All posts tagged feature


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

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

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

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

It gets even better.

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

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

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

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

 

 

 


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

By Fred Akanni, Editor in Chief

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

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

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

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

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

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

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

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

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

 


Volkswagen Pushes for Incentives to Join Egypt’s Autogas Plan

By Toyin Akinosho, Publisher

German car maker Volkswagen is asking for tax breaks and localization incentives before it agrees to produce natural gas-powered vehicles in Egypt.

It wants the opportunity to bring in foreign staff to work on the local assembly lines it would use to manufacture the vehicles in North Africa’s largest economy.

If the government gives the nod, the company will produce natural gas -powered versions of Crafter and Caddy 5 vans for the Egyptian market.

Volkswagen has been more enthusiastic to be part of Egypt’s Autogas plan than any other automaker. It announced last year that it was planning to invest in the countrywide effort. Japanese car making giants Toyota and Nissan have also expressed interest, but Nissan has withdrawn, while Toyota is, like Volkswagen, pushing for incentives. Toyota’s plan is to manufacture 240,000 minibuses running on dual fired engines. The Russian car maker Skoda is not in on the local assembly plan. But natural gas-powered versions of its Octavia and Rapid models will be imported into Egypt by local agents.

More than any African country, Egypt is big on domestic use of its natural gas deposits, the third largest in Africa. It holds 76Trillion cubic feet of reserves, less than half of either Nigeria’s or Algeria’s, but it produced 2.3Trillion cubic feet from those tanks in 2019, way higher than Nigeria’s production of 1.74Trillion cubic feet and, more importantly, over 80% of it was for domestic consumption, primarily through the country’s 40,000MWof gas fired electricity supply.

Egypt’s Autogas plan is to convert two million vehicles into dual fired engines that could be fueled by both gasoline and natural gas in the next three years.

Vehice licencing will be conditional on cars being equipped with natural gas engines.

Through the initiative, owners of vehicles over 20 years old will receive low interest loans through Egypt’s MSME Development Agency to purchase new dual-fueled vehicle. Owners of newer vehicles can access zero interest finance to outfit them with new engines.

 

 


Angola, “Creator” of EITI, Formally Applies to Join

By Toyin Akinosho

An incident that occurred in Angola in 2001, led to the formation of the Extractive Industry Transparency Initiative EITI.

But the country itself had abstained from being part of the international body for these last 19 years.

Now the Angolan Government has formally notified the EITI of its intention to join the 54 countries already implementing the EITI Standard.

The organization recalls, on its website, how opacity in the Angolan oil sector quickened the steps that led to the EITI’s founding.

In February 2001, when BP published the signature bonus of $111Million it paid to the Angolan government for an offshore license and committed to publish more, it sparked a strong reaction from Angola. In his 2010 memoir, “Beyond Business”, Lord John Browne, the then Chief Executive Officer of BP, recalled how he received a cold letter from the head of the Angolan national oil company, Sonangol, stating that, “[I]t was with great surprise, and some disbelief, that we found out through the press that your company has been disclosing information about oil-related activities in Angola”. The backlash and threats from the Angola government, led Lord Browne to conclude “clearly a unilateral approach, where one company or one country was under pressure to ‘publish what you pay’ was not workable”.

The oil companies argued for a shift away from company reporting, to reporting by governments, in order to reduce conflict with host governments and put contracts at risk. If company reporting was to be required, they wanted a global effort to level the playing field that required all companies in a country to disclose.

19 years later, 52 resource-rich states have committed to improving extractives sector transparency by implementing the EITI Standard. Yet Angola has never been a member.

In a letter to the EITI Board Chair, dated 14 September 2020, the Minister of Mineral, Oil and Gas Resources, Diamantino Pedro Azevedo, outlined steps already taken towards EITI implementation.

These include signature of Presidential Order 117/20, appointing the Minister to the role of President of the National Coordination Committee of the EITI, and a public statement announcing the Government’s commitment to joining the initiative.

“The announcement of Angola’s intention to join the EITI is a welcome development,” said the EITI International Secretariat’s Executive Director, Mark Robinson. “We have been working towards this outcome with the Angolan authorities and the Norwegian Government, who have been supportive of our efforts.

In a statement last January, the EITI called on Angola to join the EITI and implement its Standard, in the wake of the Luanda Leaks, in which the International Consortium of Investigative Journalists (ICIJ) exposed records allegedly linked to businesswoman Isabel dos Santos, daughter of the former President of Angola. Some of these revelations concern the country’s state-owned oil company Sonangol, which dos Santos headed until 2017.

The EITI said, then, that it believed that EITI implementation could enable Angola “to make sustained progress in addressing governance challenges in its extractives sector, to the benefit of Angolan citizens.”

 


Why Africa’s Oil Production Declined in the Last 10 Years

The African oil industry has enjoyed mixed fortunes over the past ten years.

Between 1999 and 2009, Sub-Saharan Africa significantly increased its share of global oil production and reserves, but since then – despite the opening of new oil provinces in West and East Africa – African production has declined and reserves growth has tailed off.

Several factors explain this, including the oil price shock of 2008 and the much longer and deeper price collapse in 2014.

Big African gas discoveries and the growth of the US shale industry have also played a part in the reallocation of investment capital.

However, Africa’s oil fortunes have also been affected by trends closer to home.

Firstly, during the oil super-cycle, many countries in the region adopted tighter fiscal terms, deterring exploration investment and rendering otherwise investable projects unviable, especially at today’s lower oil price.

Secondly, the decision-making process has become slower and more complex as countries have established new institutions to govern the sector and as governments have become more accountable to civil society and democratic practices have deepened. Consequently, many governments have been slow to adjust to changing market signals and many African oil jurisdictions have become uncompetitive.

Several recent licensing rounds have attracted limited industry interest and countries like Tanzania and Uganda that have sought to capture greater host country value in the midst of major developments have seen project momentum stall.

African countries are right to seek to maximise the socio-economic development opportunity that oil presents and to establish the right institutional framework to ensure this. However, these pressing needs must be balanced with the right economic incentives for International Oil Companies, coupled with the timely and judicious decision making that is necessary for Africa’s undoubted oil potential to be realised at a time of increasing competition for capital.

This is especially true in the context of the energy transition, which will require prospective oil producers to minimise the time to First Oil and to develop local content strategies that prepare their economies and societies for disruptive change in the global energy matrix.

Finding this balance will not happen overnight, but companies need to work harder with host countries to achieve it: engaging early and systematically with all project-affected stakeholders to ensure that host countries and prospective hosts understand the commercial needs of the business and see the merits of the investments; working with host governments and communities to develop a shared prosperity strategy that will deliver real socio-economic benefits; and ensuring that business and operations are as transparent as possible.

Excerpted from Tullow Oil’s Operational Update, 2020 and initially published in the June 2020 edition of Africa Oil+Gas Report


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

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

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

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

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

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

 

 


S/Sudan’s Nilepet Wants to Be an Operator by 2022

South Sudan’s state hydrocarbon company, Nile Petroleum Corporation (Nilepet), has set a target of 2022, to be a leading and competitive integrated oil and gas corporation of choice in South Sudan and beyond.

“We want to have our own block to operate”, says James Yugusuk, the company’s Director General for Downstream. “We want to raise world class South Sudanese technical staff and we want to construct four refineries: one in Bentiu, Paloch, Pagak and Thiangrial. All those are producing blocks. We also want to construct depots in major towns in South Sudan which is a very ambitious plan because we need to have strategic reserves. We want to extend our retail outlets to all the major towns in South Sudan. We want to have a very robust and highly effective JV and this is for companies and people who are willing to do that. We also want to have a strong footprint in the research and development programmes”.

Starting from 2013, Nilepet started participating in Joint Operating Companies in the country, holding stakes on behalf of the government in these JOCs through which it builds capacity of its staff. Between 2015 and 2018, Nilepet established joint ventures with oil service companies “and we continue to build the capacity of our national staff such that between 2022 and 2027, we’ll become a standalone operator, able to work up and develop hydrocarbon acreages by ourselves.

Nile Delta, for one, is a JV with 51% Nilepet and 49% held by Niger Delta Exploration and Production of Nigeria. “The mandate is to work on gas monetization and production optimization. This JV is also operating in the current producing blocks.

SIPET, for another, is an engineering and construction company which is 80% owned by Nilepet and 20% by QDC, a Chinese Engineering company. The areas of service are project management, consultancy, operation and maintenance. It is working on some of the country’s producing fields.

Nile Drilling is open to any international partner. “It is 90% Nilepet and 10% open to any willing investor”, Yugusuk explains. The specialization is drilling, and work over services.

“Nile Services and Logistic Company is 51% Nilepet and 49% from a local investment group and a South African company”, Yugusuk discloses. “It is into logistics and of course, it is still under development”.  Another JV that we have is the Nile-Delta Systems which deals in ICT and it is currently operating and it is 51% Nilepet and 49% ASECCO Polland.

“We have SNP Group which is 30% Nilepet and 70% a Russian company called Sufinat it is working on the Bentiu refinery and it is currently operating.  We have Dietsmann Nile S.A Ltd which is 31% Nilepet and 69% Dietsmann Technology which is an Italian company that deals on technology. It is operating.

“Again, we have NIYAT which is 40% Nilepet and 60% Eyat-Sudan. It specializes in road construction and maintenance”.

This story was originally published, for the market intelligence benefit of paying subscribers, in the July 2020 edition of Africa Oil+Gas Report. Here’s the link to the subscription portal.

 

 

 


Local Content Fund Is Nigeria’s Energy Bank in The Making

By Adeniyi Adeoloye

There is need for an Oil &Gas Bank in Nigeria, in the opinion of a cross section of stakeholders in the country’s E&P sector.

“It is imperative for government to encourage the licencing of an Oil &Gas Bank”, declared Tunde Afolabi, Chairman of Amni International, giving a keynote address at a webinar on funding for the sector. “And Government should have significant subscription in the shares of the bank”.

Austin Avuru, former Chief Executive Officer of Seplat Petroleum, observed that “there is an Energy Bank in the making in Nigeria, if we watch carefully”.

“All of us operators, today contribute 1% of our budget to the Nigerian Content Fund, a fund that is run by the Nigerian Content Development and Monitoring Board (NCDMB”

The fund can act as seed capital for starting out an Energy Bank for the Nigerian hydrocarbon industry. “The local content fund currently has about $200Million and has the chance to grow to about $1Billion in the next 10 years given the proposed legislation that is underway at the National Assembly that seeks to increase the contribution to the fund to 2% from the current 1%”, Avuru explained.

“You don’t need more than that ($1Billion), to seed a bank that will cater solely to the needs of the industry”, especially the needs of the indigenous Nigerian firms who today struggle with funding their operations.

Afolabi’s key argument was that “an oil and gas focused bank will understand the market fundamentals and the rudiments of running an E&P business”. His paper laid out a list of challenges that stand in the way of financing of projects by indigenous Nigerian E&P companies from Nigerian banks. “Facilities granted by banks to the marketers of petroleum products are included in the count of what was given to the oil and gas sector, which comes to 50% of what is granted.

The webinar, entitled Long Term Funding of E & P Business in Nigeria- Strategies for Sustainability, was organized by the Nigerian Association of Petroleum Explorationists.

This story was originally published in the August 2020 edition of Africa Oil+Gas Report. Mr. Afolabi’s full paper is published in the October 2020 edition.


FAR’s Voluntary Suspension from ASX Continues

Two weeks after it voluntarily asked the Australian Stock Exchange (ASX) to suspend trading of its stocks, FAR has announced that the suspension continues

The request was made on September 14, 2020 to allow ASX to review FAR’s Half Year Accounts and raise certain queries with FAR. It was meant to run for 10 business days.

“Since that date ASX and FAR have exchanged communications and ASX currently expects to complete their process later this week”, FAR says in a release out today September 28, 2020.

Why should we care?

FAR holds equity in the Sangomar project, Senegal’s first oilfield development, operated by Woodside Energy. It also drilled the first well in The Gambia in 40 years, although Samo-1 turned out to be a disappointing dry hole.

But FAR is very broke. It has reported that the COVID-19 pandemic and the falling oil price impacted its ability to finalise financing arrangements for its share of the oilfield development and has made the decision to commence a sale process for all or part of its working interest in parallel with investigating alternative sources of finance. While it is talking with third parties evaluating its Senegal asset for the purpose of sale it has reported that In the event that it is unsuccessful in selling its Senegal asset, “such circumstances would indicate that a material uncertainty exists” that may cast significant doubt as to its continuation as a going concern.

In the meantime, however, FAR says the Voluntary Suspension from trading on ASX  “remains in place until a further announcement in respect of the Half Year Accounts is made”.


Somalia: Past Petroleum Agreements are Null and Void

Somalia’s newly promulgated Petroleum Law, takes a dim view of agreements signed with governments who had ruled the war-torn country for most of the last 30 years.

All agreements pertaining to petroleum that were signed with administrations existing in parts of Somalia or previous provisional governments in the period between December 1990 up to September 2012 are considered null and void”, the law says. “All the agreements signed between foreign companies with the Somali government before 1991 are considered as valid agreements and they will be given good consideration”, the legislation declares. “These companies which had previous agreements before 1991 will have to renew them with the Federal Government of Somalia in accordance with Article 54”.

The new law establishes the Somali National Oil Company (SONOC) “as a commercial enterprise Controlled by the Government to conduct Petroleum Operations in Somalia. SONOC shall be entitled to exercise the right of participation referred to in article 35(1) of the Somali Petroleum Law. SONOC may acquire an Authorization by direct acquisition or pursuant to a bid process conducted by the SPA in the same manner as any other Person.

Each Production Sharing Agreement shall stipulate:

  1. the right of SONOC to participate in Petroleum Operations, up to a maximum participation right of 20%; and
  2. the right of a State-Owned Contractor which is Controlled by the Federal Member State of the Federal Republic of Somalia in which the Authorized Area is located to participate in Petroleum Operations, up to a maximum participation right of 10%.

The decision by SONOC to participate in Petroleum Operations under a particular Production Sharing Agreement shall be made by the Minister, if a recommendation to participate has been made by SONOC. The decision by a State-Owned Contractor which is Controlled by the State of the Somalia Republic in which the Authorized Area is located to participate in Petroleum Operations shall be made by the government of the State in which the Authorized Area is located.

The participation rights under Section 35.1 may occur during any phase of Petroleum Operations in accordance with the terms and conditions established in the Production Sharing Agreement.

This piece was originally published, a full month ago, in the August 2020 edition of Africa Oil+Gas Report

 

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