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ENI Reports Oil & Gas Discovery Onshore Algeria

Italian explorer ENI has announced that Sonatrach, the Algerian state hydrocarbon company, and itself have encountered a significant oil and associated gas accumulation in the Zemlet el Arbi concession, located in the Berkine North Basin in the Algerian desert.

The concession is operated by a joint venture between ENI (49%), and Sonatrach (51%). Preliminary estimates of the size of the discovery are around 140 million barrels of oil in place.

The exploratory well that led to the discovery has been drilled on the HDLE exploration prospect, located about 15 Km from the processing facilities of Bir Rebaa North field. “HDLE-1 discovered light oil in the Triassic sandstones of Tagi Formation, confirming 26 metres of net pay with excellent petrophysical characteristics. During the production test, the well delivered 7,000 barrels of oil per day and 5MMscf/d of associated gas”, ENI declares in the announcement. “The HDLE-1 well is the first well of the new exploration campaign which will include the drilling of 5 wells in the Berkine North Basin”.

The company says “the discovery will be quickly appraised with the drilling of a second well, HDLE-2, in April 2022 to confirm the additional potential of the structure extending in the adjacent Sif Fatima 2 concession operated by an ENI-Sonatrach JV (50-50%)”.

In parallel with the appraisal programme, ENI and Sonatrach will perform studies and analyses to accelerate the production phase of the new discovery through a fast-tracked development with start-up foreseen in Q3 2022.

ENI holds equity production in Algeria of about 95.000 BOEPD and it claims to be the most important international company operating in the country.

 

 


Azule Energy is the Name for the Combined ENI and BP Operations in Angola

The British major bp and the Italian giant, ENI have confirmed an agreement to form a new 50/50 independent company, Azule Energy, a bp and Eni company, through the combination of the two companies’ Angolan businesses.

The agreement follows the memorandum of understanding between the companies agreed in May 2021.

Azule Energy will be a new international energy company, independently managed, with more than 200,000 barrels equivalent a day (BOEPD) of net oil and gas production and two billion barrels equivalent of net resources. It is expected to be Angola’s largest producer, holding stakes in 16 licences, as well as participating in the Angola LNG joint venture. Azule Energy will also take over ENI’s stake in Solenova, a solar company jointly held with Sonangol.

Azule Energy will have a strong pipeline of new projects starting up over the next few years, including the new Agogo and PAJ oil projects in Blocks 15/06 and 31 respectively. It will also develop the New Gas Consortium (NGC), the first non-associated gas project in the country, which will support the energy needs of Angola’s growing economy, its decarbonization path and strengthen its role as a global LNG player.

bp and ENI say they believe combining their efforts with a long-term perspective will create more efficient operations and offer the potential for increased investment, job creation and growth in Angola, adding that they share common goals for Azule Energy in achieving environmental and sustainability ambitions. “Azule Energy will continue to develop the full potential of the country’s upstream sector, while also positioning itself to capture new opportunities from the energy transition with the growing role of gas and renewables in its portfolio”, the companies say.

“Since announcing the intent to form the joint venture in May 2021, bp and ENI have worked closely with the Angolan government and the creation of Azule Energy will be subject to all customary governmental and other approvals, with the aim of completing the transaction in the second half of 2022. Once set up, Azule Energy will be equity accounted by bp and ENI. Hydrocarbon production and GHG emissions will continue to be reported on an equity share basis”, the statement adds.

Currently ENI is operator of Blocks 15/06 Cabinda North, Cabinda Centro, 1/14, 28 and soon NGC. In addition, ENI has a stake in the non-operated blocks 0 (Cabinda), 3/05, 3/05A, 14, 14 K/A-IMI, 15 and in Angola LNG.

bp is operator of Blocks 18 and 31 offshore Angola, and has non-operated stakes in blocks 15, 17, 20 and 29. bp also has non-operated interests in NGC and Angola LNG.

 


Tullow Pledges Renewed, Aggressive Focus on Ghana’s Jubilee Field

UK independent Tullow Oil is pledging “a great deal of activity at our flagship Jubilee field (offshore Ghana), with investment in new infrastructure and new wells to grow production in the near term”.

The company, in its annual 2021 report, says it is also “taking on the operation and maintenance of the (Jubilee)FPSO.

“Following a transformational 2021, in which Tullow successfully refinanced its balance sheet, drilled highly productive wells in Ghana and demonstrated operational excellence and financial discipline across the Group, we are now concentrating on the successful delivery of our long-term business plan”, declares Rahul Dhir, Chief Executive Officer, Tullow Oil plc.

At TEN (which is Tullow Oil’s second producing accumulation ion the country), Dhir promises: “we will drill two important, strategic wells that will help define our future plans for the fields”.

He also talks of plans to continue to build production in Gabon.

“With additional opportunities to deliver value across our portfolio, including gas commercialisation in Ghana, our revised Kenya development project and an exciting well in a proven play in Guyana, we are well-placed to deliver value from our assets and to grow our business.”


Public Hearings Planned for Regulations of Nigeria’s Petroleum Industry Act

Six months after the signing into law Nigeria’s Petroleum Industry Act (PIA), a set of public hearings is being planned for the regulations through which the law will be implemented.

“We have a Presidential Implementation Committee for the Act”, says Gbenga Komolafe, Chief Executive of the Nigerian Upstream Regulatory Commission (NUPRC), one of the two regulatory bodies created by the new law. “The draft regulations that emanate from the committee will be transferred to the two regulatory bodies”, he explains.

“There will be public hearings of the regulations; just as you have public hearings for the law making, you must also have public hearings for the regulations of the law. You must have the stakeholders’ hearings”.

The other regulatory body formed by the PIA is the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).

Komolafe explains: “Here at NUPRC, the staff and management have been going through the draft regulations. The PIA provides robustly for Abandonment, Host Community, Award of Acreages and others”. He says the “PIA has dealt with all these but how do we go about giving effect to these provisions? I have been working with key staff on these”.

The Commission, meanwhile, has advertised a notice of consultation with stakeholders on regulations development in compliance with section 216 of the PIA. The notice, it says on its website, invites inputs from the lessees, licensees, permit holders, Host Communities, and other Stakeholders in the Nigerian upstream petroleum sector, by March 18, 2022.

Stakeholders’ inputs and consultation are being sought in the areas of (1) Conversion and Renewal of OPL and OML Regulations (2) Petroleum Licensing Round Regulations (3) Upstream Petroleum Fees Regulations (4) Petroleum {Drilling and Production} Regulations (5) The Petroleum Royalty Regulations (6) The Gas Pricing Regulations (7) Definitions Regulations (8) Upstream Environmental Remediation Fund Regulations (9) Upstream Environmental Management Plan Regulations (10) The Host Community Development Fund Regulations.

“I told my staff I am a process person. I believe in the rule of law. Informed by my background as both an engineer and lawyer, I know I should be committed to the process”, Komolafe told Africa Oil+Gas Report, in the first exclusive interview he would grant to any media organization since his appointment in September 2021. It was a very brief conversation, in which he parried some of the questions, the most crucial of which was around the status update of the awards of licences for the marginal field bid round. By the NUPRC’s own admission, 119 companies have fully paid the signature bonuses, out of 161 potential awardees. Several of the 119 entities have concluded the required formation of Special Purpose Vehicles (SPVs) to operate the fields and have for months been waiting for grant of licences, without which many of them can neither raise funding nor engage the operators of the acreages in which the marginal fields are, for  agreements leading to work programmes.   Mr. Komolafe simply reiterates assurances of his commitment to due process. “I am both a fellow of the Nigerian Society of Engineers as well as a member of the Nigerian Bar Association”, he testifies.

Komolafe, 58, has operated at very high levels in the public sector of the Nigerian oil industry (downstream) in the last 20 years. He was once the Group General Manager, Crude Oil Marketing Division of the NNPC, Group General Manager Special Duties (NNPC)  and pioneer Managing Director of the Nigerian Pipeline and Storage Company, a subsidiary of the NNPC.

In the interview published in the e-version of the February 2022 edition of Africa Oil+Gas Report, (release date March 6, 2022),  Komolafe declared that he had a clear vision, anchored on the law, for the Commission he heads: “It is better you have a regulator that abides with the rule of law than to have a genus as a regulator. If you have a judge in court and he decides to rule on the basis of his ingenuity, then it becomes a ground for appeal. If h you have such a judge he is a problem judge; he would be abusive discretionary. I am going to ensure that our rules and processes give effect to the law”.

But he also let pass a number of questions, including the status of the licences for those companies who have fulfilled all the conditions of the marginal field award, up to creation of Special Purpose Vehicle (SPVs). The interview with Mr. Komolafe is part of the series of interviews the Africa Oil+Gas Report is having with C-SUITE Executives in the African Hydrocarbon Industry.

 


Fossil Fuel-based Production Growth of Polyethylene is Forecast to Continue Until the Early 2040s While Focus Increases on Reducing Plastic Waste

Findings by the IHS Markit Circular Plastics Service examine the timing of the arrival of a peak in demand for virgin plastics produced from fossil-based raw materials

The production of fossil fuel-based polyethylene is expected to plateau in the early 2040s, according to the latest findings from the new IHS Markit Circular Plastics Service which provides a comprehensive, scenario-based road map of how the plastics value chain could transition from a linear to a circular economy.

“At some point in the not-too-distant future production of plastics will begin to disconnect from virgin fossil fuels. How and when will be determined by stakeholder resolve to effect a circular model.” – Robin Waters, director, circular plastics service, IHS Markit

By conducting rigorous, scenario-based analyses of global, large-volume polymers, the Circular Plastics Service (CPS) team at IHS Markit has quantified expected and potential outcomes for key measurements of plastics’ transition from a linear to circular industry model. One of the key measures of progress is the reduction, and ultimate elimination, of fossil-based raw materials used in the production of plastics.

To project outcomes of this magnitude, the impact of numerous levers must be considered from both demand and supply perspectives within the broader energy transition to net zero emissions. The team considered specific nuances for demand (both durable and non-durable), the evolving stakeholder and government regulatory outlook, investments in recycling technology and infrastructure and concluded that peak demand for virgin fossil-based plastics is decades away.

IHS Markit expects global plastics demand will grow at an average annual rate of 2.7% through 2050. Factors that can impact this growth rate include regulatory restrictions such as bans, materials substitution (e.g., from paper, glass, metal, etc.) and packaging design that eliminates excess material use as well as changes in consumer behaviors. Large-scale adoption of mechanical recycling has the potential to moderate demand growth for virgin polymers. Meanwhile chemical processes that convert waste plastics into feedstocks—either monomers (in the case of PET and PS/EPS) or hydrocarbon feedstocks (in the case of pyrolysis- or gasification-based technologies) reduce the need for fossil-based materials in the production of virgin plastics.

Focusing on plastics waste recycling has the added benefit of reducing the dependence on fossil fuel-based feedstocks for plastics. Even with aggressive consumption restrictions on non-discretionary single use products, the world will continue to demand increasing volumes of plastics. Waste plastics, if collected and properly processed, can serve as a bridge to achieving the overall elimination of our society’s dependence on fossil fuels. Technology exists, and is being rapidly implemented, to move beyond energy recovery by converting plastics waste into high value virgin plastics without the use of fossil feedstocks. Additionally, biomaterials and bio-based feedstocks offer the potential to decouple plastics demand from fossil-based feedstocks.

In addition to concerted efforts to scale the infrastructure for plastics waste collection and recycling, governments, brand owners and other stakeholder groups are promoting different means to reduce consumption of plastics. Governments around the world are increasingly implementing bans on a range of discretionary single use applications and taxing virgin (vs. recycled) plastics. The growth of returnable business models continues in developed regions for business-to-business transport packaging and is being evaluated for consumer packaging. Producers are capitalizing on the negative perception of plastics, paper, glass and metal, and are promoting alternatives to brand owners, often with negative cost and emissions implications.  How effective are all these efforts in addressing plastics waste? Will we see demand for plastics peak as a result?

IHS Markit has incorporated scenario-based modelling to assess the above factors and their expected, and potential, extent and timing. Our base case assumes the circular plastics transition accelerates, with pivotal shifts in social, policy and market forces driving fundamental change. However, the transition moves in different ways and speeds depending upon the country or region being considered. Our second scenario assumes a more revolutionary effort, with industry moving in an aggressive manner aligned with overall goals for the energy transition but falling short of achieving a full circular model for plastics by 2050. Finally, IHS Markit has modeled a fully successful circular plastics scenario in which non-durable plastics are, by 2050, no longer lost to the environment, land-filled or incinerated.

 


Seplat’s Acquisition of Mobil Producing Is Different from Other Nigerian Divestments

Seplat Energy’s entry into an agreement to acquire the entire share capital of Mobil Producing Nigeria Unlimited (MPNU) from Exxon Mobil Corporation, Delaware (ExxonMobil) is set apart from previous sales and purchases of assets between majors operating in Nigeria and their homegrown counterparts.

As indicated in the Africa Oil+Gas Reports November 2021 edition, this is an entire acquisition of a company, MPNU, and not merely of equity stakes of ExxonMobil in the OMLs operated by the US major.

For this reason, it is different from the routine sale and purchase of assets of majors by Nigerian minnows in the last 15 years and is the first major takeover of a major oil company by a Nigerian independent.

The closest thing to this transaction, in recent history, is the sale of Eland Oil & Gas to Seplat, in the year before the pandemic hit.

And it is not over yet. “Completion of the Transaction is subject to Ministerial Consent and other required regulatory approvals”, according to the dual listed company, Africa’s largest homegrown independent.

Seplat Energy itself has summarized the transaction as follows:

  • Seplat Energy Offshore Limited, a wholly owned Nigerian subsidiary of Seplat Energy Plc, has entered into a Sale and Purchase Agreement to acquire the entire share capital of MPNU for a purchase price of $1,283Million plus up to $300Million contingent consideration, subject to lockbox, working capital and other adjustments at closing relative to the effective date
  • The Transaction encompasses the acquisition of the entire offshore shallow water business of ExxonMobil in Nigeria, which is an established, high-quality operation with a highly skilled local operating team and a track record of safe operations, producing 95,000Barrels of Oil Equivalent (BOE) per day working interest in 2020  (92% liquids)

The company also talks of transformational impact   

  • The Transaction will create one of the largest independent energy companies on both the Nigerian and London Stock Exchanges, and bolster Seplat Energy’s ability to drive increased growth, profitability and overall stakeholder prosperity
  • Based on 2020 pro forma working interest volumes for Seplat Energy and MPNU, the transaction delivers:
  •    186% increase in production from 51 kboepd to 146,000BOEPD  o 170% increase in 2P liquids reserves, from 241 MMbbl to 650 MMbbl
  •   14% increase in 2P gas reserves from 1,501 Bscf to 1,712 Bscf, plus significant undeveloped gas potential of 2,910 Bscf (JV: 7,275 Bscf)
  •    89% increase in total 2P reserves from 499 MMboe to 945 MMboe[1]
  •    Includes offshore fields with dedicated, MPNU-operated export routes offering enhanced security and reliability

Details of the Transaction

  • Seplat Energy will acquire the entire share capital of MPNU from Exxon Mobil Corporation, Delaware (USA Incorporated), with an effective date of 1 January 2021 for a consideration of $1,283 million, subject to lockbox, working capital and other adjustments at closing relative to the effective date
  • The Transaction agreement also includes potential additional contingent consideration of up to $300Million in total, payable over the period 1 January 2022 to 31 December 2026, and contingent upon average Brent crude oil prices exceeding $70 per barrel and subject to MPNU’s average working interest production exceeding 60 kboepd (JV: 150 kboepd) in such calendar year
  • The consideration implies an attractive EV / 2P metric of $2.9/boe, with significant gas upside potential

A strong operating portfolio

The MPNU portfolio primarily consists of:

  • A 40% operating ownership of four oil mining leases (OMLs 67, 68, 70, 104) and associated infrastructure (NNPC is the 60% partner)
  • The Qua Iboe Terminal, one of Nigeria’s largest export facilities
  • 51% interest in Bonny River Terminal and Natural Gas Liquids Recovery Plants at EAP and Oso
  • It does not include ExxonMobil’s deep-water assets in Nigeria
  • MPNU will operate as a standalone subsidiary of Seplat Energy and upon closing and following receipt of requisite regulatory approvals, Seplat Energy will align MPNU with its overall strategic goals and ESG objectives

Financing the Transaction

  • The cash consideration payable under the Transaction will be funded through a combination of existing cash resources and credit facilities of Seplat Energy, and a new $550Million senior term loan facility and $275 million junior offtake facility
  • Global financing syndicate comprising Nigerian and international banks, as well as commodity trading companies
  • Contingent payments, if materialised on Brent oil price annual average above $70/bbl, will be funded through share of net cash flows from operations.

 


Canaries in the Goldmine: Thoughts on the oncoming Upstream Divestments by Nigeria’s major partners

By ‘Gbite Adeniji

The ongoing exercise by Shell and ExxonMobil for the wholesale divestment of their interests in petroleum joint ventures with Nigeria’s national oil company, NNPC Limited, is unprecedented in scale and has significant implications for Nigeria as a viable economic and political unit.

Shell has had a particularly interesting history in Nigeria. It secured exclusive rights to explore for petroleum in Nigeria in 1936 through its Shell D’arcy. It currently operates 18 Oil Mining Leases in the NNPC / Shell joint venture portfolio mostly through its Nigerian subsidiary, Shell Petroleum Development Company Limited (SPDC) from land, swamp and shallow water terranes.

Shell has produced several billions of dollars in hydrocarbon value since it made the first discovery of oil at Oloibiri in 1957 and is arguably the largest single private sector contributor to Nigeria’s economy. It makes significant direct contributions to Nigeria’s treasury through royalty payments, lease rental payments, petroleum taxes, lease renewal fees, and education tax. It also pays several hundreds of millions of dollars in statutory levies for the development of the Niger Delta region and for the development of local content in the petroleum industry. As the operator of the largest of the 5 petroleum joint ventures involving NNPC Limited and international oil companies (Shell, ExxonMobil, Chevron, TotalEnergies, Agip), it employs several indigenes from the communities hosting its operations and spends several billions of dollars from the joint venture budget on contracts executed by many local contractors and through several corporate social responsibility initiatives targeted at the host communities. Hence, there is a direct economic impact on the local, state and national economy from its activities in Nigeria.  Given the strategic importance of  petroleum revenues on the Nigerian state, and the socio-economic impact of Shell’s activities in every state and community in which it operates, it is no exaggeration to describe Shell as Nigeria’s most important business partner.

Coming close is ExxonMobil which commenced petroleum operations in Nigeria in 1955 through Mobil Oil Corporation. It holds its joint venture assets with NNPC through its legacy company, Mobil Producing Nigeria Unlimited (MPNU) and operates mainly in a geologically prolific area in the south eastern part of the country that is known within the industry as “the golden triangle”.

Both Shell and Exxon have initiated a process of the sale of their local subsidiaries through which they hold participating interests in the respective joint ventures (corporate sale) with NNPC Limited. These international oil companies will leave in their wake several experienced and well trained Nigerians who can operate assets anywhere in the world. They will however leave a legacy of angst in the Niger Delta and several unresolved disputes with host communities on land disputes, environmental degradation from gas flaring, crude oil spills and all whatnot.

The combined hydrocarbon reserves within the Shell and Exxon Mobil asset base are significant enough to require all Nigerians to pay attention to the prospect of a divestment of this magnitude by two of the country’s most important investors whose operations directly impact the country’s economic and, possibly, political, fortunes. The timing is of course inauspicious, with the ink hardly dry on the freshly minted Petroleum Industry Act (PIA).

The Ubit Field in ExxonMobil operated Oil Mining Lease (OML) 67: Is this merely a case of asset rationalisation or are these partners more doubtful of the redeemability of Nigeria’s political risk and have reconciled themselves with a flight to safer harbour?

It is indeed an irony and a point of curiosity that these majors worked with the different administrations in Nigeria over the last 20 years on the reform of the legal and regulatory framework of the petroleum sector, leading to the improved fiscal terms and innovations entrenched in the recently enacted PIA. More concerning is that there is nary a conversation at any meaningful level about these historically significant transactions moreso, as the other IOCs in the NNPC / SPDC and NNPC / MPNU joint ventures will almost certainly follow suit as soon as these initial transactions are concluded. Rather, there is a disconcerting air of comfort in the hallowed portals of Abuja about these impending exits whilst Nigeria’s oil barons and potentates are wringing their hands at the prospect of being successors-in-title, warts and all, to these majors. Indeed, the news wires recently reported a possibility of a “preemption” by the national oil company, NNPC Limited, of the Exxon Mobil sale, presumably on the basis of the provision in the joint operating agreement which entitles a party to acquire the interest of another party in the event of a proposed sale of its participating interest in the joint venture (asset sale). Whilst lawyers will no doubt debate the validity of a preemption to a corporate sale as opposed to an asset sale, the rating agencies will have a view on any acquisition of upstream assets on this scale by NNPC as Nigeria would be exposed to a concentration risk from its national oil company which would be a daunting prospect in today’s new era where international financial institutions are resolved to limit funding for the development of upstream assets. In effect, Nigeria might end up strangulating itself. The maxim, caveat emptor, springs to mind.

The cover for the divestments by the majors is the need to rationalise assets in their global asset portfolio, especially in light of the energy transition. This means that for Shell, Nigeria’s land-based assets that significantly contributed to its balance sheet for decades are no longer as important to the corporation in comparison to its other opportunities elsewhere. For Exxon, its joint venture assets are also not as exciting as the other opportunities within its global portfolio, such as Guyana where it is poised to spend billions of dollars on developing giant oil discoveries. It is however worthy to note that both companies will retain their interests in assets held under production sharing contracts which are largely located in Nigeria’s deepwater terrane, which must necessarily mean that these are more profitable assets than joint venture assets and safer to operate. In that case, we should expect similar divestments by Total and Chevron at some point in the near future.

What is really going on, one might ask? Is this merely a case of asset rationalisation or are these partners more doubtful of the redeemability of Nigeria’s political risk and have reconciled themselves with a flight to safer harbour? Or, is this more about the non-sustainability of Nigeria’s uncomfortable fissures, or could this be about the likelihood that the 2023 elections might not yield any game changer to Nigeria’s current capture by its insatiable potentates?  One cannot however ignore the possibility that the intractable “above ground risks” that have been a subject of angst by operators over the years might have contributed to these exits. These range from industrial scale theft of crude oil, unabated kidnaps of oilfield personnel, an unnecessarily painful administrative process for project approvals, long-running disputes with the national oil company, and issues with the quality of sector governance. If we were to be objective, all we have to do is to try to understand why other petroleum provinces are able to still attract investment from these same players.

Whatever the case, the impending exit from significant portfolios by Nigeria’s most important investors reminds one of the allegory of the canary in the goldmine or of rats and rodents scurrying out of the ground before an earthquake. To be clear, it is unusual for two, and probably, 5 IOCs to exit proven assets in a mature province and, to drive home the point, there are very few countries anywhere in the world that host these 5 majors at any one time.

When concluded, the divestments will mark a significant reduction in Nigeria’s economic ties to the United Kingdom (Shell) and to the United States of America (XOM). In trade terms, it signifies a loosening of an important economic relationship with both the United Kingdom and the United States of America. It is a winding down from the various epochs in the trade and export of such commodities as groundnut, cocoa, hides and skins, cotton, rubber, palm oil, humans, crude oil and natural gas. To the extent that it was, in any event, an imbalanced relationship over the centuries, it is not necessarily a bad thing if Nigerians effectively assume the commanding heights of the oil industry and can drive it responsibly. On this latter issue, the evidence alas, has been a mixed bag of charlatans, buccaneers and a smattering of pure breeds.

As the fortunes of the country’s 200 million people literally rests on these transactions, those at the supervisory helm of the industry have a responsibility to ensure that the successors to these interests are able to operate these massive assets based on a demonstrable track record of activities and success in the industry. The point is that a large part of Nigeria’s economic lifeblood rests so much on these assets. As such, it will be a significant failing by the Government if they end up in the hands of investors who are literally learning the business. One may learn on one asset but given the interest of the government and people of Nigeria in continued oil production from such a large swathe of assets, this is not a game for learners. Neither must the exits be approved by the government in the absence of a technically astute and bankable operational plan for production of all discovered oil and gas reserves, a clear plan for continued exploration, clarity on the remediation of environmental issues in the communities and, importantly, a clear and committed line of access to funds to work the assets. On the latter, the point is that it is not sufficient, as has unfortunately happened in some previous transactions, to just have the funds for the acquisition; there must also be funds demonstrated to the government and preferably backed by financial guarantees, that assure the people Nigeria of a commitment to immediately work the assets.

The relationship between the peoples of Nigeria and the great powers is littered with several epochs and milestones beginning with trade with Europeans, followed by slavery, colonisation, political independence, and neo-colonialism. The impending divestments signal another milestone in the country’s political economic history and a defining point. It marks Nigeria’s exit from Britain’s political sphere of influence. Ditto America’s.

Forcados Yokri Integrated Project in Shell operated OML 43: As the fortunes of the country’s 200Million people literally rests on these transactions, those at the supervisory helm of the industry have a responsibility to ensure that the successors to these interests are able to operate these massive assets based on a demonstrable track record of activities and success in the industry.

When Nigeria was being cobbled together from Britain’s northern and southern Nigerian protectorates in the early part of the last century from several warring tribes or nation states, the question in Europe was whether it was too big to survive. Over a hundred years post the amalgamation, the tribal fissures have become as glaring as they have never been. In the meantime, the USA has become a net exporter of crude oil and natural gas and no longer requires any hydrocarbon from Nigeria. In any event, the western economies and their flagship vehicles in the oil commodity game are on a hurried flight to a net zero world. In essence, Nigeria is about to be left to its own devises as these two great powers will have no dog in Nigeria’s future fights or misgovernance. Nigeria therefore had better learn to manage its politics and its new oilmen lest it finds that the canaries were singing about a ticking timebomb. With no strategic interest to defend in Nigeria, there will be no referees in our fights going forward. The policy position of the Government for its consent to these impending transactions may well determine the country’s future one way or the other. We have to hope for the sake of our collective future that the correct policy decisions will be taken on these divestments.

‘Gbite Adeniji, Lagos, February, 2022. Gbite Adeniji is the Managing Partner of ENR ADVISORY (www.enradvisory.com), a law firm focused on the energy and natural resources sectors of Nigeria. He was also the policy advisor to the Federal Government on petroleum matters between 2015 and 2018.

 


McDermott Advises Sirius Petroleum on a $200MM Financing Facility for OML 65 Development

McDermott Will & Emery is advising Sirius Petroleum PLC, in relation to its acquisition of a shareholding in the joint venture company, COPDC Petroleum Development Company Limited, which has executed agreements with NNPC (Nigeria National Petroleum Corporation) regarding the development of the Oil Mining Lease (OML) 65 licence, onshore Nigeria, and the obtaining of a senior loan facility from Trafigura Pte Ltd of up to $200Million.

The loan will be used for Phase 1 of the development of 51Million barrels (MMbbls) of proven and probable reserves on the OML 65 licence.

OML 65 is a producing onshore block with 2P reserves of 51MMbbls, according to a Gaffney Cline & Associates CPR:

  • The existing producing field, Abura, has been in production since the 1970s, has been ascribed 16.2 MMbbls remaining 2P reserves [1] and is currently producing c.8,500barrels of oil per day (BOPD).
  • OML 65 also contains two further discovered and appraised fields, Woodpile and Osaka, which have not been developed to date and will form part of the forward work programme. The two discovered fields contain an estimated 34.9MMbbls additional 2P reserves.
  • The existing production facilities and infrastructure servicing the Abura field are capable of handling up to 40,000BOPD.

The press release says: Sirius Petroleum is an Africa-focused oil and gas development, production and exploration company, building a range of diversified producing and development assets. Its strategy to acquire oil & gas assets which require funding to support the further development of existing production, develop appraised assets and future exploration assets, both offshore and onshore. Sirius works with a range of indigenous and international operational and funding partners.


With A Huge Gap to Potential, “NDEP is Industry’s Best Kept Secret”, CEO Says

Niger Delta Exploration & Production Plc, Nigeria’s longest running marginal oilfield producer, has a larger upside in its portfolio than most of its peers, its Chief Executive Officer has argued.

Gbite Falade, who has run the company for close to a year, says that “the gap to potential in terms of ullage and the improvement that you can institute immediately in terms of agreements that are in play and the new ones that you can bring on stream”, gives him a sense of the “awesome potential prospects” of this organization.

The way Falade sees it, something is always lurking around as an opportunity for increased value creation in the NDEP business profile.

At the start of 2021, the Ogbele marginal field, the company’s main upstream asset, was producing 9,000Barrels of Oil Per Day (BOPD). Today, it is doing 12,000BOPD, “not because we have drilled an additional well but as an outcome of production optimization and well intervention in a “’rig less’ way”.  Again the company’s natural gas production, which was around 40Million standard cubic feet of gas a day (MMscf/d) in January 2021, is now delivering 53MMscf/d, “and we are on a journey to double that by next year”, the CEO explains. “The lead time for gas development is such that you cannot wait until the problems are fully solved before you make the investment otherwise you would be left stranded”.

And despite the fact that Ogbele has been just a marginal field for all its 16 years as a producer of oil and gas, “the envelope of what we have today, can sustain that 12,000BOPD both on the infrastructure level and in the sub-surface”, Falade says.

Falade took over the reins of NDEP in February 2021 from Layiwola Fatona, an industry icon who led the company for 25 years, from negotiation of the acquisition of two marginal fields: Ogbele and Omerelu from Chevron, through first oil from Ogbele in 2005 to inauguration of a gas processing plant and modular refinery (2011) and establishment of NDWestern, a special purpose vehicle for acquiring Shell’s divested assets, in which NDEP holds a 42% interest (2011).

In 2020, the Africa Oil+Gas Report named NDEP Number 1 among the Nigerian Independent producers of oil and gas in its fourth edition of The Talented Tenth, a deeply researched industry ranking of the top 10 progressive, indigenous Nigerian E&P Independents. It was the first time in the four years of the ranking that any company would upstage Seplat Energy as Number 1. And the more intriguing story is that NDEP was not even a manager of an oil mining lease.

The interview with Falade, at his relatively small, modestly furnished office in Victoria Island, an upmarket business suburb located close to the South Atlantic Ocean in Lagos, is the first of a series of C-Suite conversations by the Africa Oil+Gas Report with industry leaders in 2022.

“We are going through some sub-surface data review and the preliminary opinion that we have on the table shows us prospects that are decent and significant and material enough not only to sustain the 12,000BOPD threshold that we are on right now but to take us higher by a factor of at least 50%. And this is one of the most interesting things about the asset that we are operating and indeed, not just that asset but the general story of the Niger-Delta basin”, he explains.

“At the time we took over the asset, the initial view was that there was about 5Million barrels of oil in place but at some point, it was upgraded to 10 Million barrels in place. In 15 years of production, we have successfully extracted 20 Million barrels and we are still producing at the level that we are right now. So, the continuous examination and re-interpretation of the data that we have today shows us that there is still a whole lot possible.

“With proven technology in place for proven extraction and with proven technology in place for discovery, what we are finding out is that most of the reservoirs that we have in Nigeria contain a whole lot more than we have given them credit for”.

NDEP is a diversified hydrocarbon producer with upstream crude output, midstream (gas processing) and downstream (refining, product sales). Everywhere across the chain, things are on a ramp up.

We have pre-invested and taken an investment decision to expand the 100MMsfc/d gas processing capacity by an additional 300MMscf/d to 400MMscf/d. We have taken custody of the plant equipment to carry that out and at the rate at which we are going, we foresee that in the next one or two years, we would have installed and commissioned that additional 300MMscf/d. What is driving that decision is more around the feedstock supply guarantee than the market offtake because there is more than enough latent demand in the market both in terms of export and domestic to consume the additional capacity that we are looking for”.

Of the company’s 11,000 barrels per day refining capacity, 6,000 barrels is commissioned; and the company has the license to operate 6,000 barrels, which comprises two trains. The first train is for the 1,000 barrels and the second train is for the first 5,000 barrels. The first train produces only AGO, the second train produces five different products mainly AGO, DPK, Naphtha, MDO and HFO.

“The third train has not been commissioned officially though operational. There are certain conditions to be satisfied before the regulator (the Nigerian Midstream and Downstream Regulatory Authority NMDRA), would then certify it. But we are very convinced that in the next three months, we would satisfy those conditions that will formally and officially certify that we have an 11,000 barrels per day refining capacity. In addition to that, we also have some bolt-on component parts of the refinery including a PMS unit that is also at the final stages of installation and would soon be commissioned. The naphtha that is coming out from Trains 2 and 3 right now would then be the feedstock for the production of LPG and PMS which are two vital refined products that we need as a country”.

Even with this scaling up everywhere, Falade, a one-time Senior Business Economist at Shell and a former Managing Director of Oilserv, (arguably Nigeria’s largest hydrocarbon project management service provider), is of the view that NDEP is punching below its weight.

“When you look at the fact that this company is not a listed company yet, this company is traded on the NASD and when you look at what it would mean for the fortune of both the company and its shareholders, first, for the company, its ability to raise capital for the endless opportunities that we see, it helps you to appreciate the gap-to-potential that is on the table. It is for these reasons that NDEP remains the best kept secret in the Industry.

The aspiration of the shareholders that the board has mandated, is to take this company to the stock exchange at some point to be determined. By the time we are ready, we will unfold it for the general public to be aware of but that is the ultimate aspiration and we see that as a necessary point to fully unleash this company to the next level of its pursuit. We have largely operated as a well-run company in terms of financial discipline and we have largely grown this company through internally generated funds. So, the extent to which we have scaled is driven a whole lot more by the leverage that our balance sheet carries and also by the cash that we generate in the business. But when you look at the opportunities available to us as a company, when you look at our pedigree, our track record, our reputation and at the universe of opportunities begging to be exploited, the scale of capital that you would need to execute those requires that you have a platform that would give you access if you are to pursue them. The issue of being listed is not an option, it is something that we will do but we are going to do it in the most responsible way. We are going to make sure that we remain financially stable, we remain solid and prudent and value is not destroyed in the process.

This is the first in a three-part series of published interviews with Mr. Falade.

 


Chevron’s Agbami Experiences a Headlong Plunge in Output

Chevron operated deepwater Agbami field offshore Nigeria is in a headlong crash in output.

The field produced 122,000Barrels per day of condensate in 2021, a 15% drop from the 143,307BPD averaged in 2020, according to state sanctioned official figures.

It led the seven Nigerian deepwater producing fields in a collective 50,000BPD decline year on year as indicated in this chart.

 

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