All posts tagged feature


Wabote Gets Another Four Years

He has mitigated the challenges of low crude oil prices that have marked his tenure

Simbi Kesiye Wabote has been re-appointed to run the Nigerian Content Development and Monitoring Board (NCDMB), for a second term of four years.

President Muhammadu Buhari renewed his appointment as the Executive Secretary of the board, just as he renewed the appointments of Bello Aliyu Gusau as the Executive Secretary of the Petroleum Technology Development Fund and Ahmed Bobboi, the Executive Secretary/Chief Executive Officer of Petroleum Equalization Fund (PEF).

The renewal followed recommendations to the President by Timipre Sylva, Minister of State for Petroleum Resources.

Wabote, who previously ran the National Content unit at Shell Nigeria, is the third Executive Secretary of the 10-year-old institution, the most ambitious oil industry localization agency on the African continent.

An NCDMB press release quotes the Nigerian Presidency as saying that “Wabote earned the renewal after recording sterling achievements, including managing the Nigerian Content Development Fund prudently, completing the 17 storey headquarters building of NCDMB and for initiating many landmark projects that are widely commended by industry players”.

Wabote has superintended Nigeria’s petroleum industry localization effort in a period marked by low crude oil prices, but by targeted investments in industrial parks and refineries, he has aided the fostering of beneficiation of raw hydrocarbon for the purposes of growing an industrial economy.


West African Gas Pipeline Authority Looks to Hire New Director-General

Afrique Conseil, the consulting firm based in the Republic of Benin   has launched a a vacancy announcement for candidates to recruit a new director-general to head the West African Gas Pipeline Authority (WAGPA).

The WAGPA is the regulator of the West African Gas Pipeline (WAGP) built and operated by WAPco.

Eligible candidates must be nationals from one of the four State parties of WAGPA – Togo, Ghana, Benin, and Nigeria. Those qualified will be selected based on their resume or professional experience in any of these countries.

The deadline for application is October 15, 2020, according to the recruitment notice published on the WAGPA’s website.

With headquarters in Abuja, Nigeria, WAGPA is an international body with legal personality and financial autonomy established by the WAGP Treaty signed on January 31, 2002.

See the link for details.

 


Angolan 2020 Onshore Bid Round Now to Open in January 2021

Angola 2020 Onshore Bid Round will officially open in January 2021 and bids must be submitted by March 10th 2021.

Nine blocks are on offer, in the Lower Congo and Kwanza Basins.

The country’s International Competitive Bid Round for oil gas licenses, announced last year, is a scheduled offering for onshore and offshore, in the period 2019-2025.

Last year, Angola’s National Agency of Petroleum, Gas and Biofuels (ANPG), awarded three blocks: 27, 28, and 29, offshore in the deepwater Namibe Basin.

This year, the bidding plans have been disrupted by COVID-19 complications.

The blocks on offer are CON1, CON 5, CON 6, KON 5, KON 6, KON 8, KON 9, KON 17 & KON 20 (See map here), located in the Lower Congo Basin and the Terrestrial Kwanza Basin.

Data available includes 2D seismic coverage of the LowerCongo Basin, a recently updated Geological Map and Database of the Onshore Kwanza Basin and a compilation of recent aeromagnetic data covering the Transition Zone and Shallow Waters of the Lower Congo and Kwanza Basins.

 

 


Cairo Based East Mediterranean Gas Forum Finally takes Off

By Toyin Akinosho, Publisher

Six of the seven founding states of the Eastern Mediterranean Gas Forum signed its charter September 22, 2020, marking the official commencement of the body.

The East Mediterranean region has flashed brightly on the global hydrocarbon map in the last ten years, with the discoveries and development of over 50 Trillion of cubic feet of gas off Egypt (Zohr, 30Tcf, 2015, discovered by ENI); Israel (Leviathan, 22Tcf, 2010, discovered by Noble Energy) and Cyprus (Aphrodite, 5Tcf, 2011, discovered by Noble Energy).

Egypt, Greece, Cyprus, Italy, Israel, Jordan, and Palestine have all signed. Palestine was absent and will sign later. France has formally requested to be a member and the United States has registered intention to be a permanent observer. While Turkey is keen, its politics has appeared to rile up some members.

Turkey has been exploring for hydrocarbons in contested areas of the eastern Mediterranean, Cyprus and Greece have argued.

For Egypt, whose capital Cairo is the forum’s headquarters, it was a major step in the ambition to be the region’s energy hub.

The organization will serve as a market platform for natural gas producers, consumers, and transit countries in the region to develop existing resources and develop the infrastructure for future exploitation, in addition to regulating natural gas policies in the region that protect the rights of member states to preserve their resources, the signatories said in a joint statement after the online ceremony.

Member states will exchange information and seismic data studies on potential gas wells and delineate new gas finds that straddle maritime borders. Member states could even get preferential rates on each other’s gas supplies, as well as preferential access to liquefaction facilities, he said.

The forum had a launch meeting in 2019, during which the founding members agreed to move ahead with creating a regional market to develop the eastern Mediterranean’s estimated 122 Trillion cubic feet of gas reserves.

 


Our Archive/Nigeria’s Refining Gap: The Road to Privatisation and Back

OUR ARCHIVE

DATELINE, ABUJA, AUGUST 2007

Calls for a halt to the waste of resources on Nigeria’s state owned refineries go back several decades, as the story below, from our file records of 13 years ago, shows…

In mid July 2007, less than two months after assumption of office, Nigeria’s president Umar Yar’adua ordered that two refineries that had previously been sold to the private sector be returned to state hydrocarbon company NNPC (Nigeria National

Petroleum Corporation). It was an anticlimax to a four-year, controversial privatization process, which ended just in May 2007 with 51% stake in the largest refinery, the 210,000BOPD plant in Port Harcourt, sold to Bluestar Consortium for $561Million. Mr. Yar’dua instructed the NNPC to get the refineries working to at least 70% capacity within twelve months. It was a triumph for the NNPC, which had preferred to be left to run the refineries. But was it a triumph for efficiency? Has Mr. Yar’adua rolled back the painful “gains” of deregulation in the downstream oil and gas sector? As part of our ongoing series on the Refining Gap in Nigeria, senior correspondent EJIKEME OKEKE-AGULU pieces together a six year story, highlighting the see-saw nature of the sale…

In NOVEMBER 2000, GIUS OBASEKI, then Group Managing Director of the NNPC,

gave an overview of the state of the three government owned refineries in the country. He was satisfied with himself. The “Port Harcourt Refinery is running at 75%” he told Yakubu Lawal, energy editor of The Guardian of Nigeria. “I can run Port Harcourt at 100%,” Obaseki said “But professionally, I will be doing myself damage because the cracker- the FCC will not be in place till the middle of next year”.

The country’s refineries have a nameplate capacity of 445,000BOPD; with the Warri Refinery, in the midwestern part of the country, designed for processing 125,000BOPD of crude, the Port Harcourt Refinery, (which is really two in one), located in the east of the country, designed to process 210,000BOPD and the Kaduna Refinery, sited in the north, having an installed capacity of 110,000BOPD.

It was expected, from Mr. Obaseki’s comment then, that Port Harcourt Refinery, by far the largest, would be running 100% by the middle of 2001 though subject to crude availability as the GMD had presumed. This was to be two years into the then new democratic dispensation. Obaseki also told Yakubu Lawal that the Kaduna refinery was “running 60% after a lot of maintenance work”. This performance, he promised, would be tremendously increased, such that by 2001, the Kaduna refinery would “operate at the same level with Port Harcourt”. There was a caveat, however. “Unless we are left to do our work”, Obaseki told Lawal, “we won’t get to where we want to be.”

From the results on the ground, Mr. Obaseki either “wasn’t allowed to do his work”, or the problems were overwhelming.

By 2003, two years after the Port Harcourt and Kaduna refineries were supposed to be working at full steam, and four clear years into President Obasanjo’s take over of power from the military, the thinking in government had changed from “government can run the refineries” to “let us privatise the refineries”, or so it seemed. Port Harcourt, Warri and Kaduna, didn’t achieve the full delivery of petroleum products they were designed to output. The Bureau of Public Enterprises(BPE), Obasanjo’s privatisation agency, had stepped up to the plate.

“All of the refineries are in need of complete overhauling”, the BPE said. “Bad management and poor maintenance have cut refining output considerably, it lamented.

“The Government has attempted to meet the shortfall by importing gasoline. The domestic shortage of refined products persists, and has led to numerous clashes and accidents” said the BPE and “the most recent incident occurred in Warri, Delta State, where more than 1,000 people lost their lives when a gasoline pipeline exploded and caught fire. Villagers were scavenging for gasoline, which had been in very short supply.” The BPE spelt out a number of options being considered by the Government in reforming the refineries and that included: leasing, privatisation, contract management, and joint venture.

THE PRIVATISATION JOURNEY HAD BEGUN.

On his return for a second term in May 2003, President Olusegun Obasanjo signed off on the privatization of the  three refineries. The Privatisation was to be carried out under the auspices of the National Council of Privatisation (NCP).

Transaction commenced in October 2003 with a 60-day sales study of the refineries by the then advisers, Credit Suisse First Boston (CSFB), set up to assess the saleability of the facilities and establish potential bottlenecks that may likely impact closure of transactions and recommend appropriate litigants. The advertisements for Expressions of Interest (EOIs) from prospective bidders in all the refineries commenced simultaneous with the Sales Study. This sales study was completed in December 2003, though Warri Refinery was not covered due to precarious security situation in Warri and environs at the time.

For the Port Harcourt Refinery (PHRC), a Preliminary Information Memorandum (PIM) was sent to the final list of Expressions of Interest (EOIs) approved by the Steering Committee, which included the oil majors. The PIM was also distributed to prospective bidders for new oil blocks in the 2005 Licensing Rounds.

A BPE report says that “The unbundling and corporatisation of PHRC as a separate business entity from NNPC was undertaken, with a detailed assessment of environmental impact of the refinery operations and submission of a detailed report indicating the extent of environmental liabilities and the required remediation plan in other to effectively sell off 51% of the government’s stake in PHRC”.

In November 2005, the Bureau issued the final Information Memorandum (TM) and relevant bid documents to the short listed bidders, viz,

Essar Infrastructure of India;

Oando Plc;

Refinee Petroplus; and

Transcorp Plc. The four firms submitted their technical and financial bids at the deadline of December 2, 2005.

But the BPE said the four bidders did not meet the minimum qualification benchmark after evaluation. They were asked to resubmit revised bid by April 24,2006 after pointing out the areas of weakness in the bids, which did not meet up with some, or all such minimum qualifications as;

o Technical expertise in refining will be a prerequisite;

o Credible Investment Plan aimed at critical rehabilitation and expansion of refining capacity; o A Social Plan also key in dealing with over- staffing;

o Evidence of financial resources; and

o Demonstration of managerial ability. As stated by the BPE

Efforts to understand where each of these four bidders failed the test proved abortive as the BPE never replied to the various queries sent to it by this magazine.

The four bidders however submitted revised bids by the deadline of 24 April 2006. Most of the bids were disqualified after the BPE found that technical partner was a member in more than one consortium.

Following multiple membership in bidding consortia by a technical partner, which would have led to disqualification of most of the bidders, the Technical Committee of the NCP directed that a new RFP (Requests for Proposal) be issued to bidders after further clarification on the bidding procedures. The four companies were eventually pre-qualified for the financial bids opening, scheduled for July 2006.

On the order of President Obasanjo, the process was halted and the transaction re-opened to other bidders.

There were reports then that the refinery was being underpriced and the president ordered the refinery to be returned to the NNPC. There was no improvement afterwards and so the advertisements for EOIs were again placed in December2006 with the deadline for submission of EOls was 19 January 2007. Six bids were received by the deadline from the following prospective investors which included; Mittal Investments Ltd; Indorama International Finance Ltd; Global Oil & Energy; Link Global International Ltd; Taleveras Group; and Oil Works Ltd (DFP project Finance Ltd). Following evaluation of the new EOIs, the following consortia, consisting both existing and new bidders, were approved to proceed to the next stage of the transaction: Essar Infrastructure of India, Oando Plc, Refinee Petroplus, Transcorp Plc, Mittal Investments Ltd, Indorama International Finance Ltd, Global Oil & Energy, and Link Global International Ltd. As at then, it was only the Transcorp that still represented her bid.

The Bluestar Consortium was not in the race.

But sequel to the disengagement of CSFB as transaction advisor, the Bureau sent out Terms-of-Reference (TOR) and an invitation letter to three international firms: HSBC, BNP Paribas & Standard Bank of South Africa asking them to submit proposals to act as transaction advisors for the privatisation of both Port Harcourt & Kaduna Refineries. Only BNP Paribas submitted a proposal and was appointed as the new advisor to complete the refineries transaction.

Three bidders (Oando Plc; Refinee Petroplus; and Bluestar Consortium (incorporating Transcorp) submitted their technical and financial proposals and following evaluation of the former, the three were pre-qualified for financial bids opening. The Bluestar Consortium emerged winner with a bid of $561Million for 51% stake in the plant.

FOR THE KADUNA REFINERY, following China National Petroleum Company’s lower bid of about $102Million for the Northern refinery, NPC conducted a detailed due diligence on KRPC between 17 October and 4 November 2006 prior to submission of bid for KRPC. And they submitted their technical and financial proposals. At the bids opening on May 17, 2007, it offered to pay a revised offer price of$ 102 million, which was below the reserve price. Blue Star Oil Services Consortium also took up the challenge of buying into the KPRC with an offer price of $l60Million for 5l % equity; an amount exceeding the $102 million revised offer by China National Petroleum Corporation (CNPC).

Irene Chigbue, the Director General of the BPE, said that the Bureau’s mandate has never been to sell government’s enterprises for the purpose of generating money for government. “Our greater mandate is to allow the private sector drive the nation’s economy. It is not how much we are getting from these sales that matter, but the overriding desire to see our refineries meet the local need for fuel, thereby saving the country from huge foreign reserves call arising from fuel importation.”

But the Nigerian Labour Congress and the Trade Union Congress in their fight against the refinery sale and increase in petroleum pump price that said government failed in their duty at ensuring that it maintains control on utilities that directly affects the ordinary citizen.

David Mark, then newly elected senate president (presiding over the upper legislative house) said “that there might be friction if government sells an enterprise that has social impact and there is no social cushion to alleviate the pains”.

Emman Egbogah, regional director Society of Petroleum Engineers (SPE) Africa region and former Technology adviser to the Malaysian state hydrocarbon company Petronas: argued: “there are certain critical things the government should maintain a tag upon and I think in the case of Nigeria, there are many areas in which the government of course should have some contributions to make so that distribution will be equitable and maintaining a couple of refineries shouldn’t be too much for us”

IT HAS TAKEN FOUR YEARS, starting from the first few months of president obasanjo’s second term to the last weeks of the president’s tenure, to privatise the refineries, and all that has ended in a smoke, with the return of the refinery to the NNPC.

The NNPC had been wary of going full hog with the deregulation process; at some point the Port Harcourt refinery was withdrawn from the bid process. When an audience at a seminar in the course of an SPE conference asked Edmund Ayoola, a just retired Group Executive Director at the corporation, he fired back: “Why are people insisting on buying government owned refineries?” In a veiled reference to the lack of progress of companies licenced to construct refineries, he responded in frustration: “Why won’t people build their own?”.

Even while government kept on saying that NNPC would get out of the downstream business, the corporation continued to build mega filling stations all over the country.

The most immediate reason for the failed sale of Port Harcourt and Kaduna refineries has been the face of the winners. Bluestar Consortium consists of Dangote Industries Limited, Zenon Corp and Transcorp, three companies widely perceived to be run by cronies of the former president. “All the documents released by the BPE never at any point mentioned or noted Dangote Industries and Zenon (partners in Blue star) as a partner to any of the Bidders”, according to Labour.

Mr. Dangote had tried to douse the tension arising from the transaction and the obviously connected Transcorp by saying that after refurbishing the refineries, a significant equity would be listed on the Nigerian Stock Exchange to afford Nigerians opportunity of investing in the national facility. But when the public outrage over the sale heated up, Dangote threw darts at the NNPC. He told the Daily Sun of Lagos, Nigeria that the government corporation received over $700Million, all within the last eight years, to fix the refineries.

“NNPC stinks”, Dangote charged. “The government did not spend $1.1Billion to refurbish the refineries as some papers report. I know that fact. The papers are there. For the last eight years, the government has given NNPC about $700MilIion to refurbish the two refineries—over a period of time. That money wasn’t properly applied. And even after it was applied, the refineries are still not working. They are still not working. They are worth nothing.” While Dangote fingererd the NNPC as a nest of corruption his critics accused him of using government connections to get them out of business.

Figures from NNPC down stream report for the first quarter of 2005, the latest figure obtainable from the Department of Petroleum Resources:

The Kaduna Refinery processed an average of 38,070BOPD of crude oil for the first quarter of 2005 with a shortfall of 71,930B0PD. The Port Harcourt Refinery on the other hand processed an average of 94,453B0PD, showing another deficit of 11 5,547B0PD while the Warri Refinery processed an average of 65,496B0PD and a shortfall of 59,504BOPD. In all the two refineries of Kaduna and Port Harcourt were only able to process 132,523B0PD out of their total installed capacity of 320,000bbls/d. But an American Energy Information Administration report on Nigeria puts her average crude oil consumption for 2006 at 297,000BOPD with a growth in demand of 12.8% annually.

The figures available in the first quarter of 2005 shows that that KRPC and PHRC received a total of 14,733,289Bbls in the first quarter of 2005 and processed about 11,927,082Bbls also in the same period leaving a total of 2,806,2O7Bbls unprocessed. These figures suggest that as at the time, the two refineries were actually working below 40% as at 2005.

Dangote insists that the sale was transparent enough. He told Daily Sun “BNP Paribas, which was also called in by BTE to come and also do evaluation, just a week before we bought the refineries. Both these two, their evaluation was low” both this two refers to Credit Suisse which had also carried out their own evaluation previously. “When we went out to bid, No.1, there was this company Petroplus or whatever consortium a Saharan Energy. Their group came and they bid $300million. But they couldn’t bring even a deposit. They were therefore disqualified. Oando bid $200million. And they were asked to bring half of the money. Instead of $100million, Oando could only bring $80million. So they were also disqualified. We said $200million for the 51 percent and we put down our $1 O0million. So we qualified. And now, we were asked to go back and bid again and come back with a new price”. It is clear then that Dangote was a late entrant and a lucky child of destiny at that or maybe he represented other interests. Oando would not respond to queries by AOGR.

Now that the Bluestar has pulled out of the Refinery deal and requesting a refund of $721m and the NNPC given another 12 months by the consortium of Dangote, Zenon and Transcorp will NNPC really deliver, after years of failing to deliver? Funsho Kupolokun, who took over from Obaseki in 2003 and has run NNPC ever since, is positive.

“Before February 2006, all the three refineries were running and NONE were running on less than 75% of installed capacity. This magazine’s attempt to get specific 2007 figures from NNPC headquarters in Abuja was futile by officials. Mr Kupolokun stressed that the refineries are comatose today because of the vandalised Chanomi creek crude pipeline and that they would recommence production by September 2007 after their repairs. “Then the refineries will be back; they have been tested and proven. Once we get the refineries running, we will keep improving on what we have done”.

Kupolokun told the Nigerian press, in the last week of July: “The refineries wee working by the third and fourth quarters of 2005. Our import level went down to as low as 30 cargoes and all the depots in Nigeria, except Ore, as at that date, were functioning.”  If Mr. Kupolokun is proved wrong, the costs to the struggling economy would be enormous.

This story was originally published in the August 2007 edition of the Africa Oil+Gas Report monthly..


78 Companies Bid to Repair and Operate Nigeria’s Downstream Infrastructure

Seventy-eight (78) companies submitted virtual bids to rehabilitate critical downstream pipelines, associated depots and terminal infrastructure of the Nigerian National Petroleum Corporation (NNPC) through the Finance, Build, Operate and Transfer (BOT), the company reports.

On bid are 5,120 kilometres of pipelines, traversing the entire country, with two coastal depots in Lagos, in the west and Calabar in the east.

The pipelines have been subjected to many cycles of vandalism for scores of years, and the depots have suffered from poor maintenance. There are 17 other depots around the country, all of them linked to the pipeline network, but they are not up for bid.

The losses from vandalized pipelines and rusted depots have manifested as a “fuel tanker crisis” in the country, as fuel laden tankers, playing the role of virtual pipelines, clog the highways and render the routes to the Lagos port difficult to access.  As the losses have been charged to the National Treasury, the state hydrocarbon firm has frequently faced strident criticism for not privatizing these facilities. NNPC has, however, always resisted any sale of its equity in any asset, let alone go the full hug of privatization.

Those who win the bids “will fund these pipelines, they will construct them, they will operate them with us and then ultimately they will fully recover their investment from the tariff which we will pay for using these pipelines and as soon as they recover their cost and their margin, they will hand over these assets back to us,” declared Mele Kolo Kyari, NNPC’s Group Managing Director.

The final partners of the bid opening will be selected by the end of the first quarter of 2021, Kyari explained.

 

 

 

 

 

 


BP’s Rocky Road to Becoming an Energy Company

By Gerard Kreeft

 

 

 

 

 

 

 

 

BP’s 2020  Energy Outlook is timely both for its insightful energy scenarios and as a tool for scrutinizing the company’s journey towards a greener future.

It outlines three energy scenarios in which all record a  decreased use of fossil fuels:

  • Business as Usual(BAU) records a decrease of fossil fuels (as a share of primary energy) to 80%, based on 2020 statistics; both renewables and electrification play a modest role.
  • Rapid records a decrease of fossil fuels (as a share of primary energy) to 40% and renewables rise to 40% as share of primary energy. Electricity consumption also rises above 40%.
  • Net Zero has a decrease of fossil fuels(as a share of primary energy) to 25% and renewables rise to 60% and electricity rises above 50%.

In terms of CO2 reduction the Net Zero scenario is the obvious safe choice(see below) if “Well Below 20C is to be reached by 2050.

In all three energy scenarios natural gas is a constant bridging fuel. Even under the Net Zero Scenario  the growth of natural gas to

the period  2050 remains constant.

A key point of BP’s data analysis is that non-fossil and natural gas are the winners in India and other Asian countries, while use of coal and crude oil decreases(see above).

In all three scenarios the cost of wind and solar continues to decrease substantially: using 2018 as a baseline the cost of wind energy is down some 25% and solar 50%.

Between 2030-2040 wind and solar capacity under the Net Zero Scenario apex at some 1000GW.

Average annual investments in wind and solar(based on 2018 figures) vary between $300Billion (BAU) to more than $1.1Trillion(Net Zero).

The Greening of BP

In the following 5 year period BP paints a glowing portrait of how it will reach the promised green land,for its shareholders:

  • An underlying EBIDA(Earnings before interest, depreciation and amortization) of between  5% – 6% per year through to 2025 with returns in the range of 12% – 14% in 2025 – up from around 9% today.
  • After allowing for the impact of divestments, and reflecting the expected share buyback commitment, EBIDA per share is expected to grow by 7%- 9% per year through to 2025.
  • From  2025 onwards when its low carbon projects start to kick in expect growth of between 12%- 14% to be maintained.

According to BP, its $25Billion divestment will provide the basis for up-scaling its low-carbon business. A pipeline of 25  oil and gas projects, and and additional 18 projects  in the pipeline are also key factors.

Yet key questions remain.

This year BP already wrote off $16.8Billion and in the 2nd Quarter halved its dividend. The Corona-19 crisis and the energy stalemate are  key factors for these impairments.

What if the crisis endures an additional year? Can BP’s ‘Wall of Cash’ withstand that?

An additional write-off in 2021 and a further continued reduction of the golden dividend is not unthinkable.

Then there is the paradigm of an oil company becoming an energy company. The oil company strategy: high risk = high returns is being replaced by high risk= low/no returns.

Energy companies by contrast– Vattenfall, RWE, Engie, Orsted– all are low risk:  low or no dividends for 2019. Yet their stock prices are steady and positive. Their green strategy has been delivered, in place  and accepted by the investor community.

It should not be surprising that the investor community is wondering how a transformed BP can become an energy company promising to deliver results that other energy companies can only dream about: an    EBIDA per share of between 7%- 9% per year through to 2025 and from  2025 onwards when  low carbon projects start to kick in growth of between 12%- 14%.

Then there is  the slight inconvenience of TOTAL’s  announcement: taking on board the IEA’s (International Energy Agency)  Sustainable Development Scenario(SDS) for medium/long term.  Meaning “well below 20C.” This requires a further explanation.

In July of this year TOTAL announced that it was declaring two of its oil sands projects(Canada) stranded assets even though they were classified as ‘proven reserves’.

TOTAL has in essence taken on a new classification system for struggling oil companies seeking a green future. In short, casting aside the The Society of Petroleum Engineers’(SPE) classification system which for decades has given legitimacy  for petroleum reserves.

BP has announced it wants to reduce its oil production by 2030 by 40%.  Which BP  assets will become stranded  assets?

What will happen to BP’s 20% share in Russia’s Rosneft which comprises three oil and gas joint ventures? Maintaining a presence in Russia could be very strategic, given the country’s oil and gas assets and the fact that a green strategy is still waiting to be discovered.

What about BP’s assets in Africa where the company has a considerable footprint. Some examples:

In Algeria BP has helped to deliver two major gas developments at Salah Gas and In Amenas, both of which are joint ventures with Sonatrach and Equinor.

BP currently produces, with its partners, close to 60% of Egypt’s gas production through the joint ventures the Pharaonic Petroleum Company (PhPC) and Petrobel (IEOC JV) in the East Nile Delta as well as through BP’s operated West Nile Delta fields.

In Angola BP is the operator of blocks 18 and 31 and have non-operated interest in blocks 15, 17, 20 as well as the Angola LNG plant in Soyo.

In Mauritania and Senegal,  BP and its partners are developing  the  Greater Tortue Ahmeyim  gas field with a 30-year production potential.  The field has an estimated 15Trillion cubic feet of gas and is forecast to be a significant source of domestic energy and revenue.

Many of these projects are natural gas related and could provide the bridging fuel needed for the energy transition.

The Green Competition

BP also announced that it will be spending $5Billion per year to green itself and by 2030 will have 50GW of net regenerating capacity.  To date the company has a planned pipeline of 20GW of green generating capacity.

How does this compare to its green competition:

  • Iberdrola: in the period 2018-2022 will be spending €34Billion on renewable energy and has a pending target of 45GW of installed wind capacity and a pipeline of an additional 10GW.
  • Engie: in 2020 will spend €7.4Billion on investments across a broad swath of sectors including solar, wind (on and offshore), hydro plants, biogas and developing gas and power lines , and will have 33GW of global renewable installed capacity by 2021.
  • Vattenfall: In the Nordic countries Vattenfall has low emissions with practically 100% of the electricity produced based on renewable hydro-power and low-emitting nuclear energy.
  • RWE: by 2022 RWE will have 28.7 GW of installed wind and solar capacity.
  • Orsted:has an installed capacity of 10GW and a build-out plan to increase capacity to 15GW.
  • Enel(Italy): strategic plan outlines total investments of €28.7Billion, of which 50% will be geared for deployment of 14 GW new renewable capacity.

Recently BP and Equinor announced that BP would become a 50% partner, of the non-operated assets Empire Wind(Offshore New York State) and Beacon Wind (Offshore Massachusetts).

Possibly more joint-actions can be anticipated. Why? Economies of scaling up quickly in a growing offshore wind market. Moreover, the majors have always shared costs to reduce risks in developing oil and gas assets, a tradition sure to be followed in the offshore wind sector.

Perhaps also anticipate that both BP and Equinor spin off their wind assets as a separate company.

BP’s Net Zero Scenario of reducing fossil fuels to 20% of today’s share of primary energy by 2050 is an indication how quickly this energy transition can occur. The urgency of the task ahead is virtually a guarantee that this BP scenario will happen sooner rather than later. Do not be surprised that 2030 could become the new date to become 20C neutral.

 

Gerard Kreeft, BA (Calvin University) 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.

 

 

 

 

 

 

 

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‘African Governments Will Be in “Listening Mode” Now More than Ever’-Monsieur Afrique

The current shock in the hydrocarbon industry “is so profound and so deep”, in the view of Tim O’Hanlon, Tullow Oil’s former Vice President for Africa, that “companies will find Governments across Africa in “listening mode” now than before”.

That comment references the perception, by International Oil Companies, that African Governments, as a rule, are never in a hurry to follow the pointers to fiscal terms dictated by the market.

African Governments, O’ Hanlon says “have sometimes been more than a bit “late-to-the-party” when it comes to adjusting the work programme or fiscal arrangements, necessary when the oil price dies and capital dries up”.

O’Hanlon should know, or should he not?.

For most of the last twenty years he was the face of Tullow Oil in Africa. Known to governments and stakeholders around the continent as ‘Monsieur Afrique’, he negotiated the entries for the company, represented the partner countries’ feelings in Tullow’s executive management meetings and promoted the Tullow brand at the C-Suite level type conferences.

In those years, the company earned the sobriquet: ‘Africa’s Leading Independent’. Now as it leaves Uganda, winds down in Kenya and sees its Ghanaian production declining, Tullow Oil calls itself ‘An independent oil and gas company focused on Africa and South America’.

‘Monsieur Afrique’, retired last April after 34 years with the company, and four months after Tullow’s historic headlong stock price crash.

“To have African governments listen, he says is “all it will take to re-ignite the flame and get the ball rolling whereby exploration permits are extended, stay alive and stay in the right hands (like Tullow’s) until the inevitable turn-around comes”.

O’Hanlon: Oil explorers always seem to end up looking either like visionaries or idiots – rarely in between

The inevitable turnaround?

Mr. O’Hanlon is unapologetically clear sighted about the continued relevance of fossil fuels.

In a rare, extended conversation, his first interview with any publication since his exit, he fielded questions ranging from the future of oil, the alleged retreat of Independent companies from Africa, to the ‘hysteria’ about climate change.

Excerpts from the interview, published a month ago, in the August 2020 issue of Africa Oil+Gas Report.

Having spent several decades, right in the jungles of the oil patch, negotiating deals and seeing them implemented, as actual crude flow to export, how does it feel to sit back and watch things from a distance?

For the moment, I am relaxed to sit back and watch from a distance……….but my feet are still a bit itchy to be honest!  While poor Tullow is not what it once was, our legacy is secured. Through the efforts of the brilliant technical people we always surrounded ourselves with and the cool leadership at the top, Tullow added many tens of billions of dollars to the economies of some lucky African nations. It’s uplifting to think that ordinary people just doing their day-jobs like that have had such a positive impact on a Continent with wall-to-wall problems to solve. This achievement can never be undone.

Does any of the things happening now: lockdowns everywhere, crude oil prices going negative at some point, Massive write downs by oil majors, does any of them feel surreal?

Surreal is a bit strong. We chose to work in this oil-patch which is, after all, a boom/bust game. Oil explorers always seem to end up looking either like visionaries or idiots – rarely in between. Extreme outcomes are the norm. What we do for a living is so different from all the mainstream careers out there, that after 35 years of it – all spent in Africa – little ends up being truly surreal. Surprises, shocks, failure and setbacks are what to expect and so it becomes only a question of degree…

How do you see the future of Tullow in Africa? Is there life after death?

They say “debt is death” but that is just a corny cliché. At the right level, debt is an indispensable financial tool which is perfectly suited to our E&P business. Unfortunately, some recent mis-steps by Tullow management put our debt level in the spotlight – unnecessarily centre-stage in our story – whereas our banks had been actually quite relaxed about matters. Optics and story-telling matter in the fickle marketplace and this contributed to a spiral in equity value which of course did indeed highlight the then relatively high debt level. Discretionary spending like exploration is always the first to go in tough times and yet that’s what attracted so many fans (both shareholders and African Governments) to Tullow down the years. If the new leadership is wise, it will re-establish a credible African growth narrative for Tullow – however modest for now – in order to attract again the savvy shareholders as well as the key African stake-holders before the fabulous, hard-won, Tullow brand withers further………….

With the prevailing conditions likely to linger a while longer, is there any likelihood that those many acreages in Cote D’Ivoire and other frontier acreages in Africa are likely to be worked on by the company at all?

I am on the outside now and can only speculate. While African Governments have sometimes been more than a bit “late-to-the-party” when it comes to adjusting the work programme or fiscal arrangements, necessary when the oil price dies and capital dries up, Ivory Coast has proven to be very responsive and pragmatic with us in the recent past. The current industry shock is so profound and so deep that I predict companies will find Governments across Africa in “listening mode” now than before. That’s all it will take to re-ignite the flame and get the ball rolling whereby exploration permits are extended, stay alive and stay in the right hands (like Tullow’s) until the inevitable turn-around comes.

For the past three years, the International Independent, whose exploration exploits since the late 90s led to massive discoveries of gas in Mozambique and Senegal, and oil in Mauritania, Ghana and Senegal, has been on the retreat. Anadarko is gone. Noble Energy is about to be wrapped in Chevron’s voluminous folds, Tullow has left Uganda. Do you still see a role for International Independents finding new hydrocarbons and developing them?

No doubt about it. As long as oil and gas dominate the energy mix and Africa’s energy needs accelerate like no other Continent’s, investment in exploration will have a role, albeit modest for the moment. With no criticism of the MAJORS intended, the industry niche of frontier exploration has not, with a few exceptions, been theirs in Africa for the last few decades. The risk profile of true wildcatting across Africa – often onshore – doesn’t particularly suit them whereas the independents’ shareholders are prepared to face high risk in return for access to possible bonanza outcomes. A new crop of independents will emerge to fill these needs when the time is right. They may even start with developing already discovered resources which abound in Africa, moving out into exploration again as the oxygen returns into the room.

Is this ongoing retreat only a blip?

In my opinion, it’s a wee bit more than a blip – maybe more like an abrupt and violent speed-bump! But the fundamentals are still there for the E&P business to thrive again. Africa needs development and nations develop faster with cheap energy. Resources abound on the Mother Continent and the technology and skills are there to exploit them safely and profitably. Each side – Govts and oil explorers – needs the other and this “need” is the eternal driver of good business.

What is your take on the imminent end of the fossil fuel era -especially in the context of the timeline that is now so readily bandied around?

”Bandied around” is a perfect phrase for what’s going on here. Nobody ever seems to police these wild claims and you get a hearing these days once you have a wifi connection. But words matter and the IOC’s speak in a much more measured tone. Nothing will happen overnight and indeed the energy transition is quietly underway. And so it should be. Fossil fuels are already being replaced in the mix by cleaner energy sources but (pre-Covid) the total energy demand was increasing worldwide. So, common sense and sound economics will prevail because, as ever, the private sector will have to do all the heavy-lifting here. The transition will happen faster in some regions than others but oil and particularly gas will have a major albeit  decreasing role to play for decades to come.

You keep saying Africa needs development and nations develop faster with cheap energy. That’s quite contrary to the growing narrative that solar PV prices keep going down and power generated from them is ultimately cheaper?

Solar power technology  improves daily and seems to have a huge role to play in Africa’s future energy needs. However, the connected electric grid leaves a lot to be desired in Africa and so, a bit like the connected landline phone system of old, sunny Africa could maybe skip a technology chapter here with solar power being generated much closer to where it is consumed. That would indeed be great. But again, it will be in the context of an overall energy mix. Oil products are relatively safe, flexible, cheap, widely-distributed and dense bundles of energy. Transport is the principal user of fossil fuels worldwide and Africa is on-the-move!  Just like high-Capex / low-Opex hydro-power, large-scale solar can produce impressive generating costs on a given day and that will be a very welcome addition to the minestrone of Africa’s future energy needs.

What, in your view, is the future of the oilfield service companies…Halliburton/Schlumberger/Baker Hughes? What, in your view, is the short- and long-term future of the drilling companies?

Like the IOCs, the service companies including drillers are having a grim time at the moment. But the industry is uniquely experienced in dealing with appalling risks every day which Main St. businesses can’t even comprehend. How can you set out to drill a well which will cost you M$50+ and which has an 85% chance of failing? While that risk is the IOC’s risk, we pay the service companies bills and therefore their salaries. So it is also their risk really in a way. But the service companies are habitual innovators, forever adjusting to the twists and turns and challenges of the business. This will stand to them and they will be fine. There will be mergers, they may have to learn new skills but change and challenges have been their constant companions in our crazy industry and thus ensured their survival to date…

Which of the majors will be left standing?

If Africa………….it will be TOTAL.

Can we anticipate a revival of the industry any time soon?

Yes….but one man’s soon is another man’s eternity. This COVID-19 issue needs urgent solving and then there needs to be less hysterical shouting and more listening / thoughtful discussion around the climate change debate. The huge technical, creative and financial firepower of the oil industry can then be harnessed to make a sensible and properly-paced transition towards a cleaner future energy mix. This should be done without forfeiting the right of the developing world to catch-up with our living standards here in the West which benefited from cheap energy.

Will there be a merger of activities with renewables or are these two separate worlds?

There is space and need for both entities in the energy mix for the foreseeable future. That said, the MAJORs – who have a vulnerable presence at street level and MUST therefore think big picture – will be more able and more likely to try to cover both sectors and hedge their bets through acquisition of renewable energy targets. But under the entire energy supply umbrella, there will always be a need for niche players with their expertise – be they frontier oil and gas explorers or renewable energy technology innovators. You need these pioneers and risk-takers in ours and every other industry as well as the heavy-lifters to see the job through. It’s not an either/or.

There is not a lot in the media about how you showed up. How did it all start? An engineering education in the UK? Then what? 

Do you remember the cartoon guy, Mister Magoo? Well I’m his Irish cousin and I’ve been safely walking under ladders all my life! I scraped through Engineering in UCD, Ireland’s best Engineering school, then worked with Schlumberger for a few years, then scraped through Imperial College London, the UK’s best Engineering school, then bumped into dodgy-Accountant (his words) Aidan Heavy in Dublin on the very week his start-up Tullow Oil signed an onshore exploration permit just outside Dakar, Senegal. It was like the blind hiring the blind although to be honest, Aidan is a superb entrepreneur. Ignorance of the scale of our undertakings was our best friend for the first 15 years but the work ethic was amazing. Surrounded by hungry, talented people – back then, mostly fellow Irish – survival was the objective and it remains the miracle of Tullow to this day. Success inevitably follows in our game if you can just remain focussed and simply stay in the game! Our turn eventually came and we surfed those waves, one after another – SNS gas fields, Energy Africa acquisition, huge oil discoveries in Uganda, then Ghana and finally Kenya. Aidan’s laser focus on Africa was our big differentiator. I have been blessed to be at the heart of this story from my twenties to my sixties and for much of that time I was Tullow’s Monsieur Afrique. What a ride………

And now?

The same month I retired from Tullow (April 2020) was the month Europe and Africa went into COVID-19 lockdown and the worldwide E&P sector hit the rocks. Mr Magoo again just walked under that ladder! But I am flattered to report that my phone has rung a few times with requests for advice from people with African E&P projects needing to navigate through the maze. But the maze is new every time and the same routes that Tullow took aren’t available. But that’s ok. There are other routes and there are similarities that I am recognising in their stories! I can probably help much more than I even realise but time will tell. A new start-up to go back and “discover” all that oil we left behind, well that’s possible too maybe some day. 

 

 

 

 


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.”

 

 


ENI’s New Gas Find Boosts GIP in Egypt’s Nooros to 4Tcf

The Nidoco-NW-1 exploratory well has encountered 100 metres Net Gas Sand in ENI operated Abu Madi West Development Lease in Egypt.

The discovery has extended, further north, the gas potential of the Greater Nooros area.

“The preliminary evaluation of the well results, considering the extension of the reservoir towards north and the dynamic behaviour of the field, together with the recent discoveries performed in the area, indicates that the Great Nooros Area gas in place can be estimated in excess of 4 Tcf”, ENI says in a release.

Nidoco NW-1 is located in 16 metres of water depth, 5 km from the coast and 4 km north from the Nooros field, discovered in July 2015.

50 metres of the 100 metre gas footage is located within the Pliocene sands of the Kafr-El-Sheik formations with the remaining 50 metres within the Messinian age sandstone of the Abu Madi formations, “both levels with good petrophysical properties”, the Italian major explains. “In the Abu Madi formations a new level, which was not yet encountered in the Nooros field, has been crossed proving the high potential of the Great Nooros Area and the further extension of the gas potential to the North of the field.

ENI, together with its partner bp, in coordination with the Egyptian Petroleum Sector, will begin screening the development options of this new discovery benefitting of the synergies with the area’s existing infrastructures.

ENI, through its subsidiary IEOC, holds a 75% stake in the license of Abu Madi West Development Lease, while bp holds the remaining 25% stake. The operator is Petrobel, an equal joint venture between IEOC and the state company Egyptian General Petroleum Corporation (EGPC).

 

 

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