All posts tagged gas


Oil Majors in Retreat from Congo, Gabon

By Fred Akanni, Editor in Chef

French oil major TOTAL announced last week it had agreed to sell its stakes in seven oil fields in Gabon, around the time that news filtered in that ENI had proposed divesting stakes in its operated acreages in Congo Brazzaville.

TOTAL will soon announce sale of its stakes in Congo Brazzaville. It’s only a matter of time.

Considering that Shell sold its entire onshore assets in Gabon in 2017, these two announcements tell the story that the majors are winding down in these countries, where new hub size, short term-to-market discoveries have not been made for some time.

ENI’s decision to sell in Congo is surprising, giving the Italian explorer’s penchant for developing hydrocarbon tanks that other majors dismiss as marginal. Indeed, it was only late in 2019 that ENI completed phase 2A of the Néné Marine project by putting a total of 15 wells into production and approved the implementation of phase 2B.

TOTAL, effectively, is completing a second sell off in Gabon to Perenco, the unlisted French independent, in the space of three years.

The Paris based explorer divested its stake in five fields, representing 13,000Barrels of Oil PerDay, positions in exploratory tracts, as well as the Rabi-Coucal-Cap Lopez pipeline network, all to Perenco, for $350Million in 2017. Now it is selling again to the same company, including the operatorship in the Cap Lopez oil terminal. TOTAL is going to receive $290Million and $350Million for these assets, depending on future prices of the Brent crude.

TOTAL claims to “remain fully committed to Gabon through our operated production clusters at Anguille-Mandji and Torpille-Baudroie-Mérou, where we continue to maximize value for all stakeholders,” but that statement is for optics.

The aggressive French player has the biggest, forward looking projects in Africa today.

It is constructing a $20Billion LNG facility in Mozambique, working on financial close for a $12Billion basinwide oil development in Uganda and appraising a large oil, gas and condensate find, a new heartland if you wish, in South Africa.

TOTAL’s portfolios in Angola and Nigeria, each delivers no less than 350,000Barres of Oil Equivalent a Day.

 

 


AKK: Why the Viability is Fuzzy and Delivery Timeline in Doubt

By Toyin Akinosho, Publisher Africa Oil+Gas Report

At 614 kilometres long, and running through four states, the Ajaokuta -Kaduna-Kano (AKK) National Gas Pipeline in Nigeria is the kind of infrastructure project that is described in the country’s Economic Growth Plan as transformational.

If the theory holds true that gas utilisation projects have a way of following the availability of the core trunk lines. and that every $1 spent investing in gas development and infrastructure will translate to a $3 increase in GDP, we should applaud the inauguration of AKK’s construction.

What has invited so much scrutiny is the Nigerian government’s decision to provide Sovereign Guarantees for the loan taken to construct the Project.

It is so, in part because, this is the first of several gas pipeline projects by NNPC that would come with a loan tag. The state hydrocarbon company constructed the Escravos Lagos Pipeline System and the Oben Ajaokuta gas pipeline from its balance sheet. NNPC has not disclosed that it is borrowing money to construct the 130km, 48 inch Oben-Obiafu /Obrikom pipeline, the biggest such infrastructure in the country.

But with the AKK project, the cash strapped petrostate is staking money from its depleted treasury to shoulder as much as $2.1Billion, net of interest, should there be the most extreme default in paying the loan from The Bank of China and Sinosure, a Chinese export and credit insurance corporation.

The timing and prioritization of the AKK project, in the context of other urgent deliverables in the Nigerian gas grid, the opportunity deliberately thrown away for private sector investment in our infrastructure queue as well as NNPC’s poor record of project delivery, are other issues that make the state’s financing of the AKK quite concerning.

Lenders, as a rule, call for offtake agreements as well as evidence of ability to pay, as preconditions for loans to gas projects.

The NNPC, promoter of this wide diameter (40 inch) line, does not have any Gas Sales Agreement with any factory, manufacturer, or plant, for gas from the project. Instead, it has pledged its entire receivables from gas flows from the existing pipelines today (Escravos Lagos Pipeline System ELPS, Oben-Ajaokuta Pipeline and West Africa Gas Pipeline WAGP) and used that to pledge in terms of the tariff. The tariff-receiving companies are the two gas subsidiaries of the NNPC: Nigerian Gas Processing and Transportation Company and the Nigerian Gas Marketing Company.

NNPC has admitted, in public, that generating the revenue to pay the loan is a tall order. Indeed, the need to convince the lenders it could raise financing for the project, hastened the government’s decision to launch the Gas Transmission Network Code, which takes off in mid-August 2020.

“We didn’t want to burden the National Treasury with funding the construction of the AKK pipeline”, Yussuf Usman, the corporation’s Chief Operating Officer Gas and Power, told a panel session at the Sub Sahara Africa International Petroleum Conference (SAIPEC) in Lagos in late February 2020.  “But when we went out to financiers, and told them we would guarantee the loan with payment from the gas in the various domestic gas transmission pipelines, they asked for volumes”, he explained. “The volumes did not add up”, he said.  “We knew we had to launch the Gas Network Code so that there would be assured volumes and they can be determined”.

President Muhammadu Buhari declares that the pipeline would provide gas for the generation of power and for gas-based industries to facilitate the development of new industries. The president promises that AKK would “ensure the revival of moribund industries along transit towns in Kogi, Abuja, Niger, Kaduna and Kano states”.

For one, the power plant Mr. Buhari refers to, is still on the drawing board.  It was only last February that NNPC received a USAID grant for its feasibility studies.

For another, moribund industries along the AKK corridor notwithstanding, the anticipated industrialization will take time to fledge, but the loan repayment will start being called before any sizeable industrial project takes hold.

Supporters of the AKK project stretch the argument when they compare this project with the ELPS, which some recall, in the original plan, was proposed to be a 12 inch pipeline. “NNPC in its wisdom decided to build a 36” pipeline”, these supporters contend. “As of ten years ago, that capacity, 1Billion standard cubic feet per day (1Bscf/d), was already filled up because gas is about availability”, they enthuse. “Today, we are building a loop around ELPS to double the capacity”, they cheer.

These “facts” have hidden one uncomfortable truth: the ELPS never achieves 100% uptime, so the 1Bscf/d, under NNPC management, has been a façade.

35 years ago, as a young energy reporter for The Guardian of Lagos, I was at the commissioning of the 1,300MW Egbin Power Station in Ikorodu, in the north of Lagos. Tam David West, who was then the Nigerian Minister of Power, said that the nation was anticipating the construction of the ELPS to deliver the gas that would replace the High Pour Fuel Oil, that was being used to fire the turbines at Egbin at the time.

When the ELPS was commissioned 14 years later, the market was ready with, apart from the largest power plant in the country, industrial enterprises along the Ikeja-Ikorodu corridor that were offtakers of natural gas.

The AKK is unlikely to be delivering, in the near future, to that sort of market, so its funding should have been differently thought through. And a key question is why NNPC is insistent on throwing itself at this project which started with the Korea National Oil Company proposing to execute-net of Nigerian national treasury-as part of their taking up two deepwater exploration acreages?.

NNPC, as project manager and executor, is itself a poor advertising for the timeous delivery of any project. It has been constructing two similar grid length gas pipelines, planned for four year execution, for over eight years without visible indication of their completion. It has been looping (constructing a parallel line of the same length) the Escravos Lagos Pipeline System since 2012.  It has also been constructing the Obiafu-Obrikom Oben (OB3) pipeline since 2012. There is no clear line of sight to completion of these projects. And in none of its reports has there been indication of what the delays on the projects mean in terms of haemorraging value.

These two projects are more urgent, in respect of immediate inflow of investment and cash to the Nigerian economy, than the AKK.

Take a few examples.

The ELPS is the primary ferry from the biggest gas processing plants, aimed at the domestic market. These processing plants; Chevron operated Escravos Gas Processing Plant, Seplat operated Oben Gas Plant, and NPDC operated, with NDWestern, Utorogu and Ughelli plants, have the combined capacity to deliver 1.3Billlion standard cubic feet of gas per day, but persistent downtime on the ELPS ensures the gas volumes cannot fully be pumped into this artery and our power plants, those of them that could offtake, don’t receive what they could. So, while NNPC claims it is doubling the capacity of the ELPS, neither the “original” line, nor the “new” line under construction, combined, is delivering anywhere near 80% of a single line (800MMscf/d).

The Dangote Fertiliser gas offtake agreement (75MMscf/d) with Chevron depends on the flip flop of the ELPS uptime, so does Axxela Ltd’s plan to export gas (30MMscf/d) from the western Niger Delta to Togo. Axxela is even working with NNPC to see how they can complete the looping project. This is the scale of incapacity of a company that wants to “own and operate” one more transmission gas pipeline!

The OB3 gas line is the first attempt to turn our gas transmission lines to a grid. It would deliver gas from the rich reservoirs in the east to the captive markets in the west. It is also the source of the gas that will be pumped into the AKK, because the AKK is to originate from Ajaokuta, which is fed from Oben, the terminal point of the OB3. As it is, NNPC has pushed the completion date of OB3 several times over its eight-year construction span.

A $1+Billion gas production and distribution project that depends on the OB3 is the 600MMscf/d ANOH facility, led by Shell and Seplat. Whereas Shell wants to supply the gas to factories in eastern Nigeria, Seplat wants to pump the molecules into the line, straight to Oben in Edo State, for its offtakers in the west of Nigeria. NNPC even forced itself to construct the short gas lines from the processing plants to the OB3 trunk line. These companies went ahead and took final investment decisions on the midstream part of the project, but are they likely to be idly chewing their thumbs after their plants are completed and they can’t evacuate the gas? Last time I checked; they were scrambling for alternative routes to transport the molecules.

NNPC knows what to do. But if you ask the apparatchiks in the company’s towers to spinoff the Nigerian Gas Transmission Company and the Nigerian Gas Marketing Company and sell hefty stakes to the private sector, they will kick and kick, just as they’ve done with the refineries, holding on to zero value. There is enough gas transportation infrastructure to form a very decent balance sheet for a gas transportation company run efficiently by the private sector. But who cares?


ENI Will Fastrack First Gas from New Egyptian Discovery

Italian explorer ENI says it is working with partners, “on fast tracking production”, of its new gas discovery in Egypt, “through synergies with the area’s existing infrastructures”.

The company updated its earlier report of the find, in shallow water Nile Delta offshore Egypt.

Bashrush, as the prospect is called, delivered up to 32 MMscfd of gas.

“The test rate was limited by surface testing facilities. The well deliverability in production configuration is estimated at up to 100 MMscf of gas and 800 barrels of condensate per day”, ENI explains.

Located in the North El Hammad concession, the well encountered 102 meters net gas pay “in high quality sandstones of the Abu Madi formation”, the release says.

ENI, together with its partners bp and TOTAL and in coordination with Egyptian Natural Gas Holding Company, “will continue screening the development options of Bashrush”, with the aim of fast-tracking production through synergies with the area’s existing infrastructures.

ENIholds 37.5% interest and the role of Operator through IEOC, its affiliate, while bp holds the 37.5%, and TOTAL holds the 25% of the contractor share in the concession, which is in participation with the Egyptian Natural Gas Holding Company (EGAS).

 


Egypt, Ethiopia Far from a Truce over Massive Hydroelectric Project

An agreement is still quite far-fetched between the three countries in the conflict over the largest hydroelectric power project in Africa.

Egypt’s Irrigation ministry says that the current round of negotiations, which concludes Friday, is not heading anywhere.

Egypt, Ethiopia and Sudan have been in talks regarding the impact on the flow of water in the River Nile, from the construction of the Grand Ethiopian Renaissance Dam (GERD) by Ethiopia.

At 6,450MW, the dam, formerly known as the Millennium Dam, will be the largest hydroelectric power plant in Africa, when completed.

Located in the country’s Benishangul-Gumuz Region, 15km east of the border with Sudan, it will also be the seventh largest in the world.

The gravity dam on the Blue Nile River has been under construction since 2011.

As of October 2019, the work stood at approximately 70% completion., but the filling of the reservoir, scheduled to begin in July 2020, is what is being held up by complaints from Egypt, which insists that the work will drain away large volume of water from its own section of the river.

An emergency meeting and videoconference of the Executive Council of the African Union, chaired by the South African President Cyril Ramaphosa, a week ago, resulted in considerable ease of tension.

After the talks, Egypt, Ethiopia and Sudan agreed to postpone the impoundment of the gigantic dam.

Sudanese Prime Minister Abdalla Hamdok said in a statement that it had been “agreed that the filling of the dam would be postponed until an agreement was reached”.

Mr. Hamdok added that “Sudan is one of the main beneficiaries of the dam, but also one of the big losers if the risks are not limited, which is why it reminds Egypt and Ethiopia of the absolute need to find a solution, “.

The Nile, which flows over some 6,000 km, is an essential source of water and electricity for a dozen countries in East Africa. Egypt gets 97% of its water needs from this river.

 


Algeria Extends LNG Supply Agreement to France

TOTAL and Sonatrach have signed an agreement that extends Algerian LNG supply into France by three years.

Algerian state hydrocarbon company Sonatrach will deliver up to 2MillionTonnnes per year of LNG to the LNG terminal at Fos Cavaou, on the entry port to the Mediterranean.

Fos Cavaou is a key gateway to the French and European markets.

The agreement also includes the sub-charter of an LNG tanker from TOTAL by Sonatrach.

Algeria’s initial agreement to supply LNG to France was signed in 2004.

 


TOTAL Wraps Up Financing for Mozambique LNG

By Foluso Ogunsan

The TOTAL operated Mozambique LNG (MLNG) project, to monetise the reserves in the country’s deepwater Area 1, is making progress in spite of COVD-19 challenges.

“The financing was more or less been agreed and finalised and signing hopefully it will happen very soon”, says Paul Eardley- Taylor, Head of Oil & Gas Southern Africa, Standard Bank.

Eardley-Taylor, who is perhaps the most optimistic public speaker about Mozambique’s gas prospects, says the country “really has a couple of three unique aspects to it in terms of LNG, which is why volatility really doesn’t affect it. The first one is the obvious one, it’s bang in the middle of the map, if you use the Mercator projections, ideal for Asia or Europe. Secondly you have a large glob of gas in a single location, round about 150Tcf. Thirdly Mozambique is non-aligned and really contributes to security supply in other jurisdictions”.

The two train, 13MillionTonne Per Annum (13MMTPA) MLNG, is one of the two large sale LNG projects under development in Africa’s southeasternmost edge. Final Investment Decision for the project was taken in mid-2019.

FID for The ExxonMobil led Rovuma LNG, which is to monetise the Area 4 reserves, was postponed indefinitely, last April.

What about the insurgency?

“Mozambique is an enormously long country, so it’s important to know where the insurgency is near and not near”, the Standard Bank executive explains. “The insurgency has generally been about 100, 150 kilometres to as far as 300 kilometres from the site”.

“As we generally understand, (the 3.3MMTPA) Coral FLNG is more or less on time in terms of completion, largely unaffected by COVID-19 in South Korea and Singapore,” Eardley-Taylor explains. “So we expect that by third quarter or thereabout of 2022, it comes online”.

Full details of the Financing of Mozambique’s gas projects are published in the June 2020 edition of Africa Oil+Gas Report.

 


Nigerian Companies Are the Biggest Defaulters on Ghana’s Concession Rentals

Sahara Energy Fields, Brittania U and Erin Energy, all founded by Nigerian businessmen, are among the the eight Exploration and Production Companies, that were in default of one payment or another to Ghanaian Tax authorities as of February 2019, the latest date for which data are available.

With $587671.23 behind in both arrears and 2019 outstanding, Swiss African Oil owed the most, according to  Public Interest Accountability Committee, Ghana’s equivalent of NEITI. SAO was followed by Brittania U and Sahara Energy Fields, both Nigerian owned companies, indebted to the tune of $456, 879.26 and $409,315.07 respectively. The fourth most indebted to the Ghanaian state was Gosco/Heritage, with $334,850.00 in both arrears and 2019 outstanding.

Erin Energy, also a Nigerian founded company, owed $151,200. The least indebted companies were Medea $78,050; UB Resources, $37,050 and Springfield, $33,650.


Chevron Advances Process of OMLs 86 and 88 Sale

The sale of 40% equity held by Chevron on Oil Mining Leases (OMLs) 86 and 88, is in top gear. Companies who have shown interest in acquiring the asset are expected to make full disclosure of their financial and operating capacities by the end of April 2020.

OMLs 86 and 86 are located in shallow waters at the mouth of the current Niger Delta Basin.

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 OPL 286 and is either on trend with, or even 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.

If Chevron manages to sell off its holdings in OMLs 86 and 88, it would have disposed off 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.

 


VFuels wins bid for a Modular Refinery FEED in Equatorial Guinea

Equatorial Guinea’s Ministry of Mines and Hydrocarbons, supported by its strategic partner Marathon Oil Corp., has awarded VFuels Oil & Gas Engineering (VFuels) the feasibility study for the construction of a modular refinery in Punta Europa, Malabo.

The study will include the engineering and design of a 5,000Barrels Stream PerDay (BSPD) modular refinery to supply refined products for the country’s domestic consumption. The study is expected to be delivered within 12 weeks of the contract’s signature.

Equatorial Guinea is seeking investments for a modular refinery in the continental region, storage tanks and the promotion of other projects derived from methanol, among others, according to a government statement.

“This is an important step when it comes to implementing this project with an important goal to prevent stock outs, and provide refined products of higher quality to economic operators and the general public,” stated Gabriel Mbaga Obiang Lima, Minister of Mines and Hydrocarbons. “The experience and track record of VFuels in engineering and design of modular refineries at an international level, could be beneficial to this project and Equatorial Guinea.”

The award follows up a meeting in January between President Obiang Nguema Mbasogo, Mr. Gabriel Mbaga Obiang Lima, Marathon Oil Chairman, President and CEO Lee Tillman and Executive Vice President Mitch Little, during which Marathon Oil reiterated its commitment to Equatorial Guinea and towards the development of the country’s Gas Mega Hub. Marathon Oil had then declared its support to construct a modular refinery in Punta Europa by undertaking a conceptual study on the Ministry’s behalf.

Both parties had also agreed to immediately commence feasibility studies related to methanol to gasoline and other methanol derivatives, in coordination with the Ministry of Mines and Hydrocarbons.


Sonangol Begins Second Round of Sale of Equity

Angola’s state hydrocarbon copay Sonangol has launched the second round of its widely anticipated international pubic bid for the sale of its stakes in 52 companies.

Nine companies are up for grabs in this tranche, three more than the six that were involved in the tender launched in January 2020.

The companies include Petromar, where it is divesting 30%; Sonatide Marine Limited, and Sonatde Marine Angola Limitada, 51%; Sonamet Industrial S. A and Sonacergy Services and Oil Construction Limited, 40%.

Sonangol will divest 33% from each of Paenal-Porto Amboim Shipyard and SBM Shpyard. It will sell 30% of Sonadiets Limitad and Sonadiets Services SA.

The companies for sale this time are all involved in oil and gas operations, whereas those in the January 2020 tender are enterprises in non-oil and gas functions

Bidders are expected to submit qualification documents to the Negotiation Committee for the Process of Disposal of Sonangol’s Quota in Mineral Resources and Petroleum Segment.

They are required to present a provisional bond and a value raging from $7000 to $15,000  or equivalent in Kwanzas, based on the existing foreign exchange rate.

The tender is being conducted under the terms of the country’s Public Procurement Law and applications will start to be received in mid May 2020.

 

 

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