gas Trainers Association of Nigeria (OGTAN) trainers to support their training plan, which shall be 15% of the project Man-hours of 3% of the total contract sum.
  11. Provide a detailed manning organogram for the nominated rig(s) showing that 55% by man-hours of the personnel positions and manning level onboard the nominated rig(s) will be occupied by Nigerian national employees.

NOTE: Non-compliance with Nigerian content requirements & failure to have the Rig in country are FATAL FLAWS

  1. CLOSING DATE

The Bids shall be submitted on the NDEP portal at www.ngdelta.com/ on or before 8th June 2023 being the bid closing date.

  1. ADDITIONAL INFORMATION
  2. This advertisement of a “Tender Opportunity” shall not be construed as a commitment on the part of NDEP, nor shall it entitle Applicants to make any claims whatsoever and/or seek any indemnity from NDEP and/or any of its Affiliates or Partners by virtue of such Applicants having responded to this Advert.

As Rig mobilisation is planned for Q2 2023 and the requirement is for a Light Rig, the Rig must be available in country, ready for mobilisation and the HP range limited to 1000 – 1300HP. Bidders that do not meet these criteria need not tender for this service.

NCDMB Certification of Authorization number: ES/NCDMB/NDPR/ADV/IPPG/180523/PROVISION OF 1000HP LAND DRILLING RIG

 

 


Austin Avuru’s Books Back on Sale After Vacation of Court Orders

Section: PARTNER CONTENT · May 24, 2023 · 1 comment  | 

PARTNER CONTENT

Austin Avuru’s books are now available for purchase following the vacation of court orders issued by Nigeria’s Federal High courts in Abuja and Lagos.

The Abuja court issued the injunction in July 2022 following a motion exparte filed by Tochukwu Peter Tochukwu, Esq but moved by Nsikan Samuel Ekpeyong Esq with motion No. M/9442/2022 dated 26th Day of July 2002 at an Abuja High Court presided over by Justice SB Belgore.

The injunction was issued days to the scheduled public presentation of the books – My Entrepreneurship Journey and Politics, Economics and the Nigerian Petroleum Industry all by written by Austin Avuru – Founding CEO, Seplat Energy. The third book, Austin Avuru: A Safe Pair of Hands is a biography of the mercurial and methodical oil man written by the duo of Peju Akande and Toni Kan.

Avuru had informed his invited guests of the suspension of the event and sale of the books via an e-message personally signed by him: “this event has been suspended by an Abuja High Court Injunction. Our lawyers are at work and, when we are permitted, we shall re-assemble at a later date.”

The retirement party and book presentation event had been scheduled for the 4th of August, 2022 at the Eko Hotels and Suites Victoria Island.

The court order had, among other prayers, restrained “the defendants, their privies, assigns, agents and howsoever described from proceeding to temper with the res – by taking any step geared at releasing or public presentation of  the book titled  or any other book(s) or any other venue pending the hearing and determination of the motion on notice.”

With the vacation of both injunctions, the reading public and friends of the author can now purchase copies of the books – My Entrepreneurship Journey, A Safe Pair of Hands and Politics, Economics and the Nigerian Petroleum Industry – from leading bookshops like Jazzhole, Terra Kulture, Quintessence, Glendora, Roving Heights, Spine and Label, Patabah etc as well as via amazon.com.

The books provide incisive and unique insights into the Nigerian oil and gas industry with special emphasis on the emergence of indigenous oil and gas players as well as Avuru’s place in the mix as founding partner and pioneer CEO of Seplat Energy Plc, a Nigerian and African success story that is listed both on the Nigeria and London Stock Exchange.

Geologist and publisher, Toyin Akinosho described My Entrepreneurship Journey as “a narrative on how to build, grow and sustain an upstream oil company” and “a masterpiece of economic and business analysis,” while A Safe Pair of Hands has been described as telling “a compelling story of excellence, resilience, doggedness and that unique can-do Nigerian Spirit,” and a “must-read for anyone who believes in potential.”

The third book, Politics, Economics and the Nigerian Petroleum Industry, is made up of 74 essays written and published between 1991 and 2022, in which Austin Avuru, “oil man, corporate mandarin and public intellectual shows by the example of thriving companies he has founded, nurtured and built into successful enterprises that his theories for creating value and building generational and sustainable wealth are more than just talk but well thought-out processes anchored in cleared-eyed analysis.  In the book, Avuru provides clear insights that should guide policy and decision making at the highest levels.”

 


How Natural Gas Market Integration Can Help Increase Energy Security

Section: Gas Monetization · May 23, 2023 · No comments  | 

By Rachel Brasier, Andrea Pescatori, and Martin Stuermer-IMF

Natural gas might be the same commodity everywhere in the world, but prices can vary dramatically because of the complex network of infrastructure needed to transport it.

The result is a partially fragmented global market, mainly because most natural gas moves by pipeline—unlike the market for crude oil, which is more integrated and tends to trade at a single price in most places. Such fragmentation in the natural gas market means not only that prices differ across regions, but also that high prices in one part of the world don’t necessarily transmit to buyers in other places.

Russia’s invasion of Ukraine provided a stark illustration of the effects of segmentation. Pipeline flows to Europe from Russia dropped by 80 percent since mid-2021, sending the continent’s gas prices up 14-fold to a record level in August 2022.  Prices for globally traded liquefied natural gas saw a similar jump. But LNG prices in the United States merely tripled, remaining several times below Europe and Asia.

The disparity in prices, and the US insulation against global gas-market shocks, stems from the idiosyncrasies of gas extraction and transportation. Historically, the US market was linked to crude oil prices because gas was mostly a byproduct of oil drilling, but this relationship, sometimes called artificial integration, has been unwinding over the past decade, mainly because of rising shale gas production. And as gas production surged in the US, which surpassed Russia in 2012 as the world’s largest producer, and export terminals were built, it became easier to sell into markets beyond North America.

Another important factor for gas prices is the technology needed to liquefy and ship the fuel, which must be converted into a compact form—about 600 times smaller by volume than in its gas form—called liquefied natural gas before it can be loaded onto specially designed carriers for transport by sea or road.

LNG export capacity is fixed in the short-term. Facilities for the liquefaction, exporting, importing, and regasification require major investment, so a regional shock, such as Russia’s invasion of Ukraine, can send regional prices moving in different directions.

After the invasion last year, Europe turned to LNG to replace pipeline imports of Russian gas, and US shipments emerged as a key substitute. Why was that possible when US LNG export capacity is fixed? With gas in Europe commanding a temporary price premium during the spring and summer of 2022, Asian customers of US LNG decided to reroute their cargoes to sell in Europe.

There is another important quirk of the natural gas market at play. Pricing formulas for long-term delivery contracts with US companies usually use US prices. That meant Asian customers with long-term deals could buy more cheaply from the US, then reroute tanker ships at sea to sell cargo at the much higher European spot market price.

Despite an increasing reliance on LNG as a substitute for Russian pipeline gas, European LNG import capacity turned out not to be a binding constraint on market integration. European import terminals had plenty of spare capacity before Russia’s invasion of Ukraine, and with the addition of mobile floating storage regasification units, Europe has the necessary infrastructure to accommodate higher volumes of LNG imports.

On the other hand, the United States and other gas producers are exporting at the limits of their capacities, and expansions to global LNG export capacity are needed to bring European and Asian prices back to historically normal levels over the longer term. In the United States, these capacities are poised to keep growing, even after already rapid gains. The first LNG export terminal in the country opened in 2016, followed by many more.

Sizable expansion projects already under construction in the United States, Africa, the Middle East, and elsewhere are likely to increase global LNG export capacity by 14 percent by 2025. Other planned projects could bring export capacity to around 1Trillion cubic meters, roughly a quarter of last year’s global gas consumption.

Securing financing to build new terminals, however, can face major hurdles. Companies need 15- to 20-year contracts to obtain bank financing for construction. Terminals usually cost $10Billion to $15Billion and take two to four years to complete. Timelines are less certain for projects without long-term sales contracts, and some may never be built.

Ultimately, expanded LNG export capacity for the United States and other producers may prove crucial to creating truly global gas markets that are balanced across regions. As advanced economies increase reliance on weather-dependent renewable energy from wind and solar, they will likely see critical periods of increased demand for supplemental natural gas to meet power generation needs. Integrating global gas markets and building needed infrastructure allows prices to stimulate demand and supply reactions in larger, more integrated markets. This helps to buffer global energy markets against supply shocks


TOTAL Sets up a $200Milion Foundation for Community Development in Moza’s Gas Rich District

Section: Gas Monetization · May 23, 2023 · 1 comment  | 

TOTALEnergies has received the report of the human rights advocate it commissioned to evaluate the conflict challenges and living conditions of the communities around its project in Mozambique’s gas rich Cabo Delgado Province.

The French major has elected, based on the report by Jean-Christophe Rufin, to set up a well-heeled foundation with a detailed, comprehensive work programme.

The 800-word press release focuses on improvements in community engagement and makes scant reference to the fatal attacks by Islamic insurgents which drove TOTAL and its contractors away from the LNG plant construction site in April 2021 and led to the commissioning of Mr. Rufin’s investigation.

TOTAL says that itself and its partners in the Mozambique LNG Ltd have approved the following action plan:

– Mozambique LNG shall establish a dedicated Foundation for the implementation a socio-economic development programme covering the whole territory of the Cabo Degaldo province, as part of a consistent and sustainable development strategy. The action of the Foundation will be guided by an objective of shared prosperity in the province, without waiting for the revenues expected during the production phase of the project. In order to sustain its action, this Foundation will be provided with a multi-annual budget of $200Million. The Foundation will be headed by a recognized figure in the field of local economic development and overseen by a Board of Directors including representatives of Mozambique LNG and of the civil society. Its actions will be conducted in a coordinated manner with the activities carried out by the other development stakeholders present in the Cabo Delgado province. This Foundation will act under the name of “Pamoja Tunaweza” (“together we can” in Kiswahili).

– Regarding the populations affected by the development of the Afungi industrial site, the following actions will be implemented:

  • The relocation and compensation process will be audited to identify the corrective actions to be implemented.
  • The resettlement of the Quitupo village residents will be finalized without delay. To that end, Mozambique LNG will complete the construction of the new Quitunda village houses by the end of the Summer 2023. All Quitunda houses shall be equipped with access to solar energy.
  • The inventories of the assets of the populations affected by the project and subject to compensation (constructions, land plots and plantations) will be updated, to ensure that compensations fully reflect the current situation of these assets.
  • The payment of compensations to families affected by the project will be accelerated. A taskforce shall be set up together with the Mozambican authorities to enable all families to obtain, by the end of the summer in 2023, the legal documents required to receive the payments due to them.
  • Access of local communities to agricultural areas will be facilitated and enlarged. Given that the Mozambique LNG industrial facilities do not occupy the entire land area granted by the Government of Mozambique, a surface of about 2,000 hectares located in periphery of the site will be made available to local communities for agricultural activities.
  • Individual transportation means will be provided to the fishermen resettled in Quitunda, to facilitate their access to the various fishing areas.

The report notes that the security situation in the north of Cabo Delgado has evolved positively in 2022 and recommends reviewing the framework of relations between Mozambique LNG and the Mozambican Defense Forces in light of this situation. Mozambique LNG has started a dialogue with the Mozambican authorities to this end.

Finally, a follow-up mission to monitor the implementation of this action plan will be carried out by Jean-Christophe Rufin at the request of Mozambique LNG project partners.


Africa Oil Divests from Kenyan Oil Development, to Focus on Namibia and Nigeria

Section: Farm in, Farm Out · May 23, 2023 · No comments  | 

By Toyin Akinosho

Africa Oil Corp, which marketed Kenya’s opportunities to the world and brought in Tullow Oil, has elected to withdraw from the country’s only upstream development project.

The Canadian junior says it has submitted withdrawal notices to its joint venture partners on Blocks 10BB, 13T and 10BA in Kenya, to unconditionally and irrevocably, withdraw from the entirety of the joint operating agreements (JOAs) and Production Sharing Contracts (PSCs) for these concessions. The Company has concurrently submitted notices to Ministry of Energy and Petroleum, requesting the government’s consent to transfer all of its rights and obligations under the PSCs to its remaining joint venture partner.

Africa Oil Corp has determined that “the carrying value of the Kenya intangible exploration assets was written down to $58.6Million at December 31, 2022, and the Company intends to further impair this value to zero”.

“Our strategy has shifted to focus on production and high potential exploration opportunities”, declares Keith Hill, the company’s President and CEO. Those opportunities include “our Orange Basin portfolio where we are now appraising the exciting Venus discovery, offshore Namibia”.

The production opportunity refers to the company’s stake in Prime Energy, which receives dividends from proceeds in Agbami, Akpo and Egina fields in Nigeria.

Africa Oil Corp. came into the consciousness of the global oil and gas community in the late 2000s, when it was vigorously marketing the Kenyan and Ethiopian opportunities, distributing printed regional maps and seismic sections from tiny booths at conferences focused on African oil and gas. These were the years immediately after the commercial discovery of oil in Uganda.

One company which took more than a cursory glance at those maps was Tullow Oil, which went ahead to farm in to acreages held by Africa Oil, took charge as operator and proceeded on a seismic and drilling campaign. In March 2012, Tullow announced a commercial discovery at Ngamia -1, in Block 10BB, placing Kenya on the hydrocarbon map of the planet. The South Lokichar basin development grew on the back of the Ngamia-1 discovery and the string of finds that came after it.

The latest field development plan calls for seven fields to contribute to a 130,000Barrels of Oil Per Day central processing facility from which the crude is evacuated into a 20 inch, 823 kilometre long, heated pipeline, which ferries the commodity to the country’s port town of Mombassa on the edge of the Indian Ocean.

AOC says, in its release, that it is proud to have played a central role in discovering the oil fields in Kenya’s South Lokichar Basin.

“We continue to believe these discoveries will form the basis of a significant oil producing province in the coming years with strategic value for the country. We have also had the privilege of working with our host communities on our social-focused programs and we are grateful to them for welcoming us to their midst. We thank the government of Kenya, our host communities and our joint venture partners for their support over the years and we wish them the best in taking the project forward to the next stage.”

 


First E& P Plans an Offshore Gas Gathering Hub

Section: Gas Monetization · May 22, 2023 · No comments  | 

FIRST E&P is developing an open-access offshore gas gathering and processing hub around its operated OML 83 and 85 assets. The company is hoping the facility could have the capacity to process 1Billion standard cubic feet per day, from a mix of FIRST E&P’s gas as well as other third-party gas within a 60- to 80-kilometre radius.

First E&P thinks this is an opportunity because there is, in Nigeria, an absence of open-access gas gathering, processing and transportation infrastructure in the offshore terrain.This offshore gas hub will process wet gas to pipeline specifications as well as enhance value from our gas resources with extraction of the condensate and NGLs. Robust gas transportation options in addition to pipelines, such as LNG and CNG, will also be incorporated into the development concept to efficiently serve both local and international markets. The offshore gas hub plant FEED has been launched and is expected to be completed in mid-2023 when the formal project FID is scheduled to be taken to assure first gas is on stream in 2026.

There is no certainty, though, that the FID could be taken this year.

Such a project would fill a vast infrastructure gap, which has obstructed monetization of offshore gas resources in the country.

Unlike crude oil, raw gas must be processed and conditioned to pipeline-specification gas flow, which entails separating the gas liquids, condensates and related heavy ends before moving it onshore or commercialising demand points efficiently.


Negotiations Concluded: HGA, PSA on Tanzanian LNG to Be Signed in a Few Weeks

Section: Gas Monetization · May 22, 2023 · No comments  | 

Norway’s Equinor and UK based Shell Plc have concluded negotiations on key agreements on the Tanzanian LNG development with the Government.

“Subject to successful completion of the assurance process over the coming weeks”, says Jared Kuehl, Shell’s Vice President and Country Chair for Tanzania, “we anticipate signing a Host Government Agreement (HGA) that covers the onshore elements of the project, and a Production Sharing Agreement (PSA) that oversees its upstream component”.

Unni Fjaer, Managing Director of Equinor Tanzania, notes: “Negotiations on key agreements between the international energy companies (IECs) and the Tanzanian government are now concluded, and the documents are now subject to final reviews and approvals before their expected signing in the following weeks”.

Shell’s Kuehl describes the update as “a significant milestone, on the long path to realising such a major project like Tanzania LNG, with the next steps involving a period of time of detailed engineering design work”. He says that Equinor and Shell, “as joint operators, are pleased with the steps forward and remain focused on continuing to work together with our partners (ExxonMobil, MedcoEnergi and Pavilion Energy), TPDC and of course the Government of Tanzania.”

Equinor’s Fjaer thanks “the Tanzanian government, the negotiating team from Equinor, Shell, ExxonMobil, Medco, Pavilion and TPDC for their hard work throughout this process”. She adds that the end of negotiations “paves the way for the series of milestones that need to follow to realize this fantastic LNG opportunity for the country and the world.”

The deal will allow the two European E& P giants to start engineering work on a project that will pump over 1.5Billion cubic feet per day of gas in three deepwater blocks to a 10Million-15Million tonne per annum LNG plant on the Indian Ocean coast town of Lindi.

 


ENI: Plan for the Worst and Hope for the Best!

Section: In the news · May 19, 2023 · No comments  | 

By Gerard Kreeft

Claudio Descalzi, was recently re-appointed Chief Executive Officer (CEO) for a fourth term by ENI’s Board of Directors. He has been CEO since 2014, making him one of the longest serving CEOs in the industry. Under his command the company has become a dominant voice in the industry, especially in the frontier areas of Africa and Asia, seldom covered by the media.

It is time to reflect on his reign and what to anticipate in the coming period. Perhaps a very bumpy road to 2050.

For starters the company produces 1.7Million barrels of oil equivalent per day (1.7MMBOEPD), has a balance sheet which has an economic leverage of 20%, and has, according to its website,  an Internal Rate of Return(IRR) of 34%, the highest of all its peers  for the 2012-2021. Also, its RRR(Reserve Replacement Ratio) of 110% for the period 2012-2021 is the highest compared to its industry peers.

ENI states that 90% of exploration capex is spent on near fields and proven basins. Some $11Billion in the last 10 years has been spent on its dual exploration model—near fields and proven basins. The company states that it only requires three years—from first discovery of oil  to market—twice as fast as the industry average.

Yet ENI’s stock market price, like the other oil majors, has performed badly in the period between January 2018 and April 2023. While the DOW Jones Industrial Index rose 35% (25,295 to 34,098) in this period, the ENI share and most of the European majors, with the exception of Equinor, have underperformed dramatically. In this five-year period , the ENI share price has, for example, decreased  14%. Other European stocks also decreased: Repsol down 18%, BP down 7%, Shell down 10%, and TOTALEnergies remained the same. Only Equinor was up 26%. In the same period US oil giants Chevron and ExxonMobil have seen their share prices flourish: Chevron up 32% and ExxonMobil 36%.

Table 1: Stock market prices of  majors Jan 2018- April 2023(NYSE – New York Stock Exchange)

Year Repsol BP Shell ENI TOTAL

Energies

 Chevron ExxonMobil Equinor
2018 $17 $43 $69 $35 $58 $128 $87 $23
2023 $14 $40 $62 $30 $58 $169 $118 $29

Why is it that the share prices of  Chevron and ExxonMobil have performed so well and their European counterparts, including ENI, have done so poorly?

The message from the investor community is the clarity of the message. Chevron and ExxonMobil have as their mainstay–the production of hydrocarbons and this is the message that is preached. New energy policies including CCS (Carbon Capture and Storage) and other new energy initiatives make up only  between 15-20% of their capital budgets. In the case of Chevron some $3Billion per year based on a capital budget of $15-$17Billion; ExxonMobil’s new energy comes in at $3Billion per year based on a capex of $23- $25Billion. The message is clear and simple: we are oil companies pure and simple. Done in the good tradition of John D. Rockefeller the spiritual father of both companies.

European oil giants, have seen their dualism—wanting to maintain their green image and also profiting from the oil bonanza—fall out of favor by company shareholders. Their clarity of messaging has been found wanting.   The sole exception is Equinor who have stated that the majority of their capex budget will be from renewables by 2030.

ENI’s Strategy

A key ENI strategy is developing a series of joint-ventures to ensure that ENI can achieve maximum leverage for its current oil and gas assets and at the same pursuing new strategies as part of its energy transition plan. Three examples:

Vår Energi, Norway was formed in 2018 following the merger of ENI Norge AS and Point Resources AS owned  by Hitec Vision, a private Norwegian investment fund.  The company’s primary focus  is oil and gas developments on the Norwegian Continental Shelf. ENI controls 69.6% of the shares, and HitecVision 30.4%. Vår Energi has production in 36 fields and produces 247,000 boepd.

Vår Energi has entered into a collaboration with Odfjell Oceanwind and Source Galileo to pursue a pilot project for floating offshore wind at Goliat. The Goliat platform is currently electrified and is supplied with power from shore through a power cable with a capacity of 75 MW. The purpose of the project, which is called GoliatVind, is to use the cable as infrastructure for electricity to the mainland and increased renewable power generation in Finnmark, Norway.

Azule Energy, Angola, a 50-50 joint venture between ENI and BP formed in 2022 to include both companies’upstream assets, LNG and solar business. Azule Energy is now Angola’s largest independent equity producer of oil and gas, holding 2Billion barrels equivalent of net resources and growing to about 250,000 barrels equivalent per day (boed) of equity oil and gas production over the next 5 years. It holds stakes in 16 licences (of which 6 are exploration blocks) and a participation in Angola LNG JV. The company also participates in the New Gas Consortium(NGC), the first non-associated gas project in the country.

An interesting footnote: “The JV incorporation took place after the pending conditions were met, among them having secured a third-party financing of $2.5Billion in the form of Pre-Export Financing, and after receiving regulatory approvals.” In other words, any financing of Azule Energy will not be reflected in the ENI and BP balance sheets.

Plenitude, ENI’s new company, launched in June 2022 is an integrated business combining the generation of electricity from renewables, the sale of electricity, gas and energy services to households and businesses, and a European network of charging points for electric vehicles.

Plenitude had an installed renewables generation capacity of 2.3 GW and a pipeline of renewables projects of over 10 GW, a retail portfolio of 10 million clients and an electric vehicle charging network of 7,300 proprietary installed charging points (excluding inter-operational charging points).

“The cash flows from the retail business area will underpin the growth of the business, with the Company having sufficient leverage capacity to independently achieve its targets through a strong balance sheet and an investment-grade profile. Sustainability is at the core of Plenitude as it plans to achieve Net Zero by 2040.

ENI considers the IPO an important step in the development of PlENItude. The IPO will enable the Company to diversify its ownership structure, create a long-term shareholder base, access competitive funding, consolidate its positioning and develop more quickly while creating sustainable value for all stakeholders.”

Will PlENItude be given a more important strategic role in the coming years to ensure that ENI can achieve its energy transition role?

ENI’s Dexterity

On 23 November 2022, the President of Mozambique, Filipe Jacinto Nyusi, visited and inaugurated the ENI’s Coral-Sul FLNG installation. The event took place after the shipment of the first LNG cargo on 13 November from Coral Sul FLNG. ENI’s Coral Sul FLNG project’s inauguration deserves special attention. Especially at a time when the two of the country’s most highly touted LNG projects—Rovuma and Mozambique LNG– continue to be on security hold.

While LNG markets in 2023 are scrambling to meet European and global gas demands, there has been radio silence on two of Africa’s most touted LNG projects located in Mozambique: Rovuma owned by a consortium consisting of ExxonMobil, ENI, China National Petroleum Company, Galp, Kogas and ENH; and Mozambique LNG owned by TOTALEnergies, Mitsui Group, ENH, ONGC, Bharat Petroleum, PTTEP, and Oil India.

ENI’s pole position that the company has achieved with its Coral South project cannot be underestimated. With a long-term predicted weakened global demand for LNG, both ExxonMobil and TotalEnergies may have to go cap-in-hand to ENI to discuss possible project options.

ENI’s North African Gas Hub

ENI’s North African Gas Hub–Algeria, Libya and Egypt–will certainly be a key provider of natural gas to Europe. The three countries together produce 650,00BOEPD, approximately a third of ENI’s total global production.

Algeria

In July 2022 Sonatrach and ENI announced that an additional 4Billion cubic meters per year (Bcm/y) will be exported to Italy via the TransMed Pipeline which is a 2,475 km-long natural gas pipeline built to transport natural gas from Algeria to Italy via Tunisia and Sicily. Built in 1983, it is the longest international gas pipeline system and has the capacity to deliver 30.2Bcm/y of natural gas.

ENI recently  announced that it has agreed to acquire BP’s business in Algeria, including the two gas-producing concessions “In Amenas” and “In Salah” (45.89% and 33.15% working interest respectively).

In 2023 ENI’s production from Algeria is 130,000BOEPD.

Libya

The Libyan gas produced by the Wafa and Bahr Essalam fields operated by Mellitah Oil & Gas, an operating company jointly owned by ENI and NOC(Libyan National Oil Company). The gas  is brought to Italy through the Greenstream pipeline. The 520-kilometre natural gas pipeline crosses the Mediterranean Sea connecting the Libyan coast with Gela in Sicily. The natural gas pipeline has a capacity of  8 bcm/y. ENI has a production of 168,000 boepd.

Egypt

ENI is operator of the large Zohr field which In August 2019, had a  production of more than 2.7Billion cubic feet of gas per day (Bcf/d). An important agreement was the restart the of Damietta liquefaction plant which will provide up to 3 bcm in 2022 for European customers. ENI produces 360,000BOEPD.

The Kazakhstan Connection

ENI has been present in Kazakhstan since 1992  and is a co-operator of the Karachaganak producing field in which it has a share of 29.25% share; and is a partner of the North Caspian Sea PSA (NCSPSA) consortium which operates  the Kashagan Project.  The success of both projects is dependent on the goodwill of both Russia and Kazakhstan. ENI production in Kazakhstan is 145,000 boepd.

The Karachaganak Project produces approximately 45% of Kazakhstan’s natural gas. Peak production reached 155Billion cubic feet per year and oil production of 100,000 bopd(barrels oil per day). An important part component of this project is the Karachaganak Orenburg Transportation System (KOTS) connecting

the Karachaganak field to the Orenburg Gas Plant (OGP) in the Russian Federation. Two pipelines of 28 inches in diameter transport sour gas to OGP for further treatment. In addition, there are three 14-inch lines of which one is a liquid export line and two are dual service and transport either unstabilised liquid or sour gas.

The Kashagan Field discovered in 2000 has approximately 13Billion barrels of recoverable reserves. The project has from the start been hampered by harsh weather conditions including sea ice in the winter, temperatures varying from -35C to -40C, extremely shallow water and high levels of hydrogen sulphide, together with project delays, mismanagement and disputes. In 2012 it was designated as the main source of supply for the Kazakhstan-China oil pipeline. CNN Money had estimated that field development had cost $116Billion, making it the most expensive energy project in the world. No wonder cynics named the project ’Cash-is-Gone’.

Caspian Pipeline Consortium (CPC)

An equally troubling problem is the Caspian Pipeline Consortium(CPC) which transports Caspian oil from Kazakhstan to Novorossiysk-2 Marine Terminal, an export terminal at the Russian Black Sea port of Novorossiysk. The CPC pipeline handles almost all of Kazakhstan’s oil exports. In 2021 the pipeline exported up to 1.3MillionBPD(barrels per day). On July 6, 2022 a Russian court ordered a 30-day suspension of the pipeline because of an oil spill. The CPC appealed the ruling and the suspension was lifted on 11 July of the following week, and the CPC was instead fined 200,000 rubles ($3,300).
The incident demonstrates the vulnerability of future production. No doubt this is not the last such incident which involves Russian and Kazakhstan goodwill to ensure that Kazakhstan’s oil and production does not falter. Being dependent on Russian-Kazakhstan goodwill is the most brazen example of a lack of diversity of oil  supply.

Some Final Considerations

ENI is a company that can be admired because of the joint-ventures it has established to date, its contrarian decentralized management style, and its symbolic race to become green. Yet there is a  need to establish a more central message. Much too much of a central green message has remained at the decentralized level of its joint ventures. In effect reducing any message that top management wants to send to shareholders. Consider the following aspects:

Going Green

If ENI is to be a serious contender in the Green Race it must ask whether it continues down the road of its current European duality: wanting to be green through its PlENItude subsidiary and also maintain its core mandate that of producing hydrocarbons. To date only Equinor has found a doable solution: announcing that by 2030 the majority of its capex will be based on renewable fuels.  Will Plenitude become ENI’s green vehicle in the energy transition?

Meanwhile the European competition has not been sitting idle:

Enel: committed to achieving CO2 neutrality by 2040 instead of 2050, achieving 75% of electricity from renewables and 80% digitalization of its customers on the grid  by 2025. and having an installed generating capacity of 75GW by 2050.

Engie: pledged to reduce to CO2 neutrality by 2045, 45% of investments is focused on renewables and by 2030 will have 80GW of installed generating capacity.

Iberdrola: in the period 2023-2025 the company will invest $50Billion and achieve net zero for Scope 1, 2 and 3 before 2040. By 2030 the company will have installed capacity of 100GW, valued at $70Billion.

Note: Essentially, scope 1 and 2 are those emissions that are owned or controlled by a company, whereas scope 3 emissions are a consequence of the activities of the company but occur from sources not owned or controlled by it.

Ørsted: the Danish wind energy pioneer, continues to set new records. Ørsted share price in December 2022 was $93; five years earlier in 10 June 2016 it was $37. By 2030 the company’s goal is to have an installed capacity of 50GW. Ørsted is also involved with the building of two energy islands– Bornholm and North Sea– which will deliver 10GW of power.

What has set these companies apart is that they have created a huge competitive advantage which will be hard to challenge for newcomers. Moreover, they have moved well beyond simply dabbling in green energy. These companies have become specialists and now moving on to the next level: creating a digital platform on which value does not reside in owning resources but rather in managing data-driven ecosystems. Essentially borrowing a chapter from Uber, which does not own taxis or Booking, which does not own hotels. Creating a digital platform on which value does not reside in owning resources but rather in managing data-driven ecosystems.

How will shareholders react to  these companies in 2023?  To date there is good news and bad news for green energy companies.

Table 2: Stock market prices of new energy companies  Jan 2018- April 2023

Year Enel Engie Iberdrola Ørsted
2018 $5 $16 $7 $49
2023 $7 $16 $13 $89


Enel, the Italian power company has seen its share price increase by 40%. Engie, the large French energy giant has seen its share price remain flat . Iberdrola, the Spanish power company has had an increase of 86% and Ørsted, the Danish power company, has seen its stock soar by 82%.

ENI’s Joint Ventures

The Vår Energi  and Azule Energy joint ventures demonstrate that ENI is willing and able to put together decentralized entities in diverse settings and still  maintain management control. Do not be surprised that additional JVs will be commissioned.

In the future ENI’s North African Gas Hub–Algeria, Libya and Egypt—will probably become more integrated as it continues to provide natural gas to Europe.

What could provide the company additional problems is its multi-party relationship in Kazakhstan dependent  on the good will of the Governments of both Kazakhstan and Russia and the Karachaganak and  Kashagan Partners.

ENI operates in a very fluid market place and has shown the ability to be diverse and able to provide contrarian strategies. The company has a divergent portfolio yet it lacks an overarching strategy which provides a roadmap to its 2050 low carbon deadline.  Such a roadmap should provide clarity of message which no doubt would help bolster its share price.

Gerard Kreeft, BA (Calvin University, Grand Rapids, USA) and MA (Carleton University, Ottawa, Canada), Energy Transition Adviser, was founder and owner of EnergyWise.  He has managed and implemented energy conferences, seminars and university master classes in Alaska, Angola, Brazil, Canada, India, Libya, Kazakhstan, Russia and throughout Europe.  Gerard has Dutch and Canadian citizenship and resides in the Netherlands.  He writes on a regular basis for Africa Oil + Gas Report, and contributes to IEEFA(Institute for Energy Economics and Financial Analysis). His book The 10 commandments of the Energy Transition is now on sale at  Bookstorehttps://books.friesenpress.com/store/title/119734000211674846/Gerard-Kreeft-The-10-Commandments-of-the-Energy-Transition


Egina Slides Deeper, Desperate for The Floor

Section: In the news · May 19, 2023 · 5 comments  | 

By Johnson Otalo

The Egina field in deep offshore Nigeria has plunged further lower than the symbolic 100, 000Barrels of Oil Per Day

Its April 2023 output of 91,266BOPD is an even stronger signal of its  unrelenting pace of decline since plunging to 145,000 Barrels of Oil Per Day BOPD, as of March 2022, a clear 25% decline in two years of production

The field commenced production in December 2018 and peaked at 200,000BPD in mid-2019.

Peak output, as a rule, for a field its size, (>500Million barrels estimated recoverable reserves) should take at least three years before descent.

On the contrary, Nigeria’s “youngest” large sized deepwater development started crashing rapidly from peak output in 2020.

The field now delivers less than Chevron operated Agbami and Shell operated Bonga complex, both of which have been in production for over 12 years.

Egina’s rapid fall contrasts the argument that Nigeria’s output decline is largely the result of pipeline sabotage, which obstructs evacuation from the flowstations to the terminals. It also challenges the notion that wells shut in out of economic or physical challenges are the major culprits for the country’s production slide. What this precipitous drop calls for is massive investment in new field development away from easy targets of saboteurs.

TOTAL has commenced a nine well drilling campaign including seven development and two exploration wells to halt the decline, but it’s not clear if hook up of the new producers has commenced.

This story is an updated and abridged version of the one published in the March 2023 edition of Africa Oil+Gas Report, released to paying subscribers. It is here as a form of public service.

 

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