NNPC’s upstream technical service subsidiaries NETCO and IDSL, were badly bruised by the challenges in the oil and gas industry in 2020, recording large losses of revenue but eventually clawing victory from the jaws of defeat.
The two companies managed to each turn a profit despite their large year on year declines in revenue. NETCO made…
Oil production from the country’s mature oil fields continues to decline steadily from a peak production of 2Million barrels of oil per day in 2008 to the current 1.13Million barrels per day. But it is too early to write off Angola as an important oil producer in the global oil industry. One needs to be reminded that Angola remains Africa’s second-largest oil producer after Nigeria.
In the past few weeks, events have happened which point to a turnaround in Angola’s oil industry.
1.) Nine blocks in the onshore Lower Congo and Kwanza Basins were awarded to various small international and local Angolan oil companies. This is positive news. However, the existing subsurface geological and seismic data indicate that if exploration is successful, the new oil fields will likely be small. Future possible oil production from those areas likely will not materially impact Angola’s oil production. However, the activity there could build a reasonably sized onshore oil industry and create jobs which would be very important for Angola’s struggling economy.
2.) TOTALEnergies announced they will commence this month the drilling of an exploration well on ultra-deepwater Block 48 in a world record-breaking water depth of 3,628 m (11,900 ft). This record was previously held by TOTALEnergies in an exploration well drilled in 2016 in 3,400 m (11,155 ft) water depth off Uruguay. A possible oil or gas discovery in Block 48, which is located in the Lower Congo Basin, will open up a wide range of similar prospects in this basin’s ultradeep waters. Accordingly, this well will be one of the world’s most high-profile wells to be drilled this year.
3.) This month, TOTALEnergies announced that following their recent successful appraisal well drilled in the Golfinho oil discovery, they will install a floating production project in the deepwater Kwanza Basin to produce oil from the Cameia and Golfinho oil fields. The FPSO will go online in 2026 and produce 100,000 barrels of oil per day. The importance of this announcement is under-appreciated by most oil industry observers and needs to be further explained.
The offshore Kwanza Basin has been explored for over a half-century, beginning in 1968 with the drilling in shallow water Block 7. Neither a drop of oil nor a cubic metre of gas has been produced in the basin since that time. However, beginning in 2011, Houston-based Cobalt International Energy made seven oil, gas, and condensate discoveries in Cretaceous-age pre-salt sediments. Due to a wide range of various issues, Cobalt went bankrupt in 2017 and its discoveries remained undeveloped. Thereafter, TOTALEnergies was awarded operatorship of the legacy Cobalt blocks. The French major re-evaluated the discoveries and remaining prospects and completed the successful Golfinho appraisal well. The Cameia – Golfinho production project will create an activity hub in this part of the Kwanza Basin which will result in a further reappraisal of the other Cobalt discoveries, prospects, and leads which could lead to additional oil production projects.
At times, oil and gas explorers need to take a historical view of the exploration in any sedimentary basin. In the deepwater Kwanza Basin, in 2011 a huge drilling campaign commenced which was focused on exploring for oil in the pre-salt sediments. The objective was to try to duplicate in the Kwanza Basin the major oil discoveries made in Brazil’s pre-salt, including the giant Tupi (now Lula) and Libra oil discoveries. The operators included BP, TOTALEnergies, Repsol, ENI, Statoil, Maersk, Petrobras, and Cobalt. The results were very disappointing. Oil discoveries by Cobalt and Maersk were non-commercial. The campaign also resulted in natural gas discoveries which were relinquished by the oil companies since at that time they had no rights to the gas. For example, as unbelievable as it may now sound, ConocoPhillips drilled the Kamoxi-1 exploration well on Block 37 and walked away from a 160 m gas column in the pre-salt without testing it.
Since that time, Angola revamped its oil and gas legislation so that the companies are also entitled to any gas they discover. You can be sure that a number of companies have now taken a hard look at the possible appraisal of ConocoPhillips Kamoxi gas discovery in view of the high current and projected global gas prices. Accordingly, in my view, the deepwater Kwanza Basin could eventually host a floating Liquified Natural Gas (LNG) project if the threshold gas reserves for a commercial project are established.
From a geologist’s point of view, the Kwanza Basin’s gas potential is promising. From an environmental viewpoint, such a project is positive since gas is the least carbon-emitting of the hydrocarbons. Most forecasts are that gas will be the critical “bridging fuel” in the rapidly increasing energy transition. From an economic viewpoint, such an LNG project could be commercially positive since gas prices continue to escalate and the need for gas keeps ramping up worldwide.
In conclusion, there is lots of life left in the Angolan oil patch and the turn-around has just begun.
Tako Koning is a Calgary, Canada-based energy consultant who worked in Angola for twenty years from 1995 to 2015. He is a graduate of the University of Alberta with a B.Sc. in geology and from the University of Calgary with a B.A. in Economics. He is a registered professional geologist with the Association of Professional Engineers and Geoscientists of Alberta (APEGA). In Angola, Tako was employed mainly by Texaco but also later by Tullow Oil and the American/British consulting firm of Gaffney, Cline, & Associates. He has been on the International Advisory Board of Africa Oil + Gas Report since its inception in 2001. In 1994, Tako was awarded Honorary Life Membership by the Nigerian Association of Petroleum Explorationists (NAPE) for his work with Nigeria’s university students and also for his assistance to NAPE.
TOTALEnergies has proposed a date for the likely first oil from the planned Golfinho development in Block 20/11 I offshore Angola.
That date is 2026.
The company got assurance that the development would go forward after drilling a drawn-out appraisal well which lasted over eight months, ending in July-August 2021.
Golfinho is one of seven deep-water discoveries made in Blocks 20/11 and 21/09 by US independent Cobalt International which went bankrupt in 2018, after “selling” the acreage to Sonangol, the state oil company.
TOTALEnergies acquired Sonangol’s stakes in the two blocks and assumed operatorship in 2019.
Cobalt’s announcement of the Cameia-1 discovery in Block 21/09 in February 2012, suggested that predictions of significant reservoirs below the salt layer in deepwater Kwanza Basin were not exaggerated. Indeed, Cobalt Energy’s discoveries went contrary to the news of disappointing dry holes in the pre-salt layer in Kwanza Basin’s deepwater and ultra-deepwater terrains.
Golfinho-1 (Block 20/11) was one of a string of discoveries after Cameia-1 and Cobalt announced, by 2016, that there were as much as a 750Million barrels of oil equivalent in those two licenses.
TOTALEnergies is calling for tender for a new Floating Production Storage and Offloading Facility with some 100,000Barrels of Oil Per Day project in Golfinho and other accumulations in Block 20/11 in mind.
The company will separately develop the Block 21/09 discoveries: Cameia, Mavinga, and Bicuar with a different FPSO if the appraisals prove sufficient volumes.
The construction arm of China’s state-owned CITIC Group Corporation Ltd. (formerly the China International Trust Investment Corporation) is one of only two companies whose offers for the concession of the Port of Lobito, Angola, were admitted.
The other offer being considered came from International Container Terminal Services Inc (ICTSI), according to the Angolan Ministry of Transport.
The concession for the management and operation of the Multipurpose Container and Cargo Terminal at the Commercial Port of Lobito is for a period of 20 years, the ministry says.
Bolloré Logistics, the French-owned company with a wide Africa network, put in the preliminary bid, but it failed because it did not provide for the payment of the minimum amount of the concession fee of 80Million dollars under the terms of the tender specifications.
Dubai Port World, Yilport, Qterminal, and Abu Dhabi Ports all bid for the concession, but did not make an offer.
An evaluation committee will rate the proposals admitted to the competition, and the winner is expected to be announced before the end of 2021, according to the statement.
The container and general cargo terminal at the port of Lobito has a total area of 241,540.94 square metres, a berth of 1,199 linear metres, and the capacity to handle more than 600 thousand tons of non-containerized cargo and 250 thousand TEU (unit equivalent to 20 feet) per year, the Ministry of Transport claims.
CITIC Construction has branches in Algeria, Angola, Venezuela, Brazil, Argentina, Uzbekistan, Kazakhstan, Belarus, South Africa, Kenya, Russia, Myanmar, and a number of other overseas markets.
The Nigerian independent, Eroton, has stopped evacuating its crude to the Bonny Terminal through the Nembe Creek Trunk Line.
The operator of Oil Mining Lease (OML) 18, an onshore acreage in eastern Nigeria, commenced oil barging operations (shipping its cargoes on water) from the lease, to a Floating Storage Offshore vessel on the Atlantic, in late September 2021.
Although, Eroton had planned an alternative evacuation route for its crude for the last four years, this move came almost abruptly.
The company has struggled with massive crude oil theft by vandals along the 97kilometre NCTL, the newest and yet the most persistently damaged, crude to terminal evacuation pipeline in the country.
Eroton has the capacity to produce over 40,000 Barrels of Oil Per Day, but oil delivered to the Bonny Terminal for sales was approximately 6,600BOPD in first half 2021, compared with 25,200BOPD in first half 2020, according to recent update by San Leon, a London listed company which owns 10% of the acreage.
While OPEC restrictions have been a key part of the steep reduction, “third party terminal and gathering system issues”, (San Leon’s phrasing for Bonny Terminal and NCTL) have been most responsible for the decline.
Partners in Kenya’s two proven onshore acreages have high graded the field development plan for the basin-wide, crude oil project.
Far from the earlier proposed “foundation stage development” involving a 60,000 to 80,000Barrels of Oil Per Day (BOPD) Central Processing Facility (CPF) and an export pipeline to Lamu, the three companies: Tullow Oil (operator), Africa Oil Corp, and TOTALEnergies, have now informed the Government that Blocks 10BB and 13T licenses can deliver production plateau of 120,000BOPD, with expected gross oil recovery of 585Million barrels of oil (MMBO) over the full life of the field.
This resource position, the partners say, “is supported by external international auditors Gaffney Cline Associates (GCA), who have issued a Competent Persons Report (CPR) and confirmed the life of field resource position of 585MMBO”.
The key changes to the development concept have been driven by:
1. Incorporating the production data from the Early Oil Pilot Scheme (EOPS) where 450,000 bbls were produced from Amosing and Ngamia fields. These two fields account for over 50% of the resource distribution, leading to greater confidence in achieving the higher end of the resource distribution range.
2. Optimising the number of wells to be drilled with drilling initially at the crest of the fields to achieve First Oil. Changing the producer to injector ratio from 2:1 to 1:1 leading to improved pressure support and higher resources recovered from the reservoir.
3. Adding the Ekales field into the first phase of production. Ekales is geographically straddled between the Twiga and Amosing fields and ongoing technical work has helped mature our understanding.
As such, the first phase will now include the Ngamia, Ekales, Amosing, and Twiga (NEAT) fields and will target 390MMBO of the overall 585MMBO.
4. Optimising the overall development cost with a facility design capacity of 130,000BOPD and an increase to the pipeline size from 18” to 20” to handle the increased flow rates.
Total gross capital expenditure (capex), which covers both the upstream and the pipeline to First Oil, is expected to be c.$3.4Billion.
The increase in capex from the previous design is due to a bigger facility processing capacity, additional wells to be drilled, and larger diameter crude oil export pipeline, which delivers a 30% increase in resources whilst lowering the unit cost to $22/bbl (previously c.$31/bbl).
The revised concept also allows greater flexibility in adding additional fields into production without significant modifications to the project’s infrastructure.
Tullow Oil, the London-listed independent that runs the largest oilfield operations in Ghana, has declared a profit after tax of $93Million for the First Half of 2021.
Most of the money was made from the proceeds of crude oil production from the West African country.
“The start of drilling in Ghana is one of the most tangible examples” of the significant achievements made during the period, the company explains.
Tullow’s gross (operated) production in Ghana averaged c.107,000Barrels of Oil Per Day (BOPD), with c.70,600BOPD(net: c.25,100BOPD) from the Jubilee field, “slightly ahead of expectations due to good facility uptime and well performance”. Gross production from the TEN fields averaged c.37,000BOPD(net: c.17,400BOPD).
Working interest production from Ghana averaged c 42,500BOEPD in 1H 2021, three times the WIP from Gabon (c.14,800BOEPD). Overall Group working interest production averaged 61,230 BOEPD, with Equatorial Guinea and Cote d’Ivoire contributing 2,100BOEPD and 1,800BOEPD respectively.
Operating costs during the period averaged $12.9/bbl, “a year-on-year increase primarily due to lower production and increased costs related to extended COVID-19 operating procedures”.
Tullow reports underlying operating cash flow of $218Million and free cash flow of $86Million during the period and congratulates itself on reduced administrative expenses of $23Million in 1H 2021, “down c.50% year-on-year”.
The company’s spent $101Million on capital investment and $37Million on decommissioning.
But its net debt at 30 June 2021 was around $2.3Billion, it says, with gearing of 2.6x net debt/EBITDAX; and “liquidity headroom and free cash of $0.7Billion.
Tullow says it completed a comprehensive debt refinancing with $1.8Billion of five-year Senior Secured Notes issued and a new $500Million revolving credit facility.
Crude Oil output crashed to significant lows in five acreages held by Nigerian independents in the western onshore Niger Delta, in August 2021, according to field data seen by Africa Oil+Gas Report.
These acreages, operated as Joint Ventures with state oil firm NPDC, produce the bulk of the hydrocarbons in Nigeria’s western onshore as well as most of the natural gas for the country’s electricity supply.
NPDC/Neconde’s OML 42 output fell to 23,000 Barrels of Oil Per Day (BOPD), from 38,669BOPD averaged in July 2021.
VAALCO Energy’s co-venturers on the Etame field offshore Gabon, have approved the agreements to replace the existing Floating Production, Storage and Offloading unit (FPSO) with a Floating Storage and Offloading unit (FSO).
The new deal, VAALCO says, will significantly reduce storage and offloading costs by almost 50%, increase effective capacity for storage by over 50%, and is expected to lead to an extension of the economic field life, resulting in a corresponding increase in recovery and reserves from the field.
That transaction, christened ‘the Bareboat Contract and Operating Agreement with World Carrier Offshore Services Corp’, is now effective.
“We expect to have the FSO in place and operating in September 2022 prior to when our current FPSO contract expires”, says George Maxwell, VAALCO’s Chief Executive Officer. ”We will continue to maximize the value opportunities for our shareholders and look forward to beginning our next drilling campaign at Etame later this year.”
VAALCO, holds a 63.6% participating interest in the Etame Marin block, which to date has produced over 120Million barrels of crude oil and of which the Company is the operator.
This is like mid- 2013 all over again, a half-year after RoyalDutch Shell completed a significant asset sale and was about to conduct another. But this time, the scale is humongous, and the above headline is closer to the narrative than it was when we ran it in 2013.
Shell is about to sell acreages. ExxonMobil is in the midst of selling and Chevron has almost concluded a sale.
But again, the really big disposer is RoyalDutch Shell.
When the European major concludes the imminent sale of its equity in 18 joint venture assets in Nigeria, it will be left with just one operated acreage and two non-operated assets, all of them in deepwater. Midstream, it will still hold the largest non-state share in the NLNG plant, but it will no longer be in direct control of the feedstock. The company whose name was, for most of the last 65 years, synonymous with the phrase ‘Nigerian Oil industry’, will have retreated into the background.
In our last monthly edition, released in mid-July, 2021, we explored the likely beneficiaries of these sales. We have updated the analysis in this edition. In that issue, we worried about the impairment to the state coffers and debated whether the overall divestment picture was a good or bad sign, on balance to the fiscus. In this edition, we ask, why is the state company deeply concerned about this sale?
Elsewhere in the magazine, our regulars are of course included: who is getting to first oil; who is drilling what and where? Where in Africa is gas being commercialized and how can our subscribers benefit from such opportunity? Where else is opening up and what are the new technologies?
The Africa Oil+GasReport is the primer of the hydrocarbon and the growing new energy industry on the continent. It is the market leader in local contextualizing of global developments and policy issues and is the go-to medium for decision makers, whether they be international corporations or local entrepreneurs, technical enterprises or financing institutions, for useful analyses of Africa’s oil and gas industry. Published by the Festac News Press Limited since November 2001, AOGR is a monthly, publication delivered to subscribers around the world. Its website remains www.africaoilgasreport.com and the contact email address is firstname.lastname@example.org. Contact telephone numbers in our West African regional headquarters in Lagos are +2348038882629, +2348036525979, +2347062420127, +2348023902519.