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Tullow Gets Licence Extensions, Even though It Will Leave Kenya

By Bunmi Aduloju

The Kenyan government has granted the application of Tullow Oil and its Joint Venture partners for tenure extension for Blocks 10BB and 13T, even though the London listed company is working on selling its stakes in the asset

The country’s Ministry of Mines and Petroleum approved  the work programme and budget for 2021, in which the partners  pledge to re-assess Project Oil Kenya and design an economic project at low oil prices whilst preserving the phased development concept of the Field Development Plan. Tullow announced this extension on December 8, 2020.

The company had reported, three months ago, that its farm-down process in Kenya had been suspended “pending a comprehensive review of the development concept and strategic alternatives”.

The company had also noted, in earlier briefs, that it would use the extended time frame, when granted, to work on “submitting an updated Field Development Plan by end of 2021”.

The phased development concept proposes that the Amosing, Ngamia and Twiga fields should be developed as the Foundation Stage of the South Lokichar development. This stage would include a 60,000 to 80,000BOPD Central Processing Facility (CPF) and an 892km export pipeline to Lamu.  The installed infrastructure from this initial phase can then be utilised for the optimisation of the remaining South Lokichar oil fields, allowing the incremental development of these fields to be completed at a lower unit cost post-First Oil.

Tullow Oil’s suspension of its planned farm down, however, doesn’t mean that the company has a future in Kenya. The farm down process will restart, after government has agreed on a new template for development, sometime in 2022.

 

 


In Senegal, Woodside Wants it All

Barely three months after pre-empting the sale of Cairn Energy’s interest in the Senegalese oilfield development and adjoining discoveries to a third party, Woodside Energy has made the same move on a similar transaction by FAR.

In mid-August 2020, the Australian explorer executed its right of first refusal to Cairn Energy’s sale of its 40% interest to LUKOIL, the Russian giant.

Last weekend, it pre-empted the sale of FAR’s i15% interest to the Indian company ONGC.

If Woodside successfully acquires both Cairn’s and FAR’s interests, its working stake in the Sangomar exploitation area will be 82%, with the state owned Petrosen holding 18%. The working interest in the remaining Rufisque, Sangomar and Sangomar Deep (RSSD) evaluation area (including the FAN and SNE North oil discoveries) will be Petrosen 10%, and Woodside 90%.

That is if the Senegalese authorities approve the transactions, as they are.

But Woodside is not there yet.

Although Cairn Energy PLC shareholders voted in favour of the sale and purchase agreement for Cairn Energy’s stakes on 23 September 2020, the transaction with FAR still depends on the outcome of a shareholder meeting, scheduled for December 21, 2020. “The shareholder meeting documentation expressly contemplated that such authorisation would cover the exercise of a pre-emptive right”, FAR says in a release.

Woodside has offered FAR the exact terms of the FAR/ONGC Transaction, including: • Payment to FAR of $45Million • Reimbursement of FAR’s share of working capital, including any cash calls, from 1 January 2020 to completion • Entitlement to certain contingent payments capped at $55Million.

Woodside says that the acquisition will be funded from current cash reserves.

Woodside CEO Peter Coleman said the acquisition of FAR’s participating interest makes the value proposition for Sangomar even more compelling. “Sangomar is an attractive, de-risked asset in execute phase, offering near-term production. The acquisition is value accretive for Woodside shareholders and results in a streamlined joint venture which will assist in our targeted sell-down in 2021”.


Kenya, in Defiance, Plans to auction More Coal Licences

By Macson Obojemuinmoin

Kenya plans to auction additional coal blocks in the east of the country, in defiance of growing international calls to end coal use in the global energy mix.

The government is pushing to exploit the deposits in the Mui Basin, often reported by the media to be rich deposits, but, like most media reports of geologic provinces, with scant evidence of the definitive size of the asset. Mui Basin has witnessed a total of 71 exploration and appraisal wells, most of them drilled in Block C to depths ranging from 75 to 445 metres. Some 32 wells have intersected coal.

The Energy ministry, through the Energy and Petroleum Regulatory Authority (EDRA), has conducted licencing rounds in the basin since 1999, covering an area of 500 square kilometres.

Last year, the African Development Bank (AfDB) said it would not fund a coal-fired power plant project in Kenya and has no plans to finance new coal plants in future. The pan continental lender published an environmental and social impact assessment in May 2019 for the Lamu project, which was planned to be a 1,050 megawatt plant in eastern Kenya was backed by Kenyan and Chinese investors. Construction was originally planned to start in 2015.

Akinwumi Adesina, the AfDB president, unveiled ambitious plans to scrap coal power stations across the continent and switch to renewable energy. “Coal is the past, and renewable energy is the future. For us at the African Development Bank, we’re getting out of coal,”Adesina said as he outlined efforts to shutter coal-fired power plants and build the “largest solar zone in the world” in the arid Sahel belt.

But Kenya’s energy and business analysts have lined up behind the government. George Wachira, the country’s top energy analyst, wrote last year in BusinessDaily, the influential financial newspaper,  that coal was a commodity which cuts across mining, energy and manufacturing economic sectors. “It is mainly used for power generation and for providing heating energy to heavy industries like cement and steel. Locally produced coal has the potential to become an economic integrator with large employment and gross domestic product (GDP) opportunities. Like crude oil, coal is an extractive and productive resource that creates real national wealth”.

EPRA, the energy regulator, says that “the government has decided to concession all four blocks (in the Mui Basin) to private companies through a competitive international bidding process, to fast-track exploration, development and production.”

 


Indians to Take over FAR’s High Profile Assets in Senegal

By Toyin Akinosho

FAR has finally found a buyer for its high profile oil and gas asset offshore Senegal.

ONGC, the Indian state hydrocarbon company, has agreed to buy the property, which includes FAR’s entire interest in the Production Sharing Contract for the Rufisque, Sangomar, and Sangomar Deep Offshore Blocks offshore Senegal and the relevant Joint Operating Agreement (the RSSD Project).

The Sangomar exploitation project, located in these blocks, is the largest offshore crude oil development currently under construction in Africa. Phase 1 development of the project, which will develop some 250Million barrels of oil, remains on track for targeted delivery of first oil in 2023. Production from this phase is expected to be around 100,000 barrels of oil per day (BOPD).

The Australia listed minnow, which has struggled as a going concern-and has defaulted on paying cash calls on the project- in the last two quarters, says it has entered into a Sale and Purchase Agreement with ONGC (full name ONGC Videsh Vankorneft Pte Ltd), the largest E&P company of India, which has agreed to pay FAR $45Million at completion. In addition, ONGC has agreed to reimburse FAR’s share of working capital for the RSSD Project from 1 January 2020 totalling $66.58Million, payable on completion. The reimbursement is comprised of cash calls paid by FAR, including $29.60Million paid to cure FAR’s default to the Joint Venture. The Transaction also includes an entitlement to certain contingent payments capped at $55Million.

The Transaction is subject to conditions precedent, including the following:

  • The written approval of the Minister of Petroleum and Energies for the Republic of Senegal to the transfer of the Transferring Interest to the Purchaser being obtained. FAR hopes that such approval would be obtained in January 2021.
  • RSSD Project Pre-Emptive Rights – The Transaction is conditional on the waiver or non-exercise of preemption rights available to FAR’s co-venturers in the RSSD Project. FAR is issuing the pre-emption notices between November 11 and November 12, 2020, and the co-venturers have 30 days to advise if they wish to exercise their right to preempt the Transaction on the same terms and conditions as ONGC. In the event of pre-emption, FAR will receive the same consideration as from ONGC.
  • FAR Shareholder Approval – ASX Listing Rule 11 requires that FAR obtains shareholder approval in relation to the Transaction. FAR intends to convene a general meeting of FAR shareholders as soon as practicable to be held in December 2020 to consider approving the Transaction (including if the sale is the subject of pre-emption).
  • Third Party Agreement Termination – The Transaction is subject to the termination or satisfactory resolution of an agreement between FAR and a third party, details of which are currently commercial in confidence. ONGC has the discretion to waive this condition.

Cath Norman, FAR’s Managing Director, describes the offer from ONGC as representing “the best option available at this time and we trust that our shareholders will vote for this transaction”. She reinstates the well-known fact that “the market for financing and selling assets has been weak since the impact of COVID was felt in March of this year”.

If the Transaction completes, the company anticipates, “FAR will be in a strong financial position and will be relieved of its future development obligations in relation to the RSSD Project, which in the absence of a sale, FAR cannot currently meet beyond December 2020”.

FAR expects to have approximately $130Million in cash at the close of this Transaction that, Ms. Norman says,” will be used to rebuild the Company and further our other West African prospects offshore the Gambia and Guinea-Bissau”.

Having been in the RSSD project for 14 years, “it’s a bittersweet moment to be selling our stake. FAR is committed to our projects in The Gambia and Guinea-Bissau and using our deep knowledge of the MSGBC Basin to potentially explore offshore Senegal again,” Norman declares.


Court Restores Marginal Fields Revoked by Nigerian President

A Federal High Court in Abuja, Nigeria’s capital city, has set aside the purported reversal of the consent given by the Government for the farm-out agreement between Chevron and Transnational Energy Limited (TEL) on the Abigborodo and Hely Creeks marginal fields in the Oil Mining Lease (OML) 49.

Justice Taiwo Taiwo held that the defendants failed to supply counter evidence and arguments to disprove the plaintiffs’ claims. The judge noted: “One thing that is very clear and undeniably so, is that the averments of the plaintiffs, from the inception of the meetings and correspondences between the plaintiffs, Chevron Nig Ltd, the third defendant,  Department of Petroleum Resources, (DPR), Nigerian National Petroleum Corporation (NNPC) and National Petroleum Investment and Management Services (NAPIMS) on the farming out by Chevron Nigeria of the Hely Creek and Abigborodo marginal fields within OML 49 were not denied’.

The court, upheld the plaintiffs’ claims and granted all the reliefs sought, including an award of $20Million in damages against the defendants, who are all Federal Government’s agents. The suit was filed by Transnational Energy Limited (TEL) and Bresson A. S. Nigeria Limited. Defendants were Minister of Petroleum Resources, Minister of State, Petroleum Resources, DPR, NAPIMS, and the Attorney General of the Federation. Sijuade Kayode, lawyer to the plaintiffs, claimed that a farm-out agreement over the two marginal fields was concluded between TEL and the joint venture operators, Chevron Nigeria Limited in 2017 for amongst other purposes, to provide feedstock to a gas-to-power project developed by TEL and its partners, which started in 2012. The DPR, in a letter dated 20th February 2017, conveyed a letter of ministerial consent by the Minister of Petroleum Resources approving the farm-out and its terms, the lawyer stated. The DPR, in its said letter, equally directed TEL to pay a prescribed premium to Federal Government, after which the farm-out will become effective, a directive TEL complied with by paying the prescribed fee of $639,820.65, the plaintiffs added.

Rather than allow the plaintiffs enjoy the benefits of the agreement after the government acknowledged receiving TEL’s payment, the then Chief of Staff to President Muhammadu Buhari, the late Abba Kyari, wrote a memo, purporting to revoke the earlier ministerial consent, claiming to have acted on the instruction of the President. They added that the DPR, without any notice to the farmee (TEL) put the two fields in the 2020 marginal fields basket, even though the fields were not part of the original 57 fields approved for the bid round, a decision TEL and its sister company in the power business (Bresson A.S. Nigeria Limited) challenged by filing the suit.

The plaintiffs exhibited their audited accounts, business plan and financial model which showed that both plaintiffs had jointly expended $22,718,000.00 (twenty-two million, seven hundred and eighteen thousand United States dollars) on the development of the gas and power side of the project. They also exhibited their financial models in arguing that they have lost over $164Mllion due to the actions of the defendants, while Federal Government may have equally lost over $68Million in royalty and taxes not earned as a result of the actions of the defendants.

The plaintiffs asserted that their gas-to-power project elicited a massive international cooperation spanning over 15 countries and involving over 100 international experts. “As a matter of fact, the Hungarian Exim Bank went to parliament to amend its legislation in order to raise her scope of participation in the power side of the projects,” they said. Justice Taiwo, in the judgment delivered on October 18, 2020, a copy of which was made available on Friday, held that the defendants failed to supply counter evidence and arguments to disprove the plaintiffs’ claims.


DPR Waits on President Buhari’s Nod, to Announce Winners of Marginal Fields Bid Round

By Macson Obojemie, in Lagos

The Department of Petroleum Resources (DPR), Nigeria’s regulatory agency, is awaiting the approval of the Minister of Petroleum, to announce the results of the Marginal Fields bid round.

DPR concluded the analysis of the bids in the last two weeks and it has sent the results to the Minister of State for Petroleum, Timipre Sylva, who is to deliver it to President Muhammadu Buhari, the country’s defacto Minister of Petroleum.

The three and half month-long bid round exercise featured 52 fields and was concluded on September 15, 2020.

It was heavily subscribed; the largest number of bid applications in any hydrocarbon licencing sale in Africa in close to 10 years.

While the round started with over 500 applications, it closed with at least 100 applications making it all the way, each delivering at least $115,000 to the Nigerian treasury in the process.

And there will be more money heading to those coffers; when the results are announced, wining bidders have to pay signature bonus before the final awards. Analysts expect some highly contested fields, like Egbolom, to attract north of $5Million as signature bonus.

Nigerian marginal fields bid round is restricted only to locals.

Most applicants in this round, the second such formal round of its type in 17 years, were Nigerian independents who already produce crude oil and gas and are seeking to expand their portfolios. Others were Nigerian oil service contractors who now feel they should take positions in hydrocarbon acreages. Fuller story on the Bid Round is published in the monthly Africa Oil+Gas Report.


Dana Gas Sells Part of Its Egyptian Asset for $236Million

Sharjah based Dana Gas has formally announced the sale of its 100% working interests in the El Manzala, West El Manzala, West El Qantara and North El Salhiya onshore concessions and associated development leases in Egypt.

Dana Gas will retain its interests in its onshore and offshore exploration concessions, respectively El Matariya (Block 3) and North El Arish (Block 6), and will actively pursue maximizing the value of these assets.

The property on sale produced 30,950 barrels of oil equivalent per day, and contributed $38Million to the Company’s EBITDA in the first half of 2020, the company says. Transfer of ownership, responsibilities and staff to the buyer of the assets will take place upon execution and formal approval of the deeds of assignment for the various concessions.

The beneficiary of the sale is IPR Wastani Petroleum Ltd, a member of the IPR Energy Group to whom Dana Gas is selling for a consideration of up to $236Million. The two parties have entered into a binding agreement with including contingent payments. Under the terms of the sale, the consideration comprises (i) a base cash consideration of $153Million, including the net working capital associated with the assets and before any closing adjustments, and (ii) contingent payments of up to $83Million subject to average Brent prices and production performance between 2020-2023 as well as the realization of potential third party business opportunities. Upon closing, the base consideration will be adjusted by the collections received and payments made by the Company during the intervening period between the effective date, and the closing date.

The transaction, which is subject to a number of conditions precedent and to the Egyptian Ministry of Petroleum and Mineral Resources’ approval, is currently expected to complete early 2021. The proceeds will be used to reduce debt and for general corporate purposes. Consistent with this reported actions this year by most international oil and gas companies, the COVID-19 pandemic and associated negative economic effects, Dana Gas will take an impairment in Q3 2020 which will be disclosed to the market following review by the external auditors as part of the Q3 financial results.

 


Morocco, Considering COVID -19, Grants Licence Permit Extension

Moroccan authorities have extended the permit for the onshore Sidi Moktar acreage by 24 months, as a result of COVID-19 issues.

The beneficiary of the consideration is Sound Energy.

The company says the extension is a result of regular dialogue with the regulatory authorities, L’Office National des Hydrocarbures et des Mines ONHYM, which has now added 24 months to the initial period of the Petroleum Agreement in order for the Company to complete the committed work programme.

London listed Sound Energy was awarded the petroleum agreement related to the 4,712 square kilometre Sidi Moktar permit on 12 February 2018, with an initial period of 2 years and 6 months.  The Company holds an operated 75% position in the permits with the remaining 25% held by ONHYM.

The acreage is in the Essaouira basin, central Morocco

Subject to the issuance of the Joint Arreté signed by the Minister  in charge  of Energy and Minister in charge of Finance, the length of the initial period will now be 4 years and 6 months, commencing 9 April 2018. The work programme commitments for the initial period remain unchanged.  The lengths of the first and second complimentary periods, which would commence upon the successful completion of the recently extended initial period, remain unchanged at 3 years, and 2 years and 6 months, respectively.

 


Angola Signs Three New Deepwater Contracts with ExxonMobil

Angola’s National Oil, Gas and Biofuels Agency (ANPG) has signed three Risk Service Agreements with ExxonMobil and Sonangol Pesquisa e Produção, SA (Sonangol P&P), the operating arm of the state hydrocarbon company.

Deep water blocks 30, 44 and 45, covering over 17,800 square kilometers are located between 50 and 100 kilometers from the Angolan coast, in water depths ranging from 1,500 to more than 3,000 meters.

ExxonMobil will operate the three blocks, with 60% interest, while, Sonangol P&P “will have an associative participation of 40%”, a statement by ANPG declares.

Paulino Jerónimo ANPG ‘s Chairman of the Board of Directors, remarks that ExxonMobil’s presence in the Namibe Basin, where the country has never found hydrocarbon, is a key advantage. It would, he argues, help the country  to deepen the geological knowledge  in the largely unexplored basin.

“The success of the work carried out in Angola by international operators, many of whom already have a consolidated presence in the country, is an extremely important factor for the development and credibility of the Angolan oil sector”, Jerónimo notes.

“We will work with the Angolan government and ANPG to identify the border areas with the best resource potential, applying our proven experience and our cutting-edge technology,” says Andre Kostelnik, ExxonMobil’s General Manager in Angola, adding that ” these new concessions are the result of the long success history of our exploration and production activities in Angola.”

Sebastião Gaspar Martins, Chairman of the Board of Directors of Sonangol, in turn, considers the extension of prospecting and exploration activities to an area unexplored in Angola to be extremely important. “We are excited to be a part of this challenging project”, he explains.


Nigeria Opts for Non-Discretionary, Open Bid Round Awards in Proposed Reform Law

Nigeria has opted for non-discretionary award of petroleum licences, with open bid rounds as the core framework, if the Petroleum Industry Bill (PIB) currently in its parliament is the signpost of things to come.

The 252 -page draft bill was delivered to the bicameral house of legislature by the executive arm of the Nigerian government on Tuesday, September 29, 2020.

It says that petroleum prospecting licence or petroleum mining lease shall only be granted –

(a) based on a fair, transparent and competitive bidding process; and

(b) in compliance with the provisions of this Act, regulations made under this Act and licensing round guidelines issued by the Commission for each licensing round.

The ‘Commission” refers to the Upstream Regulatory Commission, which s created by the new law. The success of the reform rests largely on its capacity to deliver.

“The Commission may periodically publish a licensing round plan”, the PIB declares, stopping short of decreeing some form of regularity.

The Minister may, on the recommendation of the Commission, grant a petroleum prospecting licence or petroleum mining lease to a winning bidder, provided that the winning bidder has complied with the requirements of the bid invitation.

The Minister shall inform the Commission of his decision within 90 days of the application for licence or lease and where he fails to inform the Commission within the stipulated time, the licence or lease shall be deemed granted.

Award process

(1) The grant of a petroleum prospecting licence or a petroleum mining lease on a previously appraised area of a petroleum prospecting licence or a surrendered, relinquished or revoked petroleum mining lease in, under or upon the territory of Nigeria, shall be by an open, transparent, competitive and non-discriminatory bidding process conducted by the Commission. The winning bidder shall be determined on the basis of the following bid parameters –

(a) a single bid parameter, which shall be based on any one of the

following parameters –

(i) a signature bonus to be paid in full prior to the granting of the licence or lease by or on behalf of the winning bidder;

(ii) a royalty interest;

(iii) a profit split or profit oil split;

(iv) a work programme commitment during the initial exploration period; or

(v) any other parameter as may be defined specific to a bid round;

and

(b) a combination of the bid parameters, based on a points system assessable by the bidder in such

a manner that the bidder with the highest aggregate number of points shall be the winning bidder.

The PIB says that notwithstanding the bidding parameters prescribed, where there is a bilateral or multi-lateral agreement between Nigeria and another country, the Government may, for strategic purposes and in return for substantive benefits to the nation, direct the Commission to negotiate and award a petroleum prospecting licence or petroleum mining lease to a qualified investor identified in the agreement or treaty.

A SIGNATURE BONUS PAYABLE IN RESPECT OF any licence or lease awarded shall be based on a transparent method for evaluating the acreage.

The Commission shall call for bids in accordance with a procedure published on its website and in at least two international financial newspapers and two national newspapers with wide coverage.

Where the Commission calls for bids pursuant to this section, it shall prescribe a technical, legal, social, economic and financial requirement, including the minimum experience and capacity for an applicant in a regulation or guideline, and the applicant shall be chosen in accordance with the regulation or guideline.

The bids received based on the bid parameters through an open, transparent and competitive bidding process, shall include an electronic bidding process, open to public and conducted in the presence of representatives of the Nigerian Extractive Industry Transparency Initiative, the Ministry of Finance and the Ministry of Petroleum Resources.

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