covid-19 - Africa’s premier report on the oil, gas and energy landscape.

All posts tagged covid-19


Morocco’s $9/MMBtu Gas Price Looks Good on Paper

“Gas has been a growing component of Morocco’s power generation mix”, says Chariot Oil&Gas, the London listed minnow who is looking to develop a gas field in the country.

“Attractive gas prices are established for power generation and industry”, the company notes.

The power sector pays $8 per million British thermal units (MMBtu), which roughly equates a thousand cubic feet (Mscf). It the sort of price that gas producers dream about, especially at this time when international prices have shrunk.

It gets even better.

Gas prices  for industry are in the range of $9-11/MMBtu.

Rabat is pushing natural gas as part of the national strategy to reduce imports and transition to lower carbon energy.

A key problem is that coal significantly dominates the energy scene. Although Morocco imports most of its energy needs, facilities for gas commercialization are underutilized. The installed gas fired electricity capacity is 850MW using around 100Million standard cubic feet of gas per day. Natural gas supplies 15% of the country’s electricity. But the Moroccan government isn’t looking at gas as the prime energy fuel in the forseeable future. The country, instead, talks up renewables.

Chariot keeps scouting for investors to develop the Anchois gas find. We are “continuing to engage with off-takers and develop alternative commercialisation routes for gas and liquids”, the company says in its latest update.

 

 

 


Without a Host Community Trust, You Lose Your Nigerian Oil Licence, PIB Says

By Fred Akanni, Editor in Chief

Failure by any holder of a licence or lease to incorporate a trust for the benefit of the host communities in the licence area may be grounds for revocation of the licence or lease, according to the Petroleum Industry Bill (PIB), currently tabled for discussion at the Nigerian National Assembly.

“Each settlor, where applicable through the operator, shall make an annual contribution to the applicable host community development trust fund of an amount equal to 2.5% of its actual operating expenditure in the immediately preceding calendar year in respect of all petroleum operations affecting the host communities for which the applicable host community development trust was established”, says the 252 page draft legislation.

Host community issues are some of the most intractable items in the development of Nigeria’s oil and gas industry. Some companies have robust Host Community plans while several do not.

The Nigerian state has earned 83 Trillion Naira (or $216Billion) in hydrocarbon revenues in the last thirty seven years, according to the Nigerian Natural Resource Charter (NNRC), but many of the communities in which the fossil fuel is extracted are derelict.

In the PIB’s definition, a “settlor” is a holder of an interest in a petroleum prospecting licence or petroleum mining lease or a holder of an interest in a licence for midstream petroleum operations, whose area of operations is located in or appurtenant to any community or communities.

“Where there is a collectivity of settlors operating under a joint operating agreement with respect to upstream petroleum operations, the operator appointed under the agreement shall be responsible for compliance with the law on behalf of the Settlors”.

The constitution of the host communities development trust shall contain provisions requiring the Board of Trustees to be set up by the settlor, who shall determine its membership and the criteria for their appointment. The Board of Trustees shall in each year  allocate from the host communities development trust fund, a sum equivalent -(a) 75% to the capital fund out of    which the Board of Trustees shall make disbursements for projects in each of the host community as may be determined by the management committee, provided that any sums not utilised in a given financial year shall be rolled over and utilized in subsequent year; (b) 20% to the reserve fund, which sums shall be invested for the utilisation of the host community development trust whenever there is a cessation in the contribution payable by the settlor; and (c) to an amount not exceeding 5% to be utilised solely for administrative cost of running the trust and special projects, which shall be entrusted by the Board of Trustee to the settlor. The law also says that host community development plan shall -(a) specify the community development initiatives required to respond to the findings and strategy identified in the host community needs assessment; (b) determine and specify the projects to implement the specified initiatives; (c) provide a detailed timeline for projects; (d) determine and prepare the budget of the host community development plan; (e) set out the reasons and objectives of each project as supported by the host community needs assessment; (f) conform with the Nigerian content requirements provided in the Nigerian Oil and Gas Industry Content Development Act; and (g) provide for ongoing review and reporting to the Commission.

The PIB does not relate this trust fund to the Niger Delta Development Commission (NDDC) which has the legal backing to receive 3% of the total yearly budget of any oil producing company operating onshore and offshore in the Niger Delta area.

But the new law says that “each host community development trust may receive donations, gifts, grants or honoraria that are provided to such host community development trust for the attainment of its objectives”.

 


Angola: New Development and Field Expansion Projects Resume as COVID- 19 Clears

Four key Angolan oilfield development, redevelopment, field optimization and field extension projects were halted by the COVID-19 challenges, from June 2020, and they will proceed in full as the anxiety clears.

The redevelopment of the Chevron operated  Tômbua Lândana development area, which comprises Kuito, Benguela, Belize, Lobito, Tomboco and Tômbua Lândana fields in Block 14; new developments in the ExxonMobil operated Block 15; new phases in the expansion of the CLOV and Dalia clusters of fields in TOTAL operated Block 17 and  the Platina field, part of BP operated Greater Plutonio development area, in Block 18 are all projects for which the Majors and the government had signed renegotiation agreements in the last 12 months.

These agreements provide for drilling of several development and exploration wells, to add, as a collective, over 120Million barrels of oil. The Block 14 agreement, in particular, provides for the drilling of several development and exploration wells, adding, in the first phase, approximately 60Million barrels in reserves.

Paulino Jerónimo, Chief Executive of the country’s National Oil, Gas and Biofuels Agency (ANPG), says there was a brake on implementation of these developments as a result of the State of Emergency imposed by COVID-19. “It caused the temporary suspension of the contracts of most of the rigs operating in national territory. We have been working with the Ministry of Mineral Resources, Oil and Gas, oil operators and service providers to prevent the spread of the pandemic in oil facilities and the return, as soon as possible, of the rigs in order to effect the agreements”, he said in an interview published on the ANPG website, adding “in Block 18, the development of allowing the production of about 20 thousand barrels of oil per day in the near future”.

The agency he says is pleased that, “the return of the rigs for the execution of the approved project has already started”.

 

 


The New Map: Energy, Climate and the Clash of Nations

The COVID-19 pandemic has brought new disruption to a world already struggling over how to satisfy its energy needs, address climate change and cope with new power relationships in a complex new era of “Energy Transition,” according to a new book, The New Map: Energy, Climate and the Clash of Nations, by IHS Markit Vice Chairman Daniel Yergin.

“As a result of the pandemic, an uncharted chasm has suddenly appeared on the map, which the world is now beginning to work its way around,” Yergin writes.

In The New MapYergin, author of The Quest and The Prize (for which he received the Pulitzer Prize) looks at an energy world already being reshaped by myriad forces—from the remarkable change in the energy position of the United States in the middle of a contentious presidential election, to geopolitical tension with China and Russia, to the reappearance of the electric car, the growing global role of renewables and the “post-Paris” era of energy transition.

“This is no simple map to follow, for it is dynamic, constantly changing,” Yergin says, as major countries chart intersecting and sometimes conflicting geopolitical paths in a new era of “great power competition.”

This already-disrupted world is now being further disrupted by the coronavirus and its dire impacts on people’s daily lives and the habits that underpin the global energy system. “The office of the future” for many will end up “at home”, he writes, which will mean less commuting, and thus reducing gasoline demand. But that will be offset by more people driving their own cars to avoid mingling with others on public transportation, as indicated by the upsurge in the sale of used cars indicates. And “electrons will replace molecules” as business travelers make more of their trips digitally, rather than in airplanes.

COVID-19 has also opened a wholly new era for world oil—what Yergin calls the era of the “Big Three”—the United States, Saudi Arabia and Russia.

When COVID-19 triggered the shutdown of entire economies, what Yergin describes as the “economic dark age,” it caused an unprecedented collapse in oil demand and (briefly) the unthinkable—oil priced at less than zero. That is when the United States, now the world’s largest oil producer, took the extraordinary step of brokering an agreement between Saudi Arabia and Russia to rebalance the market.

The pandemic also raises the big question: will the pubic health related upheaval speed or hinder the much-debated “Energy Transition” from fossil fuels to renewables? Yergin recommends a degree of caution against expectations for a rapid transformation.

“The notion of a fast track to a wholesale energy transition runs up against major obstacles: the sheer scale of the energy system, the need for reliability, the demand for mineral resources for renewables, and the disruptions that would result from speed,” Yergin writes. “On top of all of that is the high cost of a fast transition and the question of who pays for it—especially given the staggering amounts of debt that governments took on in 2020 to fight the economic consequences of the coronavirus.”

“Energy transition certainly means something very different to a developing country such as India, where hundreds of millions of impoverished people do not have access to commercial energy, than to Germany or the Netherlands,” he adds.

Yergin also observes how the global health crisis has underscored the role of plastics, made from oil and natural gas—whether for food and sanitary purposes, its multiple applications in hospital operating rooms, the indispensable N-95 mask or the-now-ubiquitous plastic shields that protect shopkeepers and essential workers.

The New Map is also a story of the clashing paths of global powers:

  • New Cold Wars

Energy looms large in the new cold wars that are developing between the United States on one hand, and Russia and China on the other.

Russia’s path on The New Map is a mix of energy flows, geopolitical competition, contention over the unsettled borders left in the wake of the Soviet Union’s collapse—and “Vladimir Putin’s drive to restore Russia as a Great Power.” This includes Russia’s “pivot to the east,” geared mainly towards one country, China and its energy needs for what will become the world’s largest economy.

The New Map looks at how swiftly (and potentially perilously) the relationship between China and the United States is changing from “engagement” to “strategic rivalry” at a time when “China is expanding its reach in all dimensions”, most visibly via the trillion dollar-plus Belt and Road Initiative.

It is also asserting control for almost all of the South China Sea, through which $3.5Trillion of world trade flows and nearly half of all the global oil tanker shipments travels. The most critical oceanic route in the world has become the “sharpest point of strategic confrontation with the United States.”

  • Rivalry in the Middle East and “Peak Demand?”

The Middle East, still the source for a third of the world’s oil and gas, continues to be shaped by rivalry, most notably between Saudi Arabia and Iran, and by jihadism. But it is also being reshaped by concerns over “peak demand”—how long consumption of oil will continue to grow and when it will begin to decline. This has fueled a new urgency for exporters to diversify and modernize their economies—an urgency heightened by the collapse of demand in the wake of COVID-19.

  • “Auto-Tech” and the “Mobility Revolution”

Concerns of “peak demand” have been driven in no small part by the emergence of the electric car, ride-hailing and ride-sharing services, and automated vehicles. This “New Triad” is challenging oil’s century-long dominance of the transportation market and creating a new contest for what could be a new trillion-dollar industry—what is dubbed “Auto-Tech.” But here too, the coronavirus may have “disrupted the disruption”—as consumers turn more to personal vehicles rather than shared ones.

  • A Mixed Energy System of Rivalry and Competition

Yergin says that the next few decades will likely see the world’s energy supplies coming from a mixed system of rivalry and competition among energy choices—one where oil retains a preeminent position as a global commodity. He also emphasizes that technological innovation will be the critical factor for the future of energy.

“How fast the mix changes will be determined not only by politics and policies, but by technology and innovation,” Yergin writes. “That means the ability to move from idea and invention to technologies and innovation and finally into the marketplace. This is not something that necessarily happens fast.”

 

 


Jet Fuel Demand Will Be Harder Hit Than Other Premium Fuels

The economic crisis caused by COVID-19 is hitting Jet Fuels far much more than it does Road Fuels.

Total global demand for road fuels will fall by 10.1% in 2020, or by 4.8MillionBPD year-on-year. The Rystad estimates Road fuel demand in 2019 to have been 47.4MillionBPD. It now sees this number dropping to about 42.6MillionBPD in 2020.

But the Norwegian conslutancy expects jet fuel will be hit the hardest. We expect global commercial air traffic will fall by at least 51% this year versus the levels seen in 2019, which we estimate stood at around 99,700 flights per day. For 2021, we expect around 76,800 flights per day. These numbers will be revised as operators continue to cut routes.

Many distressed airlines are facing heavy cost cuts and are laying off unprecedented numbers of employees as many non-essential routes are closed.

As a base case we now assume that the common summer air travel peak will not occur at all this year. We see global jet fuel demand falling by almost 41.4% year-on-year, or by at least 3MillionBPD. Last year’s demand for jet fuel was about 7.2MillionBPD.

Jet fuel demand in April was as low as 2.9 MillionBPD, and shrank further to 2.8Million BPD in May 2020.

In 2021, jet fuel demand is expected to average 6.1MillionBPD


PGS to Release Seismic Data for Namibe Basin in November 2020

PGS’ seismic acquisition vessel, Ramform Sovereign, has completed a large acquisition project offshore Angola using multisensor GeoStreamer technology. Operational and geological objectives were achieved successfully and safely, despite the COVID-19 restrictions.

The 2020 PGS Namibe Basin survey connects the three dimensional (3D) seismic coverage of southern Angola with PGS seismic data library coverage in Namibia, completing a large MultiClient footprint of high-quality broadband seismic data that spans the Namibe Basin.

Predicted reservoir presence and distribution maps indicate that this area contains a variety of leads and prospects”, PGS claimsin a release. “Full depth-imaging incorporating FWI velocity model building will improve knowledge of the subsurface petroleum system and reduce the risk for frontier exploration”.

The fast-track data for Angola Namibe Basin will be available in late fourth quarter, likely around November. 2020.

 

 


Tullow Reports $1.3Billion Half Year Loss, Talks Up Ghanaian Asset

London listed Tullow Oil has reported a post-tax loss of $1.3Billion in the Half Year, between January 1 and June 30, 2020.

The company’s revenue was $731Million during the period, with gross profit of $164Million.

Tullow said that the loss after tax was driven by exploration write-offs and impairments totalling $1.4Billion pre-tax. Net debt as of June 30 2020 was $3illion; Gearing of 3.0x net debt/EBITDAX; liquidity headroom and free cash of $0.5Billion.

The best performing asset in Tullow’s portfolio remains Ghana’s Jubilee field and TEN cluster of fields. Tullow talks of “strong operational performance”, of those assets in 1H 2020, with “both FPSOs delivering in excess of 95 per cent uptime.”

The Ntomme-09 production well came on stream in August and is incrementally adding c.5,000BOPD gross to TEN oil production.

Tullow’s report talks of maximizing gas offtake nominations from both Jubilee and TEN, in order to “focus on continuous improvement to maintain FPSO uptime in excess of 95%”.

The company has been working on restructuring its business since the sharp plunge in its stock rice in December 2019 led to significant leadership changes.

The current CEO, Rahul Dhir who took charge in July 2020, has commissioned a comprehensive review of Tullow’s portfolio, growth prospects and capital structure. “Once this review is complete, and its conclusions have been fully validated, the Group will hold a Capital Markets Day (CMD) before the end of the year. At this CMD, Rahul Dhir and other senior leaders will lay out their plans for Tullow’s business and assets and demonstrate how they will unlock material value from the portfolio”.

 

 

 


Sonatrach’s 50% Budget Slash, Cuts Out Sixty Planned Wells in Algeria

Algerian state hydrocarbon company Sonatrach is spending half of its originally planned budget for 2020.

Africa’s largest NOC was ordered to reduce its budget for 2020 from $14 Billion to $7 Billion(or from €12.4Billion to €6.2Billion).

The group, which contributes nearly 60% of the state budget and more than 95% of the country’s foreign exchange earnings, has significantly reduced its drilling and field optimization activities and suspended plans for newfield developments, no matter how close to existing facility. Africa Oil+Gas Report sources say that over 60 planned new wells will be affected.

There were 50 active rigs in Algeria in 2018, but they dropped to 42 in 2019. They would have dropped to 32, with COVID-19 challenges, but now they are likely to slip to 29, Africa Oil+Gas Report research suggests.

Hydrocarbon revenues into Algeria crashed by nearly 30% in the first quarter 2020, compared to last year.

Unlike most other hydrocarbon-led economies in Africa (Nigeria Angola, Libya, etc), most of the work programme in Algeria is performed by Sonatrach, as a result of historic production agreements that always insisted that Sonatrach operate the acreages.

So, unlike its peer countries, the state cannot spread the burden of financing oil and gas field operations in this time of pandemic, in a way that international companies have a good share of the risk.

Algeria, last year approved laws to encourage increased equity stakes and participation in acreages and projects by E&P companies, but the lingering antigovernment protests have discouraged implementation.

This article was originally published in the June 2020 edition of the Africa Oil+Gas Report


Angolan Output Will Slip Much Further, Before It Recovers

By Toyin Akinosho, Publisher

Rumours of Angolan petroleum prospects having turned the corner are extremely exaggerated.

Declining production in Africa’s second largest crude oil producing country is too set on course that output will fall deeper than it is now before it reverses.

Angola’s hydrocarbon regulatory agency ANPG forecasts that the country’s crude oil output in blocks currently under production will contract continuously in the next decade, and drop below 1 Million barrels per day (BOPD) in four to five years.

It’s true that Angola’s rig activity has inched up in the last month and that industry reforms by President João Manuel Gonçalves Lourenço (in power since September 25, 2017), has bolstered investor interest. It’s also true that Angola has not experienced cancellations of any large-scale projects due to COVID-19 and that production shortfall since May has largely been the result of OPEC+ agreed cuts. Angola’s key challenge, however, is that reservoir depletion will take its course.

ANPG’s latest published updated oil production forecast for the coming years assumes only the exploration of the existing blocks until maturity, underlining the need for the country to increase production through exploration of new blocks, so as to avoid a crash in revenue.

Energy analysts, including the Economist Intelligence Unit (EIU), see production increasing in four years’ time, after the current reforms in the country have led to new investment.

Until then, however, result of natural field output decline will outpace new take points from infill drilling.

The ANPG´s forecast points to production of 1.28Million barrels per day (MMBOPD)  in 2020, a figure that is 0.092MMBOPD below the average in 2019.

Oil production should decrease in the coming years, plunging bellow 1MMBOPD between 2024-2025.

 

 


PIB: “I’ve Finished My Work”, Sylva Says, “Delivery Now Up to The National Assembly”

By Bunmi Aduloju

Timipre Sylva, Nigeria’s Minister of State for Petroleum Resources, says that the timeline for the delivery of the Petroleum Industry Bill (PIB) is out his control.

“Timeline is always a difficult question because this is something that has to do with the National Assembly”, Sylva told Osten Olorunsola, who engaged him at a discourse organized by the Nigerian Association of Petroleum Explorationists (NAPE).

The PIB is an omnibus reform legislation, which, “combines 16 different Nigerian petroleum laws in a single transparent and coherent document ….” according to the Nigerian Ministry of Petroleum.

The first version of the PIB was presented to the National Assembly, the country’s bicameral house of legislature, in 2007. It didn’t make it to law. It has returned, fruitlessly, to two National Assemblies after that.

Olorunsola, who started out as a Petroleum Geoscientist, has been director and chief executive of the Department of Petroleum Resources, the country’s regulatory agency, and was a former Vice President, Shell Gas and Power, Africa.

Sylva explained to him: “For us (in the executive arm of Nigeria’s Federal Government), I would tell you very confidently that we have finished our job. The drafting process is concluded. We have discussed with some relevant industry operators as well. At this point what is happening is that the Ministry of Justice was looking at the draft again to ensure that it is not in conflict with the existing laws in the country. And even that process has now been concluded. So, we have requested the National Assembly to see if they can re-convene during their recess to accept the PIB. And then after that, frankly, I cannot say how long it is going to stay with the National Assembly. I am sure you understand that. But, my understanding from all the consultations we have had with them is that they are going to look at it expeditiously. I do not think that it is going to stay for more than (I am just trying to be excessive in my estimation) six months in the National Assembly”.

The discourse with Mr. Sylva, was the third in the series of engagements that NAPE, the largest body of upstream petroleum technical professionals in Africa, has been having with the policy and regulatory heads of the Nigerian Petroleum industry. The series has included Sarki Auwalu, Director/Chief Executive of the DPR and Mele Kolo Kyari, the Group Managing Director of NNPC, the state hydrocarbon company.

 

 

© 2024 Festac News Press Ltd..