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The Downstream Gas Market Has a Large Headroom to Grow in Nigeria

In the third and final part of a C-Suite interview series, AOGR’s Akpelu Paul Kelechi, searches for insights to Aradel Holdings’ Natural Gas Development Plans in Nigeria.

Excerpts from the answers by GBITE FALADE, the company’s CEO…

In a recent report, Aradel Holdings quoted the realised price for gas at $2.1 per thousand cubic feet (Mscf). For a company that supplies the Nigeria Liquefied Natural Gas (NLNG) system, that’s pretty low. That’s even lower than the $2.18 that domestic gas suppliers are complaining that government is limiting them to supply to electricity producers. Is that how low the NLNG pays?

The price that we get from our gas supply to NLNG is lower than $2.10 per thousand cubic feet. We have two customers and what we have published there (in the half year report) is the blended price of the two markets. The domestic off-taker is actually paying more than what the NLNG does but I think it’s important to go back in history. This is a pricing that has been enshrined in a long-time off-take agreement that lasted ten years. At the time when the contract was put in place, that price was the best you could get. The only option was the domestic market at that time was basically selling at N10 per thousand standard cubic feet. The pricing framework of gas is now more cost reflective. We are going through a round of negotiation to renegotiate that contract and we are very clear our minds that we would not renegotiate on those similar terms.

The NLNG model was structured such that gas was meant to be fed into the plant from the owner companies, from their upstream businesses. What those parent companies did was to take an integrated view.  So, it was okay for them to take a haircut on the feedstock sales price of the gas to NLNG knowing full well that the super normal margins they have in NLNG would make them more money on an integrated basis. For a third party like ourselves who do not have equity in NLNG, it’s a very punitive price. Now, [there has been] a whole lot of maturation in the gas business, that we now have options and we are digging in our heels to insist that we need to sell at a price that reflects what the domestic market currently offers.

“We’ve done feasibility studies for three major gas-based industries; ammonia-urea, ethylene and methanol. We are about on boarding a business opportunity manager whose full-time job is to drive this activity, such that as we bring more gas to the surface, we are sequestering a portion of it and creating”

Now that you have talked about a maturating market, what does the Nigerian government’s CNG policy mean for producers like you? Are people talking to you about gas supply? Government is keen on pursuing this as the alternative to gasoline and diesel and it looks like it might energise the domestic gas market.

One of our off-takers who has been off-taking gas from us for more than three years now is a CNG manufacturer. They source the gas from us, compress it and reticulate it using specialised CNG trucks.

It’s important to first understand the construct of the CNG business. It is meant to be a displacement fuel. CNG and LPG offer a commercial advantage where they are cheaper in terms of calorific content basis benchmarked against their next alternative. So, the whole idea around gas is that gas should be a displacement fuel. If your primary fuel today is LPFO, HFO or AGO for whatever application, gas is always in a position to displace them from an economic point of view.

There are a couple of CNG plants in the Southwest. Even at the current price today which is north of $8, in fact, it is more of about $10 per thousand standard cubic feet; it still offers a significant discount advantage relative to whether you’re talking about LPFO or you are talking about HFO and all of that.  Even within the southwest area, it offers as much as a 40% discount in terms of price advantage. By the time you transpose that into PMS, it even becomes a whole lot more. So, for producers like ourselves, we are more than happy to continue to support that space.

It is a space that is infrastructure enabled so there needs to be not just investment in the mother station that compresses the gas, you also need investment in the specialised trucks, you need investment at the last mile where you have a PR (Pressure Reduction) and monitoring station that steps down the pressure and allows it to go into the applicative usage. The more of those that we have, we could then create a network that makes it a whole lot easier. Initially, the off-take is more around people who are using it to displace AGO, HFO, HPFO and LPFO for power generation. So, people are using it to generate power of up to about 1MW capacity and that finds ready application in that area.

But that’s a one-to-one delivery. To use gas a displacement for PMS, it means you need to have a network of different CNG stations where if somebody fills up his car with CNG at point A, he doesn’t need to come back to point A to refill because there are intermediate spots among the line. As government continues promoting CNG, we expect to see entrepreneurs latching on to the momentum of government campaign and investing in dispensing stations. It may first of all start as a cluster maybe within the southwest and then extended to maybe the middle belt. Transporters can then be comfortable that as they drive through the length of breath of the line, there is a dispensing station that is not too far away where they can refuel and continue their journey. 

With as little as 5MMScf/d, you [can do] decent CNG investment that forms the basis of your mother station and then from there, you go to feed the daughter stations and the refuelling sites.

You’re suggesting that there is a whole lot of infrastructure investment that needs to happen. The way the filing stations are on the road as one travels from Afikpo to Bede in Nigeria’s middle belt, that’s not going to happen in three years for CNG right?

It can happen and it just takes a different business mindset to make it happen. An approach that segments the off-take for the purpose of transportation is required. They need to first of all target the fleet vehicles. And there are popular fleet vehicles and I will like to use for example, those from Port Harcourt to Lagos. Assume you do have supply capacities for CNG in the south-south and because you have the presence of the ELPS line from Warri all the way coming to Lagos; it then becomes possible to find intermitting points where you can T-off and set up a mother station such that when you look at the endurance, if somebody takes his truck today and fills it up, I don’t know the numbers but I strongly believe that a full tank for those trucks can take them some hundreds of kilometres in terms of drive time. So, coming from Port Harcourt and going to Lagos, you probably don’t need more than one or two intermediate points to refill your tank.

So, you can start by building the case around fleet vehicles such as the trucks, the luxurious buses, and as that becomes deepened, it becomes easier for even light vehicles to ride on the back of those structures. Before, you know what’s happening, somebody could say, okay, since there is a dispensing station at the Shagamu- Ore-Benin Road, why can’t I extend this CNG service into city-centre? So, it’s that sort of reticulation that allows people build around existing hubs and radially expanding out that could help the adoption and I think that in two-three years, this can be done.

”We’ve gotten to a peak of about 61Million standard cubic feet of gas per day in the recent past and we strongly believe that with some intervention work that we’re starting shortly, we should be able to restore our gas production potential to about 70Million standard cubic feet of gas per day

There was supposed to be some Final Investment Decision (FID) taken on a new, large, gas project. Now that you are talking of maturation of gas in the market, what is the agenda for gas commercialisation in Aradel in the next ten years?

Our future development plan is actually more denominated in gas than in oil. Our five-year programme would see more than double the growth rate in gas than what we have in oil. Our future plans and programmes are actually rooted more in gas exploration and gas development. But it’s not as if we are holding back our oil development; we are very focused on chasing the oil barrels because there’s a market for it today and we know that the time frame that you have for oil development is shorter than the one you have for gas because of the transition narratives. But even without holding back the development of oil, we have sufficient established gas reserves that allow us to be able to even grow our gas production at more than doubled the rate at which we are able to grow our oil. So, gas exploration and gas development are a big play for us going to the future.

We’ve gotten to a peak of about 61Million standard cubic feet of gas per day in the recent past and we strongly believe that with some intervention work that we’re starting shortly, we should be able to restore our gas production potential to about 70Million standard cubic feet of gas per day and that’s more than double what we had in third quarter 2022. But consistent with our thoughts, philosophy around oil and how we create value in the oil, we create value through exports and through refining for domestic. We’re taking a similar view for our gas. We’re going to bifurcate it along the lines of playing gas sales but we are also forward integrating in the value chain to applicative usages of gas. By the end of this year, we should be taking the final investment decision on which of the gas-based industry would we be creating as a further extension in our value chain. We do have the endorsement of our board to travel in this direction.

We’ve done feasibility studies for three major gas-based industries; ammonia-urea, ethylene and methanol. We are about on boarding a business opportunity manager whose full-time job is to drive this activity, such that as we bring more gas to the surface, we are sequestering a portion of it and creating value in some base industry whose final products them becomes the subject of either a domestic or a regional reticulation.

So, you’re going to see a wider extension of our integration beyond the three lines that we have today. Today we have the upstream, the gas plants in the midstream for gas commercialisation and the refinery. We will have an investment that is downstream of that gas plant that takes some of the product from the gas plant and create value. For us, that is the best way to domicile value and benefit for the local economy and in terms of what the product is, each of the three products that I have spoken about, we are undeserved; whether it is in our domestic economy or in the region economy. That is the direction we’re going.

Again, this is part of the reason why we will become listed and listing is going to ultimately [open up] significant capital to be able to play across all these Investments. So, gas remains a very key component part of our value proposition going into the future.

What is Aradel’s overall vision for the next five years?

Our vision is to continue to remain relevant when it comes to the key and strategic industry players. Today, we see an evolution in our industry, an evolution where, increasingly, the contribution of the IOCs, especially in the onshore, shallow waters and swamp is declining significantly. We’re seeing different players trying to come into that space and we think that process will become full blown within the next five years.

So, what you should expect of Aradel is that we will be one of the big players that will fully step in to ensure that the country doesn’t get short-changed because the IOCs have exited. We have in our own little way shaped how things have evolved in this industry. We pioneered marginal field operations, we pioneered host community trust fund and we pioneered modular refinery.

We intend not to vacate these spaces in the next five years. End of last 2022 we became the first company in our sector to go to the bond market and raise capital. When we did that, we were oversubscribed at excellent pricing terms, 99% of that subscription came from pension funds. That’s a huge vote of confidence, [for] pension funds which are the biggest holders of funds to start looking in our direction. We did that without being a listed company. We won’t be the first to become listed, Seplat is. But we would deepen that leadership when we get listed. You are going to see a significant scaling up of our reserves holdings, in our production and all of that.

Where we are headed to is when you look at our return in terms of value per barrel of our reserve per spend, you will struggle to find a company that is doing better than what we are doing.

One aspect that I’ve not spoken about because we’ve kept it under the radar is that we’ve already started a journey to renewables.  I am not allowed to say more about that at this pint.

You talked about the IOCs leaving and you own 42% of ND Western. Aradel has also, on its  own, apart from ND Western, taken a stake in Renaissance, which just acquired Shell Petroleum Development Company (SPDC). Will Aradel on its own singularly go for acquisition of Oil Mining Licences ( OMLs) or PMLs or would it continue to do so as a partner of ND Western?

All options are on the table. We also have demonstrated our capacity to work in partnership with others and that’s evident in ND-Western where with three other partners and allies, we invested and acquired divested interest and we have run that for north of 10 years. We’ve done that without an issue, which is very rare in our industry. Within the context of that framework we are committed to exploring more of such opportunities together. Within our structure as Aradel, we also do have some opportunities that we are pursuing but which are just premature for me to talk about now but which will end up in play. Our strength has always come from directly operating things.

”With as little as 5MMScf/d, you [can do] decent CNG investment that forms the basis of your mother station and then from there, you go to feed the daughter stations and the refuelling sites.

Our industry is evolving and we believe that as long as we continue doing what we’re doing now, it’s only a matter of time before we get to the next operated venture. Whether that is a full-blown mining lease or a PML.

 

 


Nigeria Still Searching for the Floor of its Natural Gas Output

The Nigerian gas market did not step-up in September 2023, if the volumes by the main indigenous gas producers were any indication.

Oando, the largest indigenous gas producer on a gross basis, experienced a large drop from 482Million standard cubic feet a day (482M Mscf/d) in August 2023, to 344MMscf/d in September 2023, in the four OMLs (60,61, 62, & 63) operated by Nigerian Agip, in which it is a 20% partner.

ND Western’s gross output (in JV with NNPC E& P Ltd) was doing 263MMscf/d, lower than it’s August 2023’s 279MMscf/d. This was nowhere near the average of 300+MMscf/d in 2022.

Seplat’s gross gas output was 249MMscf/d in September 2023, compared with 242MMscf/d it recorded in August 2023.

Aradel Holdings, operator of the Ogbele field, was in negotiation for more favourable payment terms with SPDC, through whose infrastructure it supplies 35MMscf/d to the Bonny NLNG plant.


Perenco Moves on to Mayumba Gas to Power Project in Gabon

Perenco has signed a Memorandum of Understanding (MoU) with the Government of Gabon to commence the first phase (20MW) of a Gas to Power Project in Mayumba.

The Anglo- French player will be investing $50Million to collect, process and export offshore gas.

The 20MW power to be injected from the project into the Gabon south network will double the power available in this area (presently 10 MW generated from diesel).

The project is expected to electrify 90,000 homes in Mayumba and other cities, including Tchibanga, Bongolo, Mouila, Lambaréné.

Perenco officials told Africa Oil+Gas Report  that the Gas to Power facility is targeted at the development of south Gabon “where the network is saturated, with limited power generated at high costs”.

The company is also looking at the possibility of extending the network to the North or the East.

“Industries that will benefit from  this new power supply include the Tchibanga marble company and  some of Gabon’s iron ore mining companies”,  they explain. There is even the chance of a future Mayumba harbour being a beneficiary.

Construction works on the Mayumba Gas to Power Project is expected to start in 2nd Quarter of 2024, with a planned completion date set for 2025.

 


Omani Company in 40MMsf/d Gas Sale Agreement with Tanzanian Government

Oman based vehicle ARA Petroleum Tanzania (APT), together with its UK partner AMINEX Plc, has signed a gas sales agreement (GSA) for the sale of gas from the Ntorya field to the Tanzania Petroleum Development Corporation (TPDC).

APT, which was established in 2018 for the purpose of accelerating the development of the Ntorya accumulation, is the operator of the asset. AMINEX holds a 25% interest in the acreage that hosts the Ntorya field.

Key terms of the GSA include:

  • The GSA will continue until the earlier of the expiry or termination of the Ruvuma PSA or Development Licence or the cessation of economic production from the Ntorya Gas Field;
  • The Daily Contract Quantity (“DCQ”) for the first Contract Year is 40 MMscfd. The DCQ for subsequent years may be increased upon agreement of the parties. The Maximum Daily Quantity (MDQ) to be sold under the GSA will be 120% of the DCQ, being 48 MMscfd for the first Contract Year. The Tanzanian authorities have indicated their willingness to take more gas as production from the field increases and their ability to take such gas increases, with production of 140MMscfd anticipated within a few years of first gas;
  • Payment may be made by the TPDC in US Dollars or Tanzanian Shillings.

With the gas in Ntorya now having an offtaker, the Tanzanian government is expected to speed up the issuance of Development Licence which will allow the award of a rig contract and enable the drilling of Chikumbi-1 and the workover of Ntorya-1. The testing of Ntorya-2 is now scheduled for mid-2024 using an in-country mobile test unit.

AMINEX reports that “despite the completion of an environmental impact assessment on the proposed pipeline to the Madimba Gas Plant and payment of all compensation to relevant landowners, there has been a delay in the construction of the pipeline”. The Madimba Gas Plant is where the Ntorya gas will be delivered for processing and onward delivery though the National Gas pipeline) The Tanzanian authorities now expect the pipeline to be completed by the end of 2024. APT is working closely with the TPDC to expedite construction as soon as possible.

AMINEX claims that the Ntorya discovery contains 1.8 Trillion Cubic Feet (1.8Tcf) of gas according to 3rd party CPR and has been proven by 2 wells both producing 20 MMSCF/d each during testing.

 

 

 

 


Nigerian Domestic Gas Market: How We Threw It All Away

BOOK EXCERPT

Author: Charles A. Osezua

It was a balmy Wednesday afternoon in May 1989, when news came over the radio that the Armed Forces Ruling Council (AFRC), Nigeria’s highest decision-making body, had approved the Gas Pricing Policy my team and I had worked on for nearly three years.

With hugs, high fives and jubilation in the room, we congratulated each other and basked in the euphoria for the rest of the day. To many, the news would have been no more than another news bulletin highlighting some government action, but to us and many industry players and watchers, the announcement signalled something monumental and, in many ways, the key to unlocking the development of Nigeria’s abundant natural gas resources had been given legal imprimatur.

I was excited and felt very proud to be a Nigerian and I could envision, immediately, the economic development and transformation of my country facilitated by gas which would fuel power and petrochemical plants, as well as fertiliser companies with other multiplier effects. It was an opportunity for Nigeria to industrialise, stamp her authority as the leading economy in Africa, and perhaps dictate the pace of, or become the go-to-nation for Gas Policy and Pricing dynamics.

The making of the Gas Pricing Policy was a massive undertaking spanning over 18 months spent gathering data and meeting requirements by professionals from the Nigerian National Petroleum Corporation (NNPC) and Shell Petroleum Development Company (SPDC), with support from their home offices in London and The Hague. We had spent several months in London at Shell Centre, relentlessly working and carefully reviewing the output from a computer model called The Pathfinder.

Given the diversity of interests and attempts to fairly satisfy varying parties in the country, the model had to go through a lot of re-works, which eventually gave birth to an agreed blueprint with timelines across the gas value chain for the various actions and activities from gas production through transportation all the way to utilisation.

Days and weeks were spent inside the chilly offices and corridors of the corporate planning department of the defunct National Electric Power Authority (NEPA), and the Ministry of Industries, Power and Steel, to meticulously gather data on existing and planned power projects, fertiliser plants, steel plants, and rolling mills, in order to provide base load estimates for the proposed National Gas Supply Master Plan.

This was followed by months of technical and commercial presentations to oil and gas industry stakeholders, top NNPC management, key decision makers of international oil companies, owners and producers of gas, NEPA, industrialists, and relevant government ministries, to ensure their buy-in.

Finally, Nigeria had the approval of the Armed Forces Ruling Council for a Gas Pricing Policy that would drive the development of gas infrastructure for the first time in the (by then) thirty one years since the production of oil and gas began in the country. At that point, the general feeling was that the country had ultimately set its sights on transforming the lives of its people by directly and indirectly creating employment for thousands and even millions, using gas as energy for economic growth and sustainable development.

Given the assumptions that went into the economic model for the gas pricing policy, we envisaged mass investments across the gas value chain propelled by growth in power generation, petrochemical industries, as well as re-energised and expanded industrial estates.

Our joy was, however, short-lived as our celebration was abruptly shattered.

Two weeks after the passage of the Gas Pricing Policy into law, there was an unprecedented development. The new law to be documented in the Federal Government Gazette was suspended! This was unexpected and had never happened before.

I was shocked and had to ask, “Is this real? Have we surrendered to mediocrity? Have we suspended our future as a nation that was set to dictate the pace for other emerging economies in Africa?” We were all perplexed and our faces were grim, as if the world had crashed around us. Indeed, we were grossly disappointed, and couldn’t fathom what had happened.

“What happened?” was the question.

We soon had an answer. An Air Force chief with responsibility for Power, Steel and Industry who was absent from the council meeting when the approval was granted, raised objections. He was said to have declared that “my ministry cannot pay the approved tariff’.

Shockingly, the Commander in-Chief had vacillated and the council decided to review the policy. Hitherto, as I was informed, nobody could reverse the decision of the Commander in-Chief in a military government, let alone a decision backed by the Armed Forces Ruling Council chaired by the Commander in-Chief. It was unbelievable!

Over three decades later, I watch in disbelief as we struggle.

Excerpted from The Rise of Gas: From Gaslink to the Decade of Gas, by Charles. A. Osezua, founder of the pioneering Nigerian gas utility firm Gaslink and the gas processing company PNG. Published in Nigeria by RADI8 Limiited


Invictus Moves Closer to Launching the Zimbabwean Gas Market

Australian junior Invictus Energy, and One Gas Resources have executed an updated Gas Supply Memorandum of Understanding (MoU) with Mbuyu Energy, a Zimbabwean consortium led by IPP developer Tatanga Energy.

The consortium, which includes existing Invictus’ institutional shareholder Mangwana Opportunities Fund, is seeking to develop a 500MW Gas to Power project.

“Following the recent confirmation of the discovery of gas (in Mukuyu-2 Sidetrack) at the Cabora Bassa Project, the updated MoU builds on the previous MoU signed in December 2019 with Tatanga Energy”, Invictus declares in a statement.

If indeed an economically sizeable reserve base is proved up in that discovery, then this MoU on gas supply has effectively inaugurated Zimbabwe’s domestic gas market.

The MoU is a precursor to the negotiation of a full Long Term Gas Sale Agreement (GSA) to supply sufficient gas to power the proposed plant.

The plant can be expanded in future phases to up to 1,000MW (equating to a forecasted demand of approximately 1.4Trillion cubic feet of natural gas over 20 years).

“The updated MoU will see the parties work together to assess the feasibility of developing the project utilizing gas produced from the Mukuyu field or any other field developed in the Cabora Bassa project”, Invictus explains.

“The project will be designed to minimize its environmental footprint and will utilize an efficient Combined Cycle Gas Turbine configuration (CCGT) that will incorporate cutting-edge carbon”, Invictus explains. reduction technologies.

“The development of the Gas to Power Project will be synchronized with the broader development of the Mukuyu field and the Cabora Bassa project as a whole including gas production, transportation and the processing infrastructure required to provide natural gas feedstock to the power plant”, Invictus avers.

Preliminary feasibility studies have identified a number of suitable locations that provide the ability to supply electricity through the local grid as well as potentially export to customers through the Southern Africa Power Pool (SAPP).

The Mukuyu gas field is located within 100 kilometres of three (3) major interconnectors to the SAPP grid which provides the ability to export power to any country in the region. Mbuyu will enter into discussions with a number of existing high energy demand power offtakers including large scale miners, industrial and other large-scale users of energy – many of whom currently import their electricity from neighbouring countries. The project will supply much needed reliable and affordable baseload power to these companies.

The ability to source reliable baseload power from a new domestic supply will provide significant economic benefits to potential customers many of whom have had to curtail operations and expansion plans as a result of the power deficit the country is currently facing.

This is the second major Gas Sale MoU executed for the Cabora Bassa project following the MOU executed with Sable Chemicals to provide gas feedstock for the manufacture of ammonium nitrate fertiliser which is currently supplied by rail from South Africa.


German Firm to Import 1.2MMMTPA of Nigerian LNG, From Ogbelle

Riverside LNG of Nigeria and Johannes Schuetze Energy Import AG of Germany have signed an agreement on a gas export partnership,

It is part of the two agreements that involve a $500Million renewable energy pact and gas export deal between Nigerian and German entities.

President Bola Tinubu of Nigeria witnessed the signing of the two Memoranda of Understanding (MoU) in Berlin, Germany, at the 10th German-Nigerian Business Forum, according Ajuri Ngelale, Tinubu’s Special Adviser to the Nigerian President on Media and Publicity

The $500Million cooperation on Renewable Energy brings together Union Bank of Nigeria and Germany’s DWS Group.

David Ige, CEO of GasInvest, who signed the MoU on gas supply, said the Riverside LNG project aims to supply energy from Nigeria to Germany, extinguishing about 50Million cubic feet per day of flared gas in Nigeria.

‘Gbite Falade, (pictured above), CEO of Aradel Holdings, operator of the Ogbelle field and supplier of initial gas to Riverside LNG. “Now, [there has been] a whole lot of maturation in the gas business, that we now have options”, Falade told us in an interview in October 2023.

”The project will supply energy from Nigeria to Germany at 850,000 tonnes per annum, expanding to 1.2Million tonnes per annum.

”The first gas will leave Nigeria for Germany in 2026, and there will be further expansion”, Ige said.

1,2Million tonnes per annum translates to 192Million standard cubic feet per day of gas.

Riverside LNG facility “is strategically located at Ogbelle in Rivers State, Nigeria, connected to the Ogbelle Gas Plant and the Onne Port in the Oil & Gas Free Zone Area”, Riverside LNG says on its website.

The 100MMscf/d Ogbelle gas processing plant, operated by Aradel Holdings, currently supplies gas to the Nigerian Liquefied Natural Gas (NLNG) system in Bonny as well as a last mile supplier of Compressed Natural Gas (CNG), The plant will now add Riverside LNG to its offtakers.

Mr. Ige, a former reservoir engineer at the UK major Shell, manager at Accenture and latterly group executive director at NNPC, said the project will extinguish significant volumes of flared gas in Nigeria “and open alleyways of new and greater exports of gas to Germany.’’

The German partners, the statement said, expressed confidence in investing in Nigeria’s gas sector.

Frank Otto, Chief Operating Officer of Johannes Schuetze Energy Import AG, described the partnership as a “big deal” for the German market.

Farouk Gumel, Chairman of Union Bank, emphasized the importance of rural inclusion and bringing more people into the formal economy.

President Tinubu said that Nigeria was well primed to attract foreign direct investments as it runs a resilient democracy,

”Since 1999, we have witnessed changes in democratic governance, with peaceful transfers of power within and between parties. Democracy in Nigeria has proven to be flexible and resilient. Shake off any remnants of the military era syndrome; we have moved beyond that. Despite challenges faced by other African nations, Nigeria stands firm, and we are your partners.’

”For those who feared various obstacles; look at me—I come from the private sector, trained by Deloitte. I served as the treasurer in ExxonMobil. Define corporate governance in any way, and I am in it. I governed Lagos for eight consecutive years.

”Nigerians voted for me for reforms, and from day one of my inauguration, I implemented the reforms. My inaugural speech did not disclose what I would do. I removed the fuel subsidy that is a great burden to Nigerians from the moment I stepped into office.

”The arbitrage regime is gone forever. Now, you can bring your money in and out as you wish. If you encounter any problems, rest assured that I have built one of the most reliable teams Nigeria has seen to address them. I appeal to you to forget the past and focus on building a relationship that removes obstacles, fostering progress and prosperity in Nigerian-German relations.’’

 

 


In the Southern African Rush, Mozambique Is Ahead of the Pack

It is all coming together, finally, for Mozambique.

  • A second Floating liquefied Natural Gas LNG project is in planning stage to monetise the deepwater reserves in the twin Coral fields in Area 4 licence
  • An integrated oil and gas project to extract more volume from the onshore hydrocarbon fields in the Inhambane province is heavily under construction
  • Most crucially, is the return to work on a massive LNG project to drain a large swath of deepwater gas in Area 1.

Then there is the mammoth, LNG project in Area 4. The conversations around it are rather muted.  When it comes, it comes.

It has been a full year now (November 13, 2022), since the first cargo of the 3.4Million tonne per annum (3.4MMTPA) capacity Coral South (Coral Sul) FLNG, left Mozambican shores for the global market.

Mozambique has made more than a tiny penny from the rent.

The ENI operated facility had delivered $34Million into the Mozambican treasury by mid-May 2023, six months after that historic first cargo.

Read more…


THE TRAGEDY OFNIGERIA VS P&ID-AVURU

By Austin Avuru

Thank Goodness, the Hon. Justice Robin Knowles, CBE has finally brought relief to all Nigerians by his judgement in the appeal by Nigeria against an arbitration tribunal judgement in 2017 awarding some Six Billion dollars ($6Billion) against her. That judgment debt, accruing compound interest at 7%, would have ballooned to $11Billion by now. You will appreciate the full impact of an $11Billion judgment debt against Nigeria when you consider that, for the past five months, we have been struggling unsuccessfully to secure a $3Billion credit line to stabilise our exchange rate. That sum is more than twice our annual capital expenditures! So, how did we get into this sorry bind?

The first wrong step was a result of the arrogance of power, a characteristic quite common with many Nigerians occupying very high and influential Government positions. They make pronouncements and give directives, resulting in commitments way beyond their remit. In this instance, the Ministry of Petroleum Resources initiates a large volume gas supply agreement with a purported gas processing company when they do not produce a single molecule of gas! They did not even have the presence of mind to refer the proposal to their parastatal NNPC for consideration. The Honourable Minister of Petroleum Resources went ahead to execute an agreement forwarded to him by the Director of Legal Services, committing to supply 400Million standard cubic feet per day of gas over a twenty year period when both of them were well aware that the Ministry does not produce gas. How do you commit to give what you do not have? The absurdity of this agreement did not end there. The processing company was being offered 15% of this gas volume (amounting to the shrinkage upon extraction of condensate, gas liquids and LPG from the gas volume supplied) for free! For those conversant with this kind of transaction (I have, in my previous jobs executed a few of them) this shrinkage is priced in the range of $3.5 to $4.25 per thousand cubic feet. This means that, at $3.50 per thousand cubic feet, the gas supplier should earn about $73.5Million per annum on a 15% shrinkage for 400MMscf/d supplied. This amounts to $1.47Billion over the 20-year contract period. This was given out free to the gas processor. You will now understand why the P.&ID party described the agreement as “a very sweet deal”. If the gas supply obligation was met, they begin business with a whopping discount of almost $1.5Billion, and if the obligation is breached, they resort to arbitration for even higher damages. Head or tail, they were big winners and we were losers from day one.

After executing the agreement, the Honourable Minister directed his staff to instruct Addax and ExxonMobil to supply the gas. They were not parties to the agreement, and could not have entered into an agreement so schewed against them. Out of courtesy to their “big brother” Joint Venture partner, NNPC they initially pretended to go along until they eventually refused to commit to any gas supply arrangements. Then P. & ID declared a breach and initiated arbitration proceedings against Nigeria. Our legal team was faced with two major hurdles. The Ministry had no budget for, and therefore, no funds to pay their legal fees. They also could not pay for badly needed expert opinion on legal, commercial and technical aspects of the transaction. Worse still, not being in the business of gas production and supply the Ministry could not provide their legal team with data and information with which to prepare their case. Faced with these hurdles, they kept asking for adjournments while their counterparty was assembling an iron-clad representation before the arbitration tribunal, albeit with perjured information and the support of bribed officials and Nigerian partners. In this circumstance, the Nigerian legal representation was shallow, half-hearted and unconvincing. They found more comfort in pursuing a negotiated settlement, having in the face of their handicaps, internally accepted defeat at the arbitration tribunal.

A negotiated compensation of $1.1Billion was first arrived at, which looked attractive in the face of a $6Billion arbitral award. When they could not secure government approval for this sum, they negotiated it further down to $850Million and forwarded it to the President for approval. With only three days left to hand over, on May 26, 2015, President Jonathan refused to approve, minuting on it “Please pass this on to the incoming President”.

When President Buhari inherited this complicated mess, he ordered a full-scale investigation into the circumstances and actions that brought us here. In January 2017, the tribunal issued the final award of $6Billion to P. & ID which at 7% interest had ballooned to $9.6Billion. At this point, the Federal Government assembled a crack team of English lawyers to appeal against the ward and seek to set it aside. By this time, the Nigerian Attorney General, and the EFCC were scrambling to prove a case of fraud, bribery and corruption by practically labelling all members of the Government Team that had been involved in this case as “compromised”. They even got one top Ministry official to confess that he had been bribed by P. & ID officials ten years earlier. Justice Robin Knowles was not swayed by these “findings” and infact specifically exonerated the Nigerian Lead Counsel of any corrupt practices.

The English legal team, on the other hand, subpoenaed different banks, communication networks and other institutions to assemble unassailable evidence that:

  1. The Director of Legal Services in the Petroleum, Ministry, while serving and in retirement was continuously being paid monies by P. & ID officials before, during and after the entire litigation process and was anticipating sharing in the award proceeds.
  2. All confidential correspondences (legal privileged data) between the different parties working for Nigeria and top officials of government were intercepted by and circulated among P.&ID Officials.
  • The P.&ID principal witness statement was perjured as verifiable lies were told under oath.

With their detailed preparations and a very strong, persuasive argument in court, Justice Robin Knowles was swayed that a corrupt process, unknown to the arbitration tribunal had led to the award of a quantum of costs that was almost embarrassing to the English justice system. In fact, he alluded to the fact that if the award was allowed to stand, it would cast a pall on the credibility of the arbitration principle, especially as it is usually not open to the media and public scrutiny that make open courts more circumspect in their judgements. Here again, the performance of the English legal team made ours a laughing stock, a tragedy. It would appear that the endemic corruption in our judicial system, where justice is obtained more by corrupt means than the quality and depth of legal representation is rubbing off on our learned attorneys as evidenced from their shallow preparations and poor representation in this case. Their representation was so poor that the tribunal judges simply treated Nigeria with disdain and proceeded to award P.&ID all that they asked for even when it was glaringly unreasonable. P.&ID would have smiled home to share $9.6Billion with their cohorts from a transaction where their total expenditure was less than $3Million!

In reflecting on the tragedy of this case, I can only wonder when we are going to produce a generation of Nigerians who will truly love this Country, stand by her and sacrifice for her.

Austin Avuru,fnape

November 3, 2023

 


Moza’s Gas Exports Fetched Over $300Million in 2Q 2023

Mozambique’s natural gas exports increased in volume by 80.9% in the second quarter of 2023, compared with the same period in 2022, delivering a revenue of  $336Million  to the national treasury, according to data from the Bank of Mozambique (BdM),

This is an inflow of $238.1Million more than in the same period in 2022, explained essentially by the increase in the volume exported. The bank said that the inflow was r significant despite the fact that international price of natural gas fell by 64.1% in the period.

Mozambique commenced export of Liquefied Natural Gas (LNG) in November 2022, but the country has been exporting natural gas by pipeline to South Africa since 2004. The vast difference in revenue is explained by the volume as well as the government’s take.

Overall, however, Mozambique earned $2Billion from exports in the second quarter, $179Million less than in the same period in 2022. India purchased the most from Mozambique, with a 15.3 per cent share of the total, mainly coal, followed by South Africa, with 13.3 per cent, leading among natural gas, and China, with 10.3 per cent, essentially in heavy sands.

 

 

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