A large majority of Siemens shareholders voted Friday July 10, 2020, to approve the spin-off of the company’s energy business to Siemens Energy AG.
“This step paves the way for the establishment of an independent company rigorously focused on the energy sector”, the German conglomerate said in a release.
“In the future, Siemens AG will concentrate on Digital Industries, Smart Infrastructure and Siemens Mobility”, the company explained.
In total, 61.94 % of the capital stock of Siemens AG entitled to vote was represented at the shareholders’ meeting, which was held as a virtual event due to the coronavirus crisis.
Approval of the Spin-off and Transfer Agreement between Siemens AG and Siemens Energy AG was the only item on the meeting agenda.
The agreement was approved by a majority of 99.36percent of the capital stock represented. The highest number of participants following the Extraordinary Shareholders’ Meeting online was 3,870 at the July 10, 2020 Extraordinary Shareholders’ Meeting.
Assala Energy increased production of the Shell assets it bought in Gabon from 40,000BOPD to 55,000BOPD in the space of two years.
The London headquartered company claims it installed new equipment and brought down the cost per barrel to $12.
It is hoping to ride the storm of steep drop in prices, exacerbated by COVID-19, even with all the volatility.
Assala pumped $60Million into the five acreages in 2018 and spent $240Million more in 2019, in the process, drilling 20 new wells and optimizing 60 existing wells.
It had a war chest of $300Million for 2020, of which it had spent $70Milion in the first quarter alone.
So what will happen now?
If it survives the next 12 months, its plan is to continue from where it stopped.
The company was raring to go before COVID-19 happened. In late 2019 it acquired three onshore exploration licences from the Gabonese authorities: Mutamba-Iroru II, Nziembou II and Ozigo II, in addition to the five licences it purchased from Shell: Rabi Kounga II Toucan II Bende M’Bassou Totou II, Koula/Damier and Gamba/Iyinga. It also holds interests in four non-operated licences (Atora, Avocette, Coucal and Tsengui.
TechnipFMC has now signed the much-anticipated major Engineering, Procurement, and Construction (EPC) contract with Egypt’s state owned Assiut National Oil Processing Company (ANOPC) for the construction of a new Hydrocracking Complex for the Assiut refinery.
The $2.5Billion hydrocracker will upgrade residual oil from the 90,000BOPD Assiut refinery, in the town of Assuit, in Upper (southern) Egypt.
The work also involves Egyptian state-owned contractor ENPPI.
“This EPC contract covers new process units such as a Vacuum Distillation Unit, a Diesel Hydrocracking Unit, a Delayed Coker Unit, a Distillate Hydrotreating Unit as well as a Hydrogen Production Facility Unit using TechnipFMC’s steam reforming proprietary technology. The project also includes other process units, interconnecting, offsites and utilities.
The complex will transform lower-value petroleum products from Assiut Oil Refining Company’s (ASORC) nearby refinery into approximately 2.8Million tons per year of cleaner products, such as Euro 5 diesel.
With the final 1,240tonne propylene mounded bullet installed at Dangote Petroleum Refinery and Petrochemical complex in Nigeria, Mammoet is demobilizing equipment it has deployed there over the past two years. This concludes another successful project completed safely and delivered on time.
Mammoet was contracted to assist in the construction of the refinery in 2018. The scope consisted of receiving, inland transport, on site lifting and installation of hundreds of refinery components. Sourced globally and consisting of multiple shipments, these components were delivered to the purpose-built Dangote Quay Lekki in Lagos. They were then transported to the project site. Prior to installation, the components were stored temporarily on freshly paved Enviro-Mat; which Mammoet describes as its innovative and sustainable solution for native soil improvement, which was deployed to provide the main crane hard stands.
To optimize the construction process and schedule and ensure the highest levels of construction uptime, Mammoet says it has drawn on its diverse fleet of heavy lifting and transport equipment. This has included conventional trailers and trucks, Self-Propelled Modular Trailers (SPMTs), plus mobile and crawler cranes ranging in capacity from 250tonnes to 1,600tonnes.
Mammoet also brought two of its largest super heavy lift ring cranes with lifting capacities up to 5,000tonnes – the PTC 200 DS and PT 50 – to bring maximum efficiencies to the execution of the project. Their lifting capacity, combined with a long reach and a small footprint, enabled more efficient approaches to lifting and installing heavy and oversized components, such as a 3,000tonne regenerator- which Mammoet claims is “the heaviest item ever transported over a public road in Africa” and a 2,000tonne crude column “ – the largest crude column in the world.
Throughout the duration of the project Mammoet transported 239 items from the jetty to site, with a combined weight of 84,905tonnes and installed 154 items with a combined weight of 68,415tonnes.
Over 100 Mammoet professionals worked on this project for around two years adhering to the strictest safety standards – ensuring transportation and installation activities were efficiently scheduled and safely executed. Precise planning and thorough coordination were crucial to minimize delays and additional costs, maximizing the project’s efficiency.
During the project, Mammoet and its partner in Nigeria – Northridge Engineering, contributed to the local community by ensuring that the operations created value and opportunities by supporting local employment, training and encouraging local businesses to be part of the supply chain. 54 local employees were crucial to this work, covering a range of skills including SPMT operators, crane riggers and drivers. Mammoet also subcontracted work to 43 Nigerian businesses throughout its two years on site.
Dangote refinery is a 650,000 barrels per day (bpd) integrated refinery and petrochemical project under construction in the Lekki Free Zone near Lagos, Nigeria. It will be Africa’s biggest petroleum refinery and the world’s biggest single-train facility. Once onstream, the refinery will increase the country’s oil exports and reduce its reliance on imports of petroleum products, thereby boosting economic growth in Nigeria and generating thousands of jobs.
Africa Finance Corporation has signed a Joint Development Agreement with Brahms Oil Refineries Limited to act as co-developer on the development and subsequent financing of a petroleum storage and associated refinery project in Kamsar, Guinea-Conakry.
This will include a 76Million litre crude oil storage terminal; 114.2Million litre storage terminal for refined products; ancillary support transportation infrastructure, and 12,000 barrels oil per day modular refining facility.
Through this joint development, AFC will invest in the project development workstreams that should ensure the Project reaches financial close in 2020.
Brahms Oil Refineries is a part of Brahms Group, a Switzerland based diversified company with a strong industrial & international finance network and an excellent knowledge of Sub-Saharan Africa.Once operational, the Project will have a refinery capacity that is the equivalent of one-third of the country’s demand for refined products, thereby reducing its reliance on imported refined products, improving the country’s balance of payments, and reducing foreign currency demand. It will also allow for direct & indirect job creation and enhance the development and productivity of other sectors, especially mining, which today accounts for 15.3% of the country’s GDP but could contribute even more if the country had the necessary infrastructure to maximise and locally beneficiate its natural resources. The Project is strategically located in Kamsar, which is one of the larger mining regions in the country. To increase its impact on Guinea, AFC is considering several projects in the country to create an integrated ecosystem. This would include, alongside this Project, a 33MW solar project port, and other mining projects, all of which will complement AFC’s earlier investment in Alufer’s Bel Air bauxite mine.
Departures in troubling times can be sudden and abrupt. Therefore no one should be shocked nor surprised about the possible resignation or sacking of Ben van Beurden, Shell’s Chief Executive Officer.
In a lengthy interview in the prestigous Dutch financial publication Het Financieele Dagblad of 4 July 2020, van Beurden goes to great length to explain the dilemma Shell is facing:
The need to re-organize itself so that it can become a greener company;
Whether Shell’s headquarters ( now in the Netherlands) should be moved to the UK;
The struggle of deciding to reduce its golden dividend (the first time since WW II);
Writing down of some $20 billion in assets;
How to face the Energy Transition.
Het Financieele Dagblad also reveals that total investments, between 2016 and 2019, were $89Billion, of which
Ben van Beurden,Shell CEO
only $2.3Billion was directed to new energy. In March 2020, Shell’s share price on the New York Stock Exchange was $25/ share compared to a high of $70/share in May 2018.
Shell is not alone in the dilemma it faces. The other majors, including BP, Chevron, ENI, ExxonMobil, Equinor and TOTAL, face similar hurdles. Instead of (again) having a discussion on how to green Shell and the rest of the sector, it is more relevant to accept the basic premise, long discussed in Africa Oil + Gas Report, that an oil company, by its very nature, cannot be green.
Oil companies are by their very definition focused on a fossil fuel. Their reserve count (Reserve Replacement Ratio) is purely based on a fossil fuel. Clean energy—wind,sun or hydropower—cannot be part of the mix. The US SEC stock market regulator leaves no doubt about that! At present the RRR rate for the industry is 7%, a historic 20 year low. The norm is 100%, meaning that oil companies previously were able to fully replace all of the oil and gas that they produced annually. There is no evidence that Shell and the rest of the E+P sector are making any effort to broaden the basic definition of RRR to include renewables and thereby also bolstering fossil fuel reserves.
The concept of the ‘Integrated Oil Company’ has become untenable. The extended oil price crisis between Russia and Saudi Arabia, coupled with COVID-19, have had disastrous consequences for the oil majors as well as national oil companies. Exploration budgets have been frozen, people sacked, dividends to shareholders reduced or postponed, and assets written down. Future signs are not encouraging as evidenced by:
Rystad Energy predicting a write off of 14% of the current world’s oil reserves.
Goldman Sachs estimates that borrowing costs for fossil-based projects is as high as 20% compared to as low as 3% for clean energy projects.
In a shrinking E+P market, size and valuation still matters. The three pillars of the value chain- Upstream, Midstream and Downstream-provide enough clues about the tensions facing the sector.
There is already an informal integration of sorts within the Upstream portion of the value chain. In most offshore jurdisictions, offshore concessions are shared among the majors and state oil companies in order to minimize project risks.
We will probably witness heightened project co-operation among the majors in an attempt to maintain or reduce project costs. At a regional or country level, we should anticipate increased project co-operation. Areas of co-operation could Include seismic surveys, project management, rig-sharing and marine operations. Such integration will also require the buy-in of the drilling contractors, service providers and marine contractors.
Deepwater exploration and project management could perhaps be delegated to companies who are best in class.
For example in Sub-Sahara Africa, TOTAL, with its deepwater track record in Angola Block 17, could certainly play a strategic role in determining how future deepwater projects are managed. Its Brulpadda Deepwater Project in South Africa( drilled to a final depth of more than 3,600 meters), bears testimony to the company’s deepwater agility. In Nigeria, expect Shell, with its dominant offshore assets, including Bonga to possibly seek more co-operation with other majors. Expect BP’s Orca-1 deepwater play in Mauritania to have a stringent project development budget.
Alliances, Mergers and Takeovers
What will be the tipping point when cost savings and joint-co-operation have run their course? A matter of the last man standing?
Instead, anticipate in the coming months, strategic alliances and acquisitions to ensure market size that matters. The oil majors are notorious in ensuring that energy scenarios are developed and implemented. Think of Shell’s takeover of British Gas in 2015. The planning was meticulous and carefully rehearsed. Major shakeouts on a massive scale can be expected in the coming months.
The Winners and Losers
Imagine this to be a gigantic game of high stakes poker. Not necessarily that the winner takes all but the prizes are there for the taking. Some observations.
In Sub-Sahara Africa, TOTAL, with its Angola Block 17 experience could well be nominated to be the company of choice for exploration, given its technical prowess and ability to innovate.
Nonetheless, other majors also have considerable strengths: Shell’s Bonga Project in Nigeria coupled with its deepwater experience in the Gulf of Mexico. ExxonMobil with its Block 15 experience in Angola and offshore Guyana with its 16 oil discoveries.
Finally, anticipate that one or two of the majors will be become dedicated deepwater exploration companies on behalf of the majors; also look to further integration of oil and gas services.
Natural Gas and LNG
Given that natural gas is viewed as the cleanest hydrocarbon, this portion of the value chain could become even more competitive and crowded:
Shell’s market share of the gas value chain extends from the Middle East through to Asia Pacific and the company operates 20% of the global LNG fleet ; Chevron with its Australian Gorgon and Wheatstone LNG projects is an important gas player in Asia-Pacific and is also a key shareholder in Angola LNG; ExxonMobil developed Asian markets with its Arun LNG project in Indonesia and in the 1990s involved with RasGas(Qatar).
Given that natural gas is viewed as a transitional fuel, all of the majors will want to profile their companies as energy friendly. This scramble could become very ugly as they compete with one another.
in its 2019-2020 analysis of the Chemical industry, Deloitte encourages companies to extract more growth out of their existing assets and resources. For example, investing in high-performance plastics for new vehicle models.
Both Shell and ExxonMobil have key global positions in the chemical sector. In 2002 Chevron and Phillips merged their chemical operations.
It should not be surprising that mega-mergers occur to include the chemical businesses of the majors. Perhaps, not surprisingly BP has just announced selling its chemical business to Ineos for $5 billion.
Finally mega-mergers leading to more specialization offers the oil and gas sector the best chance for maintaining a large market share with economies of scale. Doing-more-with-less could become the new motto of the sector.
Gerard Kreeft, BA (Calvin University, Grand Rapids, Michigan,USA) 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.
The Nigerian Content Development and Monitoring Board (NCDMB) has signed equity investment agreements with two companies-Duport Midstream Company for the establishment of an Energy Park in Egbokor, in the country’s midwest and Eraskon Nigeria Limited, for a lubricating oils blending plant in Gbarain, in Nigeria’s south central east.
The planned Energy Park comprises a 2,500BPD modular refinery, as well as a thirty million standard cubic feet of gas a day (30MMscf/d) gas processing facility, which will include a CNG facility and 2MW power plant.
The lubricating oils’ blending plant will have the capacity to produce 45,000litres per day and enhance the availability of engine oils, transmission fluids, grease and other products.
Simbi Wabote, Executive Secretary NCDMB, explained that the investments were part of the approvals granted recently by the Board’s Governing Council chaired by Timipre Sylva, Minister of State for Petroleum Resources, He clarified that the investments were coming under the Board’s commercial ventures programme and were in sync with the NCDMB’s vision to serve as a catalyst for the industrialisation of the Nigerian oil and gas industry and its linkage sectors.
The Duport partnership, Wabote indicated, is in furtherance of the Board’s strategy to enhance in-country value addition by supporting the establishment of processing facilities close to marginal or stranded hydrocarbon fields.
NCDMB has already had partnered with the Waltersmith Group and Azikel Petroleum Company for the establishment of modular refineries in Imo State and Bayelsa State respectively.
Algeria and Libya, the two net exporters of crude oil in North Africa, will experience the highest contraction of their economies in the region.
Libya, which is mired in civil war on top of the challenges of COVID-19 and fall in demand for crude oil, will contract by 58.7% in 2020, by IMF estimates.
Algeria’s GDP will drop by 5.2%, says the global lender.
While Algeria is not at war, its political system is delegitimised by weekly protests and political tensions, which do not appear likely to go away anytime soon. Unemployment in the country runs at 11.1% and youth unemployment stands at 26.4% for the under 30s, who make up two-thirds of the country’s population of 41 Million.
Meanwhile, Egypt, a net oil importer with a robust hydrocarbon industry and a diversified economy, will experience a 2% growth rate in 2020. It is the bright star in the region.
Tunisia and Morocco, no petrostates, no oil exporters, will also fall, with the former contracting by 4.3% and the latter dropping by 3.7%.
The IMF also predicts that, at 20% of GDP, Algeria’s budget deficit will be the worst in North Africa. The country, which is Africa’s third highest oil producer, will experience a high current account deficit, at-18.3%, in the year.
The Nigerian National Petroleum Corporation (NNPC) has reported an explosion incident which occurred on the Gbetiokun field, in Oil Mining Lease (OML) 40, operated by the Nigerian Petroleum Development Company (NPDC), on behalf of the NPDC/Elcrest Joint Venture.
The incident, which occurred on Tuesday July 7, 2020 during the installation of a ladder on a platform (Benin River Valve Station) for access during discharging of Gbetiokun production, unfortunately caused 7 fatalities, a release by Kennie Obateru, NNPC Group General Manager, Group Public Affairs Division, has said.
The release stated that detailed investigation of the cause of the explosion has commenced, while the Department of Petroleum Resources has been duly notified and Form 41 was being prepared for the Industry regulator as required in circumstances of this nature.
The bodies of casualties have been deposited in a morgue in Sapele, while families of the personnel involved are being contacted by their employers: Weld Affairs and Flow Impact, which are consultants to NPDC.
The release stated that all personnel on board the platform had been fully accounted for.
Mele Kyari, NNPC Group Managing Director, in the statement commiserated with the families of the bereaved, praying that God grants them the fortitude to bear the irreparable loss of their loved ones.