All posts tagged feature


Africa’s renewable energy capacity is set for consecutive years of growth, exceeding 50,000MW (50 GW) in 2025

Africa’s installed capacity of renewable energy, which stood at 12,600MW (12.6GW) in 2019, is set for consecutive years of growth, a Rystad Energy analysis shows. The continent’s capacity is forecast to reach 16,800MW (16.8 GW) in 2020, add another 5,500MW (5.5 GW) in 2021, and further climb to 51.2 GW in 2025, led by growth in solar and wind projects in Egypt, Algeria, Tunisia, Morocco and Ethiopia.

At present, South Africa leads the continent in terms of installed renewable energy capacity with 3.5 GW of wind, 2.4 GW of utility solar, and a solar-dominant 1 GW pipeline of projects in development. Egypt and Morocco are in second and third place in terms of solar capacity with 1.6 GW and 0.8 GW, respectively.

Nearly 40 out of 50 African countries have installed – or plan to install – wind or solar projects. And although the learning curve may be steep for first-time market entrants with sizable development pipelines, inexperienced players will be able to leverage the lessons learned in Egypt, South Africa and Morocco and implement this knowledge into development plans.

Algeria will see the most renewable growth in Africa towards 2025, increasing capacity from just 500 megawatt (MW) in 2020 to almost 2.9 GW in 2025. The increase will come primarily from one mega-project, the 4 GW Tafouk 1 Mega Solar Project, which will be developed in five phases of 800 MW capacity each, to be tendered between 2020 and 2024. Rystad Energy expects three of the tendered projects with 2.4 GW of capacity will be commissioned by 2025.

Tunisia will also see formidable growth, skyrocketing from 350 MW of renewable capacity in 2020 to 4.5 GW in 2025. The additions will come from larger solar plants such as the 2 GW TuNur Mega Project, which is currently in the early stages of development and is expected to come on line by 2025.

Learn more in Rystad Energy’s RenewableCube.

In terms of speed, Egypt has been one of the quickest African nations to install solar and wind since 2017, and currently has approximately 3 GW of installed capacity. The country has a massive 9.2 GW development pipeline – which mostly consists of wind projects – putting Egypt on track to overtake South Africa in 2025 and become the green powerhouse of Africa.

Growth will come from large projects such as the 2 GW Gulf of Suez Red Sea Wind Project, which will be located in the governorate of the Red Sea. Of the capacity to be installed, 500 MW will be developed by German giant Siemens Gamesa and 1,500 MW remains to be awarded. Four out of the top 10 projects to be developed in Africa in the next five years will be in Egypt, underscoring the Egyptian government’s commitment to its renewable goals.

Morocco follows Egypt in terms of the quick pace of installations with 2.5 GW of installed capacity, dominated by 1.7 GW of wind power. Rystad Energy expects solar will drive the growth there, with a handful of large projects already in the works such as the 1 GW Noor Midelt Hybrid (CSP + Solar PV), the 400 MW Noor PV II, and the 120 MW Noor Tafilalet.

Ethiopia’s capacity numbers will also take a huge leap: The county currently has only 11 MW of installed solar capacity and close to 450 MW of installed wind, but is expected to have 3 GW of renewable capacity on line by 2025. The Tigray Hybrid Project will drive this increase and is expected to contribute at least 500 MW of solar capacity by 2025, assuming a resolution to the current ongoing conflict by then

The cost of renewables is at an all-time low now, and as larger markets such as China, India and Europe are on track to reach installation targets, wind and solar components will become ever cheaper and more easily accessed, creating a conducive environment for investment also in Africa.

“Development on the continent has historically been slow due to political instability, lagging policy and infrastructure, and poor procurement. However, as electricity demand increases, many African nations are turning to renewable solutions to meet energy targets, with solar overtaking wind in the next five years as the renewable technology of choice,“ says Gaurav Metkar, analyst at Rystad Energy.

For more analysis, insights and reports, clients and non-clients can apply for access to Rystad Energy’s Free Solutions and get a taste of our data and analytics universe.

 


UI Grants Two Oil Chiefs Its Highest Honorary Awards

By Macson Obojemiemoin

Theophilus Danjuma, Founder and Chairman of South Atlantic Petroleum (SAPETRO) and retired Lt. General of the Nigerian Army and Layiwola Fatona, Co- Founder and Chief Executive Niger Delta Petroleum Resources (NDPR), were two of four recipients of the University of Ibadan’s highest  honorary awards. The honours were conferred as part of the University’s 72nd anniversary ceremonies.

Danjuma became an honorary Doctor of Letters. Fatona was granted an honorary Doctorate of Science.

Abel Idowu Olayinka, the University’s Vice Chancellor, said that the institution did not deliberately set out to look for awardees from the oil industry. The nomination of General Danjuma came from the Medical Sciences, whereas he, he admitted, pushed for the choice of Dr. Fatona.

Olayinka, a professor of earth sciences who is close to the oil industry, is leaving the Vice Chancellorship position at the end of November 2020 after a five year term.  He wanted to honour Fatona, an alumnus of the University who he describes as an ‘industry icon’,  to be a fait accompli before he leaves.  “I can’t push for it from outside”, he told Africa Oil+Gas Report on the side-lines of the awards ceremony.

Although Danjuma and Fatona are known to have influenced the donations of hundreds of millions of Naira, to support the University, Olayinka said that  honorary awards are primarily more influenced by lifetime achievement than philanthropy. “But it is easier to convince the nominating committee of a candidate’s worth for an award when they can see evidence of his charitable causes on the campus”.

Danjuma has donated a Travel Fellowship for Kidney research to UI, Nigeria’s premier University. Fatona has, among other interventions, committed the NDWestern/NPDC joint venture to the construction of a multipurpose, four storey building for the study of geosciences.

The nomination and approval process for honorary awards is overseen by a Joint Committee of the Council and Senate of the University.

The outgoing Vice Chancellor has superintended the improvement in the University’s rankings to the Number 1 position in West Africa and to a placement between 400th and 500th in the world, according to The Times Higher Education World University Rankings 2020, which includes almost 1,400 universities across 92 countries, standing as the largest and most diverse university rankings ever to date.

But he is not entirely satisfied. “We can do a lot better”, he said, his right arm describing a wide arc of the campus; “There are, as of now, no students on campus. For eight months, Nigeria’s Federal Universities have been under lock and key, not only due to COVID-19 restrictions, but because University teachers are on strike. Its not very good”.


Egypt’s lagging Transmission Upgrade Cramps the Gains of Electricity Generation

By Toyin Akinosho

Some 27,000MW of energy out of the 58,000MW generation capacity, cannot be delivered to the final consumers

Egypt embarked on an accelerated increase in electricity generation from 2015.

Now the country produces 58,000MW of electricity, ousting the power cuts that were severe between 2011 and 2014.

But the large surplus of supply, even during peak demand in the summer, has not totally annulled the blackouts around the country. Power outage stubbornly remains because transmission capacity has lagged behind generation increase.

Part of the problem is that the jump in generation was delivered by the government, without a comprehensive reform that ensures private parties contributing to generation, transmission and distribution at the same time.

The Electricity Ministry speedily added more than 28,000 MW in six years, through 27 power plants, excluding the (vast solar power plant) Benban park, which by November 2019, was producing almost 1,500MW.

The frenetic pace in increase in generation left transmission and distribution capacity in the dust, such that 40% of the total generation cannot be picked up by the relatively more outdated transmission and distribution infrastructure.

In effect, some 27,000MW of energy out of the 58,000MW generation capacity, cannot be delivered to the final consumers. Besides, operational and equipment inefficiencies keep some 4% of energy away.

The Egyptian government has been playing catch up with transmission and distribution infrastructure build out.

The Electricity Ministry built transmission lines between 2014 and 2018 extending over 2,600kilometres, the ministry spokespersons say. That’s equivalent to the total lines established over the previous five decades. “The grid had been built, starting from the 1960s, with a total length of less than 2,000 kilometres”, Mohamed Shaker, the Minister of Electricity & Renewable Energy, told the American Chamber of Commerce in February 2018. “We are constructing over 2,000kilometres, using a Chinese company, the largest in the world, as well some local companies.”

But that is not enough. The Ministry has spent   more than $1.6Billion (EGP 25Billion) between 2018-2020 to upgrade the transmission grid, and is now planning to invest another $765Milllion (EGP 12Billion) during the current fiscal year, $35Million (EGP 555Million) of which is going towards Greater Cairo alone, the Ministry claims. The target is extension of total transmission lines to 6,006km, by end of 2020, a situation which raises the maximum load to 32,000MW — a 600 MW or 1.87% increase.

Mr. Shaker’s ministry’s 2018-2021 plan called for reducing electricity loss from 4.07% in 2018-2019 to 3.82% in 2019-2020 and to 3.8% in FY2020-21. These losses were common due to the poor-performing transmission and distribution lines, in addition to consumers obtaining electricity illegally by linking houses to distribution lines directly without a meter to count consumption, thus avoiding paying of dues.

The government also says it is replacing more than 30km of medium-voltage overhead lines at a cost of $2Million (EGP 30Million). Africa Oil+Gas Report could not verify the ministry’s claim that this project, on its own, has led to a 25% decrease in blackouts. There are also plans to build a “parallel core grid”, of around 500 m of transmission lines as a safety gap to improve the service and reduce loads on the main network.

Work is also going on to replace overhead lines with underground cables. Projects are far more advanced in heavily populated areas, such as Cairo.

Despite Egypt’s significant success in increasing generation, there are areas, including East Owinat, Marsa Alm, Halayeb and Shalatin, which are outside of the grid. The government says it plans to extend electricity lines to some of those areas, but the details are hazy.

The current grid for the most part relies on outdated technologies that incur major maintenance costs and make identifying the causes of interruptions difficult. Whenever a power interruption occurrs, electricity distribution companies have to wait for consumers to report the problem. Once they receive a complaint, they investigate the cause, and either find a quick fix or order a reroute of the line — altogether an exhausting and time-consuming operation.

Egypt’s electricity ministry is also talking about is smart meters. “We are going to have our distribution network to be a smart grid”, Shaker told the American Chamber of Commerce in Cairo. One Million, Two hundred and fifty thousand smart meters were under construction, he said.

It takes a lot more effort, than just constructing smart metes, to effect a smart grid, which allows utilities and customers to receive information from and communicate with the grid.

The Egyptian government has moved far slower to work on transmission and distribution of electricity than it has done on generation. Mr. Shaker’s presentations to the American Chamber of Commerce in Cairo in February 2018 and June 2019, which were published by Africa Oil+Gas Report, were both loud on the work on generation and relatively quiet on the achievements in transmission. But Egypt, more than any other in Africa, is keeping its eyes on the electricity ball.

This piece was originally published in the September 2020 edition of the monthly Africa Oil+Gas Report. It’s one of few select articles that make it from paid subscription service to the free newsletter


Wintershall Transfers Operatorship of Libyan Field

The German independent Wintershall Aktiengesellschaft (WIAG) has transferred operatorship of Contract Areas 91 (former Concession 96) and 107 (former Concession 97) in the onshore Sirte Basin to Sarir Oil Operations (SOO), a newly established joint operating company with the National Oil Corporation (NOC).

WIAG had operated the fields for close to a year after the signing of two Exploration and Production Sharing Agreements (EPSAs) in December 2019, while SOO was being established and prepared to assume operational responsibility. Now, the vast majority of WIAG’s Libyan personnel has been transferred to SOO and will continue to work in their previous roles.

Oil production in the fields located in Contract Areas 91 and 107 has been suspended since mid-January 2020 due to blockades of the export infrastructure.

Things however are looking up in Libya now; as a peace process goes vigorously underway, oilfield taps are being opened and hydrocarbon production has increased.

“Although the coronavirus pandemic and the conflict in Libya have posed additional significant challenges during the past months”, the company explains in a briefing, “NOC and WIAG are nonetheless convinced that as a result of a comprehensive and diligent transitional process, SOO has successfully been enabled to operate the fields in a reliable manner and in accordance with good oilfield practices”.

 

 


President Buhari to Commission a Modular Refinery in Eastern Nigeria

The facility is the first project in a planned industrial-energy park

Nigeria’s President, Muhammadu Buhari, will commission a 5,000 barrels per day (BPD) modular refinery in Ibigwe, Imo State, in the east of the country on November 24, 2020.

The facility, which will be commissioned under the chairmanship of the Governor of Imo State, Hope Uzodinma, is the first of a three-phase project. It will deliver about 271Million litres of refined petroleum products (Diesel, Kerosene, Heavy Fuel Oil-HFO and Naphtha) per annum.

Promoted by Waltersmith Petroman Oil Limited, operator of the Ibigwe marginal oil field,  the project is developed by Waltersmith Refining and Petrochemical Company, a Joint venture (JV) between Waltersmith Petroman Oil Limited (70% equity) and the Nigerian Content Development and Monitoring Board (NCDMB), with 30% equity.

It is also the first project of a planned energy-industrial park. Waltersmith, as of last February, disclosed that it had surveyed 500 hectares of land, out of which it had  acquired 65 hectares of land for the park, on which it proposes   to build a Power Plant. The company  received an electricity generation license from the Nigerian Electricity Regulatory Commission (NERC) in 2017 to develop a 300MW gas fired plant(the Ugamma Gas Power Plant) to be situated in the same energy industrial complex as the refinery and the flow station in the Ibigwe field.

The power plant will utilize processed gas largely from third parties operating gas fields that are within proximity with the Ibigwe field. It will then supply this power to nearby industries as well as industries who come to locate themselves in that industrial park.

Meanwhile, the second phase of the Modular Refinery construction, a 25,000 BPD capacity will be added, while the third phase, another 20,000 BPD, is expected to bring the capacity to 50,000 BPD.

It is expected that President Buhari will be commissioning both the first phase of the refinery and breaking the ground for the 45,000BPD second and third phases of the refinery, planned to deliver about 1.4Billion litres per year of refined petroleum products (Premium Motor Spirit – PMS, Diesel, Kerosene, Aviation Jet Fuel and HFO).

 


First speakers announced for Angola Energy Month

PARTNER CONTENT

First Speakers Announced for the Angola Energy Month Programme

In recognition of the importance of the oil and gas industry and the recently announced Presidential Decree; AECIPA (Association of Contracting Companies of the Angolan Oil Industry) has launched Angola Energy Month to take place during December, featuring a series of webinars culminating in the three day virtual Angola Oil and Gas Services and Technology Conference (15-17 December 2020).

The initiative will be held under the high patronage of the Ministry of Mineral Resources and Petroleum, Angola with the virtual Angola Oil and Gas Service and Technology Conference being officially opened by H.E. ENG. José Barroso, Secretary of State for Oil and Gas, Angola.

THE PROGRAMME

Over two complimentary webinars (2nd and 8th December) through to the official conference 15-17 December, Angola Energy Month featuresunparalleled opportunities for networking with Angola’s leaders andestablish business in one of the world’s most lucrative markets.

https://us02web.zoom.us/webinar/register/WN__nelPhkGSH-04KLnniJySg

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SPECIAL EARLY RATE ENDING THIS WEEK

As a special offer, AOTC delegate registration sits at just $250 until November 20th, rising to $450 thereafter. This provides you the
opportunity to network with the whole value chain for four weeks as the platform remains live from December 8th – January 8th, ensuring you create and develop new and existing relationships.
https://angola-series.com/speaker-proposal
AOTC is accessible for all participants with an interest in Angola’s oil and gas industry. The AOTC virtual conference provides a first-class conference program with speakers drawn from industry leaders and global experts in addition to the opportunity to conduct one-to-one meetings with fellow participants.

To ensure your company maximises the abundance of wider participation opportunities, explore the buttons below or contact the team below to build a bespoke solution, ensuring your marketing and business development objectives are met.
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Whisky Galore: Developing an Energy Roadmap for Guyana

By Gerard Kreeft

 

 

 

 

 

 

Whisky Galore! A 1949 British comedy film based on a true event concerning a shipwreck off a fictional Scottish Island. The islanders have run out of whisky because of wartime rationing.

Then they discover the ship is carrying 50,000 cases of whisky, which they salvage. The film is a cat and mouse chase between the islanders, anxious to preserve their precious cargo, and government officials, eager to seize the contraband.

A story of islanders eager to preserve their pot of gold.

Could a similar tale be told about Guyana?  This South American country has a population of only 782,000 persons  but had been constantly in the news since May, 2015, when ExxonMobil and its partners Hess Corporation and CNOOC International announced the discovery of more than 90 metres of high-quality, oil-bearing sandstone reservoirs about 200 km off its coastline.

The Liza-1 well was drilled to 5,433 metres in 1,742 metres of water, and was the first well on the Stabroek block, which is 26,800 square kilometres in size.

ExxonMobil’s Stabroek Block

According to ExxonMobil the gross recoverable resource for the Stabroek Block is now estimated to be more than Eight Billion boe (barrels of oil equivalent). In total, 18 discoveries to date.

One source predicted : “This small nation is likely looking at a windfall in royalties. For a country of less than a million people, the find changes everything. Within a decade Guyana could be completely transformed by the find, going from unpaved roads and sporadic power to being a developed nation”.

The International Monetary Fund (IMF) in a recent report warned of the dangers that oil wealth could bring, noting that by 2024 oil could generate 40% of the country’s GDP. As a result the Government of Guyana has set up its Natural Resources Fund (NRF) for managing its oil wealth.

This is where the optimism stops.

In a blistering critique of Guyana’s new found oil wealth the Institute for Energy Economics and Financial Analysis based in Cleveland, Ohio (IEEFA) sketches a somber picture: “Over the next five years, revenues from Guyana’s newly discovered oil reserves will be insufficient to cover the country’s deficits, support new spending and build its wealth. New oil revenues will provide Guyana with some choices, but will not generate enough revenue to satisfy all of these needs. Longer term, the declining oil and gas sector faces challenges that will result in it becoming even smaller and an increasingly less reliable partner for Guyana.”

IEEFA argues that:

  • Oil revenues to Guyana will be constrained during the next five years by low global oil prices and the price of oil is likely to remain below $50/bbl.
  • For the next five years, oil revenues will not fully cover Guyana’s budget deficit likely leading to an aggregate shortfall of between $160Million to $482Million.
  • At the end of five years Guyana will carry a minimum $20Billion outstanding balance owed to its oil producer partners. This amount must be paid, along with other contractually obligated development costs, before the country can fully enjoy any long term benefits that might materialize.

Some Inconvenient Truths

  • On June 27, 2016 the Government of Guyana signed a Production Sharing Agreement with a consortium consisting of ExxonMobil (45% working interest), Hess Corporation (30% working interest), and CNOOC International (25% working interest). ExxonMobil is headquartered in Irvine, Texas, a suburb of Dallas.  Hess Corporation is based in New York City.  CNOOC International is owned by China National Offshore Oil Company (CNOOC) and is one of the largest national oil companies in China and is based in Beijing.
  • The agreement outlines how oil production will take place, how costs are calculated, and how ‘profit oil’ is divided among the parties. ‘Profit oil’ is the amount left over after the oil is extracted and sold and recoverable contracts have been fulfilled.
  • As a 50% partner the Government is expected to be a full financial and technical partner. Both in terms of exploration and development costs. According to IEEFA, up to and including 2024, total project costs are expected to be more than $39Billion, half  of which must be paid by the Government of Guyana.
  • The size of the concession is huge: extending between Guyana’s border with Venezuela to Guyana’s border with Suriname, a total of 26,800 square km. In comparison, oil blocks located offshore USA Gulf of Mexico are approximately 214 square km, 100 times smaller than Guyana. Even offshore  Angola, which has huge blocks – between 4000 to 5000 square km—are small compared to that of Guyana. The size of the concession is virtually a monopoly position.
  • The virtue of such a large concession also offers the following advantage: allowing the consortium to charge exploration  and field development costs for new projects in the block  against the cost  of a revenue producing  field,  as in this case the Liza Field.
  • The contract also stipulates that the Government will fully pay the consortium’s income tax for a five-year period: $653Million, a windfall for the consortium.
  • IEEFA concludes that ” if the Guyanese government follows prudent fiscal planning for the use of the anticipated revenues during the next five years, the new resources will be insufficient to cover the country’s expected annual deficit. … aggregate revenues available for the budget after contributions are made to the sovereign wealth fund would be insufficient to cover budget deficits in 2020, 2021 and 2022, leading to a shortfall of $152Million over the full five years. The revenue level during the next five years indicates that new spending of any kind would have to be delayed. The choice is whether to use the revenues to balance the budget and grow Guyana’s sovereign wealth fund or to spend the money now on new budget priorities.”

Signature Bonuses

According to the New York City-based Natural Resource Governance Institute (NRGI), which provides advice on economic, fiscal and public policy to resource-rich countries,  the Government of Guyana collected a signing bonus of only $18Million. The NRGI categorically stated, “Guyana needs to stop collecting chicken feed in the form of signature bonuses. It must demand what it deserves…”

This amount is in sharp contrast to the $3Billion that Sonangol, the state oil company of Angola, collected in  signing bonuses back in 2006 for three deep water blocks, Blocks 15/06, 17/06/ and 18/06 which were the relinquished parts of the oil producing Block 15, operated by ExxonMobil, Block 17 operated by TOTAL, and Block 18 operated by BP. True, times have changed and Angola was then the golden boy of the deepwater plays. Yet the contrast is startling to say the least.

The New Reality
 In 2007 ExxonMobil had a market capitalization of $528Billion and today has been reduced to less than $140Billion. Annual revenues peaked at $486Billion in 2011 and in 2019 were reduced to $265Billion.

Then there is the matter of impairment charges. In a recent filing with the US Securities and Exchange Commission, ExxonMobil  indicated that it is possible it will write down its  Kearl Project of proved reserves in the Canadian Oil Sands of its Canadian affiliate Imperial Oil Limited, which account for 20% of the company’s 22.4 BOE ( billion barrels  oil equivalent) reported in 2019.

ExxonMobil is also expected to reduce the 1Billion BOE of proved reserves from its unconventional operations in the Permian Basin, Texas.

Proved reserves, linked to RRR (Reserve Replacement Ratio) is the Holy-of-Holies for the industry. An indicator how well a company’s reserves stand. To have them declared as impairment charges has basically destroyed the entire petroleum classification system.

The sly culprit was the major French energy company, Paris-based TOTAL. In the summer of 2020 TOTAL took the unusual step of writing off $7Billion  impairment charges for two oil sands projects in  Canada.  Both projects at the time were listed as ‘proven reserves’.

TOTAL’s candor has unwittingly opened a Pandora’s Box of potentially explosive proportions. All of the majors are showing red ink but increasingly attention is being given to impairment charges and the loss of proven reserves. Have proven reserves become the equivalent of stranded assets?

TOTAL’s strategy is focused on the two energy scenarios developed by the International Energy Agency (IEA): Stated Policies Scenario(SPS) is geared for the short/ medium term; and Sustainable Development Scenario(SDS) for medium/long term.

Taking the “Well Below 2 Degrees Centigrade” SDS scenario on board, TOTAL has in essence taken on a new classification system for struggling oil companies seeking a green future.

This comes at a time that ExxonMobil is coming under closer scrutiny. It has announced  the sacking of  14,000 employees. Capital spending is being reduced by $10Billion to $23Billion. It is feared that if  oil remains under $45 per barrel ExxonMobil could face a cash crunch.

The twin folly that ExonMobil nows faces is the following:

  • Guyana is now being touted as ExxonMobil’s leading strategic investment. In essence that is why ExxonMobil and its consortium have frontloaded the contract costs and the reimbursements. Guyana is now viewed as ExxonMobil’s leading cash cow.
  • Yet because the long established hydrocarbon classification system has now been superceded by the IEA’s climate scenarios,  this will downgrade considerably the value of Guyana’s deepwater oil and gas assets with the fear of being reduced to stranded assets.

Conclusions

The present situation could grant  the Government of Guyana a position of strength perhaps leading to major contract revisions  or perhaps even pushing  the government to declare the present contract a basis for force majeure

Needless to say, with the Stabroek Block held 75% by American oil companies, ExxonMobil and Hess Corporation, and 25% by one of the largest national oil companies of China, such a move could cause consternation in Washington and Beijing.

The Government of Guyana does not at the present time  have the  technical and financial expertise to properly act on behalf of its people or guard its public oil and gas interests.

A Final Warning

Post-Paris Climate Agreement, those companies who have developed a green scenario, a Plan B, and who use such a plan to butress up their reserve count will have the resilence to develop deepwater projects and make them bankable. This could prove to be most invaluable.

Ignoring the Paris Climate Agreement, signed in 2015, is dangerous for oil companies and their investors.  The importance of the Paris Accord is reconfirmed by the latest news coming out of Washington that President-elect Joe Biden is reportedly planning to issue executive orders to quickly reverse some Trump measures, such as Trump’s exiting of the Paris Climate Accord, as soon as Biden takes office in January.

Look to players such as TOTAL, now working in deepwater Suriname, to jump into neighbouring Guyana if ExxonMobil begins to flounder.

Equinor and even Shell could also become  potential partners.

Not only are these companies greener than ExxonMobil, but the investor community has green growth on their radar screens. A green perception will also aid deepwater developments. A stable share price is a guarantee that deepwater projects have the resilence to develop and grow.

Only having hydrocarbons in your portfolio has become hazardous to your health.

Additional actions should be taken:

  1. Strengthening the Natural Resources Fund (NRF)to ensure it can fulfill its mandate.
  2. Establishing a National Energy Agency to be responsible for the country’s concessions, and oil and gas legislation. In short the eyes and ears of the Government.
  3. Establishing a State Energy Company to be the negotiating partner of all oil and gas activities.
  4. Canada and Norway, both steeped in the oil and gas tradition, and seen as honest brokers could most likely provide financial, economic and technical expertise to help set up such institutions.
  5. The country requires an energy roadmap in order to build up a diversified economy.

Fast forward 10 years and perhaps the people of Guyana will by then have found their version of Whisky Galore!

Note:

The following is from the website of the Institute for Energy Economics and Financial Analysis (IEEFA):  The IEFFA examines issues related to energy markets, trends and policies. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.  IEEFA receives its funding from global philanthropic organizations and individuals. IEEFA gratefully acknowledge our funders, including the Rockefeller Family Fund,  Energy FoundationMertz-Gilmore FoundationMoxie FoundationRockefeller Brothers Fund,  KR Foundation and Wallace Global Fund, and some who choose to remain anonymous.

The Natural Resource Governance Insitute (NRGI) says that its objective as stated on its website is “Ensuring that countries rich in oil, gas and minerals achieve sustainably inclusive development and that people receive lasting benefits from extractives and experience reduced harms”.  Amongst its distinguished Board of Directors is Dr. Paul Collier, professor at Oxford University in the UK and world renown authority on economic and public policy.

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 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.


Is Nigeria Finally Within Reach of a New Oil Law?

By NJ Ayuk, Executive Chairman, African Energy Chamber  

This week, the African Energy Chamber will publish a report outlining its short-term predictions for the continent. That report, Africa Energy Outlook 2021, identifies Nigeria as the country with the most potential for increasing hydrocarbon production. But it also points out that Nigeria faced certain challenges with respect to realizing this potential.

Of course, some of the challenges have their roots in the events of 2020 — the coronavirus (COVID-19) pandemic, the dramatic fall in global energy demand, and the oil price war between Russia and Saudi Arabia that briefly sent crude prices into negative territory. However, the country is also facing a number of ongoing challenges.

One of these is the need for a new oil and gas regulatory regime.

‘Africa Energy Outlook 2021’ notes that Nigeria’s government has been working for years to meet this need. So far, all of its attempts have failed. In 2018, for example, members of the Senate voted to approve legislation known as the Petroleum Industry Governance Bill (PIGB), only to have President Muhammadu Buhari veto its version of the bill and send it back to the floor.

Buhari’s administration has not given up, though. Earlier this year, the president declared that his administration was determined to draft a new version of the oil and gas law and secure its passage through both houses of the National Assembly before the end of 2020.

Signs of Progress … But How Much?

The AEC’s report expresses some doubt about Buhari’s ability to get that far with the new Petroleum Industry Bill (PIB). I see this skepticism as understandable, given that Nigeria has been trying — and failing — for nearly two decades to effect change on this front. But I also want to point out that Abuja has made some genuine progress this year.

First, the government completed the draft version of the PIB and submitted it to the National Assembly in August.

Second, the government secured pledges from both houses of the legislature to expedite discussions on the PIB so that it can be passed before the end of the year.

Third, the bill passed its first reading in the House of Representatives and the Senate on Sept. 30.

Fourth, the bill passed its second reading in the House of Representatives and the Senate on Oct. 20.

Fifth … well, is it reasonable to list a fifth sign of progress? Perhaps not. Almost immediately after the PIB passed its second reading, Nigeria’s Senate suspended plenary sessions until Nov. 24 so that it could focus exclusively on drawing up the federal budget for next year. Additionally, it gave the relevant Senate committees eight weeks to make the required legislative inputs into the bill.

Short on Time

Because of these developments, the timeline for securing passage for the bill has shifted.

As I mentioned previously, President Buhari has said he wants to sign the PIB into law before the end of this year. But if the Senate continues to focus exclusively on the budget until Nov. 24, it will have just over a month to meet that deadline — or even less, if the committees take the full eight weeks allotted to them for making legislative inputs. Either way, it will have a great deal to do in a short time. It will have to wrap up committee discussions, pass the new oil and gas law in its third reading, secure the assent of both the House of Representatives and the Senate to the final version of the legislation, and then send it to the president for signature within just a few weeks.

In theory, the PIB could lose momentum during any of these stages. If the committee discussions run for the full eight weeks, they will end on Dec. 15, leaving very little time before the end of the year. If legislators propose amendments during the third reading, they may need extra time to debate and vote on their proposals. If the House of Representatives and the Senate turn out different versions of the PIB and are unable to come to terms quickly, the initiative could stall. If President Buhari takes exception to any changes made during earlier steps in the legislative process, he could veto the bill.

If any of these things happen, the government may find itself ending 2020 without a new oil and gas law in place.

But would that really be such a bad thing?

More than Money

Yes, I think it would.

For years now, uncertainty about the legal regime has been discouraging companies from making commitments to the West African state’s oil and gas industry. According to Nigeria’s Department of Petroleum Resources (DPR), the repeated failure of attempts to adopt a new oil and gas law costs the country about $15Billion each year in lost investments. It’s therefore reasonable for Buhari and his government to seek passage for the PIB as soon as possible. After all, Nigeria can ill afford to keep losing so much money — especially at a time when its oil and gas industry is under extra strain because of the extraordinary events of 2020.

But it’s not just about the money. I believe there is an objective need for reform — and that the PIB can meet that need.

Nigeria’s oil and gas sector has earned the reputation of being corrupt, non-transparent, and inefficient. This reputation drives potential investors away, thereby depriving the country of money — and, what’s more, depriving it of jobs (in both the industry itself and in related sectors such as construction and transportation) and also of opportunities for partnerships, training, technology transfer, and other things that help support and amplify economic growth.

In other words, without the PIB, Nigeria can’t use its vast oil and gas reserves to optimal effect!

Needed Reforms

The PIB does try to address the deficiencies of the current system.

For example, it calls for dismantling state-run Nigerian National Petroleum Corp. (NNPC) and dividing its functions up among three separate entities. It provides for NNPC’s regulatory and administrative functions to be transferred to two new government agencies: one to supervise upstream operations and another to supervise midstream and downstream operations, including domestic gasification programs. At the same time, it assigns the company’s commercial functions to a new entity that will be known as NNPC Corp.

This one change has the potential to make a big difference. With respect to transparency and efficiency, the bill draws a clear line between Nigeria’s need to monitor and regulate the companies that work in the oil and gas sector and its need to have the capacity to develop its own resources. It also calls for NNPC Corp. to be audited annually by an independent company — rather unlike the current version of NNPC, which has come under fire in the past for its less-than-transparent accounting practices. And with respect to corruption, it establishes NNPC Corp. as a purely commercial entity with no access to the federal budget — and, therefore, fewer opportunities to function either as an instrument of state policy or as a shady space in which government officials can move money around for their own purposes.

Of course, these aren’t the only good things the PIB could do. For example, the bill also contains provisions that might settle investors’ questions about the Deep Offshore and Inland Basin Production Sharing Contract Act, a controversial piece of legislation that some energy companies have described as little more than a revenue grab. Additionally, it eliminates two state bodies that haven’t been doing the best job at monitoring the downstream fuel sector: the Petroleum Products Pricing Regulatory Agency (PPPRA), which oversees fuel pricing, supplies, and distribution, and the Petroleum Equalisation Fund (PEF), which distributes cash with the aim of making motor fuel prices uniform throughout the country. Moreover, it puts a single agency — the new midstream and downstream agency mentioned above — in charge of domestic gasification initiatives. This makes sense, given that gasification depends on the construction and expansion of transportation and distribution networks. It could also help coordinate the process by putting all activities under a single umbrella.

Don’t Stop Pushing

There are other attractive features to the PIB, but I don’t have the time or space to list them all here.

I do want to emphasize, though, that I think Nigeria needs this new law, both in general and with the particular details included in the government’s draft version. Buhari is therefore right to push the National Assembly to pass it as quickly as possible — and he should keep pushing, even if legislators miss his Dec. 31 deadline.

In other words, the president should hold members of the National Assembly to the commitment they made earlier this year to accelerate this process! If he does, he should see the PIB pass soon — and once it takes effect, it can lay the foundation for a more efficient, less corrupt, and more transparent oil and gas sector in Nigeria. And, equally important, Nigeria can start capitalizing fully on its oil and gas resources.

(https://EnergyChamber.org)

 


Moza’s Floating LNG Facility Nears Completion

By Fred Akanni

Construction of the Coral-Sul FLNG facility, Mozambique’s first Liquefied Natural Gas facility is almost completed. The floating plant will sail-away to the south east African country in 2021 to begin natural gas extraction in the vast offshore Rovuma Basin.

The lifting and installation of the last of the 13 topside modules, “configuring the entire gas treatment and liquefaction plant”, was announced by ENI, the Italian energy company which will operate the facility.

With this milestone, first gas from Coral-Sul FLNG is on course for 2022. “The massive 70 thousand tons topside was lifted onto the hull one module at a time and is now complete. However, construction continues with integration and commissioning activities” declares Roberto Dall’Omo, ENI’s General Manager on the Rovuma Basin project.

ENI discovered the Coral field in Area 4 licence Mozambique in 2012, a year after it encountered the Mamba field in the same basin: Rovuma. It estimates 16Trillion cubic feet estimated recoverable reserves of gas in the former.

The Coral Sul FLNG (meaning Coral South) is one of two projects on the field; farther down the line, the company expects to also develop the reserves in the north of the field under a project christened Coral North. ENI’s partners in Area 4 include ExxonMobil and CNP), Galp, KOGAS and the Mozambican state hydrocarbon company Empresa Nacional de Hidrocarbonetos (ENH) E.P.

These same partners are also involved in another project: the 15MMTPA Rovuma LNG facility, a much bigger, onshore plant which will be operated by ExxonMobil. The Final Investment Decision for that project has stalled.

ENI claims that the Coral-Sul FLNG, with a capacity of 3.4Million tons of liquefied gas per year (MMTPA) is the world’s first newly-built deepwater floating liquefaction plant.

It is based on six ultra-deepwater wells in the Coral Field, at a water depth of around 2,000 metres, feeding via a full flexible system the Coral-Sul FLNG.

 

 


Indians to Take over FAR’s High Profile Assets in Senegal

By Toyin Akinosho

FAR has finally found a buyer for its high profile oil and gas asset offshore Senegal.

ONGC, the Indian state hydrocarbon company, has agreed to buy the property, which includes FAR’s entire interest in the Production Sharing Contract for the Rufisque, Sangomar, and Sangomar Deep Offshore Blocks offshore Senegal and the relevant Joint Operating Agreement (the RSSD Project).

The Sangomar exploitation project, located in these blocks, is the largest offshore crude oil development currently under construction in Africa. Phase 1 development of the project, which will develop some 250Million barrels of oil, remains on track for targeted delivery of first oil in 2023. Production from this phase is expected to be around 100,000 barrels of oil per day (BOPD).

The Australia listed minnow, which has struggled as a going concern-and has defaulted on paying cash calls on the project- in the last two quarters, says it has entered into a Sale and Purchase Agreement with ONGC (full name ONGC Videsh Vankorneft Pte Ltd), the largest E&P company of India, which has agreed to pay FAR $45Million at completion. In addition, ONGC has agreed to reimburse FAR’s share of working capital for the RSSD Project from 1 January 2020 totalling $66.58Million, payable on completion. The reimbursement is comprised of cash calls paid by FAR, including $29.60Million paid to cure FAR’s default to the Joint Venture. The Transaction also includes an entitlement to certain contingent payments capped at $55Million.

The Transaction is subject to conditions precedent, including the following:

  • The written approval of the Minister of Petroleum and Energies for the Republic of Senegal to the transfer of the Transferring Interest to the Purchaser being obtained. FAR hopes that such approval would be obtained in January 2021.
  • RSSD Project Pre-Emptive Rights – The Transaction is conditional on the waiver or non-exercise of preemption rights available to FAR’s co-venturers in the RSSD Project. FAR is issuing the pre-emption notices between November 11 and November 12, 2020, and the co-venturers have 30 days to advise if they wish to exercise their right to preempt the Transaction on the same terms and conditions as ONGC. In the event of pre-emption, FAR will receive the same consideration as from ONGC.
  • FAR Shareholder Approval – ASX Listing Rule 11 requires that FAR obtains shareholder approval in relation to the Transaction. FAR intends to convene a general meeting of FAR shareholders as soon as practicable to be held in December 2020 to consider approving the Transaction (including if the sale is the subject of pre-emption).
  • Third Party Agreement Termination – The Transaction is subject to the termination or satisfactory resolution of an agreement between FAR and a third party, details of which are currently commercial in confidence. ONGC has the discretion to waive this condition.

Cath Norman, FAR’s Managing Director, describes the offer from ONGC as representing “the best option available at this time and we trust that our shareholders will vote for this transaction”. She reinstates the well-known fact that “the market for financing and selling assets has been weak since the impact of COVID was felt in March of this year”.

If the Transaction completes, the company anticipates, “FAR will be in a strong financial position and will be relieved of its future development obligations in relation to the RSSD Project, which in the absence of a sale, FAR cannot currently meet beyond December 2020”.

FAR expects to have approximately $130Million in cash at the close of this Transaction that, Ms. Norman says,” will be used to rebuild the Company and further our other West African prospects offshore the Gambia and Guinea-Bissau”.

Having been in the RSSD project for 14 years, “it’s a bittersweet moment to be selling our stake. FAR is committed to our projects in The Gambia and Guinea-Bissau and using our deep knowledge of the MSGBC Basin to potentially explore offshore Senegal again,” Norman declares.

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