All posts tagged africainbusiness


Serica Walks Out of Namibia

British junior, Serica Energy has decided to walk away from its Licence 047 in Namibia, covering Blocks 2512A, 2513A, 2513B and part of 2612A.

It is exiting the South West African country, nine years after it was originally awarded the assets.

Serica, a gas focused company with relatively extensive UK operations, has basically sat down on its Namibian portfolio for all of those nine years.

It admitted this much in its statement: ”The initial work commitment was fulfilled when BP farmed-in to the licence and funded a 3D seismic survey at no cost to Serica. In late 2013, BP decided to exit the licence rather than making a commitment to drill in the next licence period”.

Serica claims it “continued with its technical work to interpret the seismic and geological data, and secured extensions to the licence and waivers on area relinquishment and well commitments”.

Having just been formally awarded four new blocks in the UK’s 32nd licensing round and seeing gas prices trending up, it has opted “to withdraw from Namibia to focus on Serica’s North Sea-focused portfolio and opportunities”.

“The pace of exploration activity in Namibia has been slower than we hoped, and the development of any discovery would likely have been expensive, time consuming and inconsistent with our sustainability objectives”.


FAR Is About to Ride into the Sunset

FAR Limited, the Australian minnow which brands itself as a key player in Africa’s Northwest margin, may soon be swallowed.

If the company’s shareholders agree to a proposal from Remus Horizons PCC Limited, a private investment fund regulated by the Guernsey Financial Services Commission, FAR, an explorer with holdings in Senegal, Gambia and Guinea Bissau; the MSGBC axis where hub sized hydrocarbon resources have been found in the last eight years, will be gone.

Things are still in a preliminary stage. FAR cautions that “the Proposal is not a legally binding offer, there is no certainty that the Proposal will necessarily eventuate, and that the Proposal terms are uncertain at this stage. Accordingly, care needs to be used in assessing the Proposal”.

Remus’ move is “conditional non-binding indicative, to engage in further discussions and further investigations for the purpose of evaluating its capacity to make an offer or announce an intention to make an offer to acquire 100% of the shares of FAR at 2.1c cash per share.

Remus has stated that the price represents a premium to the cash backing per share that would exist if FAR was to complete the sale of the Rufisque Offshore, Sangomar Offshore, Sangomar Deep Offshore (RSSD)project to Woodside Energy (which pre-empted the earlier proposed sale to ONGC Videsh.

Remus has also stated that it is conditional (amongst other things) on: –

The FAR shareholder meeting to consider approving the sale of the RSSD project scheduled for Monday 21 December 2020 being rescheduled. –

  • FAR providing access to management and information in relation to the RSSD project and Remus being satisfied with such information.
  • No superior proposal emerging. Remus has stated that the Proposal will be funded from available internal cash reserves and that any formal binding offer would not include any financing conditions. Remus has stated that Remus is willing to discuss the possibility of making available a zero coupon bridge loan to FAR of up to $50Million from the date of any binding offer on terms and subject to conditions to be agreed to enable FAR to meet its valid funding calls in relation to its interest in the RSSD project and other necessary working capital requirements.
  • Remus has stated that it is well placed to move quickly to complete its confirmatory investigations and has committed to engage collaboratively with FAR to progress the Proposal.

FAR says it is seeking clarification from Remus regarding various aspects associated with the Proposal. In these circumstances, FAR has determined to postpone the shareholder meeting currently scheduled for 21 December 2020 to 10.00 am on 21 January 2021. “This will enable further time for FAR and its shareholders to be able to obtain further information in relation to the Proposal and assess the relative merits of the sale alternative and the Proposal. FAR will in due course distribute updated meeting information in this regard. FAR has appointed Baker McKenzie to advise in relation to the Proposal”.


Mozambique’s 450MW Gasfired Power Plant Now Certain of Going Ahead

By Macson Obojemiummen

A substantial portion of the debt funding requirements have been secured for the Central Termica de Temane (CTT) power project in Mozambique.

CTT will receive funding of up to $200Million from the U.S. International Development Finance Corporation (DFC) and up to $50Million from the OPEC Fund for International Development (OPEC Fund) once execution of the loan agreements and other closing conditions have been finalised. The International Finance Corporation is expected to provide the balance of the required debt financing and is in the process of finalizing its approvals.

The technical solution for the project has also been finalised.  Through a competitive procurement process, the Spanish contractor, TSK, has been selected to design and construct the power plant, “which will use efficient and well-proven Siemens gas turbines”, Globeeq, a power developer, says  in a note. “TSK has extensive experience in designing similarly-sized combined-cycle power plants utilizing the Siemens turbines”.

The 450 MW gas-fired power project is located at Temane in Inhambane Province in Mozambique.

Originally developed by  Electricidade de Moçambique, E.P. (EDM)  and Sasol New Energy Holdings, Globeleq is lead developer along with its consortium partner, eleQtra in the Temane Energy Consortium (TEC).

The project will supply low cost, reliable power to EDM through a 25-year tolling agreement using natural gas supplied from the Pande-Temane fields operated by Sasol and ENH, the state-owned hydrocarbon company.  TEC will also provide support to EDM in the development of the Temane Transmission Project.

EDM selected TEC in December 2017 as part of a competitive bidding process. “EDM chose the consortium due to its experience developing and operating gas-fired power projects; competitive cost of capital; and ability to deliver the most competitive tariff”, Globeleq claims in a release.

A joint development agreement was signed on 20 June, 2018 to progress the development of the project and bring it to financial close.

On 28 August, 2019, the Government of Mozambique signed financing documents for the Temane Regional Energy Project.


In Uganda, The Winner Takes All

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.


Will Schlumberger Treat Otakikpo the Way It Treated Madu/Anyala?

Macson Otiti, in Port Harcourt

In November 2018, Schlumberger pulled out of the Madu /Anyala field development project offshore Nigeria.

It was 17 months after the oil service giant had inked a tripartite agreement to be financier and technical service provider on the project, with the Nigerian independent First E&P, operator of the asset, and NNPC, the state-owned partner.

Schlumberger’s decision to pull its $724Million funding for this development in Oil Mining Leases (OMLs) 83 and 85, has been kept out of public scrutiny by all the parties involved.

But as the company moves on to another Nigerian field development project, questions are being raised: Will Schlumberger prevail through the life of the Otakikpo field expansion project? Or will it, again, pull out?

These questions are grounded in some context.

Five months before Schlumberger walked out of the Madu/Anyala, it had pulled out of another planned investment in West Africa: the Fortuna NLNG project off Equatorial Guinea.

Schlumberger was involved in the Fortuna LNG project through OneLNGSM, a Schlumberger/Golar LNG joint venture partnership with which operator Ophir Energy had signed a binding Shareholders’ Agreement, to develop the 2.2Million Tonnes Per Annum Fortuna NLNG.

OneLNGSM owned 66.2% of the $2Billion project of which $1.2Billion was to be debt financed. Schlumberger did say it pulled out of OneLNGSM because the Fortuna project was unable to finalise attractive debt financing in time.

Less than a month after the mighty Schlumberger withdrew from OneLNGGSM, Gabriel Lima Obiang, the Equatoguinean Minister of Mines and Hydrocarbons (MMH), noted that the government could bring in some other investors to the project to replace Ophir. He referenced the expiration of the Block R licence at the end of 2018.

The minister did not renew the licence, effectively tossing out Ophir Energy’s five-year appraisal drilling, FEED studies, and three-year widely publicised effort to raise finance. Faced with the loss of its biggest development on the continent, Ophir has since exited its entire portfolio in Africa.

First E&P has not suffered the same fate as Ophir. It has struggled too, though, and scaled down the number of wells needed to drill to get to first oil by more than half. In its case the state has been more benevolent:  the Madu/Anyala development has benefitted from ready cash call payments by NNPC.

The Otakikpo field is operated by Green Energy International Limited (GEIL), which has the London listed LEKOIL as financial and technical partner. Schlumberger, officially never responded to enquiries from Africa Oil+Gas Report. But highly regarded sources who are familiar with the company’s working, say that the Schlumberger’s financial exposure in the two projects: Otakikpo and Madu/Anyala are dissimilar. And the terms are different.

Whereas the Madu/ Anyala project was to be executed under Schlumberger Production Management SPM, in which the company is an investor and recoups its money on production,  the deal on Otakikpo is being consummated under the company’s Asset Performance Solutions (APS) scheme, in which case Schlumberger is not putting a single dollar on the table, but using its brand to help the partners pull in financiers. “Schlumberger’s involvement in Otakikpo is a support by way of investing sweat equity and integrity”, our sources say.

Still, there’s something unnerving about a partner who has dropped out of two hydrocarbon field developments inside of the last two years.

GEIL signed a Memorandum of Understanding (MoU) with a consortium of international financiers for a package of more than $350Million, to take forward the second phase development of Otakikpo. The consortium includes an international bank based in London, a crude oil off-taker and an EPC contractor. The Field Development Plan FDP of the project involves the drilling of seven additional wells (there are two producing wells already) and expansion of the crude processing infrastructure. The plan also includes the construction of a 1.3Million barrels onshore terminal and a 17 kilometre export pipeline to connect the terminal to an offshore loading system. GEIL director of corporate affairs Olusegun Ilori said that the company intends to increase production from 6,000 barrels per day (BOPD) to 20,000BOPD.

Anthony Adegbulugbe, chairman GEIL has been quite enthusiastic about the work programme and vocal in the media about the financial and technical partnerships he has attracted on board of this expansion project. With COVID-19, there may be delays, the cost of debt financing may go up and the project may have to be phased, but Otakikpo expansion looks likely to go on. The one other worry is, as Schlumberger is the main subsurface service vendor, and its services come at premium cost, continual benchmarking with the rest of the industry is key. After all, this is the era of bare bone cost of production.

 

 


Nigerian Companies Are the Biggest Defaulters on Ghana’s Concession Rentals

Sahara Energy Fields, Brittania U and Erin Energy, all founded by Nigerian businessmen, are among the the eight Exploration and Production Companies, that were in default of one payment or another to Ghanaian Tax authorities as of February 2019, the latest date for which data are available.

With $587671.23 behind in both arrears and 2019 outstanding, Swiss African Oil owed the most, according to  Public Interest Accountability Committee, Ghana’s equivalent of NEITI. SAO was followed by Brittania U and Sahara Energy Fields, both Nigerian owned companies, indebted to the tune of $456, 879.26 and $409,315.07 respectively. The fourth most indebted to the Ghanaian state was Gosco/Heritage, with $334,850.00 in both arrears and 2019 outstanding.

Erin Energy, also a Nigerian founded company, owed $151,200. The least indebted companies were Medea $78,050; UB Resources, $37,050 and Springfield, $33,650.


Smart Policy Options Will Safeguard Nigeria’s Economy from COVID-19 Shocks

The Nigerian Natural Resources Charter (NNRC) has urged the Nigerian government to act quickly on a number of reform items, long on the drawing board, if the country “is to minimize the effects of the inevitable recession contributed by falling oil prices, depreciating revenues, and rising debt ratio,” that are aggravated by the rampaging global pandemic known as the Novel Coronavirus Disease 2019 (COVID-19 for short).

Drawing on the benchmarks and the gaps identified in its recently published 2019 Benchmarking Exercise Report (BER), the Charter acknowledges the government’s recent steps; “to deregulate the downstream sector, re-open bid rounds of marginal fields, cut the 2020 budget, contemplate privatization of the refineries and others”.

But “to optimize the opportunities from oil and gas exploitation to withstand the prevailing COVID-19 shocks and its after effects”, the Charter urges, “Nigeria must consider the following policy options to stabilize the sector, maintain revenue flows, attract investment and drive growth:

  • Maintain peace and stability in the Niger Delta to sustain revenue flows from oil production. Sustaining benefit transfer schemes by NDDC, MNDA and other interventions will support the government’s stabilization efforts;
  • Improve coordination between federal and Niger Delta state governments on the response to the COVID-19 pandemic including the design and implementation of stimulus plans;
  • Liberalize the downstream sector to allow market forces determine pump prices for petroleum and other products. This will ensure the availability of revenues necessary for more critical areas of the economy;
  • Improve the efficiency of the downstream oil sector by reviewing its policies, regulations and operational guidelines to ensure profitability, improved private sector participation and improved employment;
  • Adopt and constitutionalize a savings mechanism with clear and transparent operational rules. This could be by retaining the more effective sovereign wealth fund (SWF) in the NSIA and transferring funds from the Excess Crude Account, the stabilization fund and other similar funds to the SWF. This will help fortify the Nigerian economy from oil price volatilities and other economic shocks. Ramping and prioritizing domestic gas-based industrialization projects, to diversify Nigeria’s energy supply, increase local employment and reduce domestic demand and Nigeria’s reliance on oil;
  • Support a major and urgent shift to gas in terms of investment focus. Gas supply to domestic market for power, industrial & manufacturing feedstock and enabler to economic development. Emphatic shift to the gas value chain offers Nigeria the leverage for socio-economic development in the medium to long term; ·
  • Fast-track the passage of the petroleum industry bill to bring about the fiscal, governance and regulatory clarity required to monetize Nigeria’s 200 Trillion cubic feet of gas reserves. Speedy passage of the Petroleum Industry Bill will provide a clearer strategic direction to the entire industry, re-engender trust, thereby increasing investments which will in turn increase national revenues required for development;
  • Review the existing fiscal framework to ensure competitiveness and support Nigeria’s ability to attract investments into the upstream sector, effectively shoring up Nigeria’s diminished reserves;
  • Institutionalize cost management strategies within the sector with the overall objective of reducing the high unit production cost of crude thereby improving governments revenue from the sector;
  • Immediately privatize refineries as stated by NNPC to improve Nigeria’s access to finished products in country, reducing potential for over reliance on external support for products, to preserve Nigeria’s sovereignty; and
  • Sell off unviable government owned oil assets to raise revenue and boost efficiency in the short to medium term.

“Adopting these reforms will improve Nigeria’s competitiveness, revenue inflows and improve her ability to survive and subsequently recover from the effects of COVID-19 on the global economy”, the NNRC  explains, asking that the government be consultative in its approach to reforms, transparent and inclusive to increase likelihood of acceptance and implementation.

“Prioritizing these reforms are necessary while Nigeria considers other medium to long term reform plans simultaneously. The NNRC’s 2019 Benchmarking Exercise Report (BER) outlines other sector gaps to be focused on in the medium to long term to improve Nigeria’s oil sector performance. These can be found on the NNRC website on www.nigerianrc.org/2019-benchmarking-exercise-report.”

 


Aminex On Course of Farming Out Ntorya Gas Field In Tanzania

Aminex Corp, the London listed junior who is a leading gas producer in Tanzania, has revealed discussions with Eclipse Investments regarding a possible farm out of part of its interest in the Ntorya Appraisal Area.

Eclipse is a wholly-owned subsidiary of the Zubair Corporation and is Aminex’ largest shareholder. The Zubair Corporation is one of Oman’s leading business groups.

→   Read the rest of this entry


ADF Opens up Trade Routes on The Continent

THE AFRICAN DEVELOPMENT Fund (ADF) is opening up intra continental trade links with the provision of loans for road infrastructure connecting different countries in the different regions of Africa.

Close to a $l00 million will be used to upgrade local road network, as well as strengthen links between Lesotho and South Africa in the south and Guinea and Senegal in the west. Upgrading works on the Likalaneng-Thaba Tseka stretch of the Trans-Maloti highway, a vital link connecting Maseru, Lesotho’s capital city, and the towns of Likalaneng and Thaba Tseka to the seaport of Durban in South Africa, will benefit from a $10.5 Million loan. The road also connects poor rural mountainous areas to the productive lowlands of the country. The project will include the upgrading of 85 km of existing gravel road to a bitumen road standard of a width of 7-metre carriageway and 1.0 meter paved shoulders on either side between Likalaneng and Thaba Tseka. A major highway between Guinea and Senegal will be partly Funded by another $ 85 million loan. The money will pay for road upgrade between Labe in Guinea to Tambacounda in Senegal, opening tip the high agricultural and livestock potential areas in the two countries, and strengthening regional cooperation and economic integration by reducing non-tariff barriers and ‘invisible’ costs. The link will help develop business activities along the corridor and boost the living conditions of local populations, in the view of the ADF. Construction of 385 km of tarred road between Labe and Médina Gounass involves 316 km in Guinean territory and 69 km in Senegalese territory and would also see to the rehabilitation of 89 km of tarred road between Medina Gounass and Tambacounda, while upgrading 190 km of rural roads in the two countries. The money includes a $31 million loan benefiting Senegal and a grant of $54 million in favour of Guinea and the West African Economic and Monetary Commission (UEMOA/WAEMU) to the tune of$ 8.4 million.

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