All posts tagged feature


ENI Gets two Algerian Gas Fields to the Market, for Europe

Italian major ENI has taken onstream, two gas fields in Algeria that will supply the European market.

It has been a fast-track development.

The assets are “related to the Berkine South contract”, which was signed (with the state hydrocarbon company Sonatrach), in April 2022.

The entire Berkine South acreage itself currently has a production capacity of 35Million standard cubic feet per day of gas (MMscf/d), and approximately 4,000 barrels per day of associated liquids.

With new fields coming on stream and ramped up in the following months, ENI expects the Berkine South gas output to be tripled to 70MMscf/d by the end of 2022.

These molecules are meant for export into Europe.

“The production of the Berkine South, which is the first contract to be signed under the new Algerian hydrocarbon law 19-13, is operated by ENI and Sonatrach”, ENI explains in a statement.

ENI has seen itself, since the Russian/Ukraine conflict started, as the champion of alternative sources of natural gas for Europe. Most of its developments for this purpose, in Africa, are relatively small, but they add up.

ENI has also taken more assets where other European companies are unwilling. In September 2022, the company announced that it had reached an agreement on the acquisition of BP’s operations in Algeria, including “In Amenas” and “In Salah”, “the most important gas production fields operated by international companies in the country”, ENI claims. “Following this operation and the development programmes in the Berkine basin, ENI’s production in Algeria is expected to reach over 120,000 barrels of oil equivalent per day in 2023”.

 

 

 


Uganda’s Local Entities Receive 36% of Procurement Spend by Oil Companies

Fifty-two Million US Dollars, out of the $147Million spent by the licensed oil companies on procurement, between 2017 and 2020, was on local entities owned by Ugandans.

This represents 35.75% of the total procurement spend by the lOCs, “1,700 Small and Medium Enterprises (SMEs) had their capacity built in the areas of health, safety and environment, bid management, financing, corporate governance, among others”, reports Jessica Kyeyune, National Content Specialist at the Uganda National Oil Company (UNOC).

546 entities registered on the National Supplier Database (NSD) have so far been contracted in the country oil and gas sector. Out of these 498 (91%) were Ugandan entities while 48 (9%) were non-Ugandan.

Ugandan nationals directly employed by the oil companies as of September 2021 stand at 81%, with 59% at management, 75% technical and 100% of their support staff, according to data by UNOC.

4,435 Ugandans have been trained by the Oil companies in various technical disciplines to competitively participate in the oil and gas sector.

“The companies are creating many spin-offs in areas such as employment and secondary industrial services”, Kyeyune explains. “This has created direct benefits to the economy through generating tax revenues and improvement of infrastructure, such as roads, leading to a decrease in the cost of doing business in the country”.

It is the view of UNOC as well as the Petroleum Authority of Uganda (PAU) that local gains from oil & gas investment will be bolstered by further field development and exploration, joint ventures and farm-in arrangements in existing licenses, the production and processing of the crude oil, transportation facilitates and services related to this field (engineering, pipelines, storages facilities and refinery construction).

“The impact created by oil companies is on a growth trajectory and we believe the companies are contributing to the eluviation of poverty in the country by providing employment that pays higher than a living wage, improving the standards of living for many Ugandans and impacting the indirect and induced sectors of the economy like Agriculture, education, tourism, to mention but a few”, Kyeyune says. “All these are achieving National Content on a direct, indirect and induced aspects of the Oil & Gas value chain”.

 


What is the Economic Justification for the Nigeria-Morocco Gas Pipeline?

By Dan D. Kunle

The Nigerian state hydrocarbon company, NNPC Ltd has announced, with flourish, the plan to take final investment decision (FID) on the proposed Nigeria to Morocco to Europe Pipeline by 2023.

But is this the important project that NNPC and the Nigerian Government are making it out to be?

Mele Kyari, the NNPC’s chief executive, reportedly restated the price tag: $25Billion to Bloomberg. He was also more forthcoming about the length: 5,600Kilometres.

The line is proposed to originate from Lagos and run parallel the West African Gas Pipeline currently linking Nigeria and Ghana, a project which has struggled with certainty of gas delivery and has underperformed its contractual obligations for the 10+years it has been in operation.

The facility, for which a Memorandum of Understanding (MoU) between Nigeria, the Economic Community of West African States (ECOWAS) and Morocco was signed in late September 2022, now looms larger in our consciousness than any other hydrocarbon evacuation project in play, in the context of Europe’s desire for natural gas to replace Russian supply.

“I am not unaware of the phosphate fertilizer production and supplies from Morocco to Nigeria. But this monoproduct is not sufficient to justify a gas pipeline, as compared with LNG plants and regasification facilities…”

Last March, the OPEC Fund agreed to a $14Million contribution to a $90Million loan for the Front-End Engineering Study (FEED) of a part of the Project.

The line will ultimately pump Nigerian gas through the Maghreb-Europe pipeline to the European gas network. Along the route it is expected to supply gas to the land-locked countries of Burkina Faso, Mali and Niger. In will pass through Benin, Togo, Ghana, Côte d’Ivoire, Liberia, Sierra Leone, Guinea, Guinea-Bissau, The Gambia, Senegal and Mauritania.

Among the questions that keep coming up, are: How sudden has the economic and technical justification been validated for this type of project from Nigeria to Morocco?

At what cost is this project and where is the funding likely to come from?

Who scoped this project?

Have all the maritime permits and approvals, country by country, been obtained?

Who are the offtakers, where are their Gas Sale and Purchase Agreements (GSPAs)? Who are the producers? What are the upstream details? Where is the investment plan by NNPC for the production of the gas that will be dedicated to this ambitious pipeline?

Who, when and where will the gas be produced to feed into this type of an ambitious dream?

How many years will it take Nigeria and Morocco to implement and complete this ambitious project?

It may be pertinent to ask the Nigerian government and NNPC Ltd, what has happened to the Obrikom-Obiafu to Oben (OBOBOB ) project, which construction has lasted 16 years; what is the status of that project now?. What is going on with this very important project from the East Niger Delta to the West of the country?

Why would Morocco not consider building a REGASIFICATION facility in her country and also possibly acquire LNG carrier vessels to move around the ocean waters of the world?  Is this not more cost effective than embarking on an extensive undersea gas pipeline?

Morocco does not need this pipeline all the way from Nigeria, unless there is something we don’t know. Could it be political and territorial ambition? But for what purpose?

Morocco can purchase LNG from Senegal and/or Mauritania; countries that are close to her, either by LNG carrier vessels, which are more flexible or by gas pipeline, because of the short distance.

Does the MoU between Nigeria and Morocco imply that the Federal Government and NNPC abandoned the AKK pipeline to Niger and Algeria enroute to Europe, in favour of this undersea line to Europe through Morocco?

Why will the Nigerian government want to waste time and money in this critical period when we have no adequate domestic gas delivery framework?

Does this Nigeria-Morocco gas pipeline replace the other LNG plans; Brass LNG and OK LNG?

Twenty Million Ton capacity LNG plants will cost about $21Billion today and Nigeria with her gas resources can actualise these projects in five years, if we are determined to join the LNG suppliers race in the world.

The USA started LNG production and supply only in the last ten years and they are gunning for Number 1 position against Qatar and Australia. It will be very uneconomical for Nigeria to abandon LNG projects  for a white elephant, undersea gas pipeline from Lagos to Morocco.

There are so many numerous advantages for Nigeria to develop her LNG projects because of the value additions in maritime and shipping business. The cost of maintaining the gas pipeline underwater is enormous.

The global race for LNG production and supplies is heating up because of (1) the Russian/ Ukraine conflict and (2) gas is a transitional fuel. If the supply from Russia had not been through pipeline, but by LNG vessels, the situation would not have been this precarious.

Having rationalized and reviewed this ambitious gas pipeline between Nigeria and Morocco, I am not unaware of the phosphate fertilizer production and supplies from Morocco to Nigeria. But this monoproduct is not sufficient to justify a gas pipeline, as compared with LNG plants and regasification facilities as the case may apply to each country. At any rate, Togo has huge phosphate deposits and it is close to Nigeria, so why can’t Nigeria simply develop the deposits next door?

From records, ECOWAS economic treaty and Nigeria’s development plans had recommended a railway system in the region that will, among others, transport phosphate deposits from Togo to the Federal Superphosphate fertilizer complex in Kaduna.

Have NNPC and the Federal Government abandoned the Trans Sahara Gas project that was going to go from Nigeria through Niger Republic (also expected to pump its own gas) to Algeria and Europe?

Dan Kunle is a business and privatization consultant.


Tullow’s Marriage with Capricorn – Abandoned at the Altar

By Gerard Kreeft

In was only a few months ago—June 2022—that it was announced that Tullow Oil and Capricorn Energy were smitten and anticipations were high. The relationship would flower and blossom, setting new precedents for Africa focused Independents. Now September 2022 Capricorn and NewMed Energy, an Israel-based natural gas company, have found each other and Tullow has been stood up at the altar. What is behind this change of heart?

The simple answer is geo-politics. NewMed has seized the moment to position itself to be an early provider of natural gas/LNG to Europe. Capricorn, with its London stock market listing and its proximity to European markets gives NewMed excellent access to European gas markets. To entice Capricorn shareholders, a dividend of $620Million is being offered at the completion of the deal. Capricorn shareholders will retain a 10.3% of the share capital of NewMed. NewMed will hold 89.7% of the group’s share capital.

Capricorn: A Case of Take the Money and Run?

The Capricorn-Tullow proposed merger, was announced as a merger of equals. Yet Capricorn would be taken over by Tullow. By all accounts Capricorn has a very tenuous existence and was looking for a better suitor. Capricorn Energy’s sole production of some 36,500Barrels of Oil Equivalent Per Day (BOEPD), is coming from its Western Desert, Egypt asset which it bought from Shell in September 2021.

The Shell connection also takes us to India. The Rajasthan asset was bought by Cairn from Shell and discovered in 2004. At the time this was the largest onshore discovery in India for more than 25 years with the potential to provide more than 30% of India’s daily crude oil production.

Cairn Energy sought to raise capital for its India subsidiary Cairn India in order to further develop the Rajasthan block. Subsequently Vedanta Resources purchased a majority stake of Cairn India in 2010 from Cairn Energy for $8.48Billion. According to the Capricorn website $4.5Billion was paid out to shareholders between 2006 and 2012.

Along the way, the Indian government made a retrospective tax demand, and the dispute that lasted seven years and was finally settled by arbitration. The Government of India was required to make to Cairn/Capricorn a final payment of $1.06Billion. This payment has bolstered Capricorn’s wallet.

While its Indian debacle was playing out, Capricorn continued exploration activities elsewhere. It discovered the Sangomar Field in Senegal in 2014, and subsequently sold it to Woodside. Upon first oil, anticipated in 2023, Woodside will pay Capricorn $100Million. Capricorn also participated in the development of two of the largest projects in the UK North Sea, Catcher and Kraken, which began production in 2017 and subsequently sold in November 2021.

Capricorn may now have exploration rights in the UK, Egypt, Israel, Mauritania, Mexico and Suriname but these properties add little to the company’s value at a time when oil and gas assets, especially exploration assets have a diminishing value.

The Capricorn share price on January 5, 2018 was 266 pence, and on June 1, 2022 was 202 pence. At the time of the announced merger with NewMed on September 30, 2022, the share price had increased to 245 pence.  Capricorn’s stock market capitalization as of October 3, 2022 was 755Million British pounds.

Tullow: An Orphan seeking a Home

Tullow Oil, long seen as a preeminent Africa focused independent, has in the last 3-5 years been forced to face, squarely, the reduction of its huge debt load. In December 2019 CEO Paul McDade was sacked by Tullow’s board of directors because the company had to write off $1.2Billion, resulting in a halving of its share price, and a cancellation of any possible dividend. The company share price was 220 pence on January 5, 2018 and on June 1, 2022 it had been reduced to only 55 pence per share price. A four-fold reduction! In the period July-September, 2022 the share price has floundered between 40-43 pences per share.  Tullow’s stock market capitalization on October 3, 2022 was 606Million British pounds which was 20% lower than the market capitalization of Capricorn.  An amazing disparity in investor confidence and stock performance.

Tullow’s debt also was accumulated because of missed production predictions from its flagship operations in Ghana. The company suffered setbacks in Uganda, Kenya and Guyana. In 2020, in order to raise cash, the Irish producer sold all of its Uganda assets to TOTALEnergies for $575Million.  In 2021 the company produced 59,000 bopd (barrels of oil per day): 42,000BOPD from its Jubilee and TEN fields in Ghana and an additional 16,000BOPD from non-operating assets in Gabon and Ivory Coast.

At the time of the merger talks with Capricorn, Tullow Oil’s CEO Rahul Dhir promised production of some 125,000BOEPD by 2025 which it will certainly need in order to further reduce debt and develop its exploration assets. The need for a new plan is urgent.

NewMed: The Prince in Waiting

Yossi Abu, CEO of NewMed Energy, is the prime strategist in building Israel’s natural gas entity which could become an important source for the European Union.  NewMed is Israel’s leading energy partnership in exploration, development, production and sale of natural gas and condensate.  NewMed’s shares trade on the Tel Aviv stock exchange.  In June 2022 the EU, Egypt and Israel signed a tripartite agreement to ship LNG to Europe via Egypt’s LNG infrastructure.

NewMed, originally named Delek Drilling, was founded in 1993 to search for natural gas in the Mediterranean. Subsequently Noble Energy (now Chevron) and two additional companies also farmed in. ‘Yan Tethys’ in 2004 became Israel’s first natural gas project.

Other successes followed:

  • Tamar reservoir in 2009 with proven reserves of 306Billion cubic metres (Bcm).
  • Leviathan reservoir with proven reserves of 650 Bcm in 2010 and FID(final investment decision) in 2017 and now shipping natural gas to customers in Israel, Jordan and Egypt.
  • Aphrodite, in the Cyprus EEZ zone (Exclusive Economic Zone) in 2011 together with Shell and Chevron.

NewMed states that the Leviathan+ Aphrodite fields have gas reserves of 13.4 tcf, comparable to Angola which has gas reserves of 11 tcf. By 2030 the expanded Leviathan Project(1B) + Aphrodite will have production of  200,000BOEPD.

Concluding Remarks

What is surprising is the fluidity and speed of the changing energy landscape. The Tullow-Capricorn merger, once seen as a done deal, was scrapped and instead NewMed has emerged as a potential regional gas player. Given the EU’s search for alternative gas resources NewMed has proven to be at the right place and at the right time.

The real loser is Tullow which must (again)seek new opportunities in the African landscape. Not just oil and gas projects but gas projects seen as a stepping stone to meet CO2 neutrality by 2050. The Tullow dilemma is also a warning to other independents seeking new opportunities. Green deals may be closer than you think.  Also, in its weakened position, Tullow could be swallowed by a larger company who wishes to increase their footprint in Africa.

Capricorn has been rescued from an untimely demise. Shareholders will receive a handsome dividend and Capricorn will be remembered only as providing NewMed access to London’s money markets and to the EU’s heartland. No doubt we will hear more from NewMed in the future.

Gerard Kreeft, BA (Calvin University, Grand Rapids, USA) and MA (Carleton University, Ottawa, Canada), Energy Transition Adviser, was founder and owner of EnergyWise.  He has managed and implemented energy conferences, seminars and university master classes in Alaska, Angola, Brazil, Canada, India, Libya, Kazakhstan, Russia and throughout Europe.  Kreeft has Dutch and Canadian citizenship and resides in the Netherlands.  He writes on a regular basis for Africa Oil + Gas Report, and contributes to IEEFA(Institute for Energy Economics and Financial Analysis). His book ‘The 10 Commandments of the Energy Transition ‘is available His book The 10 commandments of the Energy Transition is on sale at https://books.friesenpress.com/store/title/119734000211674846/Gerard-Kreeft-The-10-Commandments-of-the-Energy-Transition

 

 

 


NPDC In 800% Profit Surge Despite Lower Crude Oil Sales, Weaker Operating Performance

With revenue from its core business relatively unimpressive year to year, how did NPDC manage to achieve such spectacular rise in Profit after Tax?

By Macson Obojemuinmoin

NPDC’s 800% increase in profit after tax, literally made all the difference in the “spectacular profit” that that the NNPC Group reported that it made in 2021.

There are 28 subsidiaries in the NNPC Group, but NPDC (Nigerian Petroleum Development Company), the upstream operating subsidiary, is the jewel in the group’s crown.

NPDC’s net profit after tax of ₦747Billion, a 792% jump in 2021, was more than a dramatic recovery from a 21% loss in revenue in 2020. (NPDC’s Profit after tax in 2020 was ₦ 84Billion. Far down from ₦478.5Billion in 2019).

Curiously, the difference in NPDC’s “overall revenue” year on year was only 32%, from ₦1.029Trillion in 2020, to ₦1.362Trillion in 2021.

As NNPC Group ‘s Profit after tax was ₦674Billion, it goes without saying that the contribution was largely from NPDC’s significant profit surge.

But how much of this runaway financial success was derived from the income from the actual work-related performance in the year of review?

As NPDC is primarily in the business of oil prospecting and production (as well as gas and power production and sales), it is logical to assume that its profit surge was significantly underpinned by the sharp increase in the price of crude oil in 2021. Average 2021: $70.54 (2020: $39.95).

But this surge in profit didn’t essentially come from crude oil sales.

Take a look at the numbers. NPDC’s crude oil revenues relate to liftings of the company’s equity interest in its various oil assets. However, in terms of direct lifting, the company lifted 26Million barrels of crude from a total of 16 oil mining leases (OMLs) in 2021, a sharp drop of almost half of the 47Million barrels it lifted from the same properties in 2020.

Its indirect liftings were higher; some 348,000 barrels from the ENI operated OMLs 60-63 in 2021, compared with 150,000Barrels in 2020. This is a minuscule fraction of the overall liftings.

In sum, this is weak operating performance; for a company to sell, in a year of soaring prices, half of what it sold in a year of depressed prices.  The company thus increased its income only slightly, from ₦683Billion in 2020 to ₦749Billion in 2021.

The volume of marketed natural gas also fell, from 530Billion standard cubic feet in 2020 to 248Billion standard cubic feet in 2021, largely as a result of diminished supplies to the Nigerian Liquefied Natural Gas Limited from 256Billion standard cubic feet to 78Billionstandard ubic feet.  Revenue from natural gas was, however, almost flat: from ₦211Billion in 2020 to ₦223Billion in 2021.

With revenue from its core business relatively unimpressive year to year, how did NPDC manage to achieve such spectacular rise in Profit after Tax?

The answer lies in some of the small print.

NPDC obtained a Presidential waiver, it says in the report, of ₦173Billion on its outstanding tax liabilities. It also raised income by reducing the cost of sales: from ₦837Billion in 2020 to ₦445Billion in 2021. The details of the so called reduction in the cost of sales show that the reduction in royalties and rental charges to the Nigerian government was around ₦200Billion year on year. This is an evolving story.

 

 


LPG: Lagos State Obstructs Ease of Business

The Selai Gas Company is a downstream Nigerian gas entity which launched in April 2022 as an LPG retail company with a community empowerment focus. It is also a vehicle for manufacturing LPG cylinders as well as (ultimately) delivering gas for power. It was inspired by the national authorities’ proclamation of a decade of gas, but as it turns out, most of its two-year journey from drawing board to first retail station has been characterized bby obstacles with sub national regulatory agencies.

Africa Oil+Gas Report’s Akpelu Paul Kelechi spoke with Selai Gas CEO DAMILOLA OWOLABI on the issues, zeroing in on the company’s engagement with regulatory authorities all the way from inception of the idea to delivery of the station. She also speaks about how the processes could be improved.

You chose this particular place was because you have a history here and to bring the gas closer to the people. Are there any other reasons?

We want to be able to create a platform where we give you cylinders at an affordable rate and you spread the payment over a period of time. So, again as an earlier mentioned, Yes, we are in business to make money but also, we want to create an impact within the neighborhood.

What about the logistics in setting this place up?

There were a number of logistic challenges. We had to deal with the “area boys,” (street toughs), we had to deal with the Landlord Association, you know, it was a lot of work and convincing sessions that we had to have with them. One thing the (widespread youth protest) End SARS did for my business thinking was a mind shift. It made me see that everyone in any community where you where your business is situated in is a stakeholder, right? You’re not just coming in because you want to make money off that community; you need to bring them into your business as well. So, End SARS (the widespread youth protest) happened here and this neighborhood was a mess during End SARS. While it was happening, the head of the area boys was in touch and he was giving me updates of what was going on. By the time I came, this entire place was like the war zone because you could literally see corpses on the street. It was very tragic. But one thing I noticed was that there were two stores that were not inflicted by the End SARS and all.

 One of the shops belongs to a friend of mine who owns a grocery store down the road. And another one was the NNPC stand right opposite here. So, for him, why didn’t they touch it? When I asked the area boys why they secluded his own store from the attacks, they said, “Alhaji has been very good to us Alhaji is a man of the people, he carries us along and all that. Again, it comes back to making seeing them as some kind of stake holder in your business. For the NNPC, I think why that happened was that they got an information that product was on board as such they couldn’t throw in fire. Then, when they also tried to vandalize the place, someone came and told them that his family member works here, so they should please stay away and all.

Those two experiences helped me to build more like a strategy on how to relate with the community.

 Are there any specific regulatory hurdles that you had to scale to achieve this?

A lot, in fact they are countless. We didn’t have issues with the Nigerian Midstream and Downstream Petroleum Regulatory Authority NMDPRA (formerly Department of Petroleum Resources, DPR), because they were very professional, they knew what they wanted and we kept to it. But with the Lagos State government, my goodness! It was like a lot of agencies where just duplicating their responsibilities. I have no business with Lagos State Ministry of Energy when NMDPRA (formerly DPR) was already in the picture. The latter already told us what we needed to do and we were already in line with that so why go to the Lagos State Ministry of Energy? After NMDPRA (formerly DPR) had given us their approved Environmental Impact Assessment EIA, we still had to go to the Lagos Ministry of Environment to do another EIA. We also had to go to the Lagos State Town Planning and that was the toughest because there were lots of issues, we had to deal with them. The process is way so cumbersome; it took us roughly about it eight months to get out of there.

Imagine that your investment is tied down for eight months; your bottom line would feel it. We had to wait eight months to be get approval from Lagos State Town Planning and there were lots of hurdles, there were lots of back and forth, there were so many things that were not needed. I’m very knowledgeable about the industry so I knew at a certain time what we needed to get in place, our safety measures was top notch and our documentation processes were high quality, but these guys always just have a way of frustrating your effort. It takes a special Grace and special knowledge and strength to be able to run a business in Nigeria, particularly Lagos. I don’t know the ease of business that is being said in Lagos because there is no ease of business; it is really tough.

How do you rate the various government agencies in making this place reality?

I would score the Nigerian Midstream and Downstream Petroleum Regulatory Authority NMDPRA (formerly DPR) eight (8) out of 10 because they did very well in helping with the processes. They know what they are doing and they were very professional about it. But for the state government, they just had everybody in that space and they really didn’t even have a clue of what needs to be done. For the state government agencies. I will give them two (2) out of 10 because their processes were really stressful. We had to deal with Lagos State Government for about eight months while we worked with NMDPRA (formerly DPR) for barely two months.

If not for the Lagos State government, this plant would have been open since November 2021.

From our calculations and from what we had in the plan, it was supposed to be opened by November of 2021, but the Lagos Government didn’t make that happen. Once you get this document, another agency asks for another document; once you don’t get that another one comes and you are like, it is the same thing that I got from this other agency and they would tell you, well, you have to also get this from us because you are planted in Lagos; in a case of explosion for instance, NMDPRA (formerly DPR) is at the federal level, they won’t be the ones to come to your rescue, it is we the state government. So you need to cover all those agencies.

Some would argue that those checks that the Lagos State government had to make you go through are to ensure that you are doing the right thing.

I think there were just too many duplicated efforts; aside town planning, which is very important, I honestly think we had no business with the Lagos Safety Commission because NMDPRA (formerly DPR) already gave us a suitability approval; they came here, they saw the place and they agreed it is suitable. We also invited the town planners and they came here as well for suitability and they confirmed it, okay. If NMDPRA (formerly DPR has given the suitability report to be okay, why are we dealing with the Lagos State safety commission again? Why we dealing with Lagos State Environmental Protection Agency? We’re dealing with safety commission, LASEPA; we have to deal with Ministry of energy when DPR had already covered that and each of these agencies were asking for their own different EIAs on the same plot of land. How do you explain that? So, each agency wants you to give them a separate EIA. When I tell them, I have an EIA already that has been done, they say no, they have to get their own registered consultants to come and do the EIA. These multiple duplications cost us so much.

“Even though the Lagos State government had given us approval, we also needed the approval from the local government because they were not going to let us see the day right? So, a lot of unbudgeted expenses were there and we didn’t even see it coming”.

But the government at all levels has touted the mantra about ease of doing business …

Ease of doing business doesn’t exist in Nigeria. Particularly in Lagos. I don’t know of other places but particularly in Lagos State, the ease of doing business mantra is not working here.

You have enumerated some of the challenges that you had to face but what solutions would you proffer if you were in government?

I would say, if you want to setup a gas plant in Lagos, once you have the approval from the NMDPRA (formerly DPR), and you have the approval from town planning, the urban and regional planning, you’re fine. Let’s even say the they want their own Ministry of Energy to have a part in all this since DPR is at the federal government level, so the Ministry of Energy can come in at state level. Once these two state agencies give you the go ahead, they can share that information with other agencies. I don’t have to go to LASEPA, I don’t go to the Safety Commission, I don’t have to go to Lagos State Building Control Agency LABCA for instance. I don’t have to go to all those places, right? Once Town Planning gives you a go ahead and the Ministry of energy okays it, come on, they should share that information on the state level. So, all you need to do is, once they come to you and ask, do you have this from minister of energy, do you have this from the ministry of physical planning? Yes, and you are fine. But we had to merry-go-round six-to-seven agencies, spending money and wasting time and they had to give us different documents for the same project, it didn’t just make sense.

The government has declared this decade, the next 10 years as the decade of gas and the business you are into really fits into that profile. I mean, you are supplying LPG and you help reduce the amount of CO2 that is emitted in this community; but has the federal government in any way kind of incentivized you?

You mean financial support from the government, not at all. Everything has been equity and bank loan.

How would you get your supply?

Currently because we do not own our trucks yet, we’re not able to buy directly from NLNG. What I mean by that is, where NLNG discharges their vessels at whatever terminal in Lagos, you can buy at a cheaper rate from them. That is, cheaper than what’s the major marketers are selling. We have not been able to do that because we don’t own trucks. So, at the moment what we’re doing is third party trucks where we have to get trucks from truck owners and we load products from the major marketers. Yeah, and that really is a lot of Cost.

Also, the short term goal of Selai is actually to own our own trucks where we can lift our products from the NLNG at a more competitive rate compared to what the major marketers are doing and where we can also use those trucks to supply other gas plants because by the time you own your truck you’re able to control the number of products that come to you, you’re able to get as much as you want as against relying on someone else to supply you. And it’s another means of income for the business as well. And that also helps us to supply other plants within the neighborhood.

The major marketers can you expand on that?

The major Marketers are basically the guys are import; so, the Rain Oils of this world, the NIPCOs, 11 PLC and the rest. Yeah, we have to buy from them because we don’t own our truck yet to be able to get directly from NLNG.

What are the facilities you have right now that could bolster your business?

We have a 30 Tonne tank and we have our delivery arm as well that was what I mentioned earlier when I talked about “Uberizing” the place. We also have able and experienced staff and our customer service is top-notch.  We’ve been doing quite a number of training actually in the last six weeks for our staff because we want to open well, we don’t want to open and we don’t want to open to the public and we’re having to deal with a lot of issues. So what we’ve been doing is training on safety and customer service just to help every staff of Selai Gas perform optimally when our gates are opened to customers. I also want to mention that we have the part for accessories, what we call Selai Accessories. We sell cylinders and cylinder accessories and you could also call for a technician to come check on your burners, or check on your cylinder back at home and technician will be sent to you. One of the midterm goals for Selai is to own our cylinders because we cannot thrive in this cylinder program without owning our own cylinders. So, at the moment, we’re in partnership with a company here and we buy cylinders from them but eventually, our goal is to own our cylinders.

When you say own, do you mean you want to produce your own cylinders?

Yes, we want to produce our own cylinders.

How soon would this happen?

It’s still in the works but right now, we have secured a place on Lagos-Ibadan Express Way because we don’t want to import cylinders. I see from the market survey that there are too many regulatory issues that you’re going to be dealing with if you are importing cylinders and this is too expensive. So what we want to do with the help of the government, the NCDMB, Bank of Industry, you know, so we’re hoping that in the nearest future, we’re able to make use of that land on Lagos-Ibadan Express Way to build a cylinder production plant.

I don’t want to bring in cylinders from China because I know that I have the capacity to do it in house. So we’re appealing to the agencies of the government that are involved in helping medium scale businesses to thrive to please reach out to us and we’re happy to reach out to you as well. But there’s a lot of bureaucratic processes in getting this done. We want to be able to share our business ideas before them, share our goals before them and let them know that we’re not in this business for ourselves. We’re more in this business for the impacts on the community.

If you want to put a number to it, to set up an LPG filling station like you have done, what is the figure like?

At the time our business was a paper, a business plan, all we have projected was maybe about a hundred million naira for the kind of picture we had in mind for a standard gas plant. But at the time of implementation, well inflation caught up with us and exchange rates was something else and we had to do with all of that. So, if you have in mind to build a standard gas plant in Nigeria, particularly Lagos, I would say you should plan within 150 to 200Nillion Naira because the price change is alarming.  You sleep today at a particular price and the next morning you are calling the vendor to say okay, send your account number let me pay the money and he tells you madam, forget that invoice, I’m sending you something else because things have changed. What can we do? The truth is, there are quite a number of unforeseen expenses that you’re going to incur. in our business plan, we didn’t foresee that we’re going to spend so much with regulatory agencies particularly Lagos State. We didn’t see that coming. We also didn’t know that we were going to even pay so much to the local government. That’s another thing I forgot to mention. Even though the Lagos State government had given us approval, we also needed the approval from the local government because they were not going to let us see the day right? So, a lot of unbudgeted expenses were there and we didn’t even see it coming, but we have to just move along because we have come that far and we couldn’t just go back.

 

 

 

 

 

 


ENI: The Joker in the Deck?

By Gerard Kreeft

ENI, the Italian-based oil and gas giant is often overlooked in any discussions involving the other oil majors-BP, Chevron, Equinor ExxonMobil, Shell and TOTALEnergies. Yet ENI could be the Joker in the deck providing surprises to an unwitting public and be an upstart which deserves the needed attention. ENI’s strong presence in North Africa—Algeria, Egypt, and Libya—could in the coming months become one of Europe’s substitute provider of natural gas. The company operates in the frontier areas seldom mentioned in the daily news media.

For starters the company produces 1.7Million barrels of oil equivalent per day (MMBOEPD), has a balance sheet which has an economic leverage of 20%, and has, according to its website, an Internal Rate of Return (IRR) of 34%, the highest of all its peers  for the 2012-2021. Also, its RRR (Reserve Replacement Ratio) of 110% for the period 2012-2021 is the highest compared to its industry peers.

ENI further states that 90% of exploration capex is spent on near fields and proven basins. Some $11Billion in the last 10 years has been spent on its dual exploration model—near fields and proven basins. The company states that it only requires three years—from first discovery of oil to market—twice as fast as the industry average.

Yet ENI’s stock market price, like the other oil majors, has performed badly in the period between January 2018 and June 2022. While the DOW Jones Industrial Index rose 23% (25,295 to 31,097) in this period, most of the majors, with the exception of Equinor and Chevron, have underperformed dramatically. The ENI share price has, for example, in this five-year period  decreased by 20%.

Table 1: Stock market prices of  majors 2018-2022(NYSE)

Year Repsol       BP       Shell ENI Total

Energies

Chevron ExxonMobil Equinor
2018 $18 $43 $69 $35 $58 $128 $87 $23
2022 $13 $29 $53 $28 $49 $157 $88 $34

Note: Values based on  January  5 2018 and  June 30 2022

During this 5-year period the share price of the oil majors is as follows:

  • BP is down 32%
  • Repsol is down 28%
  • Shell is down 25%
  • ENI is down 20%
  • TOTALEnergies is down 16 %
  • ExxonMobil remained flat
  • Chevron’s stock up 23%, and
  • Equinor up 48%.

A key ENI strategy  is developing a series of joint-ventures to ensure that ENI can achieve maximum leverage for its current oil and gas assets and at the same pursuing new strategies as part of its energy transition plan. Three examples:

 Vår Energi, Norway was formed in 2018 following the merger of ENI Norge AS and Point Resources AS, owned by Hitec Vision, a private Norwegian investment fund.  The company’s primary focus is oil and gas developments on the Norwegian Continental Shelf. ENI controls 69.6% of the shares, and HitecVision 30.4%. Vår Energi has production in 36 fields and produces 247,000 boepd.

Azule Energy, Angola, a 50-50 joint venture between ENI and BP formed in 2022 to include both companies’upstream assets, LNG and solar business. Azule Energy is now Angola’s largest independent equity producer of oil and gas, holding 2Billion barrels equivalent of net resources and growing to about 250,000 barrels equivalent per day (boed) of equity oil and gas production over the next 5 years. It holds stakes in 16 licences (of which six are exploration blocks) and a participation in Angola LNG JV. The company also participates in the New Gas Consortium(NGC), the first non-associated gas project in the country.

An interesting footnote: “The JV incorporation takes place after the pending conditions were met, among them having secured a third-party financing of $2.5Billion in the form of Pre-Export Financing, and after receiving regulatory approvals.” In other words, any financing of Azule Energy will not be reflected in the ENI and BP balance sheets.

Plenitude, ENI’s new company, launched in June 2022 is an integrated business combining the generation of electricity from renewables, the sale of electricity, gas and energy services to households and businesses, and a European network of charging points for electric vehicles.

Plenitude had an installed renewables generation capacity of 1.4 GW and a pipeline of renewables projects of over 10 GW, a retail portfolio of 10Million clients and an electric vehicle charging network of 7,300 proprietary installed charging points (excluding inter-operational charging points).

“The cash flows from the retail business area will underpin the growth of the business, with the Company having sufficient leverage capacity to independently achieve its targets through a strong balance sheet and an investment-grade profile. Sustainability is at the core of Plenitude as it plans to achieve Net Zero by 2040.

ENI considers the IPO an important step in the development of Plenitude. The IPO will enable the Company to diversify its ownership structure, create a long-term shareholder base, access competitive funding, consolidate its positioning and develop more quickly while creating sustainable value for all stakeholders.”

ENI’s North African Gas Hub

 ENI’s North African Gas Hub–Algeria, Libya and Egypt–will certainly be a key provider of natural gas to Europe. The three countries together produce 648,000BOEPD, approximately a third of ENI’s total global production.

Algeria

In July 2022, Sonatrach and ENI announced that an additional 4 bcm/y(billion cubic metres per year) will be exported to Italy via the TransMed Pipeline which is a 2,475 km-long natural gas pipeline built to transport natural gas from Algeria to Italy via Tunisia and Sicily. Built in 1983, it is the longest international gas pipeline system and has the capacity to deliver 30.2bcm/y of natural gas.

ENI recently announced that it has agreed to acquire BP’s business in Algeria, including the two gas-producing concessions “In Amenas” and “In Salah” (45.89% and 33.15% working interest respectively).

In 2023 ENI’s production from Algeria will rise to over 120,000BOEPD.

Libya

The Libyan gas produced by the Wafa and Bahr Essalam fields operated by Mellitah Oil & Gas, an operating company jointly owned by ENI and NOC(Libyan National Oil Company). The gas is brought to Italy through the Greenstream pipeline. The 520 kilometre natural gas pipeline crosses the Mediterranean Sea, connecting the Libyan coast with Gela in Sicily. The natural gas pipeline has a capacity of  8 bcm/y. ENI has a production of 168,000BOEPD.

Egypt

ENI is operator of the large Zohr field which In August 2019, had a  production of more than 2.7Billion cubic feet of gas per day (Bcf/d). An important agreement was the restart the of Damietta liquefaction plant which will provide up to 3Bcm in 2022 for European customers. ENI produces 360,000BOEPD.

The Kazakhstan Connection

 ENI has been present in Kazakhstan since 1992  and is a co-operator of the Karachaganak producing field in which it has a share of 29.25% share; and is a partner of the North Caspian Sea PSA (NCSPSA) consortium which operates  the Kashagan Project.  The success of both projects is dependent on the goodwill of both Russia and Kazakhstan. ENI production in Kazakhstan is 145,000 boepd.

The Karachaganak Project produces approximately 45% of Kazakhstan’s natural gas. Peak production reached 155Billion cubic feet per year and oil production of 100,000BOPD. An important part component of this project is the Karachaganak Orenburg Transportation System (KOTS) connecting the Karachaganak field to the Orenburg Gas Plant (OGP) in the Russian Federation. Two pipelines of 28 inches in diameter transport sour gas to OGP for further treatment. In addition, there are three 14-inch lines of which one is a liquid export line and two are dual service and transport either unstabilised liquid or sour gas.

The Kashagan Field discovered in 2000 has approximately 13Billion barrels of recoverable reserves. The project has from the start been hampered by harsh weather conditions including sea ice in the winter, temperatures varying from -35C to -40C, extremely shallow water and high levels of hydrogen sulphide, together with project delays, mismanagement and disputes. In 2012 it was designated as the main source of supply for the Kazakhstan-China oil pipeline. CNN Money had estimated that field development had cost $116Billion, making it the most expensive energy project in the world. No wonder cynics named the project ’Cash-is-Gone’.

Caspian Pipeline Consortium (CPC)

An equally troubling problem is the Caspian Pipeline Consortium (CPC), which transports Caspian oil from Kazakhstan to Novorossiysk-2 Marine Terminal, an export terminal at the Russian Black Sea port of Novorossiysk. The CPC pipeline handles almost all of Kazakhstan’s oil exports. In 2021 the pipeline exported up to 1.3MMBPD. On July 6, 2022 a Russian court ordered a 30-day suspension of the pipeline because of an oil spill. The CPC appealed the ruling and the suspension was lifted on 11 July of the following week, and the CPC was instead fined 200,000 rubles ($3,300).

The incident demonstrates the vulnerability of future production. No doubt this is not the last such incident which involves Russian and Kazakhstan goodwill to ensure that Kazakhstan’s oil and production does not falter. Being dependent on Russian-Kazakhstan goodwill is the most brazen example of a lack of diversity of oil  supply.

Final Remarks

ENI’s energy scenario assumes that Brent oil will have a cushion of $75 per barrel and by 2050:

The company will reach a net zero carbon intensity.

ENI will have an installed renewable capacity of 60 GW.

The company will have 160,000 electrical charging points.

Natural gas will be 90% of ENI’s total oil and gas portfolio.

ENI operates in a very fluid market place and has shown the ability to be diverse and able to provide contrarian strategies. A characteristic needed in a fast-changing energy world. The Joker has not yet dealt his final card.

Gerard Kreeft, BA (Calvin University, Grand Rapids, USA) and MA (Carleton University, Ottawa, Canada), Energy Transition Adviser, was founder and owner of EnergyWise.  He has managed and implemented energy conferences, seminars and university master classes in Alaska, Angola, Brazil, Canada, India, Libya, Kazakhstan, Russia and throughout Europe.  Gerard has Dutch and Canadian citizenship and resides in the Netherlands.  He writes on a regular basis for Africa Oil + Gas Report, and contributes to IEEFA(Institute for Energy Economics and Financial Analysis). His book The 10 commandments of the Energy Transition is now on sale at  Bookstorehttps://books.friesenpress.com/store/title/119734000211674846/Gerard-Kreeft-The-10-Commandments-of-the-Energy-Transition

 

 

 

 

 

 


Niger Delta E&P, Pillar Oil, Win Lead Sustainer Trophies at Lagos Book & Art Festival

By Fred Akanni

Nigerian independents, Niger Delta Exploration & Production (NDEP) and Pillar Oil Limited have each been awarded the title of ‘Lead Sustainers’ of the Lagos Book and Art Festival.

The annual event is Nigeria’s leading advocacy festival for literacy and the two companies have been the leading and most consistent sponsors for the past 11 years.

NDEP has also contributed severally to the discursive sessions, which populate the weeklong feast of the written word.

“It’s an incredible gesture to have such iconic private sector enterprises support our campaign to rid the nation of ignorance”, says Jahman Anikulapo, programme chairman of the Committee for Relevant Art (CORA), organisers of LABAF. He was responding to NDEP’s promise to increase its sponsorship for the 2022 edition of the Festival.

The 24th LABAF will run from November 14-20, 2022 at the Freedom Park in Lagos, with the theme Pathways to the Future.

LABAF is a comprehensive, week-long culture picnic that has run annually since September 1999. It features reading sessions, conversations around ‘content and context of books’, art and craft displays, kiddies’ art workshops, Publishers’ Forum, Writers’ Workshops and Book Trek, Book exhibitions, Drama skits, Live music and dance. It is an art festival with high book content.

Among the 15 books up for the curated segment of the festival this year are:

  • Abdourahman Waberi: The United States of Africa
  • Paul Morland: The Tomorrow’s People: The Future of Humanity in Ten Numbers
  • Mo Gawdat: Scary Smart: The Future of Artificial Intelligence & How You Can Save Our World
  • Ayodele Arigbabu: Lagos 2060
  • Kim Stanley Robinson: New York 2140
  • Ian McEwan: Machines Like Me and People Like You
  • Jonathan E. Hillman: The Digital Silk Road: China’s Quest to Wire the World and Win the Future
  • Ashlee Vance: Elon Musk- Tesla, SpaceX, and the Quest for a Fantastic Future Paperback
  • James Dale Davidson & Lord William Rees-Mogg: The Sovereign Individual: Mastering the Transition to the Information Age
  • Daron Acemoglu & James A. Robinson: Why Nations Fail: The Origins of Power, Prosperity, and Poverty Paperback
  • Itse Sagay: All Will Be Well
  • Yemi Ogunbiyi: The Road Never Forgets
  • Lawson Omokhodion: Powered by Poverty
  • Muyiwa Kayode: Brand Nation

 

 

 


Our Latest Issue/Southern Africa: New Hot Spot, Old Habits

This is our fifth Southern Africa Special since we started dedicating an edition to the annual gathering in Cape Town.

There are two such conferences now and this year, the Southern African hydrocarbon story is more compelling.

It all happened quickly, one after the other, at a time of great anxiety in the world.

Just before the year of COVID, TOTALEnergies opened a new petroleum province offshore South Africa. The discovery of the Bullfrog (Brulpadda), in the legendary “Cape of Storms”, in deepwater Outeniqua basin, was followed up late the following year, in 2020, with the discovery of the Leopard (Liuperd). The unveiling of these significant gas and condensate tanks indicate that Africa’s most industrialised economy has no more excuse for indifference in growing a gas-based industry.

But as you’d find out in those pages, the more things change, the more they stay the same.

To Namibia: In 2021, a rank unknown Canadian minnow delivered screaming headlines from around the drill bit in a rank unknown onshore frontier. ReconAfrica drilled two stratigraphic test wells onshore the country’s north, and confirmed that the Kavango or the Owambo (Etosha) Basin, a very large, previously unregarded sedimentary basin, exists beneath the sands of the Kalahari Desert.  The 6-1 and 6-2 wells intersected over 300 metres of oil and gas shows and 200 metres of oil and gas shows respectively.  The two were drilled to provide stratigraphic, sedimentological, reservoir and geochemical information.  Neither of them was tested, but Reconfrica had made a point: “There’s something here!”. As we went to press with this edition, the company was drilling three seismically defined exploration wells whose primary zone is a Permian-age Karoo rift fill sequence of sediments.  Based on the two stratigraphic wells and recently acquired high-resolution seismic, the Kavango basin is now viewed as highly prospective for conventional light oil and gas.

The bigger story from Namibia however is that two wildcats, spud back-to-back in late 2021 by two of the world’s biggest oil companies, made significant oil and gas discoveries. Shell’s Graff 1 and TOTAL’s Venus-1, drilled in deeper water Orange Basin, have been described by Rystad as some of the largest finds on the planet in the last one year. The once “disappointing” Namibian hydrocarbon scene, has certainly turned the corner.

Elsewhere in the south, Zimbabwe is currently hosting a two well campaign; a rare drilling activity, while Angola looks to two projects to top up its output by 300,000BOPD by 2026.

There is always a spoilsport: TOTAL has not returned to the site of the largest hydrocarbon project in Africa; the 13Million Metric Tonne Per Year Mozambique LNG project. The company blames the Islamist insurgency, which it says is still raging. The government pleads in response: “We are winning the war”.

Read your copy here…

The Africa Oil+Gas Report is the primer of the hydrocarbon industry on the continent. It is the go-to medium for decision makers, whether they be international corporations or local entrepreneurs, technical enterprises or financing institutions, for useful analyses of Africa’s oil and gas industry. Published since November 2001, AOGR is a monthly publication delivered to subscribers around the world. Its website remains www.africaoilgasreport.com and the contact email address is info@africaoilgasreport.com. Contact telephone numbers at the headquarters in Lagos are +2347062420127, +2348036525979 and +2348023902519.

 

 

 


Nigerian Gas Investment-Seven Thematic Areas

By Ed Ubong

Nigeria declared A Decade of Gas on March 29, 2021. We like to think of that declaration in the following areas.

Gas For Power-The most important area is that gas must provide power and electricity for Nigeria. The Gas for homes-we are keen to seeing that Nigeria’s gas is used for cooking.

Gas for industries-The third thematic area is that gas must drive Nigeria’s industrialization.

Gas for Exports– This is very important from a foreign exchange perspective. Nigeria must play in the regional and international markets with respect to gas.

These four areas that are the end products of gas, require three sets of enablers.

The first one, we call it Infrastructure for gas. We must build the required pipelines that would ensure that gas can be utilized in country. We must also support virtual operators that can move gas without pipelines to where it is needed while we are building those pipelines.

The second enabler is Regulatory framework, pricing, and security, having to do with the infrastructure and the business climate that supports gas investment. All these must be in place for investors to be able to support us as we move on to the decade of gas initiative.

The third enabler is the human capacity- we must build for the gas sector; train . new professionals and retool all professionals who are able to do the switch from oil to gas as we sort of continue the transition.

So, what has happened since Nigeria declared a decade of gas on March 29, 2021?

About gas to power, there have been significant.

Read More

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