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Local Senegalese player Gorée Offshore Engineering (Gorée) has got more than a foot in the door to contracting opportunities in the Sangomar field, the first commercial scale oilfield development in the country.

In Consortium with Genesis, a wholly-owned Technip Energies company, Gorée has signed a multi-year Outline Agreement (OA) with the Australian explorer Woodside Energy (Senegal) B.V.

The Consortium will provide Asset Integrity Management Engineering Services to the Sangomar Field’s first phase, located offshore Senegal and operated by Woodside.

“This international Consortium will be pivotal in delivering a successfully integrated Integrity Management offering for Woodside while delivering key local content milestones in developing and supporting Senegalese engineers through knowledge sharing, on-the-job training, mentoring, and interactive learning”, Technip says in a statement.

Gorée, which was founded in May 2019, says it is committed to serving clients operating in the MSGBC basin, particularly offshore Senegal and Mauritania.

Gaspard Mendy, Goree’s founder, kickstarter

This contract to the Genesis- Gorée Consortium, announced on July 13, 2023, follows an earlier award to Gorée, in July 2022, of a structural engineering design project by Subsea 7 in Senegal, involving design of sea fastenings for 52 subsea structures to be installed at the Sangomar field, which is on course to deliver first oil before December 2023.

Gorée was founded and led by Gaspard Mendy, a Senegalese Chartered Engineer with 15 years’ industry experience. He holds a 2006 MEng (Hons.) degree in Aerospace Engineering from The University of Liverpool. He has worked in various contracting and consulting roles for several major operators and contractors, including ConocoPhillips, Perenco, Worley, CB&I and KBR. Principal Offshore Structural Engineer with 15 years’ experience in the North Sea, Caspian and African sectors.

The Sangomar field, discovered (as SNE field) in 2014, is spread over 400 square kilometres, in water depths of 700 – 1400 metres. The first phase of the development will target ~ 230Million barrels of crude oil; it includes the installation of a stand-alone floating production storage and offloading (FPSO) facility and subsea infrastructure that will be designed to allow subsequent development. The FPSO has a production capacity of approximately 100,000Barrels of Oil Per Day of crude oil, which will provide revenue to help deliver sustainable long-term economic and social benefits for Senegal.

Angola’s oil and gas regulator ANPG says the Presidential Decree 86/18 applies to it as the institution covering Angolan Commercial Companies: Commercial Companies governed by Angolan Law and Foreign Companies operating within the country’s hydrocarbon sector.

The “Diploma” also applies to entities that contract services and acquire goods for carrying out petroleum operations.

• After completing their registration and obtaining their certificates, service providers are able to participate in tenders published by contracting entities.
• The contracting entities shall submit to public tender the contracting of services and the acquisition of goods necessary for carrying out the petroleum operations.
• Tenders will be announced through one of the most popular newspapers in Angola and other appropriate channels, identifying the goods and services they intend to purchase including the conditions of participation.
• Candidates’ proposals must be submitted in a closed and sealed envelope within a maximum period of 120 (one hundred and twenty) days, and this period must be indicated in the tender notice.
• The Operator has 12 (twelve) weeks, after opening the proposals, to analyze them and submit the list of bidders to the National Concessionaire for evaluation.
• ANPG, as a National Concessionaire, must formally issue its opinion regarding the list of competitors within a maximum period of 15 days from receipt of prior notice.
• Finally, the Operator will announce the final result and the winner of the contest and proceed with the signature and execution of the contract.

Angola wants to reach, in the coming years, a production of 1.2Million barrels of oil day, against the current 1.15MMBOPD, the country’s regulatory agency: National Agency of Petroleum, Gas and Biofuels (ANPG) has declared.

Ana Miala, the ANPG’s director of production says that the country currently has the capacity to produce 1.18MMBOPD, which is 30,000BOPD higher than what it is currently averaging. The target is to reach and stay around 1.2MMBOPD in the medium term.

According to Ana Miala, the Executive’s objective is to continue producing above 1,100 thousand barrels of oil/day. “We are not concerned with production growth, but with its stability. The goal is to continue producing above 1,100 million barrels until 2035”, and the same production volumes until 2050.

Miala is of the view that the ongoing bid round for new blocks will lead to conditions that will halt the country’s crude oil decline.

“ANPG is working to meet the target, set in 2019, that  55 blocks will be bid for by 2025 and this bidding represents a segment of this objective. It is right because without bidding for oil blocks, we will not be able to stop the decline in production and add value to the Oil and Gas industry, which at this stage needs more exploration in order to guarantee its continuity”.

By Gerard Kreeft

Harry Houdini, the famous 19^th century illusionist, created a sensation when he made an elephant disappear. Much in the same tradition Shell is creating its own illusion: selling itself as an energy company but remaining very much an oil company.

 Shell’s Dilemma

In its most recent three-year forecast, Shell presented the image of an energy company helping the world maintain energy security and diversity of supply. How was the illusion created? In spite of the smoke and mirrors hydrocarbons is receiving more than 80% of future investment capital in the period 2023-2025. New energy is receiving only some 20% of capital investments.

This is exactly  the same range that Chevron and ExxonMobil maintain. New energy policies including CCS (Carbon Capture and Storage) and other new energy initiatives make up only  between 15-20% of their capital budgets. In the case of Chevron some $3Billion per year based on a capital budget of $15-$17Billion; ExxonMobil’s new energy comes in at $3Billion per year based on a capex of $23- $25Billion.

Why does Shell insist in pursuing the illusion that it has any interest in being an energy company? Back to Shell. What does it state?

Firstly, Upstream+ Integrated Gas would in the period 2023-2025 have a budget of $40Billion in capital expenditures.

Secondly, Downstream—Chemicals and Products + Renewables in the period 2023-2025 would have a capital budget of $35Billion.

Break the numbers down and you can actually what Shell is proposing:

Integrated Gas+Upstream will receive a budget of $13Billion per year for the period 2023-2025;

Previously Integrated Gas+Upstream had received a budget of $12Billion per year.

Downstream which includes Chemicals and Products + Renewables will receive a yearly budget of $11.7BillIion over the three year 2023-2025 period.  Previously it amounted to $6-8Billion.

Chemicals and Products will be annually increased to $6-7Billion up from  $4-5Billion.

Renewables will be given an annual budget of $5Billion, up from $2-3Billion. While this is a sizeable increase renewable energy only represents 20% of Shell’s capital budget.

Shell notes that its low carbon solutions will focus on biofuels, hydrogen, electric charging points, and CCS(Carbon Capture and Storage).

Previously Shell’s capital budget was $21-23Billion and for the period 2023-2025 it is estimated to be between $22-25Billion.

What Shell is actually saying is that its business as usual.

In the world of Shell. Yet Shell’s message is not resonating with shareholders. In the January 2018-May 2023 period the Dow Jones Industrial Index rose 31%: increasing from 25,295 to 33,093. Yet Shell’s share price for the same period is down 16%. The other European oil majors(with the exception of Equinor), have also seen their share prices underperforming badly: Repsol down 18%, BP down 16%, Shell down 16%, Eni down 20%, but TotalEnergies was up 3%. Only Equinor was up 17%.

In the same period US oil giants Chevron and ExxonMobil have seen their share prices flourish: Chevron up 20% and ExxonMobil 22%.

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

Oil Company or Energy Company

Would it not make more sense for Shell, much like Chevron and ExxonMobil. to focus on its hydrocarbon portfolio, providing shareholders a clear choice of what the company is offering? The premise that the company can offer a business case for its renewables is a complete illusion.

Shell has argued that its Upstream pillar ..”delivers the cash and returns needed to fund our shareholder distributions and the transformation of our company, by providing vital supplies of oil and natural gas.”

Is this really so? The Shell share price demonstrates that there is little trust in this vision. Leaning and depending on its upstream portfolio to lead the company to a bright new green future is perhaps central to Shell’s dilemma. The share price and dividend yield simply demonstrate that upstream oil and gas is viewed as a sunset industry. Perhaps a distant memory of the integrated oil companies of 50 years ago. Not one to build a green future on.

Shell’s vision is also a testimony demonstrating how little the Green Alliance—Enel, Engie, Iberdrola, and Ørsted–is understood and viewed. What has set these companies apart is that they have created a huge competitive advantage which will be hard to challenge for newcomers. Moreover, they have moved well beyond simply dabbling in green energy. These companies have become specialists and now moving on to the next level: creating a digital platform on which value does not reside in owning resources but rather in managing data-driven ecosystems. Essentially borrowing a chapter from Uber, which does not own taxis or Booking, which does not own hotels..  Some members of the Green Alliance have established  new goals, such as CO2 neutrality by 2040 instead of 2050 to which Shell is pledged.

 Look at what the green competition is doing:

• ENGIE based in France: In 2021 the company spent more than $11Billion on investments across a broad swath of sectors, including solar, wind (on and offshore), hydro plants, biogas, and developing gas and power lines, and will have 50 GW of global renewable installed capacity by 2025.
• Enel based in Italy: The company’s strategic plan outlines total investments of $231Billion and tripling renewable capacity to 154 GW by 2030.
• Ørsted based in Denmark: By 2030 the company will have an installed capacity of 50 GW of renewable power.
• Iberdrola based in Spain: From 2020–2025, the company will be spending $165Billion on renewable energy and has a pending target of 95 GW of installed wind capacity.
• RWE based in Germany: By 2030 RWE will have 50 GW of installed wind and solar capacity.
• Vattenfall based in Sweden: In the Nordic countries, Vattenfall has low emissions, with practically 100% of the electricity produced based on renewable hydro power and low-emitting nuclear energy.

If Shell continues down the path it has laid out for 2023-2025 we can anticipate a floundering share price with the continuing duality: wanting to be an oil company and at the same time having a green coating.

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

By Gerard Kreeft

On May 31, 2023 Equinor announced that it would delay by at least three years its Bay du Nord project in the deepwater Flemish Pass basin, 500 kilometres off the coast of Newfoundland, Canada.

Why?

Because the project would cost an estimated $12Billion.

Only $12Billion you might think. Is that a reason for not developing this project at a time when oil and gas companies are showing record earnings?

Equinor’s reasoning is not directly related to the capital costs of Bay du Nord. By 2030, the company is pledged to spending half of its capex on renewable energy. In 2023 its capital budget is $17Billion. On this basis, Equinor’s capital budget for future oil and gas projects is rather restrained, especially at a time when its shareholders have seen their share price increase by 17% in the period 2018-May 2023, the company can ill-afford to change course to take on more oil and gas projects such as Bay du Nord.

Equinor has gained the reputation as a green energy champion. The company’s share price speaks for itself.

While Equinor’s European competitors—BP, ENI, Shell and TOTALEnergies—have seen their share prices flounder, Equinor has shown itself to be the exception.

Simply examine the evidence:

In the January 2018-May 2023 period the Dow Jones Industrial Index rose 31%: increasing from 25,295 to 33,093. Yet the European oil majors (with the exception of Equinor), have seen their share prices underperforming badly: Repsol down 18%, BP down 16%, Shell down 16%, Eni down 20%, TotalEnergies was up 3%. Only Equinor was up 17%. In the same period US oil giants Chevron and ExxonMobil have seen their share prices flourish: Chevron up 20% and ExxonMobil 22%.

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

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

Pillar Number One

More concerning is Equinor’s twin pillars of natural gas and its growing offshore wind portfolio. Does Equinor have the financial depth and ability to achieve maximum leverage for both pillars?

Equinor’s offshore wind portfolio is pledged to grow to 12–16 GW of installed capacity by 2030. Equinor has chosen a series of joint ventures to develop its offshore wind portfolio. The first, Dogger Bank, heralded to become the world’s largest offshore wind farm, is being developed together with SSE Renewables based in the UK. Located in the North Sea, the project will produce some 3.6 GW of energy, enough to power 6 million households.

The second is Equinor’s Empire Wind and Beacon Wind assets off the USA’s east coast. In September 2020, it was announced that BP was buying a 50% non-operating share, a basis for furthering a strategic relationship. The two projects will generate 4.4 GW of energy.

Does Equinor have the size and economies of scale to compete with its European rivals? For example:

• ENGIE, based in France: In 2021 the company spent more than $11Billion on investments across a broad swath of sectors, including solar, wind (on and offshore), hydro plants, biogas, and developing gas and power lines, and will have 50 GW of global renewable installed capacity by 2025.
• Enel, based in Italy: The company’s strategic plan outlines total investments of $231Billion and tripling renewable capacity to 154 GW by 2030.
• Ørsted, based in Denmark: By 2030 the company will have an installed capacity of 50 GW of renewable power.
• Iberdrola based in Spain: From 2020–2025, the company will be spending $165Billion on renewable energy and has a pending target of 95 GW of installed wind capacity.
• RWE based in Germany: By 2030 RWE will have 50 GW of installed wind and solar capacity.
• Vattenfall based in Sweden: In the Nordic countries, Vattenfall has low emissions, with practically 100% of the electricity produced based on renewable hydro power and low-emitting nuclear energy.

Pillar Number Two

According to the Norwegian Petroleum Association (see below), Norway produced 22% of Europe’s natural gas demands in 2020. Additionally, two-thirds of Norway’s total gas resources is still to be produced. No doubt in the short-term natural gas exports from Norway to Europe will be substantially raised.

Choosing a Future Home

Equinor shareholders may, in the short-term, find themselves facing an anguishing choice: whether to break up the company. Equinor’s net income in 2022 was $28.7Billion, basically the lion’s share from natural gas while its renewables business division (read offshore wind) suffered a loss of $184Million in 2022, deepening from a $136Million loss in 2021.

Would it not make more sense to hive off the offshore division to a market leader such as Enel, Engie, Iberdrola Ørsted or RWE who have the economies of scale and know-how to ensure that shareholders are suitably rewarded?

No doubt Equinor’s natural gas will continue to flourish in the short-term. The key question is what will happen to the offshore wind division? In this context, do not expect that the Bay du Nord project will be developed in Canada any time soon.

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