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OPEC Quota Crimps Indie’s Output in Gabon

Paris based minnow, Maurel et Prom (M&P) reports its working interest oil production (80%) in Gabon’s onshore Ezanga permit dropping by a whopping 14% in the first nine months of the year, compared with the same period in 2019.

The volume was 17,500BOPD (gross production: 21,875 bopd) for the first nine months of 2020.

“This was due to production cuts, initially voluntary, then mandatory as a result of OPEC quotas”, the company explains in its most recent update.

“In order to take advantage of the period of low crude prices, M&P had temporarily suspended production from certain wells to improve reservoir conditions for the future starting from May 2020.

“This effort has subsequently continued under the quotas established by OPEC, of which Gabon is a member. Production at the Ezanga field is therefore currently limited to 19,000BOPD (or 15,200BOPD for M&P working interest).


New Oil Route Planned to Bypass the Suez Canal

Israel’s state-owned Europe Asia Pipeline Company (EAPC) has inked an agreement with UAE-based Med-Red Land Bridge to move crude oil from the Arabian Gulf to Europe through a land route

Currently crude oil shipments to Europe from the Gulf States go through the Suez Canal, which is supervised by Egypt.

The binding Memorandum of Understanding (MoU) by the two parties, calls for using the existing Eilat-Ashkelon pipeline, owned by EAPC, to connect the Red Sea to the Mediterranean.

EAPC says it could increase the quantity of shipped oil by “tens of millions of tons per year,” according to newswires.

Oil could start flowing through this route at the start of 2021.

EAPC and Med-Red — a consortium of Emirati and Israeli companies say that the “land bridge” to ship oil between countries in the region will save time and fuel compared with the Suez Canal.

Israeli economic magazine, Globes said: “There will be options to bring the oil by tanker to Eilat port or to build a pipeline from the UAE across Saudi Arabia to Israel”, adding that Med-Red is already in “advanced negotiations with major players in the West and in the East for long-term service agreements,” according to EAPC’s statement.

The UAE and Israel began normalizing relations only two months ago, in a truce brokered by the US’ Trump administration.

The proposed alternative route to the Suez Canal will certainly shave significant revenue from the waterway’s pocket.

Nearly 66% of oil sent from the GCC to western countries is shipped through the Suez Canal or the Sumed pipeline linking Alexandria to the Red Sea.

 


It’s Official: Tullow Finally Leaves Uganda

The Ugandan Government and the Ugandan Revenue Authority have executed a binding Tax Agreement that reflects the pre-agreed principles on the tax treatment of the sale of Tullow’s Ugandan assets to TOTAL.

Tullow Oil, in a release this morning, October 21, 2020, says it is pleased to announce that the Ugandan Minister of Energy and Mineral Development has also approved the transfer of Tullow’s interests to Total and the transfer of operatorship for Block 2.

With all the Government-related conditions to closing having been satisfied, Tullow expects the transaction to close in the coming days after completing certain customary pre-closing steps with TOTAL.

“Tullow will provide a further update once the transaction has closed and funds have been received”, the London listed Tullow says. “On closing, Tullow will receive $500Million consideration and a further $75Million when a Final Investment Decision is taken on the development project.

“In addition, Tullow is entitled to receive contingent payments linked to the oil price payable after production”.


‘I Don’t Have the Chance to Be Chairman of Seplat’-Austin Avuru

By Toyin Akinosho

A few days to the deadline for submission of bids for the Nigerian marginal field bid round, Austin Avuru is going through documents on a desk near a window with almost the same view as the one from his office in his last job.

He is operating from a “family office”, located a whistling distance from the Lagos headquarters of Seplat Petroleum, the London listed company he co-founded and ran for 11 years.

I ask him how deeply involved he is in the marginal field bid round: how many fields he is bidding for.

“You know they say you can bid for a number of fields, but experience will show that you can only win one if you’re lucky”, he responds with the usual candour.  “We applied for three fields with the hope that we can win one and that will be a good start for us. And if we do win, we’ll set up a team which is the operating company for that field. AA HOLDINGS will set it up properly, fund it, supervise the development of that field and then it runs on its own as a company”.

AA HOLDINGS is the vehicle Avuru created for his business life after Seplat, he explains, “a modest investment company run out of our own personal capital, and we’ll concentrate on four areas. The oil and gas upstream which is where I’ve always been, some real estate, some agriculture. The case of agriculture will be greenhouse farming. The farming with greenhouse is let’s see how we can apply some technology to farming and see what the yields will be like and then we will be active in the Nigerian Stock Exchange. In Equity investments. Those are the four areas”.

He has had some time to think it through.

“I had four years to plan for my retirement”, he says. “I gave notice of retirement from Seplat, to the board in July 2016 and named the date of August 1 2020, which was going to be our tenth anniversary as a company. I had a lot of time to prepare, mentally in particular. During this period, I was doing my little calculations; if I put everything all my emoluments and perks all together, what does it amount to? And when I retire, what is the minimum income I would need to have to be able to continue with the modest lifestyle and not necessarily stepping down drastically?. Experience has now shown me that when you’ve had enough time to think through all this, retirement doesn’t come as a shock. As you can see, it’s exactly thirty days after I retired I sat on this desk and started working.

I steer the discussion back to the Marginal field bid round, asking him, if he would run a marginal field operating company, if AAH HOLDINGS wins an oil field

“No! We’ll hire a full team from MD down to run the place”.

‘So’, I ask, ‘if you’re looking at three fields, it means you’re paying all the way down to the last bit, which means you’re investing roughly about $450,000’.

“Yes! About $350,000. It’s a hefty cheque. To tell you the truth, it wasn’t in our 2020 budget when we set out, but we didn’t know what the terms would be, that’s what it is”

I am interested in what Seplat Petroleum will become in Avuru’s life going forward. In corporate Nigeria, co-founders of companies frequently end up becoming Chairmen of the boards.

I am a little surprised by his answer.

“ No! You don’t even have the privilege of eyeing it in the case of Seplat. Dr. A.B.C Orjiakor is the first and only Non-Executive Director to be Chairman. After him, the Chairman of Seplat will be an independent Non-Executive Director. This is how to explain it. I’m still on the board of Seplat, not because I’m ex-CEO, but because Platform group of investors that I represent in Seplat, still have an equity interest of more than 7.5%. If our equity interest drops below 7.5%, we won’t have a seat on the board. That is the shareholders’ interest that I represent. Dr. A.B.C Orjiakor represents the Shebah shareholder interests. So those who are shareholder interest representatives are called non-executive directors. The Executive Directors are members of the management team. The Independents -and there are six of them on the board -are the ones who have no shares in the company at all or they have very few, not enough to think that they have substantial interests, so they essentially represent the minority shareholders and the regulators. They’re the eyes and the ears of the regulators and the minority shareholders. It will be one of those independent directors that will be Chairman after Dr ABC Orjiakor has done being Chairman. I do not even have the chance to be Chairman of Seplat because I’m not an Independent director. That’s part of our governance structure in the sense of it”.

Now it gets interesting.

‘This is what you wrote for yourselves or this is part of what the London Stock Exchange demanded?’, I ask.

“That’s what the London Stock Exchange views as best practice. For an independent director to be Chairman. And for having a Chairman for more than nine years, a number of boundaries here and there and we intend to stay with those. The regulators and the small-sized shareholders would normally be nervous if a major shareholder is also the chairman. So everybody will be much more comfortable if an independent is Chairman and let the major shareholders have their seats on the board to protect their interests. That’s the best practice’.

The Full story will be published in the November 2020 edition of Africa Oil+Gas Report

 


Nigeria’s Regulator to Take over Frontier Exploration, in the New Law

Exploration of frontier basins shall fall under the purview of the Upstream Regulatory Commission, if the Petroleum Industry Bill, under consideration at the National Assembly, becomes law in its current form.

In the wordings of the law, the Commission is now empowered to carry out the functions that the state hydrocarbon company, NNPC, currently performs through its subsidiary: Frontier Exploration Services. One passage in the PIB  that expressly indicates this is Section 9, part of which says:Where data acquired and interpreted under a Petroleum Exploration Licence is, in the judgment of the Commission, requires testing and drilling of identifiable prospects and leads, and no commercial entity has publicly expressed an intention of testing or drilling such prospects, the Commission may engage the services of a competent person to drill or test such prospect and leads on a service fee basis”.

The NNPC is performing this exact function in the ongoing drilling of Kolmani River 3, the second appraisal of the gas discovery made by Shell in 1999.

NNPC reported last year that the first appraisal, Kolmani River 2, in the Gongola Basin, encountered both oil and condensate apart from gas and that they were significant finds. The corporation did not disclose specific petrophysical details of the find, a situation that has aggravated the uncertainty in the conversation around likely economic sizes of hydrocarbon reservoirs in Nigeria’s inland basins.

NNPC is also carrying out exploration activity in the Chad Basin further northwards and has had to stop its seismic operations after insurgents attacked and killed technical workers and some of the security forces.

The PIB says that the function of the Upstream Regulatory Commission, with respect to Frontier Basins shall be to – (a) promote the exploration of the frontier basins of Nigeria; (b) develop exploration strategies and portfolio management for the exploration of unassigned frontier basins in Nigeria; (c) identify opportunities and increase information about the petroleum resources base within frontier basins in Nigeria; (d) undertake studies, analyse and evaluate unassigned frontier basins in Nigeria. The law also says that there shall be maintained, a Frontier Exploration Fund, which shall be 10% of rents on petroleum prospecting licences and petroleum mining leases.The Commission shall manage the Frontier Exploration Fund in accordance with regulations made under this Act”.

 


GNPC Has Not Achieved Operatorship Status, PIAC Declares

Ghana National Petroleum Corporation (GNPC) says it has achieved the first part of the objective of “becoming a stand-alone Operator by 2019 and a world-class operator by 2027”.

But the Public Interest Accountability Committee (PIAC) demurs, arguing that GNPC is yet to achieve anywhere close to any of the objectives. But the PIAC does not explain its disagreement with GNPC’s claim to operatorship.

According to GNPC, the role of Operator will allow it to retain maximum benefits for Ghanaians including the ability to:

  •  align reserve management policies with national development policy
  • control technical operations and contracting processes
  •  allow better support of local content development
  •  build effective systems and processes
  •  appropriate a greater share of revenue and benefits for the nation.

“In GNPC’s assessment of progress against its overarching goal, it asserts that it has attained operatorship, citing its role in the Voltaian Basin and the OGH_WB_01 – Shallow water Block”, PIAC says in its annual report.  “GNPC further points to its role in managing interests in various assets, including the Saltpond Field decommissioning activities as well as the Corporation’s capacity along the upstream value chain, and capabilities in the upstream petroleum industry, as it is a party to all upstream Petroleum Agreements in Ghana as well as its plans to operate two onshore blocks by 2021 as evidence of its operatorship status”.

PIAC says that its “assessment of GNPC’s claims in the light of the definition of operatorship under Act 919, found no evidence to support GNPC’s claim of attaining operatorship”.

This story was initially published in the August 2020 issue of the Africa Oil+Gas Report


Pavel Oimeke Returns as Head of Kenya’s Energy and Petroleum Regulator

Pavel Oimeke has returned to his position as Director General of Kenya’s Energy and Petroleum Regulatory Authority (EPRA), after the Employment and Labour Relations Court in Nairobi cleared him for reappointment.

Jackton Ojwang, retired Supreme Court Judge and chairman of the EPRA board said in a statement that Mr. Oimeke could now return to his job.

Oimeke, a trained engineer initially appointed on August 1, 2017, was to have commenced the second three-year term at the head of the agency on August 1, 2020, but an EPRA board meeting decided to send him on leave pending the outcome of a case where a petitioner, Emmanuel Wanjala, challenged his second term in office.

Mueni Mutung’a, the EPRA Secretary and Director of Legal Affairs, has been acting as Director General since August 17, 2020.

EPRA, a Kenyan state corporation established under the Energy Act, 2006, is the sector regulatory agency responsible for economic and technical regulation of electric power, renewable energy and downstream petroleum subsectors.

“His reinstatement follows a court order issued by in Nairobi on October 6, 2020,” Mr Ojwang’ said in a statement. “Mr Oimeke had stepped aside in August 2020 pending the hearing and determination of a court case contesting his appointment as director-general”.

 


In Search of the Future of Africa’s Oil and Gas Industry

By Gerard Kreeft

 

 

 

 

 

 

The increased speed of the Energy Transition continues to make headlines in Europe.

This is not necessarily good news for Africa. The greening of Europe could in the short and medium term have a boomerang effect in Africa, given the strong presence of the majors there.

Any argument that supporting Africa’s oil and gas industry is a step to helping  bridge Africa’s energy transition becomes nul and void. The greening of Europe promised by the  majors could in fact mean reducing oil and  gas activities in Africa. For example, both BP and TOTAL have pledged to reduce considerably their oil and gas assets. Africa could be a prime candidate.

What is the Energy  Transition doing for Africa’s Oil and Gas Industry?

Are Africa’s state oil  and gas companies prepared to take on new exploration and developments as never before? Why? Simply because the oil and gas majors are choosing  low carbon prospects and natural gas projects on a massive scale,  leaving many potential prospects in Africa in doubt. TOTAL’s Mozambique LNG poject is expected to cost $20Billion and produce up to 43Million tonnes per annum. It will go ahead, but smaller oil and gas projects may not be treated so kindly.

Energy scenarios released by both BP and TOTAL are predicting a sharp decrease of oil production, adding to the view that exploration budgets of the majors will not be a priority item. Instead as TOTAL has explained low cost, high value projects are the goal. Squeezing more value out of its various African assets to ensure a prolonged life cycle.

For too long Africa’s new fledging  state oil companies have been proxies to the international oil majors. In the process many of them have not developed technical knowledge, capability and expertise to manage and implement oil and gas projects.

Being hostage to the whims of the oil majors is no formula to ensure that a country’s oil and gas assets are to be developed. Certainly when the window of opportunity to develop oil and gas assets  could be closing within the next 20-25 years.

Shuffling the Deck

A key aspect of the energy transition includes a serious analysis of company assets. Rystad, the Norwegian energy research  company recently conducted a study that concluded that the world’s largest oil and gas firms could sell or swap oil and gas assets of more than $100Billion in order to adjust and transform to cleaner sources of energy.

The Rystad Energy Study, covers a wide geographical spread  and includes  ExxonMobil, BP, Shell, TOTAL, ENI, Chevron, ConocoPhillips, and Equinor. The eight companies may need to divest combined resources of up to 68Billion barrels of oil equivalent (boe), with an estimated value of $111Billion and spending commitments in 2021 totalling $20Billion.

The key criteria for determining whether a major would benefit from staying in a country are the company’s cash flow over the next five years, the potential growth in its current portfolio, and its presence in key E&P growth countries towards 2030. Based on this, Rystad claims that majors may seek to exit 203 country positions and, as a result, reduce their number of country positions from 293 to 90.

The Continued Need for  Exploration and Development

The case for renewed oil and gas exploration has best been presented by Wood MacKenzie (Andrew Latham and Adam Wilson)who argue that whatever the pace of the energy transition, oil and gas exploration will remain critical well beyond 2040.

“Exploration will be critical in meeting this future demand. Yet exploration is widely perceived as discretionary, even unwarranted. Doubters see a world of risk, declining demand, enormous existing resources and a supply pecking order that ranks exploration squarely in last place. There’s even a public image problem in the false narrative that each new discovery somehow extends the fossil fuels era.”

The authors state that companies  showing signs of fatigue with exploration are questioning their long-term commitment to upstream petroleum. Only about half the supply needed to 2040 is guaranteed from fields already onstream. The rest requires new capital investment.

Cumulative global demand for oil and gas over the next two decades will be at least 1,100Billion boe even in a 2°C scenario. It could be as much as 1,400Billion boe on their base case forecasts. Around 640Billion boe could be met by proven developed supply from onstream fields. This leaves a ‘supply gap’ of some 460Billion to 760Billion boe.

Lessons learned and some practical solutions 

Of interest are lessons learned from Tullow Oil. In its 2019  annual report Tullow states that between 1999- 2009 Sub-Sahara Africa significantly increased its share of oil production and reserves.

With the oil shock of 2009 and the much deeper price collapse of 2014, larger African gas discoveries, and the US shale industry, oil discoveries have diminished on the continent.

Tullow further states that many African countries have adopted tighter fiscal terms, deterring exploration investments, rendering otherwise investable projects unviable at today’s oil prices.

Finally, decision-making has been slower, more complex as new institutions have been developed to govern the sector and governments have become more accountable to civil society. Tullow cites Uganda and Tanzania as examples of where increased industry participation was sought, but stalled because of a lack of market interest.

Additional practical measures:

  • Clear definitions of regulatory power: does a country’s regulatory regime  define what a Ministry of Energy does as opposed to the goals of the state oil company?
  • Improved fiscal and tax incentives to encourage new exploration companies to participate
  • High on the list of priorities for these fledging state oil companies should be knowledge transfer and development of local talent, which the majors should provide.
  • Special teams consisting of the majors and state oil companies be set up to develop energy transition road maps.
  • Extra monetary or tax incentives to ensure a speedy transfer of knowledge and developing local content.
  • To date the international multilateral agencies- be that the World Bank, African Development Bank, or the International Monetary Fund- were reluctant to throw new petro-economies a life line, based on oil and gas potential. This should be re-evaluated so that both oil and gas and renewables can be used to evaluate a country’s financial needs. Perhaps an item for the agenda of APPO (African Petroleum Producers Organization).
  • At the national level state oil companies and energy agencies which support renewables must better coordinate their national energy policies.

Gerard Kreeft,  BA (Calvin University ) and  MA (Carleton University, Ottawa, Ontario, Canada), Energy Transition Adviser, was founder and owner of EnergyWise.  He has managed and implemented energy conferences, seminars and master classes in Alaska, Angola, Brazil, Canada, India, Libya, Kazakhstan, Russia and throughout Europe. He writes on a regular basis for Africa Oil + Gas Report.


Without a Host Community Trust, You Lose Your Nigerian Oil Licence, PIB Says

By Fred Akanni, Editor in Chief

Failure by any holder of a licence or lease to incorporate a trust for the benefit of the host communities in the licence area may be grounds for revocation of the licence or lease, according to the Petroleum Industry Bill (PIB), currently tabled for discussion at the Nigerian National Assembly.

“Each settlor, where applicable through the operator, shall make an annual contribution to the applicable host community development trust fund of an amount equal to 2.5% of its actual operating expenditure in the immediately preceding calendar year in respect of all petroleum operations affecting the host communities for which the applicable host community development trust was established”, says the 252 page draft legislation.

Host community issues are some of the most intractable items in the development of Nigeria’s oil and gas industry. Some companies have robust Host Community plans while several do not.

The Nigerian state has earned 83 Trillion Naira (or $216Billion) in hydrocarbon revenues in the last thirty seven years, according to the Nigerian Natural Resource Charter (NNRC), but many of the communities in which the fossil fuel is extracted are derelict.

In the PIB’s definition, a “settlor” is a holder of an interest in a petroleum prospecting licence or petroleum mining lease or a holder of an interest in a licence for midstream petroleum operations, whose area of operations is located in or appurtenant to any community or communities.

“Where there is a collectivity of settlors operating under a joint operating agreement with respect to upstream petroleum operations, the operator appointed under the agreement shall be responsible for compliance with the law on behalf of the Settlors”.

The constitution of the host communities development trust shall contain provisions requiring the Board of Trustees to be set up by the settlor, who shall determine its membership and the criteria for their appointment. The Board of Trustees shall in each year  allocate from the host communities development trust fund, a sum equivalent -(a) 75% to the capital fund out of    which the Board of Trustees shall make disbursements for projects in each of the host community as may be determined by the management committee, provided that any sums not utilised in a given financial year shall be rolled over and utilized in subsequent year; (b) 20% to the reserve fund, which sums shall be invested for the utilisation of the host community development trust whenever there is a cessation in the contribution payable by the settlor; and (c) to an amount not exceeding 5% to be utilised solely for administrative cost of running the trust and special projects, which shall be entrusted by the Board of Trustee to the settlor. The law also says that host community development plan shall -(a) specify the community development initiatives required to respond to the findings and strategy identified in the host community needs assessment; (b) determine and specify the projects to implement the specified initiatives; (c) provide a detailed timeline for projects; (d) determine and prepare the budget of the host community development plan; (e) set out the reasons and objectives of each project as supported by the host community needs assessment; (f) conform with the Nigerian content requirements provided in the Nigerian Oil and Gas Industry Content Development Act; and (g) provide for ongoing review and reporting to the Commission.

The PIB does not relate this trust fund to the Niger Delta Development Commission (NDDC) which has the legal backing to receive 3% of the total yearly budget of any oil producing company operating onshore and offshore in the Niger Delta area.

But the new law says that “each host community development trust may receive donations, gifts, grants or honoraria that are provided to such host community development trust for the attainment of its objectives”.

 


Angola, “Creator” of EITI, Formally Applies to Join

By Toyin Akinosho

An incident that occurred in Angola in 2001, led to the formation of the Extractive Industry Transparency Initiative EITI.

But the country itself had abstained from being part of the international body for these last 19 years.

Now the Angolan Government has formally notified the EITI of its intention to join the 54 countries already implementing the EITI Standard.

The organization recalls, on its website, how opacity in the Angolan oil sector quickened the steps that led to the EITI’s founding.

In February 2001, when BP published the signature bonus of $111Million it paid to the Angolan government for an offshore license and committed to publish more, it sparked a strong reaction from Angola. In his 2010 memoir, “Beyond Business”, Lord John Browne, the then Chief Executive Officer of BP, recalled how he received a cold letter from the head of the Angolan national oil company, Sonangol, stating that, “[I]t was with great surprise, and some disbelief, that we found out through the press that your company has been disclosing information about oil-related activities in Angola”. The backlash and threats from the Angola government, led Lord Browne to conclude “clearly a unilateral approach, where one company or one country was under pressure to ‘publish what you pay’ was not workable”.

The oil companies argued for a shift away from company reporting, to reporting by governments, in order to reduce conflict with host governments and put contracts at risk. If company reporting was to be required, they wanted a global effort to level the playing field that required all companies in a country to disclose.

19 years later, 52 resource-rich states have committed to improving extractives sector transparency by implementing the EITI Standard. Yet Angola has never been a member.

In a letter to the EITI Board Chair, dated 14 September 2020, the Minister of Mineral, Oil and Gas Resources, Diamantino Pedro Azevedo, outlined steps already taken towards EITI implementation.

These include signature of Presidential Order 117/20, appointing the Minister to the role of President of the National Coordination Committee of the EITI, and a public statement announcing the Government’s commitment to joining the initiative.

“The announcement of Angola’s intention to join the EITI is a welcome development,” said the EITI International Secretariat’s Executive Director, Mark Robinson. “We have been working towards this outcome with the Angolan authorities and the Norwegian Government, who have been supportive of our efforts.

In a statement last January, the EITI called on Angola to join the EITI and implement its Standard, in the wake of the Luanda Leaks, in which the International Consortium of Investigative Journalists (ICIJ) exposed records allegedly linked to businesswoman Isabel dos Santos, daughter of the former President of Angola. Some of these revelations concern the country’s state-owned oil company Sonangol, which dos Santos headed until 2017.

The EITI said, then, that it believed that EITI implementation could enable Angola “to make sustained progress in addressing governance challenges in its extractives sector, to the benefit of Angolan citizens.”

 

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