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Angola’s Oil Industry –The Turn Around Begins

By Tako Koning

Angola’s oil industry has been low profile the past few years with no really significant major oil or gas discoveries.

Oil production from the country’s mature oil fields continues to decline steadily from a peak production of 2Million barrels of oil per day in 2008 to the current 1.13Million barrels per day.  But it is too early to write off Angola as an important oil producer in the global oil industry. One needs to be reminded that Angola remains Africa’s second-largest oil producer after Nigeria.

In the past few weeks, events have happened which point to a turnaround in Angola’s oil industry.

1.) Nine blocks in the onshore Lower Congo and Kwanza Basins were awarded to various small international and local Angolan oil companies. This is positive news. However, the existing subsurface geological and seismic data indicate that if exploration is successful, the new oil fields will likely be small. Future possible oil production from those areas likely will not materially impact Angola’s oil production. However, the activity there could build a reasonably sized onshore oil industry and create jobs which would be very important for Angola’s struggling economy. 

2.) TOTALEnergies announced they will commence this month the drilling of an exploration well on ultra-deepwater Block 48 in a world record-breaking water depth of 3,628 m (11,900 ft). This record was previously held by TOTALEnergies in an exploration well drilled in 2016 in 3,400 m (11,155 ft) water depth off Uruguay. A possible oil or gas discovery in Block 48, which is located in the Lower Congo Basin, will open up a wide range of similar prospects in this basin’s ultradeep waters. Accordingly, this well will be one of the world’s most high-profile wells to be drilled this year.

3.) This month, TOTALEnergies announced that following their recent successful appraisal well drilled in the Golfinho oil discovery, they will install a floating production project in the deepwater Kwanza Basin to produce oil from the Cameia and Golfinho oil fields. The FPSO will go online in 2026 and produce 100,000 barrels of oil per day. The importance of this announcement is under-appreciated by most oil industry observers and needs to be further explained.

The offshore Kwanza Basin has been explored for over a half-century, beginning in 1968 with the drilling in shallow water Block 7. Neither a drop of oil nor a cubic metre of gas has been produced in the basin since that time. However, beginning in 2011, Houston-based Cobalt International Energy made seven oil, gas, and condensate discoveries in Cretaceous-age pre-salt sediments. Due to a wide range of various issues, Cobalt went bankrupt in 2017 and its discoveries remained undeveloped. Thereafter, TOTALEnergies was awarded operatorship of the legacy Cobalt blocks. The French major re-evaluated the discoveries and remaining prospects and completed the successful Golfinho appraisal well. The Cameia – Golfinho production project will create an activity hub in this part of the Kwanza Basin which will result in a further reappraisal of the other Cobalt discoveries, prospects, and leads which could lead to additional oil production projects.  

At times, oil and gas explorers need to take a historical view of the exploration in any sedimentary basin. In the deepwater Kwanza Basin, in 2011 a huge drilling campaign commenced which was focused on exploring for oil in the pre-salt sediments. The objective was to try to duplicate in the Kwanza Basin the major oil discoveries made in Brazil’s pre-salt, including the giant Tupi (now Lula) and Libra oil discoveries. The operators included BP, TOTALEnergies, Repsol, ENI, Statoil, Maersk, Petrobras, and Cobalt. The results were very disappointing. Oil discoveries by Cobalt and Maersk were non-commercial. The campaign also resulted in natural gas discoveries which were relinquished by the oil companies since at that time they had no rights to the gas. For example, as unbelievable as it may now sound, ConocoPhillips drilled the Kamoxi-1 exploration well on Block 37 and walked away from a 160 m gas column in the pre-salt without testing it.

Since that time, Angola revamped its oil and gas legislation so that the companies are also entitled to any gas they discover. You can be sure that a number of companies have now taken a hard look at the possible appraisal of ConocoPhillips Kamoxi gas discovery in view of the high current and projected global gas prices. Accordingly, in my view, the deepwater Kwanza Basin could eventually host a floating Liquified Natural Gas (LNG) project if the threshold gas reserves for a commercial project are established.  

From a geologist’s point of view, the Kwanza Basin’s gas potential is promising. From an environmental viewpoint, such a project is positive since gas is the least carbon-emitting of the hydrocarbons. Most forecasts are that gas will be the critical “bridging fuel” in the rapidly increasing energy transition. From an economic viewpoint, such an LNG project could be commercially positive since gas prices continue to escalate and the need for gas keeps ramping up worldwide.  

In conclusion, there is lots of life left in the Angolan oil patch and the turn-around has just begun.

Tako Koning is a Calgary, Canada-based energy consultant who worked in Angola for twenty years from 1995 to 2015. He is a graduate of the University of Alberta with a B.Sc. in geology and from the University of Calgary with a B.A. in Economics. He is a registered professional geologist with the Association of Professional Engineers and Geoscientists of Alberta (APEGA). In Angola, Tako was employed mainly by Texaco but also later by Tullow Oil and the American/British consulting firm of Gaffney, Cline, & Associates.  He has been on the International Advisory Board of Africa Oil + Gas Report since its inception in 2001. In 1994, Tako was awarded Honorary Life Membership by the Nigerian Association of Petroleum Explorationists (NAPE) for his work with Nigeria’s university students and also for his assistance to NAPE.  


China is Close to Getting Concession of Angola’s Port of Lobito

The construction arm of China’s state-owned CITIC Group Corporation Ltd. (formerly the China International Trust Investment Corporation) is one of only two companies whose offers for the concession of the Port of Lobito, Angola, were admitted.

The other offer being considered came from International Container Terminal Services Inc (ICTSI), according to the Angolan Ministry of Transport.

The concession for the management and operation of the Multipurpose Container and Cargo Terminal at the Commercial Port of Lobito is for a period of 20 years, the ministry says.

Bolloré Logistics, the French-owned company with a wide Africa network, put in the preliminary bid, but it failed because it did not provide for the payment of the minimum amount of the concession fee of 80Million dollars under the terms of the tender specifications.

Dubai Port World, Yilport, Qterminal, and Abu Dhabi Ports all bid for the concession, but did not make an offer.

An evaluation committee will rate the proposals admitted to the competition, and the winner is expected to be announced before the end of 2021, according to the statement.

The container and general cargo terminal at the port of Lobito has a total area of ​​241,540.94 square metres, a berth of 1,199 linear metres, and the capacity to handle more than 600 thousand tons of non-containerized cargo and 250 thousand TEU (unit equivalent to 20 feet) per year, the Ministry of Transport claims.

CITIC Construction has branches in Algeria, Angola, Venezuela, Brazil, Argentina, Uzbekistan, Kazakhstan, Belarus, South Africa, Kenya, Russia, Myanmar, and a number of other overseas markets.


Eroton, Hurting, ‘Walks Out’ of the Nembe Creek Trunk Line, Halts Delivery of Crude through Bonny Terminal

By Toyin Akinosho

The Nigerian independent, Eroton, has stopped evacuating its crude to the Bonny Terminal through the Nembe Creek Trunk Line.

The operator of Oil Mining Lease (OML) 18, an onshore acreage in eastern Nigeria, commenced oil barging operations (shipping its cargoes on water) from the lease, to a Floating Storage Offshore vessel on the Atlantic, in late September 2021.

Although, Eroton had planned an alternative evacuation route for its crude for the last four years, this move came almost abruptly.

The company has struggled with massive crude oil theft by vandals along the 97kilometre NCTL, the newest and yet the most persistently damaged, crude to terminal evacuation pipeline in the country.

Eroton has the capacity to produce over 40,000 Barrels of Oil Per Day, but oil delivered to the Bonny Terminal for sales was approximately 6,600BOPD in first half 2021, compared with 25,200BOPD in first half 2020, according to recent update by San Leon, a London listed company which owns 10% of the acreage.

While OPEC restrictions have been a key part of the steep reduction, “third party terminal and gathering system issues”, (San Leon’s phrasing for Bonny Terminal and NCTL)  have been most responsible for the decline.


Kenya To Produce 120,000BOPD at Peak, if $3.4Billion Oilfield Project Goes Ahead

By Toyin Akinosho

Partners in Kenya’s two proven onshore acreages have high graded the field development plan for the basin-wide, crude oil project.

Far from the earlier proposed “foundation stage development” involving a 60,000 to 80,000Barrels of Oil Per Day (BOPD) Central Processing Facility (CPF) and an export pipeline to Lamu, the three companies: Tullow Oil (operator), Africa Oil Corp, and TOTALEnergies, have now informed the Government that Blocks 10BB and 13T licenses can deliver production plateau of 120,000BOPD, with expected gross oil recovery of 585Million barrels of oil (MMBO) over the full life of the field.

This resource position, the partners say, “is supported by external international auditors Gaffney Cline Associates (GCA), who have issued a Competent Persons Report (CPR) and confirmed the life of field resource position of 585MMBO”. 

Charles Keter, Kenya’s Cabinet Secretary for Energy & Petroleum

The key changes to the development concept have been driven by: 

1. Incorporating the production data from the Early Oil Pilot Scheme (EOPS) where 450,000 bbls were produced from Amosing and Ngamia fields. These two fields account for over 50% of the resource distribution, leading to greater confidence in achieving the higher end of the resource distribution range.

2. Optimising the number of wells to be drilled with drilling initially at the crest of the fields to achieve First Oil. Changing the producer to injector ratio from 2:1 to 1:1 leading to improved pressure support and higher resources recovered from the reservoir. 

3. Adding the Ekales field into the first phase of production. Ekales is geographically straddled between the Twiga and Amosing fields and ongoing technical work has helped mature our understanding. 

As such, the first phase will now include the Ngamia, Ekales, Amosing, and Twiga (NEAT) fields and will target 390MMBO of the overall 585MMBO. 

4. Optimising the overall development cost with a facility design capacity of 130,000BOPD and an increase to the pipeline size from 18” to 20” to handle the increased flow rates. 

Total gross capital expenditure (capex), which covers both the upstream and the pipeline to First Oil, is expected to be c.$3.4Billion. 

The increase in capex from the previous design is due to a bigger facility processing capacity, additional wells to be drilled, and larger diameter crude oil export pipeline, which delivers a 30% increase in resources whilst lowering the unit cost to $22/bbl (previously c.$31/bbl). 

The revised concept also allows greater flexibility in adding additional fields into production without significant modifications to the project’s infrastructure.


Tullow Oil, Largest Operator in Ghana, Declares $93Million Profit After Tax

Tullow Oil, the London-listed independent that runs the largest oilfield operations in Ghana, has declared a profit after tax of $93Million for the First Half of 2021.

Most of the money was made from the proceeds of crude oil production from the West African country.

“The start of drilling in Ghana is one of the most tangible examples” of the significant achievements made during the period, the company explains.

Tullow’s gross (operated) production in Ghana averaged c.107,000Barrels of Oil Per Day (BOPD), with c.70,600BOPD(net: c.25,100BOPD) from the Jubilee field, “slightly ahead of expectations due to good facility uptime and well performance”. Gross production from the TEN fields averaged c.37,000BOPD(net: c.17,400BOPD).

Working interest production from Ghana averaged c 42,500BOEPD in 1H 2021, three times the WIP from Gabon (c.14,800BOEPD). Overall Group working interest production averaged 61,230 BOEPD, with Equatorial Guinea and Cote d’Ivoire contributing 2,100BOEPD and 1,800BOEPD respectively. 

Operating costs during the period averaged $12.9/bbl, “a year-on-year increase primarily due to lower production and increased costs related to extended COVID-19 operating procedures”.

Tullow reports underlying operating cash flow of $218Million and free cash flow of $86Million during the period and congratulates itself on reduced administrative expenses of $23Million in 1H 2021, “down c.50% year-on-year”. 

The company’s spent $101Million on capital investment and $37Million on decommissioning.

But its net debt at 30 June 2021 was around $2.3Billion, it says, with gearing of 2.6x net debt/EBITDAX; and “liquidity headroom and free cash of $0.7Billion. 

Tullow says it completed a comprehensive debt refinancing with $1.8Billion of five-year Senior Secured Notes issued and a new $500Million revolving credit facility.


Final Edits Hold Up Release of NNPC’s Full Audited Accounts

Some process bottlenecks are preventing the Nigerian National Petroleum Corporation (NNPC) from releasing the full, detailed audited accounts for 2020 until late Friday, September 3, 2021, or Monday, September 6, 2021. 

Ranking sources at the state hydrocarbon firm tell AfricaOil+Gas Report that the publication of the audited accounts was shifted from Tuesday, August 31, 2021, to September 3 or 6, 2021 “because we had to be sure that every little error is spotted and cleaned up”. 

NNPC’s full audited account for 2020 has been widely anticipated since President Muhammadu Buhari announced the headline earnings on August 25, 2021, especially with the claim that the company made a profit after tax of ₦287Billion, and it was its first profit in 44 years. 

BusinessDay, the country’s top financial daily, claims that its fact-checking reveals that NNPC reported a profit of ₦111.59Billion, in 2017. But the newspaper did not say whether those figures were fully audited. Then again, BusinessDay’s report is clearly a counterpoint to NNPC’s claim that its first audited annual report since its creation in 1977 was released in 2019, for the full year 2018. The corporation has also stated that the second annual audited report, released in 2020, was for 2019.

Part of the query trending on social media is how the corporation moved from a loss of ₦803 Billion in the year 2018 to a loss of ₦1.7 Billion in the year 2019 to a profit in 2020- a year of lower crude oil prices and lower crude output- and how it seemed to have zoomed to its first profit in 44 years when it never reported an audited account until 2019?

There are allegations that the ₦287Billion PAT “is actually a retention of 20% of the profits and dividends paid by independent entities,  which the NNPC received on behalf of the federation (Federal Government of Nigeria, States, and Local Government Areas)”. 

NNPC spokespersons would not respond to these insinuations, and even our sources would not volunteer answers, but they insist: “wait till the report is published, then you can analyze all you want”.


Etame Co-Venturers Approve Replacement of FPSO Offshore Gabon

VAALCO Energy’s co-venturers on the Etame field offshore Gabon, have approved the agreements to replace the existing Floating Production, Storage and Offloading unit (FPSO) with a Floating Storage and Offloading unit (FSO).

The new deal, VAALCO says, will significantly reduce storage and offloading costs by almost 50%, increase effective capacity for storage by over 50%, and is expected to lead to an extension of the economic field life, resulting in a corresponding increase in recovery and reserves from the field.

That transaction, christened ‘the Bareboat Contract and Operating Agreement with World Carrier Offshore Services Corp’, is now effective.

“We expect to have the FSO in place and operating in September 2022 prior to when our current FPSO contract expires”, says George Maxwell, VAALCO’s Chief Executive Officer. ”We will continue to maximize the value opportunities for our shareholders and look forward to beginning our next drilling campaign at Etame later this year.”

VAALCO, holds a 63.6% participating interest in the Etame Marin block, which to date has produced over 120Million barrels of crude oil and of which the Company is the operator.

 


GNPC’s Not Part of Government of Ghana, State Oil Firm Tells Auditor General

By Toyin Akinosho

Ghana National Petroleum Corporation (GNPC) says that the country’s Auditor General was wrong to have accused it of breaching Public Procurement Law pertaining to Parliamentary approvals for international business transactions.

The corporation says that the cited law strictly relates to “Government” business and not generally to statutory corporations set up for commercial purposes.

“The Ghana National Petroleum Corporation Act (PNDCL 64) establishes GNPC as a distinct legal entity and, as such, it is not legally considered to be part of Government”, GNPC declares.

GNPC was responding to the call on government, by the Auditor-General’s office, to sanction the corporation for procuring the following five contracts, for a total sum of $34,165,235.15 and GBP464,963.13 (about $34.165Million and £465,000), without Parliamentary Approval.

The contracts, as well as the manner with which they were procured, are listed as follows:

1 Procurement of Teammate full version automated audit management system 28/08/2015 Wolters Kluwer Tax and Accounting Ltd $60,100.00. Single Source.

2 Procurement of Resolve Software 04/10/2016 Messrs. Petroleum Expert (UK) Limited £47,883.13 Single Source.

3 Procurement of Seismic Survey Design Software and related activities 23/06/2017 Messrs GX Technology, GMG Products Division $116,039.15. Single Source.

4 Procurement of a contractor to acquire and process 2D Seismic Data over the Voltarian Basin for GNPC 15/04/2015 Messrs. BGP-Bay Geophysical Limited $33,989,096.00. Restrictive Tendering.

5 Development of Brand Architecture for GNPC and Explorco 27/11/2015 Future Brand £417,080.00. Single Source.

“This practice has the tendency of not allowing the intentions of the promulgators of the law (1992 Constitution) inure to the benefit of the State”, the Auditor-General had admonished. “It also denies the Lawmakers the opportunity to make inputs towards such transactions.

“The absence of above could plunge GNPC into paying for higher contract sums and possible judgment debts. Report of the Auditor-General on the Public Accounts of Ghana – Public Boards, Corporations and Other Statutory Institutions for the year ended 31 December 2020 142”, the Auditor-General observed. “We recommended that Management of GNPC should be sanctioned in accordance with Section 92 of the Public Procurement Act 2003, (Act 663) as amended for breaching the Public Procurement Law”.

The Auditor-General’s Office however noted that GNPC Management explained that “the products involved in the transactions in question were all proprietary products that needed to be procured from the Original Equipment Manufacturer (OEM)”.  

The GNPC Management also stated, according to the Auditor-General, that it sought and obtained the approval of the Public Procurement Authority (PPA) for those transactions and that the items involved were captured in the approved annual budget of the corporation which was approved by Parliament, as well as its approved procurement plans for the respective periods”. But the Auditor-General’s report insisted that the “ said budgets were not made available for our review, more so, from our audit point of view, Parliamentary approval of the Corporation’s budget does not imply approval for international business contracts since the budget does not indicate the procurement method to use neither does it indicate the vendors to deal with”.

It, therefore “reiterated its audit recommendation”, that GNPC be sanctioned.


NNPC Says it Made a Profit, a First, in 44 Years

Nigeria National Petroleum Corporation has declared a net profit for the year 2020.

The state hydrocarbon firm announced, through the President of the country, a Profit after Tax of Two Hundred and Eighty-Seven Billion Naira (₦287 Billion) in the Year 2020, sequel to the completion of the statutory Annual Audit exercise for the Year 2020.

“The NNPC losses were reduced from ₦803 Billion in the year 2018 to ₦1.7 Billion in the year 2019 and the eventual declaration of Net Profit in the Year 2020 for the first time in its 44-year history”, a statement by Femi Adesina, Special Adviser (Media and Publicity), to President Muhammadu Buhari, said.

“This development is consistent with this administration’s commitment to ensuring prudent management of resources and maximization of value for the Nigerian people from their natural resources.

NNPC published an audited annual report for the first time in 2019; it was the 2018 annual report. It published the 2019 annual report in August 2020, exactly a year ago.

The media has been so excited by the fact that NNPC now publishes audited annual reports that the default response is to praise the NNPC management for the achievement of publishing an audited annual report. The content of the reports, with the exception of the worn-out conversations around the corporation’s malfunctioning crude oil refineries, is hardly debated.

President Buhari’s own statement on the report toes the line: “I congratulate the Board, Management, and Staff of the Corporation and look forward to greater value creation for the Nigerian people.”


ENI Starts Production of Angola’s Cuica Field, Four Months After Discovery

Italian explorer ENI has reported starting production of the Cuica Field, in Block 15/06 of the Angolan deep offshore.

The company’s release does not provide the output figure, but it explains that the field is being produced via the Armada Olombendo Floating Production Storage and Offloading (FPSO) vessel.

First oil came on July 30, 2021, “just over four months from discovery”, the company says.

The Cuica field was discovered by the exploration well Cuica 1 in March 2021. It is located in a water depth of 500 metres, approximately three kilometres from the Olombendo FPSO. The early production of the development, that will increase and sustain the Olombendo FPSO production plateau, includes an oil producer well and a water injection well, tied back subsea to the existing Cabaça North subsea production system, thus exploiting the full potential of available infrastructures in the area.

The Armada Olombendo FPSO has a production capacity of 100,000 barrels of oil per day and is designed to operate during her production life with zero discharge. Besides Cuica, whose production rate is in line with expectations, the Olombendo is now receiving and treating the production of Cabaça, CabaçaSouth East, and UM8 fields for a total of 12 wells and 5 manifolds at a water depth ranging from 400 to 500 metres. The Olombendo FPSO will also receive production from the Cabaça North field in 4Q 2021.

Block 15/06 is operated by ENI Angola with a 36.84% share. Sonangol Pesquisa e Produção (36.84%) and SSI Fifteen Limited (26.32%) compose the rest of the Joint Venture. Further to block 15/06, ENI is operator of exploration blocks Cabinda North, Cabinda Centro, 1/14 and 28, as well as of the New Gas Consortium (NGC). In addition, ENI has stakes in the non-operated blocks 0 (Cabinda), 3/05, 3/05A, 14, 14 K/A-IMI, 15, and in Angola LNG. 

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