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The Two Extra Hours That Made Amenam

Section: Kickstarter · August 16, 2026 · No comments |

By Toyin Akinosho

How a stuck drill bit and a departed boss handed Daniel Ndefo the biggest discovery of his career

When the technical manager rushed for his flight out of Lagos that Friday afternoon, he left one instruction with Daniel Ndefo: stop the well at 6pm. Everyone else — Ndefo’s boss, the managing director — was already gone on summer break. The well, offshore in 40 metres of water, had been drilling through nearly 1,000 metres of shale where the geologists had expected sand. Rival drillers were phoning to mock them. “Are you a shale company now?” Ndefo recalls being asked.

He let the rig drill on.

“There’s no difference between 6pm and 9pm,” Ndefo, now 80, told me, recounting the decision that would define his 30-year career at Elf — the company that became TotalEnergies. He radioed the rig to keep going until the bit was dulled. Within the hour, the drillers broke into coarse sand and gravel, with the fluorescence and gas readings that signal oil. The bit stuck; mud began to leak away. But the discovery was made.

That encounter birthed the Amenam field, a hydrocarbon accumulation Ndefo puts at more than 500Million barrels (of recoverable crude oil reserves). The discovery lifted Elf’s Nigerian production life from a precarious five years to 30 or 40, and was celebrated across the company worldwide. “At that depth and pressure, it was something new,” he said. The top reservoir sat below 3,500 metres and, unusually, was hydrostatic rather than overpressured.

The near-miss quality of it is what stays with him. Had he obeyed the 6pm order, “Amenam would still be there” — undiscovered. It is a lesson he now presses on the operators of Nigeria’s marginal fields: don’t write off the small or the stuck. “There might be many more wells that were abandoned because they were not seeing what they expected.”

Ndefo belongs to Nigeria’s founding generation of petroleum geologists. He entered the University of Nigeria, Nsukka, in 1966 — diverted there from Ibadan by the looming civil war — lost three years to the war itself, and graduated in 1973. His class was among the country’s very first National Youth Service Corps (NYSC) cohort, the “pioneers,” and he joined SAFRAP (later Elf) straight from the classroom to the well site, spending his entire first year on the rig on his recruiting boss’s advice: “Forget about money, go and get as much knowledge as you can.”

LET’S GO TO CLASS

Look hard at the Niger Delta map and what you see is not a basin of a few giants but an accumulation of small structures that add up. More to the point: some of those “failures” failed only because the crew wasn’t seeing what it expected, and stopped. Wells are sometimes declared as dry, even though the total depth is a few metres above the horizon they were targeting. A metre of oil on a log is not a verdict — it may be a fault cut, with twenty or thirty metres waiting on the other side. Check it. Work the analysis before you write it off.

By the turn of the 1980s, exploration at Elf Nigeria was running on borrowed time. The company’s proven production life had contracted to roughly five years. Obagi field carried the portfolio — a rollover that its reservoir engineers kept alive by chasing thinner and thinner sands — but the acreage behind it was lean, and everyone in the building knew it. “Before Amenam we were like an endangered species,” Daniel Ndefo says of the explorationists of that era. Production was safe. Administration was safe. Exploration, with nothing on the horizon to drill, was not.

Amenam field being interpreted on a workstation many years after its historic discovery

The search for new, prospective Nigerian acreage was so crucial for headquarters that Elf dispatched a geoscientist to run its affairs in the country, his primary assignment being to win more blocks from the government. Almost every morning the managing director would show up for updates with Ndefo’s boss. “We went to the Anambra basin, and we saw that any discovery in the Anambra basin, which is Cretaceous, would not solve our problem. If we made a good discovery there you’d have to run a long pipeline to the ocean, and that won’t be economical.

“The government said they would encourage any company that was ready to do exploration. We said, we were ready. They gave us some offshore blocks, western offshore, near Chevron. We drilled 5 wells there. They were all gas, gas discoveries. What were we going to do with gas?

When Shehu Shagari became the president (1979) we went to him. He said we must show we were ready. We said ‘sure, we can do some investigation even in your own state’. When he insisted that we should start something, we said the first thing we had to do was to find the depth of the basement, so that we’d know at least the thickness of the basin. We had to shoot 500 line kilometres of 2D (two dimensional) seismic survey in order to determine the depth of the basement.

“And we saw something all right, that the basement was dipping towards Niger Republic, it’s shallower on Nigerian side. But towards the Republic of Niger you have thicker sediments, and of course you know what that means. If you needed to do something serious it had to be in Niger. But we saw something also, that there’s a lot of phosphates deposit. There are a lot of phosphates around the Sokoto basin”.

Elf Petroleum was eventually granted four prospecting blocks in the southeast offshore (shallow water) Niger Delta in 1985.

Amenam happened in 1990.

NDEFO TELLS THE STORY THE WAY explorationists tell the wells that mattered: not as a triumph delivered on schedule, but as a run of judgement calls made under pressure, with incomplete data and a boss’s stop-order ticking down. It is worth retelling here precisely because so little of it went to plan.

Building the picture

The groundwork was unglamorous and, in Ndefo’s telling, decisive. Part of his brief in those years was to scout and swap well data across the Niger Delta — you traded a well, you got its coordinates, a couple of strike lines and a couple of dip lines, the samples, and the logs that mattered: porosity, gamma-ray. He gathered them and plotted them, patiently, until a fabric started to show through the map. Faults, discoveries, gas — a pattern in how the Delta was put together.

So when the shallow-offshore acreages were handed to the company, Elf did not go in blind. The team had the regional read to know roughly what sat where. What they also had, on 2D, was Amenam: an unmistakable closure, but a worrying one. The structure came in below 3,500 metres. Stack the sands and you were looking at something close to 300 metres of reservoir. Big. And, at that depth, frightening. “We knew it was there,” Ndefo says, “but we were saying, even if we go for this, it might be gas — and if it is gas, it’s useless.” Gas, in that market, solved nothing.

So they did the disciplined thing and drilled the smaller prize first. Ofon went down, proved it could produce, and put cashflow and confidence behind the department. Only then, with money and nerve in hand, did they turn to the giant they had been circling.

Reading the character

Here is where the discovery earns its reputation as a happy accident — though “accident” undersells the interpretation behind it. In 40 metres of water, drilling their first well in that setting, the team was working from seismic character alone. No 3D. No pre-stack inversion sitting on a workstation to tell them sand from shale before the bit arrived. They looked at a reflection and argued about it. This event could be shale. Then what is the thing beneath it, with the different character — could that be sand? And if it is sand, under a closure this size, it could be a wonderful thing.

They committed to that reading and drilled. And for a long while the well made them look foolish. What they had hoped would come in as an alternation of sand and shale came in as shale — close to a thousand metres of it. The mockery started, as it always does. Drillers rang him up: “Dan, are you a shale company now?” In exploration, Ndefo notes drily, a dry well leaves you with no friends. But the target was that mapped top, that character change — and the shale, stubbornly, kept going.

Two quieter decisions were carrying real weight underneath the drama. The team had already been raising mud weight on the way down, spooked by thin sands they’d cut higher in the section, so they were drilling heavier than a routine well of that depth would demand — a hedge against the unexpected. And Amenam, unusually, would turn out to be hydrostatic rather than overpressured, which is part of what made it a technical talking point long after. Neither fact felt like destiny at the time. Both mattered enormously within the hour.

The two hours nobody authorised

It was August — the season the bosses take their summer leave, and hand the keys to whoever is standing there. Ndefo’s own boss had already gone. The technical manager, second to the MD, stayed on for the well and was meant to see it stopped that Friday evening. Then the airport called: come now, or lose your seat. “Dan, it’s in your hand now,” he said on his way out the door. “When it is time, you radio the rig to stop.” The instruction was clean: 6pm, and no further.

Six o’clock came. Ndefo did not stop the well. He and the geophysicists — he names the late Mike among them — had convinced themselves they were close to a drilling break, and they wanted to see the reflection they had staked the well on. “There’s no difference between 6pm and 9pm,” he reasoned. There was a bit on bottom; why not drill it until it was dulled? Everyone senior was airborne or unreachable. The call was his alone, and he made it: give it two more hours. If nothing shows, nothing shows.

He had gone home — three buildings away — for a drink and a breather when the shout came. Come, they’re calling you from the rig. This was before measurement-while-drilling gave you the formation as you cut it; the picture arrived on a lag, two hours of it at that depth, so for a while all they could do was sit in the office and wonder what was down there. What they knew immediately was that something had changed. There had been a break — fast drilling, the bit dropping through — and, with it, mud losses. Not total losses, but enough that the bottom-hole assembly took weight and stuck. They could no longer pull up, no longer drill ahead. They could still circulate.

Then the lag caught up. Coarse sands — almost gravel. Fluorescence, the first thing the wellsite man calls in. And the gas chromatograph lighting up C1, C2, C3, C4 in the sequence that tells you oil is present, not merely gas. The break had made perhaps five metres, fifteen feet, before it stuck — enough. Amenam was real.

Salvaging the well on a Friday night

A discovery you cannot get back into is only half a discovery, and the assembly was stuck. The plan came together fast: cut off the bottom-hole assembly, plug back to a chosen depth, and sidetrack — a job the team costed on the spot at around two million dollars. That kind of money needs a signature, and it was Friday evening.

With his own management gone, Ndefo worked the phones and the maps. He reached his boss, got a “whatever you can do, do,” and drove to the regulator, where the DPR always kept someone on. He laid it out for the officer on duty — the maps, the earlier logs, the drilling-rate curve, the seismic showing exactly where a clean sand under a chaotic shale should sit, and where it now clearly did. The man, by Ndefo’s account, was almost certainly not the designated authority for a call like that. He made it anyway. “Since you people — since this discovery — go ahead,” he said, with the formal review to follow on Monday. It was the go-ahead the well needed to be saved.

What it meant, and what it should still teach

Amenam, later unitised with Mobil’s Nkpono- after a hard argument over operatorship that Elf came out of holding the majority and the operator’s seat — pushed the company’s production life from five years to thirty or forty. It was celebrated across Elf worldwide, and not only for its size: a discovery at that depth, hydrostatic rather than overpressured, was genuinely new ground. By the time it was developed, Ndefo had retired, and it came onstream into a strong price — the payoff arriving, as these things often do, long after the anxiety that earned it.

He draws a working lesson from it, and it is aimed squarely at the people now holding marginal fields. The industry likes to say the elephants have all been shot. Look hard at the Niger Delta map, Ndefo argues, and what you see is not a basin of a few giants but an accumulation of small structures that add up. More to the point: some of those “failures” failed only because the crew wasn’t seeing what it expected, and stopped. Wells are sometimes declared as dry, even though the total depth is a few metres above the horizon they were drilled for. A metre of oil on a log is not a verdict — it may be a fault cut, with twenty or thirty metres waiting on the other side. Check it. Work the analysis before you write it off.

And with modern kit — rigs and stacks rated far beyond the 5,000 to 10,000 PSI ceilings his generation drilled to, MWD (Measurement While Drilling tool) showing you the formation in real time where he once ran shale density by hand in a graduated bottle through the night — the deeper, harder objectives that were once off-limits below the akata are reachable. In a market where gas is finally money, that changes the arithmetic on a lot of structures everyone quietly gave up on.

Ndefo says he can speak freely now — at 80, he likes to remind you, nobody can slap him. What he chooses to speak about, given the freedom, is Amenam. “Whenever I remember it,” he says, “I say: good.” Squeeze the timeline of that Friday down to a single hour — between six and seven — and it is plain how close it ran. Obey the stop-order, accept the disappointment of a thousand metres of shale, and the field is still down there, undrilled. “Amenam would still be there.” The reservoir did not move. The willingness to drill two more hours is what found it.

By the late 1970s the company was desperate for acreage. Elf’s reserves were thin, and Ndefo describes basin studies that took his team by Land Rover across the Benue valley to Yola and Jos, and 2D seismic shot as far as the Sokoto basin — where they found the basement dipping away toward Niger, and phosphate deposits, but no answer to Elf’s problem.

Under President Ibrahim Babangida (1985) the company finally won shallow-offshore blocks, and it was in evaluating that acreage that Amenam eventually emerged.

Much advanced tools came later: here’s a 3D rendering of a top Structure Map in the Amenam field, showing the associated fault framework and penetrated wells

He is candid about the frustrations, chief among them the cash-call crisis under (then head of state) Sani Abacha, when government routinely failed to fund its share. “I can say this confidently — at 80, nobody can slap me,” he laughed, recalling IOC chiefs gathered in Abuja whom the military ruler would refuse to meet. The workaround, he says, was sole risk: the operator funded the drilling and recovered its costs from equity crude if oil was found.

On the industry’s future, Ndefo is unmoved by the repeated announcement of the death of oil. He recalls telling one IOC chief executive that the majors publicly retreating from Nigerian oil are acquiring acreages and making discoveries elsewhere. “There’s no way people will not need oil and gas,” he said, pointing to petrochemicals, and to unexplored frontiers — the Benue trough, the deep offshore — that he believes still hold prizes.

For a man who chose geology out of a schoolboy’s love of nature, kindled by a Canadian geography teacher at Government College, Umuahia, it has been a life fully lived in the field. “There’s nothing that gave me excitement like going to the field.”

Cote d’Ivoire Poised for a Return After A 20 Year Freeze

Section: Kickstarter · September 9, 2024 · No comments |

By Toyin Akinosho

I arrived Félix-Houphouët-Boigny International Airport at 3am, in the morning, looking forward to seeing the lay of the land in the next several days and talking to a number of people about the looming hydrocarbon boom.

It had been 24 years since my last visit.

This early May 2024 trip had been prompted by reports-and their aftermath- of three discoveries of hydrocarbon accumulations, estimated at over 7Billion barrels of crude oil and gas equivalent in place in water depths ranging from 1,200 to 2,700 metres.

Nowhere else has this scale of discovery happened in Africa in the last 10 years than in Namibia, which now hosts the largest constellation of hydrocarbon super majors on the planet.

In the late 1990s, Cote d’Ivoire promised the world it would be a hub of oil and gas activity in the medium term.

It didn’t happen.

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I’d once constructed a theory, in my head, that the capital city of an African country that has recently stumbled on large oil and gas deposits would look a certain way. But I have always been disappointed. I was disappointed by the dourness of the Accra scene when I visited Ghana in 2008, a year after the couple of fields that were eventually collectively christened ‘Jubilee’ was discovered. Less than two weeks before this trip to Abidjan, I was in Windhoek, Namibia, a place whose midday pace of activity, even at main street level, was underwhelming.

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I finally located the headquarters of (the state hydrocarbon company) Petroci, not in a swank, posh corner of the city, but in the busy downtown. It’s the same downtown area that hosts the headquarters of the African Development Bank, but it doesn’t look anywhere as bespoke as the headquarters of Ghana National Petroleum Corporation in Tema, NNPC Towers in Abuja, Sonangol’s headquarters in Luanda, or even PetroSA’s head office building in Cape Town.

Read the full story here…

Hits & Misses; Independents in the Age of The Small

Section: Kickstarter · August 4, 2024 · No comments |

By Toyin Akinosho

Nationalism and ‘pretenses of nationalism’ ensured the failure of asset acquisitions by three ambitious independents in Chad, Cameroon, Gabon and Nigeria between 2021 and 2024.

The most recent case was in Gabon, where a new government, taking power in the midst of the approval process for Maurel et Prom (M&P)’s purchase of Carlyle backed Assala Energy’s assets, chose to scuttle the deal and hand the property over to Gabon Oil Company, the state hydrocarbon firm. If the transaction had succeeded, as signed, M&P’s net output in its entire portfolio would have soared by 160% to 72,000Barrels of Oil Equivalent Per Day (BOEPD).

While the Paris listed M&P walked quietly away, preferring not to argue with the state, UK based Savannah Energy chose to stand firm against Chadian authorities over the latter’s nationalization of the assets it purchased from Exxon-Mobil. The size of the pie is considered significant to Savannah: a net crude oil production of around 28,000BOPD, along with interests in the 1,200kilometre Chad-Cameroon pipeline. Savannah has taken the Chadian government to arbitration. It says in its 2023 annual report released in June 2024: “We expect the arbitral proceedings to be concluded in the second half of 2025”.

UNDER THE PRETEXT OF SAFEGUARDING NIGERIA’S ECONOMIC AND STRATEGIC interests, state hydrocarbon company NNPC, in May 2022, moved to stop Seplat Energy’s purchase of the entire share capital of the Nigerian unit of Exxon-Mobil Corporation – Mobil Producing Nigeria Unlimited (MPNU)-for a consideration of $1.28Billion. The asset is the entire offshore shallow water business of ExxonMobil in Nigeria, producing 95,000BOEPD in 2020 (92% liquids) working interest. Based on 2020 pro forma volumes for Seplat and MPNU, “the transaction would deliver 186% increase in …

Excerpted from the ‘Kickstarter’ Column in the June 2024 edition of Africa Oil+Gas Report. Access full article here.

Nigerian Oil in a Post- Diezani Trauma

Section: Kickstarter · May 19, 2022 · 1 comment |

By Toyin Akinosho,

A fuller sketch of events

In the Christmas of 2014, Nigeria had three months to go for elections.

I was living in Lagos, the country’s commercial hub, and frantically calling for the removal of Diezani Allison-Madueke as the petroleum minister.

There were numerous reasons I thought it’d be a value destroying proposition to keep Mrs. Allison-Madueke in the role, if (the incumbent President) Goodluck Jonathan won the elections. I enumerated them in this column at the time.

But close to eight years after the electoral sack of Goodluck Jonathan and the accompanying exit of Allison-Madueke, the Nigerian petroleum industry is in a far sorrier state than it was. President Muhammadu Buhari and his team have not only wasted the Nigerian energy crisis, they have encouraged the ungovernability of the space that the petroleum sector occupies, even with their much-celebrated success with the passage of the Petroleum Industry Act (PIA).

For context, I’d briefly summarise why I had forcefully called for Diezani’s ouster and then return to Buhari’s dismal performance.

The darkest spot on Diezani’s tenure was the signing and implementation of the Strategic Alliance Agreement (SAA).

She was settling down as minister in 2011 when Shell, TOTAL and ENI were rounding up the sale of their 45% in five assets onshore Niger Delta to Nigerian companies. Her ministry decided that the NNPC would be more active in management of the assets. This is fine. What’s lamentable is the way in which the country’s share of the proceeds got diluted in such a way that the net return to the national coffers was significantly diminished, in favour of the private interests that was allegedly investing in production capacity on behalf of the NNPC.

The NNPC, at the minister’s instance, nominated its operating subsidiary, Nigeria Petroleum Development Company NPDC, to manage the acreages. The NPDC in turn invited a financing partner to fund its share of the operations. The contract with Atlantic Energy (SAA) entitled it to 30% of NNPC’s share even after the cost oil had been recovered.

In order to recover its cost in funding the NPDC part of the operations, the terms called for Atlantic Energy Drilling to receive, at the beginning of production, 60% of the volume of crude oil to which NPDC (NNPC) was entitled. This is cost oil. When that cost was fully recovered, Atlantic’s share would drop to 30% of the crude oil to which NPDC was entitled. Please read this carefully; in the post-Shell operatorship phase, after the NNPC equity had been transferred to its subsidiary NPDC, to become the “operator”, with so much fanfare, NPDC had gone into an agreement with a company unknown to the industry and registered just months before the deal. The company was charged with the responsibility to fund NNPC share of the cash call for operations in return for 60% (in the first instance) and later 30% (after cost recovery) of the crude oil that should accrue to NPDC (NNPC) and by extension, the teeming Nigerian population! In effect, the rightful share of the proceeds from these assets that should flow to the National Treasury drops by at least 30%, all through the duration of the agreement.

I have gone into this simple explanation to show how inequitable the Strategic Alliance Agreement had been. What’s worse, much of the entitlement to the nation from this much reduced take never made it to the national treasury.

This brazen way of spitting in the nation’s face was the signature conduct of Diezani Allison Madueke’s tenure.

In four years on the job, she saw out three successive heads of Department of Petroleum Resources (DPR), the industry’s regulatory agency and fired four Group Managing Directors of NNPC, the state hydrocarbon company. The most important criterion for keeping any of those jobs was an undivided commitment to doing Diezani’s bidding. She had a huge appetite for pursuing vendettas, even after dismissing the non-compliant heads. Of all the acreages divested by Shell during her tenure the only one for which she got NNPC to call up its pre-emption rights was motivated by pure anger.

IOCs conducted divestments from 21 acreages under her watch, a sign of inclement investment climate more than anything else, but the minister didn’t regard it as a blot. Instead, she saw opportunities to influence the sale and purchase in her personal favour. The companies often had to watch her body language to determine who to sell to.

Diezani superintended the highest crude oil prices in history (2011 to 2014) but the Nigerian rig count trended south. The cash call issue (which is what Nigerians call the IOCs’ receivables from NNPC for joint venture operations), became more intractable than ever during her tenure. As work programmes shrank in that era of high of prices, the major companies accelerated the frequency of severance packages for their staff.

So much for memories of the Diezani era.

Buhari removed NPDC’s chokehold on Nigerian independents with assets in the Western Niger Delta, and allowed the CEO of NNPC a free hand. Key upstream operators cheered when his government proposed to pay the cash call arrears in tranches that were transparently measurable. But knowing what we know now, the gesture had come too late. Buhari himself has witnessed the divestment of seven oil mining leases by two majors and I have to quickly say this before anything else about his administration’s seven years; the impunity in acreage licencing and administration has become more rampant. The 2020 Marginal Fields Bid round was the country’s least transparent and possibly most corrupt hydrocarbon lease sale in the last 20 years. The round, superintended by the (now defunct) DPR, was so riddled with malfeasance that the newly created Nigerian Upstream Petroleum Regulatory Commission (NUPRC) cannot publish the list of awardees.

Yes, petroleum rights are where the Buhari team got it most wrong. In one case that could have been laughable if it was not so tragic, the DPR revoked the four Production Sharing Contracts operated by Sinopec-owned Addax Petroleum and, in the course of three days, re-awarded the PSCs to two Nigerian companies, one of them owned by a highly politically exposed individual. Of course, there was a lot of kicking and screaming by the state firm NNPC, the concessionaire of the PSCs and the Nigerian president instructed a return of the rights to Addax, after the Chinese government had complained, but the episode fit a pattern. In the last 18 months the Buhari administration has re-awarded at least four licences it had revoked from some companies, to other companies, all outside the process of a bid round or any form of open, transparent contest. A sense of arbitrariness is highlighted by the decision to suspend sections of the Petroleum Industry Act, because the government could not dare to remove subsidies on gasoline importation, which costs the treasury over $4Billion a year. The sense-in the air- of deepening entropy in the conduct of the affairs of the Nigerian petroleum industry has not abated.

The old habits of sitting on proposals and approvals for pecuniary gains, either at the Ministry, at the regulatory agency, or in the NNPC towers, haven’t gone away and it is largely because, despite legislated structured reforms, individuals still see themselves as the processes!

President Buhari is credited with the passage of the Petroleum Industry Act, but we must not forget that his presidency spent the longest time (six years) to work on it. Project delivery timelines haven’t improved. It is looking like none of the gas pipelines under construction by NNPC, before Buhari came in, will be completed before his eight-year term of his Presidency ends. My key worry is the unwillingness of the man once described as “ascetic, sandal-wearing general”, to tackle the glaring graft in the sector. It is why I think the country is living in the post-Diezani trauma.

This article, earlier published in the Kickstarter column of the March 2022 edition of the monthly Africa Oil+Gas Report, is republished here on this website for the larger public because of its significance in terms of public-service.

Nigerian Oil in a Post- Diezani Trauma

Section: Kickstarter · April 19, 2022 · No comments |

By Toyin Akinosho,

In the Christmas of 2014, Nigeria had three months to go for elections.

I was living in Lagos, the country’s commercial hub, and frantically calling for the removal of Diezani Allison-Madueke as the petroleum minister.

For context, I’d briefly summarise why I had forcefully called for Diezani’s ouster before I go to discuss aspects of Buhari’s dismal performance.

The darkest spot on Diezani’s tenure was…

Read More

I Disliked Tullow, Then I Loved Tullow, and Now What?

Section: Kickstarter · October 21, 2020 · 2 comments |

By Toyin Akinosho

I was extremely upset when I learned that Tullow Oil, the Irish independent, had delisted Energy Africa from the Johannesburg Stock Exchange.

The year was 2004. Tullow was on acquisition spree in Africa.

Tullow acquired the Cape Town based company for $500Million.

I was upset because Energy Africa was the one homegrown African independent with an active producing asset inventory around the continent.

It was based in Africa, listed on the continent’s most prosperous bourse and had interests in Equatorial Guinea, Congo, Gabon, Cote d’Ivoire, Ghana, Uganda, Egypt and Namibia. Its producing acreages (in Equatorial Guinea, Gabon, Congo) averaged over 20,000 Barrels of Oil Per Day (BOPD) in net output at the time.

I did not know it then, but I was beginning to nurse the sentiment that Africa needed local E&P companies to access acreage licences, operate and extract mineral resources on their own land and build technical and financial capacity on the back of the adventure.

150 years after the first Western mining companies took over vast stretches of continental land and introduced a concept of property rights that favoured them and disadvantaged the natives, they had built fortunes with those assets in their own countries. The best that African companies had become, as of 2004, was to be competent contractors.

At the time, only Nigeria’s Conoil, with about 30,000BOPD in output, operated any producing property with sizable hydrocarbon volume. The other Nigerian owned producing independents, seven of them then, had combined production less than 15,000BOPD.

In South Africa, the only homegrown E&P players were SPI, the Sasol subsidiary, and the state hydrocarbon company, PetroSA. As to why I don’t consider Sasol’s SPI as an African independent, you have to google the company’s history.

There were no comparable homegrown independents in Egypt, Algeria or Angola.

So, Tullow Oil had come from the Western Hemisphere, to shoot down such a stellar African star from the sky. It was pretty depressing.

And this Irish company with a very Irish name, started going about calling itself an African independent.

Tullow claimed it had a reason for the entitlement. It was founded in 1986, primarily to look for and work up small oil fields, which had been left behind by the majors in Africa, with no-one to work them. Its first work programme was to develop some small gas fields in Senegal.

Fast forward 18 years later, the Energy Africa acquisition bolstered this relatively small company.

In 2006, Tullow found oil in Uganda, after Hardman Resources had made the country’s first discovery. The same year, it signed a Petroleum Sharing Contract with the Ghanaian Government for Deepwater Tano Block in 2006. It was a transformative move.

At a conference in Cotonou, Benin Republic, in 2007, I sat through a presentation by Tim O’ Hanlon, then director of Tullow’ Oil’s business development activities in Africa. It was an impassioned speech, brimming with promises of genuine love for the land of my birth. I became a Fan.

Kosmos Energy’s discovery of the Mahogany field, the first sizable find in Ghana, de-risked Heydua-1, the prospect that Tullow had lined up for drilling in Deepwater Tano. In the event, Heydua turned out to be a straddle play with Mahogany. The unitized field was christened Jubilee and Tullow was appointed operator. In the space of three years, Tullow took Jubilee from discovery to market. By 2010, “Africa’s Leading Independent” had taken off.

Meanwhile, Tullow’s Irish charm was failing to work the magic in Uganda. The Government and a host of civil society groups were demanding more upfront benefits before first oil than the Ghanaians did. There was a part of the Ugandan demand that I lined up behind: would Tullow agree to converting a quarter, even a fifth, of the crude production (after first oil), to petroleum products through a refinery? Tullow demurred, citing bankability issues. The thought came back to me: Africa certainly needs brave local businessmen with industrial scale mindset who, with Government support, would take the risks.

Tullow Oil has never been the largest Western independent operating in Africa. That credit goes to Apache Corp (which also has a higher net hydrocarbon output on the continent, even if the only African country in its portfolio is Egypt), and the defunct Anadarko. Tullow was also never the lead exploration company. In the years that independents were actively foraging in frontier basins that the majors were allegedly not keen on, it was Australia’s Woodside who opened up the Northwest African margin; Anadarko funded Kosmos Energy’s Ghanaian discovery, and discovered Mozambique and, following the Rovuma basin fairway that Anadarko had proven, BG opened the neighbouring Tanzanian deepwater.

Tullow bore no shame in arriving late and buying entry into the game. But the Irish company was a fast follower.

Then came the company’s 26^th year on the continent. In February 2012, Tullow went into a drilling location in Kenya like any other wildcatter, acting on gut feeling and shooting from the hip, bearing the risk of failure.

Tullow struck oil at a depth shallower than 1,200metres, less than mid-way to the planned 2,700metre depth, in Ngamia 1, in the Turkana County, one of seven sub basins outlined on the Kenyan/Ethiopian concession map.

That discovery conferred even more respect on a company that had benefitted from a carefully deployed publicity machine.

Kenya rolled out the carpet that Uganda didn’t for Tullow. And at some point, it was being suggested that it would take Final Investment Decision on the much smaller Kenyan cluster of fields (about 100,000BOPD at peak) earlier than it would take for Ugandan development (230,000BOPD) peak production.

But who was to know that everything would go downhill from here?

After a number of challenges in East Africa, including the decision by Uganda (prompted by French major TOTAL) to abandon the Kenya route, as well as a considerably drawn out negotiation concerning Tullow’s farm down on its assets in Uganda, Tullow’s shareholders were no longer seeing a clear line of sight to new, significant hydrocarbon production, the type of which happened in Ghana between 2010 (Jubilee) and 2016 (TEN). It portended something about a company that was atrophying, rather growing.

I am running out of space here. Tullow is out of Uganda and it has signaled it was leaving Kenya sooner than later. Production in Ghana will be flat, at best, for a few years and then will start plunging. There is no major new heartland for the company on the continent. Tullow has, in the past six months, ceased calling itself Africa’s Leading Independent. Its reports now bear the title An independent oil and gas company focused on Africa and South America.

This piece was originally published, for the benefit of paying subscribers, in the June 2020 edition of Africa Oil+Gas Report. Sometimes an essay like this is republished in the newsletter; but most times it’s not.

In Uganda, The Winner Takes All

Section: Kickstarter · June 17, 2020 · No comments |

By Toyin Akinosho

TOTAL’s announcement of a half-a-billion-dollar purchase of Tullow’s entire equity in a Ugandan oilfield development, last April, sounded like a loud, symbolic statement of optimism.

In a dry white season, during which over four billion people were in lockdowns across the globe, the statement seemed to assert: “Uganda, we got you”.

At the heart of the transaction is the 230,000BOPD (Barrels of Oil Per Day) Lake Albert upstream and midstream project.

Tullow will receive $575Million, with an initial payment of $500Million for its 33.3334% stake in each of the Lake Albert project licenses EA1, EA1A, EA2 and EA3A and the proposed East African Crude Oil Pipeline (EACOP) System. It will pick up the remaining $75Million cheque when the partners take the Final Investment Decision to launch the project. In addition, the Irish independent will receive conditional payments linked to production and oil price, which will be triggered when Brent prices are above $62/bbl.

Tullow got to reduce its debt and command an immediate surge in its share price. TOTAL secured such a prize for less than $2 a barrel and for Uganda, finally, a clear line of sight to Final Investment Decision for a development that had been on the drawing board for over a decade.

As I see it, TOTAL has prevailed in Uganda in the eight years since it first entered the country’s E&P sector, via the acquisition of 33.3% of what was then Tullow’s Blocks 1, 2 and 3A for $1.45Billion. It had gradually stamped its authority, muscled out Tullow and raced past the sure footed, hard-tackling energy bureaucrats at the country’s Petroleum Authority and Minerals and Energy Ministry.

The French major is the decisive winner.

Tullow, which helped to nurture East Africa’s potential as a prolific oil producing region, and proudly displayed a badge describing itself as “Africa’s leading Independent”, now had to pack its bags.

I started having the nagging suspicion that TOTAL had taken charge in late 2015, when I witnessed, first hand, a very public argument between two ranking Ugandan and Kenyan civil servants regarding which was the optimal route to lay the EACOP, the pipeline that will ferry the crude oil produced in landlocked Uganda to the Indian Ocean for export.

“The route through Kenya is the one we have always known,” Hudson K. Andambi, (then) senior principal superintendent geologist at the Kenyan Ministry of Energy and Petroleum, said at the Africa Oil Week in Cape Town.

“We are still evaluating the routes and the least cost route is what we will consider”, declared Fred Kabagambe-Kaliisa, (then) Permanent Secretary at the Uganda’s Ministry of Energy and Mineral Development, at the same conference, minutes after the Kenyan had spoken.

It was the second public hint that the Ugandans might jettison the long- anticipated, widely expected pipeline route from Hoima, in Uganda’s oil rich province, to the Kenyan coastal town of Lamu.

I walked up to Mr. Kabagambe-Kaliisa after his presentation and asked him, pointedly, if TOTAL was behind the change. “We will take on board any concerns by our partners,” he responded, carefully weighing his words.

With crude oil found in commercial quantities in the Kenyan hinterland, over a thousand kilometres from the coast, operator Tullow had looked forward to an evacuation pipeline, originating from Uganda, that would link up with one that collects Kenyan crude, with both crudes heading for a Kenyan coastal port. The agreement signed by Presidents Uhuru Kenyatta and Yoweri Museveni in August 2015, three months before that public contestation between the Kenyan and Ugandan officials, was anchored on a 1,500 kilometre pipeline from Hoima through Lokichar in Kenya’s border region, and required guarantees from the Kenyan government regarding security, route optimization and financing.

But two months after that Kenyatta-Museveni agreement and a month before the subject spat at Africa Oil Week, Ugandan and Tanzanian officials, as well as staff from TOTAL, signed a separate agreement, creating “a working framework for the potential development of a crude export pipeline from Hoima to Tanga Port of Tanzania,” the Ugandan Ministry of Energy said in a statement, which raised some concern in Nairobi.

And now we were at this conference, I knew that Tullow should be worried, very worried.

The decision to pump the Ugandan crude through a separate pipeline from that with which it planned to pump the Kenyan crude to market, meant that Tullow would be investing in two expensive pipeline projects, each costing no less than $3.5Billion. This, at a time of plunging crude oil price, should unnerve the company, a midsized independent struggling with losses.

It might not be surprising to some, then, that in January 2017, Tullow announced that, for a sum of $900Million, it had agreed to sell, to TOTAL, two thirds of its entire stake in each of the Lake Albert project licenses EA1, EA1A, EA2 and EA3A and the proposed East African Crude Oil Pipeline (EACOP) System. It came to 21.5% of the project’s entire stake. CNOOC invoked its right- of-first -refusal and asked for half of the 21.5%. But Kampala, never in a hurry to close any deal, dragged the timing of grant of the official consent for the sale, which itself impacted the Final Investment Decision.

The sticky point was the Tax that the government would receive from the sale and purchase.

Tullow’s inability to consummate the sale signaled to its shareholders that it wasn’t creating value. Share prices kept falling. Tullow was hemorrhaging worth.

With government still playing hard ball, two and half years after the intent for the 21.5% sale was announced, TOTAL pulled rank and announced the suspension of all activities, including tenders, on the EACOP. The Chinese, not known to express anger in public, decided that this was time to talk. “It is now very difficult to negotiate with government”, Gao Guangcai, CNOOC’s Vice Project Manager, told a conference in Kampala. The implication of TOTAL’s action was that the project could not continue.

The authorities got the message and the parties went back to the table.

By April ending 2020, the global economy had seized up; the Ugandan authorities had come around and Tullow was going to make a distress sale: accept $425Million less for a much larger stake than it had negotiated it would take three years and three months earlier. TOTAL, the European supermajor with piles of cash, is the winner that takes all.

In His First Term, Buhari Wasted the Energy Crisis

Section: Kickstarter · March 4, 2019 · No comments |

By Toyin Akinosho, Publisher

President Muhammadu Buhari inherited an energy crisis in Nigeria when he took charge of the country in May 2015.

Now elected for a second term of four years, it is safe to assume that the policies he worked with wouldn’t change significantly.

Buhari took over an upstream sector gasping for breath: even as crude oil prices were crashing down as he took the oath of office, there were problems that were self-inflicted by the previous administration, which were wrestling with the sector’s legacy challenges.

Operations in the oil fields of the Niger Delta had not entirely recovered from the historic MEND attack of February 2006, which had reset the dynamics in the region around the distinctions between licence to-and freedom to– operate.

The state hydrocarbon company NNPC was owing cash calls in a way that effectively disabled work programmes of operating companies. And by insisting on operatorship without the wherewithal to do so (competencies, governance, processes and funding), the NPDC, the operating E&P arm of the NNPC, had strangled investment in assets that Shell & Co. had sold to five Nigerian independents since 2012. At the time Buhari came in, those companies had lost three years’ worth of aggressive investment to boost production.

Midstream, the President met proposals to diversify the gas market from export led to an inclusive, part export, part domestic beneficiation, which could establish an industrial economy with huge absorptive capacity. A crucial part of the challenge here was that a disproportionate percentage of construction of the midstream infrastructure was financed by the state. And Project delivery had been consistently suboptimal.

Downstream, Buhari met a huge refining gap that ensured that over 90% of petroleum products in demand were imported, and a commercial model that entitled NNPC to taking 445,000Barrels of Crude Oil Per Day of oil, while it was expected to beneficiate no more than 20% of it. Millions of litres of Gasoline were being imported at a cost significantly higher than what the government instructed the retailers to sell and as such the state was saddled with billions of dollars in subsidy claims by importers.

In the power sector, Buhari met rolling blackouts, with power generation averaging 4,000MW, mostly controlled by private actors; transmission averaging 5,000MW, still run by the state and distribution averaging 3,000MW, in the hands of the private sector.

On the new President’s table were frames of ideas around the Petroleum Industry Bill, which was first presented in Parliament in 2008. This set of laws has benefited from a robust national debate over the years; in its current form it engages every opportunity and threat in the hydrocarbon value chain, from state ownership and dispensing of oil and gas acreages, through community entitlements and responsibilities, to downstream streamlining of sales, distribution and proceeds of petroleum products.

Efforts and Results. Mr. Buhari’s government deserves credit for easing the bottlenecks in the cash calls for upstream work programmes and removing NPDC’s chokehold on Nigerian independents, allowing a more vibrant upstream segment. Investments have streamed into many Brownfield projects. There’s an uptick in drilling activity, a marker of the health of the industry, even if several actors remain cautious. The CEO of NNPC has been allowed a free hand, even though the President himself was the minister of petroleum throughout the tenure. Discussions have picked up around Financial Investment Decisions for new field projects, especially in deep-water, but while the momentum is higher with this administration than the former government, the old habits of sitting on proposals and approvals for pecuniary gains haven’t gone away and it is largely because, in the absence of structured, legislated reforms, individuals still see themselves as the processes!

A significant let down of Buhari’s administration is the cold shoulder the President gave the passage of the Petroleum Industry Governance Bill, the first of the four Petroleum Industry Bills.

Buhari’s Ministry of Petroleum Resources has crafted National Oil and Gas Policy documents, but in the absence of an act of parliament reforming extant hydrocarbon laws and operational norms, with these policies at its heart, the documents have gone nowhere. In Buhari’s first term, there was private sector equity investment in LESS THAN 250Million standard cubic feet per day capacity new gas processing plant for the domestic market. Project delivery timelines haven’t improved. None of the gas pipelines under construction by NNPC, before Buhari came in, will be completed before this current term of his Presidency ends. The private sector is not keen on midstream infrastructure, and has not been sufficiently incentivised to change its mind.

The President has not been able to work the downstream sector anywhere close to the little he has achieved upstream. The revamp programme for the refineries was a spectacular failure. It has been a hard sell to convince investors to put money in the revamp without getting equity, then allow NNPC (which ran down the facilities in the first place) to operate the refineries after the revamp, and then hope they could make their returns from the sale of the products. Mr. President’s idea of reducing the billions of dollars lost to subsidising the cost of gasoline import has been to appoint NNPC as the sole importer of the fuel. The state hydrocarbon firm itself admitted it had incurred some $2Billion in “under-recovery”, the Buhari administration’s code name for subsidy, in the 11 months between January and November 2018. The Government has now set aside $1 Billion for under-recovery in the 2019 budget, a lame, wooden, uninspiring document that is filled with less hope than apologia.

Buhari’s Ministry of Power has worked to untangle some of the knots created by the incoherent running of the industry by the previous administration. The messy regulatory issues around Aba Power Plant, the access to meters, the retrieval of power equipment lying at the ports for several years. Still, it’s incredible that the President was not in a hurry to appoint commissioners to run the National Electricity Regulatory Commission, the sector’s regulator. The NERC Chairman was appointed only last April.

But the big ticket item remains adequate power supply. The Transmission Company is owned and operated by government. At the end of Buhari’s four years, the volume that can be transmitted on the Nigerian power grid reliably and safely is 5,500MW. More than this the grid collapses. Unlike Petroleum, Mr. Buhari has a minister in charge of the Power sector, who has been pushing the principle of “incremental power”, as a bold overhaul of the sector appears elusive. A key part of the problem here is that the regulators are challenged by what they interpret as the President’s body language; NO tariff increase. The minister has chosen a bully pulpit approach to engage investors, in the absence of a fully constituted Regulatory commission. To Buhari, a cost reflective tariff means higher payment for the poor and so for four years, the several segments of the electricity value chain have been underfunded. A crisis always presents an opportunity for transformation. In his first term as President, Mr. Buhari will be remembered as wasting Nigeria’s energy crisis.

The original version of this piece was published in the January 2019 edition of the Africa Oil+Gas Report, released January 24, 2019 at the West Africa International Petroleum Exhibition and Conference.

Activating the Roadmap for Angola

Section: Kickstarter · February 14, 2019 · No comments |

By Gerard Kreeft

What can we anticipate in Angola for 2019 and beyond?

While optimism is in the air there is also a high degree of impatience. The strategy for determining the direction of Angola’s oil and gas industry—which is the piggy bank for economic diversification be that for basic education, housing, drink water and santitation, and stimulating the agricultural sector—must still be taken and implemented.

Oil and Gas Authority

Amadeu Correia de Azevedo, the Director of the Oil and Gas Authority, is quickly moving to assert it’s authority: originally the handover of Sonangol’s concessionaire role was scheduled to start in 2020; now that has moved up to January 2019 to ensure a timely handover.

The Authority is expected to be very busy from the outset:

Overseeing and Implementing the Gas Legislation
Monitoring and reviewing exploration plans and development plans
Encouraging new companies to participate in Angola’s oil and gas industry.

Certainly a key sign to watch are Angola’s production figures. The Authority’s immediate goal is to ensure that oil and gas production does not stagnate at the current level of 1.4MMBOPD, but increase to at least 1.5MMBOPD as quickly as possible in order to send a positive signal to the international investment community.

Less positive has been the news that Shell did not submit a bid for the former Cobalt Blocks. The reasoning: a difficult project and the company has better opportunities elsewhere. This highlights two major problems which the industry in Angola must face and solve:

Developing value propositions for current and new potential assets in Angola that will help stimulate production;
International companies face internally a strong debate where they will invest their exploration and development monies…and Angola is part of this competition.

Overseeing and Implementing the Gas Legislation

At the recent Africa Energy Summit organized by EnergyWise, Maria Figueiredo, Partner (Miranda Law Firm) explained the basis of the new gas legislation:

Oil companies are entitled to prospect, explore for, appraise, develop, produce, and sell natural gas either domestically or on the international market. Originally this was the monopoly of Sonangol.

Contractual terms and conditions can be agreed upon on a case by case basis.

Concessions and contracts may set periods and terms longer than those set typically for exploration of oil.

Deductible: costs incurred with development and production of associated gas and construction of relevant pipelines.

Present concession contracts for crude oil are subject to 70% Petroleum Transaction Tax (PTT), but gas projects are exempted.

Present concession contract costs not linked with exploration, development and production of crude oil not eligible for deduction for Petroleum Income Tax (PIT); for gas contracts costs linked with associated gas and non-associated gas in the context of a crude oil project become tax deductible for PIT.

For oil concessions the Petroleum Production Tax (PPT) is 20%, possibly reduced to 10%; PIT is 65.75% and for PSCs the PIT is 50%.

For gas projects the PTT is 5%; PIT is 25%, and possibly reduced to 15% for projects with certified with reserves greater than 2Tcf.

The gas legislation has been welcomed by the industry as a good start to incentivize a potential gas energy. As the industry moves forward it is anticipated that the necessary amendments and challenges will be addressed. Will the incentives extended to explore for natural gas be done at the expense of oil projects? Can the industry also anticipate that current and future oil agreements will also possibly be amended?

Nonetheless, as Qi Chen of Chiron AlkaTrans Technology outlined at Africa Energy, a gas roadmap should entail:

Long-term planning for gas development and Monetization
Guiding strategy document for national development in the gas sector
Well to wheel: reservoir to end users
Gas production, infrastructure, movement, and Monetization plants
Fit into the national energy development strategy

Monitoring and reviewing exploration and development plans

Speaking at the Energy Africa Summit, Ken Seymour, of African Oilfield Solutions(AOS) stated that if project development was to move forward it is paramount that the following criteria be addressed:

Opening licencing systems with rapid churn of acreage;
Making data freely available;
All stakeholders must be aligned to solely profit from production of hydocarbons.

While exploration has been done in the pre-salt basins, the results to date have been left wanting…yet there is optimism that with additional geological modeling and exploration, hydrocarbons can be found. For example, Sebastian Kroczka, Industry Solutions Advisor, Halliburton, visualized the following:

Application of smart connectivity between subsurface and surface data from field/FPSO to the office with automated and optimized workflows;
Faster data visualization, data analytics, machine learning, pre-processing and data integration.

Angola’s largest cash cows, the offshore Blocks 15 and 17, are fast becoming mature and innovation is needed to ensure that the life cycle of these projects can be extended. The majors involved here—BP, Chevron, ENI, ExxonMobil, Statoil and TOTAL, are interested in further developing their businesses and open to innovative ideas and business propositions, varying from enhanced oil recovery to natural gas production.

Encouraging new companies to participate in Angola’s oil and gas industry

More regional international co-operation can lead to more increased activity. For example at Energy Africa, Namcor presented its Kudu Gas to Power Project. An example of how a small dedicated gas project can be developed and monetized. A precedent for Angola and also a stimulus to establish more regional co-operation.

With the majors taking up more stakes in Nambia, additional co-operation will be sought. For example rig-sharing. A major exploration cost. With increased exploration in both Angola and Nambia time-sharing of rigs is one example of co-operation.

Certainly it should not be ruled out that new players will start to look at the regional developments in South-West Africa. New players can be engines of change and can help speed along new business developments.

Gerard Kreeft, MA (Carleton University, Ottawa, Ontario, Canada) is founder and owner of EnergyWise. The company has since 2001 managed and implemented oil and gas conferences, seminars and master classes in Angola on an annual basis.

Mr. Kreeft wrote this specifically for Africa Oil+Gas Report and the piece was earlier published in the November 2019 edition of the magazine.

If You are in Oil and Gas, You Should Be Worried

Section: Kickstarter · April 26, 2018 · 1 comment |

The world of fossil fuel is about to change. It is changing uniquely. The world will demand far more energy than it is currently doing, while the energy mix changes.

There are people who don’t believe that the transition is happening.Concerns have risen around prospects of global warming. The Paris Climate Agreement aims to keep global average temperatures from rising by two degrees Celsius.

Flooding, melting ice….the ecosystem is changing and clean air that we take for granted in many places is now coming under very severe challenges in some areas.

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