All posts tagged gas


In Pursuit of Africa’s Green Deal

By Gerard Kreeft 

 

 

 

 

 

 

The call to leave fossil fuels in the ground is a Western narrative and fails to factor in the needs of low-income Africans who would gain from a strategic approach to oil and gas operations, job creation and local enterprise opportunities,”. Quoted by NJ Ayuk, Chair, African Energy Chamber in Upstream.

NJ Ayuk’s remarks are directed to the IMF, IEA, and OECD, who are urging African countries to abandon their oil and gas assets and instead become pro-active and join the Energy Transition.

Solar, wind and hydropower are the symbols of this transition.

Setting the Scene: The External Constraints

While Ayuk’s sentiments  may strike a responsive chord it also invites a measured response. The Energy Transition is global and not restricted to Africa. It supercedes national boundaries.

The response from the oil and gas community, given that many of the oil majors work on a global basis, is also done on a global basis. This past six months, with the double curse of an oil trade war and COVID-19, the response was a global lockdown, regardless of where the majors had operations. While this double jeopardy has little to do with the Energy Transition, the global affect factor is omnipresent.

Of importance to Africa is the rate of impairment to oil and gas projects on a global scale. The most radical sign was  TOTAL’s writing down two oil sands projects in Canada which it had categorized previously as “proven assets”.

The SPE (Society of Petroleum Engineers ) on behalf of the industry,  is responsible for categorizing oil and gas reserves. The category “proved reserves”is the gold standard for indicating  a company’s oil and gas reserves. If proven reserves indeed becomes the equivalent of stranded assets this should sound off alarm bells in the board rooms of all the majors.

TOTAL’s strategy is focused on the  two energy scenarios developed by the IEA (International Energy Agency). Stated Policies Scenario(SPS) is geared for the short/ medium term;  Sustainable Development Scenario(SDS) for medium/long term.  The scenarios are in line with the Paris Climate Agreement. Taking the “well below 2oC ”SDS scenario on board, TOTAL has in essence taken on a new classification system for struggling oil companies seeking a green future.

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

Finally there is the Deloitte study entitled “The Great Compression: Implications of COVID-19 for the US  shale market”. Deloitte is forecasting impairments of up to $300Billion; and 30% of shale operators are technically insolvent.

The Deloitte study notes: “New telecommunicating norms, regionalized trade and supply chains and the stable business profile of new energies have fast forwarded the spector of peak demand to the present”.

What the study is really concluding is that the oil and natural gas infrastructure is crumbling before our eyes and being replaced by new energy which is reliable and stable!

For the service sector both Rystad Energy and the Boston Consulting Group have little good news. At the beginning of this year, according to Rystad, ultra-deep day rates were moving to the mid- $250, 000 –$260, 000 for spot work, and expecting to cross the $300 000 threshold for work with long lead times. Now further rate drops could push day rates to a level of the offshore driller’s operating expenditures.

The Boston Consulting Group, in a recent study, concluded that in 2021 the service sector will be asked to reduce costs between 20 -25%.

An African Response

Africa has 10% of the world’s oil reserves and 8% of the natural gas reserves.

African countries are also revising their energy plans. Angola’s Council of Ministers  approved a revised hydrocarbon exploration strategy that will be in effect until 2025. The strategy aims to guarantee a baseline production of over 1MMBOPD (Million barrels per day) by 2040 and the discovery of 17.5Billion bpd of oil (barrels per day) and  27 tcf of natural gas. Currently the country’s production is 1.2MMBOPD.

In a mature petro-economy where oil assets are starting to age, perhaps a bold strategy.  Yet the Government with this plan is admitting that production will  be halved compared to  the 1.8MMBOPD of a decade ago.

Angola’s goal of 1MMBOPD of production is not guaranteed.  A writ from the Angolan Government having such a strategy is dependent on  factors beyond its control. Is there any guarantee that a portion of these potential reserves will  not become stranded assets?

What about the majors, in particular TOTAL, which has a dominant position in Africa. In the past months TOTAL’s strategy was to reduce spending, sell marginal North Sea assets, buy Tullow’s Uganda assets at fire sale prices, and seek financing of its  Mozambique LNG project.

The speed of bringing projects to market will not be determined by the Government of Angola, but rather TOTAL’s pursuit of following the IEA norm of well below 2oC.

Clark Butler, author of the IEEFA’s (Institute for Energy Economics and Financial Analysis) reports in a  study “Oil Supermajors’Trajectory Towards Renewables Needs to Scale Up and Speed Up” that TOTAL must drastically increase its renewables and decrease its carbon intensity if it is to meet its climate goals. This can only mean reducing its carbon footprint and yes, in  Africa, and in this case Angola will be thrown under the bus.

Is Angola the exception? Not likely. Other African producers  have varying energy and environmental  policies. Africa is a house divided. Many countries, Many policies.

An African answer can possibly be found  in the long-delayed African Continental Free Trade Area (AfCTFA) which kicks in next year. Then  1.2Billion people across 55 nations needing access to an integrated regional energy market supported by local supply chains and intra-African trade will take place.

Highlighting the agonies of the oil and gas sector tends to blot out the march that renewables are making. Again take Angola and the goals that are being set:

  • The Laúca Hydropower Plant, once completed will reach an installed capacity of 2, 070 MW, becoming one of the largest hydropower plants in Southern Africa, alongside the Cahora Bassa Hydropower plant, in Mozambique.
  • The Baynes Hydroelectric Dam. Located on the Cunene River on the border between Angola and Namibia, the 600-megawatt dam is planned for commencement of construction in 2021, with an estimated cost of $1.2Billion and a completion date scheduled for 2025. Of the 600 MW to be produced by the plant, 300 MW will be directed to Angola and Namibia, respectively.
  • Improving the access to energy services in rural areas based on renewable sources.

    Dr Akinwumi A Adesina, President of the African Development Bank

  • Develop the use of the new renewable technologies connected to the grid, enhancing the establishment of new markets and reduction of regional asymmetries.
  • Promote and accelerate the private and public investment in the new renewable energies.

Finally, a small footnote to congratulate Dr Akinwumi A Adesina, President of the African Development Bank on his re-election for a five-year term. Under his leadership “Light Up and Power Africa”became a key theme of the Bank.

The Bank Group has approved a 125% increase in the General Capital of the Bank raising its capital to $208Billion from $93Billion, the largest in the history of the Bank.

In the next five year period of his Presidency oil and gas assets should be viewed as a currency to finance the next step of the energy transition ensuring that Africa can  design and build its own Green Deal.

Kreeft,  BA ( Calvin University ) and  MA (Carleton University, Ottawa, Ontario, Canada), Energy Transition Adviser, was founder and owner of EnergyWise.  He has managed and implemented energy conferences, seminars and master classes in Alaska, Angola, Brazil, Canada, India, Libya, Kazakhstan, Russia and throughout Europe. He writes on a regular basis for Africa Oil and + Report.

 

 

 

 


Nigeria Will Reduce Taxes on Onshore, Shallow Water Licences in New Petroleum Law

By Toyin Akinosho, Publisher

Nigerian authorities are “not unmindful that the industry players are of the view that the current level of taxation on onshore and shallow water operation is excessive”, Timipre Sylva, the Minister of State for Petroleum Resources, has declared.

“Therefore, proposed petroleum industry bill (PIB) should include the significant lowering on these taxes for new investments and for existing operations”, he explained.

Mr. Sylva announced that in the new law, which will soon start undergoing a series of readings  at the country’s parliament, “lowering of royalties is contemplated, particularly for low levels of production per field”, adding, “it is therefore our hope that the future is more positive and attractive for the Nigerian petroleum industry after the passage of the PIB”.

The Minister, who spoke as a guest of the Nigerian Association of Petroleum Explorationists (NAPE), the largest grouping of oil industry technical personnel, contended that “in the short term, the government will need a maximum fiscal environment to deal with the COVID-19 crisis”.

For this reason, he said, “we are proposing in the new law, a grandfathering”, which, in his view “will preserve current government while also guaranteeing investors return. It also guarantees that investors can continue with existing operations while earning favourable returns”.

The proposed PIB framework shall, he said, “be based on core principles of clarity, dynamism, neutrality, open access and fiscal rules of general application”.

At the same time, investments in new equities “will be encouraged with attractive competitive terms in order to achieve economic growth. Investors in existing assets will be able to sign conversion contracts to obtain better terms for existing production and be able to explore and produce parts of the existing blocks under the new terms. Investors that also want to continue operating under current fiscal terms can elect to do so (I already mentioned that)”.

Sylva, a former governor of the country’s third largest oil producing state, (Bayelsa), explained at the discourse that “Host communities will be adequately covered to foster sustainable prosperity within the communities, provide direct social and economic benefits from petroleum operations to the host communities”.


TOTAL Spuds the Second Well in the Cape of Storms

French major TOTAL has spud the Luiperd-1X well, the second exploration well on Block 11B/12B offshore South Africa following the Brulpadda discovery in February 2019.

The Luiperd-1X well will test the eastern area of the Paddavissie Fairway on Block 11B/12B to follow-up on the Brulpadda discovery of gas condensate and light oil. In the success case, TOTAL and the joint venture plan to flow test the Luiperd-1X borehole by performing a drill stem test. They look forward to drilling results in the fourth quarter of 2020.

Block 11B/12B is located in the Outeniqua Basin, covers an area of approximately 19,000 square kilometers with water depths ranging from 200 to 1,800 meters. The Paddavissie Fairway is in the southwest area of the block and includes the Brulpadda discovery, which confirmed the petroleum system. The Luiperd Prospect is the second to be drilled in a series of five large submarine fan prospects with direct hydrocarbon indicators defined utilizing both 2D and 3D seismic data.

The Luiperd-1X exploration well is being drilled in 1,795 meters of water by the Odfjell Deepsea Stavanger semi-submersible rig to a total depth of 3,550 meters subsea. The well will test the oil and gas potential in a mid-Cretaceous aged deep marine sequence where fan sandstone systems are developed within combined stratigraphic/structural closure. Drilling and evaluation of the well is expected to be completed in the fourth quarter of 2020.

TOTAL operates Block 11B/12B with 45% participating interest in, while Qatar Petroleum International Upstream LLC and CNR International have 25% and 20% participating interests, respectively, in the acreage. Africa Energy holds 49% of the shares in Main Street 1549 (Proprietary) Limited, which has a 10% participating interest in the Block.

 


Woodside’s Equity Jumps to 75% in Senegalese Oil Development

Cash strapped FAR Ltd. has admitted it cannot exercise its right over the sale of the 40% working interest in the Rufisque Offshore, Sangomar Offshore and Sangomar Deep Offshore (RSSD) Contract Area, offshore Senegal, held by Cairn Energy plc, to LUKOIL, as announced by Cairn in July.

In that case, operator Woodside Energy has the opportunity to take all of that equity.

If Woodside successfully acquires Cairn’s interest, the working interest of the remaining joint venture partners in the Sangomar exploitation area will be Petrosen 18%, FAR 13.67%, and Woodside 68.33%. The working interest in the remaining RSSD evaluation area (including the FAN and SNE North oil discoveries) will be Petrosen 10%, FAR 15% and Woodside 75%.

The Sangomar oilfield development, located in these two contract areas, is under development and Woodside has assured it is on course for first oil by 2023.

The sale of Cairn’s working interest is still subject to Cairn shareholder and Government of Senegal approval.

FAR remains in default of its payments to the RSSD joint venture, with the effective date of 23 June 2020. Its June, July and August cash calls are currently unpaid and total $28.2Million. The interest accrued to date on these payments is $0.07Million. As at 31 July 2020 FAR has cash of $63.4Million. FAR has 6 months from the date of default to make good its payments (plus interest) to the joint venture to come out of default. FAR continues to progress a sale of all or part of its working interest.


Tender for Supply of Electricity Substation Equipment

The Electricity Transmission Company of Nigeria (TCN), intends to procure critical Equipment and maintenance materials to ensure stability and reliability of the country’s grid.

The funding of the procurement is to come from the TCN Internally Generated Revenue (IGR) savings. Accordingly, reputable companies are hereby invited to apply for the bidding exercise.

Interested companies are to collect the Standard Bidding document (SBD) for the supply from the offi ce of: General Manager (Procurement) TSP, POWER HOUSE Room 122, 1st Floor, TCN Headquarters, Plot 14 Zambezi Crescent, Maitama, Abuja, Nigeria.

The opening of the TECHNICAL bids is as follows: 12:00 noon on Wednesday, 30th September, 2020 at the; Auditorium, TCN CHQ, Plot 14 Zambezi Crescent, Maitama, Abuja

For further information and/or clarifi cation, please contact the following E-mails: tcn.procurement@tcn.org.ng

The detailed invitation can be found in this link.


Senegal Expands its Stake in Sangomar Oilfield Project

Petrosen has decided to increase its stake in the Sangomar Exploitation Area from 10% to 18%.

Senegal’s state hydrocarbon company is now required to reimburse the other venturers in the Rufisque, Sangomar and Sangomar Deep (RSSD) acreage their pro-rata share of the 8% of expenses relating to the Sangomar Exploitation Area incurred since 8 January 2020.

“As a result, FAR’s stake in the Sangomar Exploitation Area decreases from 15% to 13.67%”, FAR says in a release.

Woodside Energy, the operator, holds 31.89%; and Cairn Energy has 36.44%. Russian giant Lukoil agreed to buy out Cairn Energy’s interest, but Woodside has invoked the right of first refusal. Woodside will now purchase Cairn’s 36.44% by paying $300Million upfront, plus working capital adjustments, including reimbursement of Cairn’s development capital expenditure incurred since 1 January 2020.

Work on the Sangomar Field Development commenced in early 2020 and first oil production is targeted in 2023.

FAR, an Australian junior, has struggled to pay its part of the cost of the project on an ongoing basis and has stated, time and again, that it is willing to sell some or its entire equity.


Conoil Wins Bid for Chevron’s Sale of Equity in OMLs 86 and 88

By Jo-Jackson Mthembu, in Yenagoa

Conoil Producing, the Nigerian E&P independent owned by the billionaire Mike Adenuga, is the winner of the bid for the 40% equity held by Chevron Corp. in Oil Mining Leases (OMLs) 86 and 88.

The Lagos based junior is currently in discussion with the California headquartered major.

It wasn’t clear, as of the time of this writing, how much Conoil is betting on the assets, which lie in contiguity with some of its own producing properties.

Chevron had been trying to dispose the shallow water acreages, located off the mouth of the current Niger Delta basin, for over five years. They are part of the five Nigerian tracts acquired in the course of the merger between Chevron and Texaco 21 years ago.

But things only revved up in the last seven months. Africa Oil+Gas Report disclosed, three months ago, that bidders were expected to make full disclosure of their financial and operating capacities by the end of April 2020.

OML 86 contains the Apoi fields; the largest being North Apoi.

It also holds Funiwa, Sengana and Okubie fields. One recent discovery: Buko, straddles Shell Nigeria operated Oil Prospecting Lease (OPL) 286 and is either on trend with, or on the same structure as the HB field in OPL 286. OML 88 holds the Pennington and the Middleton fields, as well as the undeveloped condensate discovery, Chioma field.

The conclusion of this sale means that Chevron has disposed of all the legacy shallow water assets it acquired when it purchased Texaco in 1999.

Between 2013 and 2015, Chevron sold its stakes in OMLs 83 and 85, both of them former Texaco Nigeria assets.

It’s instructive, then, that Chevron’s largest producing asset in Nigeria, the Agbami field, was “inherited” in that same turn- of –the- century merger with Texaco; this deepwater field alone produces 165,000BOPD, more than a third of Chevron’s total operated crude oil production in Nigeria.

 


Siemens Inks 10 Year Service Contract For Egypt’s Largest Ethylene Plant

Siemens Energy has signed a long-term preventive maintenance contract with the Egyptian Ethylene and Derivatives Company (ETHYDCO), for its industrial complex in Alexandria, Egypt.

Siemens Energy will provide the manufacturer of petroleum products, with a 10-year service contract covering three Siemens SGT-800 industrial gas turbines, which have been in operation since 2017.

As part of the agreement, Siemens Energy’s Industrial Applications team will deliver the full spectrum of turnkey outage services, spare parts and repairs for the gas turbines, which are an essential component of the company’s production processes.

Siemens says that its preventive maintenance solution “improves the reliability and availability of the gas turbines by extending the duration between maintenance intervals, thus leading to lower operational costs”.

In addition, the company explains, the preventive maintenance will help deliver additional environmental benefits, by reducing annual carbon dioxide emissions.

Currently, the power plant produces 150 megawatts (MW) of electricity to power ETHYDCO’s petrochemical complex in Alexandria, which is the largest in Africa. The collaboration between ETHYDCO and Siemens Energy will allow the technical teams to conduct all preventive checks, while unnecessary downtime is minimized.


We Won’t Cave in to Pressure to Sell Assets, NNPC Insists

Nigeria’s state hydrocarbon company Nigerian National Petroleum Corporation, NNPC, says it won’t be pressured to hastily sell its non-performing assets, including refineries, storage depots and dilapidated pipelines, just because a vocal, influential section of the public persistently calls for it.

The company is talking to Afreximbank, it says, and it has won the interest of (Russian giant) Lukoil and some Nigerian banks, to raise billions of dollars to revamp the refineries, after which it will settle into partnership with interested parties, to run the plants.

Last week, the NNPC opened bids by interested private investors to repair the pipelines and depots that are serving the refineries. The winning bidders for the extensive repairs of these pipelines would have to finance them independently and operate for a defined period in order to recover their investment costs with throughput tariffs.

“While we are open to creative ways to run the business”, says Meyiwa Eyesan, the corporation’s Group General Manager for Corporate Planning and Strategy, “what is more pertinent to us is that we run it efficiently and guarantee appropriate returns to our stakeholders who are not only our partners but also the 180 Million Nigerians”.

Speaking at a webinar on Long Term Funding of E & P Business in Nigeria- Strategies For Sustainability, organIsed by the Nigerian Association of Petroleum Explorationists (NAPE) over the weekend, Eyesan recalled the clamour, several years ago, for NNPC to sell its equity in its Joint Ventures with producing companies, in order to pay debts and fund the national treasury. It so happened that the world was going through a low crude oil price cycle at the time, she explained and the NNPC decided it was not a good time to sell. The corporation, instead, sat with its partners and agreed on a strategy to settle over $5Billion cash call arrears which it owed them. “The partners agreed to backstop incremental production to settle the arrears and today, we are over $3Billion settled in the arrears”, Eyesan, an economist by training, told the webinar. “This shows that the financial strategy is working. So, today, I am asking myself now is that questions still relevant,  that NNPC needs to sell down, given the fact that the last clamour for sell down came at a time the corporation was not in a good place (oil prices were crashing) and yet the company found a way out of the debt”.

Eyesan said that NNPC had found a way around the hindrance to the revamp of the refineries. ‘We are now making progress, talking to reputable EPC contractors”.


Tripartite Meeting Resumes on Ethiopia’s Giant Hydroelectric Project

Egypt, Ethiopia and Sudan have resumed negotiations on Ethiopia’s Renaissance Dam, in Khartoum, capital of Sudan.
A meeting between the three countries’ irrigation ministers, an AU representative, and AU chair South Africa’s foreign minister took place Sunday, August 16, 2020.
Although the giant dam is largely for Ethiopia’s electricity supply, the meeting brings together the irrigation and foreign ministers from the three countries.
The ministers will sit again on Tuesday, August 18, with Nalendi Pandor, South Africa’s foreign minister, who is representing Africa Union chair South African President Cyril Ramaphosa.

Ethiopia has been building the Renaissance Dam on the Blue Nile since 2011, a project that has become a source of intense tension between Addis Ababa on the one hand, and Cairo and Khartoum on the other hand. This dam is expected to become the largest water-powered generation facility in Africa.
The 6,000 MW dam is to have a power generation of 16,153 GWh per annum through 16 generating units with 375 MW nameplate capacity each.

The initial filling of the reservoir has been a sticky point in the conversations. Ethiopia has insisted it will not accept negotiations that will lead to “legally binding” on the initial filling arrangements as they limit the country’s fair and equitable access to the Nile.

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