All posts tagged africa-petroleum


Shell at the Brink: Never Let A Good Crisis Go to Waste

By Gerard Kreeft

Since April 1 2020 Elisabeth Brinton was appointed Executive Vice President of Shell’s New Energies business, steering the company’s work in power, renewables and lower-carbon technology. According to her Linked-In site, ”this role covers Shell’s work in wind and solar, new mobility options such as electric vehicle charging, and laying the foundation for an integrated lower-carbon power business” .
Brinton is a former Silicon Valley entrepreneur and utility industry veteran… She joined Shell in 2018 from AGL Energy, Australia’s largest integrated energy company, where she was Executive Vice President, New Energy.  She “helped to increase adoption of renewable energy, build the world’s first residential virtual power plant and grow and sell a profitable smart metering business”. Brinton also
was previously the Corporate Strategy Officer for PG&E Corporation, the US utility company that specialises in renewables, customer solar, energy efficiency and electric mobility.

She has a monumental task of developing Shell’s renewable energy strategy. The situation is grim, especially from a shareholder’s perspective. Shell’s share  price has plummeted. Earnings season is fast approaching and shareholders are anticipating their golden share dividend. Not since WWII has Shell reneged paying out such a dividend. Will it be able to continue this tradition?

The signs are not good. Shell’s cash deficit between 2010 and the 3rd Quarter of 2019 was $22.9Billion, based on a study released by the Institute for Energy Economics and Financial Analysis. The other majors- BP, Chevron, ExxonMobil, and TOTAL- included had similar cash deficits. In total more than $200Billion! With a continued lower oil price, the future scenarios are bleak.

Shell plans to invest $2 – $3Billion a year on its power and low-carbon business compared with an overall spending budget of $30Billion per year between 2021 and 2025.

Prior to the current oil and gas crisis BloombergNEF estimated that investments in renewable energy in the period 2010-2019 was $2.6Trillion. Through 2025, $322Billion per annum would be spent, almost triple the $116Billion invested in fossil fuels. With most E &P budgets locked down future investments in the oil and gas sector look grim.

If there ever is a motivation to move on and recognize that renewables are the new boys on the block the time is now. To think that Shell, who are doing symbolic spending on renewables will survive is also an illusion. Shell continues to give a gold dividend and this will be paid for by debt financing, i.e. redundancies and the selling of more assets. In the meantime the share price continues to sink like a stone.

If you make a net comparison between Orsted, the Danish the Offshore Wind Farm giant and Shell then the following:

Shell’s latest share price (6 April 2020) was US$ 39

In May 2018 the share hit a high of $70

In other words, the share has lost almost half of its value.

Orsted’s share price on April 6, 2020 was $108

Orsted’s share price on July 1, 2016 was $35

In this period of time the share price has tripled, while Shell’s share lost almost 50% of its value.

True the Shell share continues to give shareholders a golden dividend of some 6%. Orsted for the last 4 years has only had a dividend of 1.68%.

Yet the true investment return must surely be seen in the spectacular and continued rise of the Orsted share which has tripled and has only had a small blimp in the current economic crisis. How long can Shell  afford this current policy? Simply throwing money at it will not solve the problem. What is missing is a strategic vision…and simply appointing a new EVP for Renewable Energy is too little too late. Shell can possibly choose two options:

Continue on its present course paying out its current dividend and financing this through assets sales and redundancies; or

Become a truly dedicated energy company increasing its new energy budget five-fold to at least $10- 15Billion per year. At the same time decrease the dividend and ensure that the Shell share can gain a true value. Ensuring true shareholder value will depend on creating a renewable business model that meets the requirements of todays’ shareholders.

P.S.

Since this article was written, Shell has announced its commitment to take significant additional action on climate change, including a commitment to achieve net zero emissions. There’s no clarity, however, on how that commitment is tied to day to day business.

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


AfDB Is Not Supporting the East African Crude Oil Project

The African Development Bank has refuted the claims in a news article that it plans to provide financial support to the East African Crude Oil Pipeline Project.

It doesn’t name the medium, nor cite the headline, but says it “strongly refutes the claims in the misleading article, which references a letter by a group of civil society organizations and climate change advocates asking the institution to withdraw from the project due to its potential social and environmental damage”.

The facts, according to AfDB:

  1. The NEPAD Infrastructure Project Preparation Facility (NEPAD-IPPF) has not provided financing to any Private Sector Company for upstream oil or gas pipeline projects in East Africa.
  2. No commitment was therefore made to any party to fund the East African Crude Oil Pipeline Project. The project is not included in the Bank’s lending programme.
  3. The Bank is strongly committed to renewable energies.

Then the bank beats its chest

“It is important to point out that the African Development Bank Group has for more than a decade played a leading role in crafting policies and delivering investments that promote sustainable development practices on the continent, including climate adaptation and resilience.

“The Bank is committed to facilitating the transition to low-carbon and climate-resilient development in African countries across all its operational priority areas”.

 


Zohr Field Now Producing 2Billion Cubic Feet A Day

Egypt’s Zohr field, discovered by ENI in 2015, is now producing 2Billion standard cubic feet per day (2Bscf/d), “equivalent to approximately 365,000 BOEPD, according to the Italian explorer. “This outstanding result has been achieved only a few months after the first gas in December 2017 and one year before the schedule of the Plan of Development (PoD)”, the company gushes, in a release.

“This level of production was achieved thanks to the start-up of the fifth production unit (T4), backed by the eight gas producers and a new 30” x 218 km sealine, commissioned August 2018 and confirms the programme pursued by ENI, its partner, Egyptian Natural Gas Holding Company (EGAS) and their joint venture company Petrobel aimed to reach a plateau in excess of 2.7Bscf/d in 2019”.

ENI boasts even moe: “The latest achievement reinforces the exceptional development path of the Zohr project, one of ENI’s seven record-breaking projects, which is playing a fundamental role in supporting Egypt’s independence from LNG imports”.

The Zohr field, the largest gas discovery ever made in Egypt and in the Mediterranean Sea with more than 30 Tcf of gas in place, is located within the offshore Shorouk Block (some 190 km north of Port Said). In the Shorouk Block, ENI holds a 50% stake, Rosneft 30%, BP 10% and Mubadala Petroleum 10% of the Contractor’s Share (where Eni, Rosneft, BP and Mubadala Petroleum are collectivity the Contractor).

The project is executed by Petrobel, the Operating Company jointly held by ENI and the state corporation Egyptian General Petroleum Corporation (EGPC), on behalf of Petroshorouk, jointly held by Contractor (EN and its partners) and the state company Egyptian Natural Gas holding Company (EGAS).


Zomo-1; Likely Fifth Success or First Duster

Savannah’s Fifth Success or First Duster?

Savannah Petroleum has moved the GW 215 Rig to drill the fifth well in its exploration campaign in the Niger Republic.

Zomo-1, spudded on September 8, follows Bushiya-1, Amdigh-1 Kunama-1 and Eridal-1, all drilled by the British explorer between March and August 2018, and all of which encountered crude oil bearing zones, considered by Savannah to be of commercial size.

But none of the wells have been tested, so there is no clear handle on flow assurance.

As with others, Zomo-1 is located in the R3/R4 PSC Area in the Agadem Basin, south east of the republic of Niger. It is also, as with the rest, designed to evaluate potential oil pay in the Eocene Sokor Alternances as the primary target.

The well is planned to be drilled to a total depth of 2,438metres Drilling is expected to take between 30 and 35 days.

The Company plans to log all prospective sections within the well, with further logging employed for hydrocarbon bearing sections. “In the success case, the well will be suspended for future re-entry and further evaluation, which could include well testing”, the company says.


The State is Aware that Shell Will Sell Nigerian Acreages Upon Renewal

Officials in the Nigerian Ministry of Petroleum Resources are aware that the Anglo Dutch major Shell is inclined to divest from several of the 17 onshore acreages it asked the government to renew.

But they have gone ahead to renew most of the licences anyway, because they think it is unlawful not to do so.  The extant licences on the acreages were due to expire in 2019.

“By the regulations we are working with, all these assets we have renewed deserve to be renewed”, Ministry sources categorically tell Africa Oil+Gas Report.

“Shell can take us to court if we don’t renew”, say ranking government officials in the Ministry, who also argue that, with state sponsored bid rounds not having happened in the country in the last 11 years, the frequent Shell lease divestments since 2008 “have benefited Nigerian companies”, who have purchased the stakes belonging to Shell and other international companies in these assets.

As it is, even during the process of renewal between late 2017 and mid-2018, Shell was actively negotiating on the side, with several parties, its divestment from three of the acreages in the renewal basket: Oil Mining Leases (OMLs) 11, 17 and 25.

Shell was asked to pay $820Million for renewal of 14 of the 17 acreages it sought to renew, including OML 25, an acreage that Shell had put in a divestment round in 2014, but failed to sell because of a last minute NNPC invocation of its right of first refusal. Shell, NNPC and several parties have been involved in closing that transaction since that time.

Regarding OML 11 and 17, Shell has, for a while, been negotiating with buyers and has put a $1.2Billion invoice on the table.

It would seem that such asset should not have been renewed, since Shell had demonstrated that it was going to sell them. It would, ordinarily appear intriguing, that the state would renew the licence of an acreage to a company that had clearly shown it no longer wanted it.

Why don’t you put it in a bid basket so that the state gets the benefit of the licencing?, we asked.

But MoPR officials say that Shell has paid all it needed to pay on every asset in the 30 years since they were last renewed and had extensive work programme on each of the acreages, so it would have been illegal to say no to renewal.

Out of the 17 onshore acreages Shell submitted for renewal in late 2017, only three were revoked, at the provisional conclusion of the process in February 2018, “for lack of enough work done over the last 10 years”.

Shell requested for renewal of OMLs 11, 17, 20, 21, 22, 23, 25, 27, 28, 31, 32, 35, 36, 43, 45, and 46. It succeeded in getting everything renewed, but for four acreages.

OMLs 31, 33 and 36 were denied approval, while the government decided to cut OML 11 into three because it was too large. But Shell has contested the decision on OML 11, arguing that “the proposal would unduly punish” the company, which had conducted operations in the asset “legally and in full compliance with the law”.


Shell Plots A Return To Angola

By Moses Aremu, Editor

Anglo Dutch major Shell is keen on purchasing the operator stake in Angola’s Blocks 21/09 and 20/11, two very prospective acreages in the deepwater Kwanza Basin. These are the assets that Cobalt Energy, the US minnow, operated in the country until 2015, when it sought to sell its 40% stake in them to Sonangol, the state hydrocarbon company, for $1.75Billion.

That transaction fell apart in 2016, and Cobalt took Sonangol to international arbitration over its failure to extend the licence deadlines. The two companies reached a settlement-Sonangol reported in December 2017- which called for Sonangol paying $150Million by February 23, 2018 and a further $350Million by July 1, 2018.  

Sonangol has now put up, for auction, Cobalt’s 40% stake and operatorship of these assets.

Observers see Shell’s interest in the blocks as a way of re-entering the country. Cobalt’s 2016 annual report indicated that it made seven discoveries in the blocks with a total of 750Million gross barrels of oil equivalent. A significant part of the volume is natural gas, the hydrocarbon fluid type that Shell is most interested in trading with.

Shell went to Sonangol’s data showroom in Houston on early June 2018, with a delegation of about a dozen officials and the company was widely speculated as the leading contender for the assets.

Shell was one of the earliest entrants into the deepwater activity in Angola between the early and late 1990s. Its Bengo-1 well, drilled in Block 16, tested 1,780BOPD in one reservoir, the first discovery in deepwater Angola. The company’s initial enthusiasm about the structure was restrained by the well’s high gas cap and pancake thin reservoirs, but Shell was willing to risk an early production. The enthusiasm waned when Bengo-2 turned out to miss even the thin bed that was of such fascinating interest in Bengo-1. Then the more it drilled, the less fortunate the company got.  Whereas other operators: TOTAL, Chevron, ExxonMobil, even BP, went on to make discovery after giant discovery, Shell got trapped in a run of ill luck, drilling nine wells in Block 16, most with marginal results. This is curious, because Block 16 is located between the two most successful leases in the country: ExxonMobil’s Block 15 to the north and TOTAL’s Block 17 to the south. The last well Shell drilled in Block 16 was Chiluango-1 which was abandoned in early November 1998 as a dry well. In 1999, the company packed out of Angola and shifted its gaze to Nigeria where, by 1996, it had become sure of the deliverability of its huge Bonga structure, located in the upper slope of the deepwater Niger Delta.


Austin Avuru: Three Hard Knocks in The School of Life

By Toyin Akinosho

Austin Avuru, Chief Executive of Seplat, Africa’s largest homegrown E&P firm, most vividly remembers the day the company lost the bid for Oil Mining Lease (OML) 29 in eastern Nigeria.

“That was one of our lowest points in this company because the acreage was going to be a company changing asset for us: it was going to give us the size that we seek”, Avuru reflected, in his office in Lagos, Nigeria, recently, as he prepared to celebrate a milestone that ties his own personal growth with Nigeria’s 60 year trajectory as an oil producing nation.

OML 29 is a sprawling, highly valuable property, spanning an area of 983 square kilometres (or 242,550 acres) onshore and holding some 2.2Billion barrels of oil equivalent, in proved and probable (P1+P2) reserves, in nine fields, according to a 2013 Competent Persons Report by NNS .

To put some context to the figures: Seplat, today, produces, on a gross basis, slightly higher than 60,000Barrels of crude oil and condensates and 400Million standard cubic feet of gas from five acreages, whereas OML 29 alone produces over 80,000BOPD, when there is no vandalism of evacuation pipeline.

“We had the cash on the table but we did not win OML 29. We were only a hundred million dollars away from Aiteo’s bid (to Shell, which was leading a divestment of itself, TOTAL and ENI from the tract). It was insignificant because we were talking about a $2.4Billion bid and $100Miilion was less than 5% of that, so it was insignificant”.

Avuru wonders whether the inability of Seplat to clinch OML 29 wasn’t due to “the politics of who Shell figured would more easily get the approval for the purchase” from the Nigerian government. “Otherwise they” (the company which won the asset) “couldn’t pay for one year after they got it, while we were going to write our cheque immediately because we had our money ready”.

It was the loss of OML29 that made such acreages as OMLs 25 and OML 55 important to Seplat, Avuru noted. “All these issues about OML 25 and OML 55 came because we lost the big fish”.

His disappointment about OML 29, Avuru explained, pales in comparison with a particular challenge he had faced when he was building Platform Petroleum, a marginal field operator. This was before he helped bring Platform, Shebah Exploration and M&P together to create Seplat.

“The biggest setback was the day I woke up and found out that cellar of the appraisal development well that we were drilling in Umutu had collapsed. We borrowed $10Miilion to drill that well and supplemented with our cash and in the end, the well cost us $19Million. We borrowed $20Million for the gas processing plant and our production was declining and we couldn’t borrow more. We were almost in the throes of death. This was in 2009 and that was when I scratched my head and thought ‘this is it’. The only thing that came to our aid eventually was the pipeline network that we had built all by ourselves to the cluster”, he recalled, referring to  a cluster of four oil fields in the Western Niger Delta, which evacuate their crudes into Platform’s facility. “The Ase River Pipeline was generating about $2Miilion in gross revenue in tariff every year. So that revenue stream was enough to negotiate a revolving credit facility with Skye Bank for $5Million. It was that money that we eventually used to work our way back to life”.

Not all of the huge regrets of Avuru’s life in the last 15 years were business related.

“One of the biggest potholes I have had was the day I lost my wife in 2005 after the two of us had inspected the site where we (Platform Petroleum) were building our flow station in Umutu and so on”.

Avuru remarried, several years later, and then this:

“And then the day I had to open my kitchen door to inform my wife that her 57-year-old father, who had been accidentally shot by a police man and was in the hospital, had died.

“I think those were probably my lowest points in the past 15 years”.

Otherwise, much of the path Avuru had travelled, since he left the NNPC in 1992, had been strewn with gold.

At least, so it seems.

Since he left NNPC as a star geoscientist (by his own account), Avuru had worked for Kase Lawal’s Allied Energy (which became Erin Energy, and has since ceased to be a going concern) and moved on to set up Platform Petroleum, from which platform he became the Chief Executive of Seplat, the only African indigenous E&P Company to be listed on the main board of the London Stock Exchange.

In the last 12 years he had been nominated by two successive Nigerian Ministers of Petroleum for the position of the Director of Petroleum Resources and had come terribly close to being appointed to the position of Group Managing Director of the NNPC, the hugely influential state hydrocarbon company. “I had a one-on-one interview with (President) Yar’Adua”.

To mark his 60th birthday on Friday, August 17, 2018, Seplat Petroleum’s management wove a theme around the fact that Avuru was born in the year that Nigeria first exported crude oil. An industry stakeholders lecture, at a princely venue overlooking the Atlantic, entitled 60 Years After: Preparing For A Nigeria Without Oil, was attended by over 300 people, a glittering gathering featuring the country’s top business brass, C-Suite level petroleum executives, energy bureaucrats and ranking politicians.

Full details of Austin Avuru’s career trajectory, his misses and hits, as well as blinding insights into how the world of petroleum E&P works in Africa’s largest hydrocarbon producer, is published in the August 2018 edition of the Africa Oil+Gas Report. Please click here…

This publication wishes him many more fruitful years in the service of his country.

 


Ghana Launches Petroleum Register

Ghana has launched a Petroleum Register in accordance with the provisions of the new Petroleum Exploration and Production Law (Act 919, passed in late 2016).

The Petroleum Register is an online platform (www.ghanapetroleumregister.com) of a Public Register that hosts Petroleum Agreements and contracts ratified by Parliament as well as Petroleum Permits, Certificates, Authorisations, Approvals and Consents.

→   Read the rest of this entry


Tullow Darkens Its Faces In East Africa

With Jimmy Mugerwa appointed Country Manager and Grace Kavuma, Finance Manager, both in the last six months, Tullow Oil has largely localized the upper ranks of its Ugandan workforce.Jimmy Mugerwa

The jobs used to be done by Europeans. Eoin Mekie was the last Country Manager of European origin for Tullow in Uganda. He left the job in November 2012.

Mugerwa and Kavuma come to their jobs with considerable qualification and some see their placement as quite strategic. With Tullow’s completion of the sale of two third of its assets in the Albertine graben to France’s Total and China’s CNOOC — a process that was delayed by a capital tax impasse and negotiations over a stabilization clause — the national conversation is around how Ugandans will benefit from this natural resource.

The government is considering the partners’ plan of development of the Albertine Basin, where Tullow claims there has been 1 Billion Barrels of Oil discovered and there’s potential to find another 800Million barrels. The Ugandan government has been quite vocal about “detailed programme for recruitment and training of Ugandans.grace-jethro-kavuma

A Bachelor of Science graduate in Agriculture from Makerere University, who holds Masters’ degree in the same course from the University of Wales, and attended an executive business leadership programme in Lausanne, Switzerland, Mugerwa arrived Tullow Oil by way of  Shell Kenya of which he was chairman. He had worked at Shell Ghana, South Africa, Uganda and in the Netherlands.

Kavuma, meanwhile, was executive director and chief financial officer at the Development Finance Company of Uganda(DFCU) Bank, a position he held after working at Barclays Bank Uganda and Shell Africa.


John Scott Is The New CEO

Victoria Oil and Gas has announced the appointment of John Scott, 54, as the Chief Executive Officer of the Company, with immediate effect. Scott has undergraduate and post graduate engineering degrees, and initially trained with Royal Dutch Shell before furthering his education with an MBA from the London Business School. He has more than 30 years’ experience of upstream and downstream oil and gas operations both in industry and in energy banking. Scott previously served in technical and senior commercial roles with the British National Oil Company and Halliburton. He has also has held various investment banking roles with Citigroup, Standard Bank and ABN Amro. The new helmsman has extensive corporate finance and transactional experience in West Africa and Russia and has established strong business relationships within these regions. He was a founder of Toronto Venture Exchange-listed Exile Resources Inc, a West African oil and gas exploration company that merged with OandoPlc, a Nigerian oil producer. In Russia, Mr Scott has completed several high profile oil and gas transactions including the acquisition and disposal of gas assets during his time as an energy investment banker and as a Regional Director of Halliburton. Mr Scott joins VOG from Indus Gas Plc (“Indus”), one of the largest oil and gas companies by market capitalisation on the AIM market of the London Stock Exchange.

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