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Nigerian Independents Feel Abandoned by Regulators

By Jackson Jo- Mthembu, Lagos

Nigerian regulators have treated the country’s independent E&P companies, quite shabbily, at a critical time for both the nation and the players themselves, according to Layi Fatona, CEO of Niger Delta Petroleum Resources.

“We indigenous independents are like orphans”, he said at a recent webinar on the Pandemic-Induced downturn and Nigerian Petroleum Industry, adding that while the entire group of Oil and Gas producers was left out of various palliatives sponsored by the Federal Government and its agencies, “not one regulator stands to be recognized for the Nigerian Independents, sadly.”

Fatona argued that “Nigerian independents own the future. We are the only ones to ensure Nigeria’s Future Energy Independence. Nigerian Independents account for c.20% of Total Oil Production Combined, we are the largest suppliers of Domestic Gas to the Nigerian Economy. We continue in all circumstances to INVEST in Nigeria’s Energy Industry and among the over 15 of us that truly operate our fields, we take the everyday brunt of Insecurity (Pipeline Vandalism, Illegal Bunkering & Kidnapping). Perhaps – We Are the “Stone” the Builder is Rejecting or Neglecting”.

The webinar was organised by Centre for Petroleum Information, a 20-year-old Policy Think Tank.

With a global pandemic forcing travel restrictions that have held down crude oil prices, Nigerian independents have been challenged by the “inability to operate and produce at break-even cost, some shut in of production operations, difficulty in meeting Royalty, Taxes and Debt financing obligations, disengagement of staff and employees in some cases”.

Fatona asked Nigerian regulators to “act as critical enablers and support for advancing the case of the Nigerian Independents”, and called on “agencies such as the CBN need to engage local financial institutions on the possibility of restructuring existing debt obligations to facilitate survival of the industry”. He argued for “more emphasis to be placed on Operational and Cost Efficiency”,  and declared that “the Petroleum Industry Bill is needed NOW to create the right fiscal environment for new development investments”.

Nigerian independents, by Fatona’s definition, are Indigenous oil and gas companies with holdings of marginal fields or oil blocks. The assets are in the Niger Delta province in Nigeria, comprising Land, Swamp and Offshore locations. Their gross and equity production, individually, range from 1-85,000BOPD. They are purely indigenous or, in some cases, with minority foreign interests. They operate under JVs, PSCs and TSAs. They are funded by Nigerian/International Lenders OR carry arrangements from IOCs.

 

 

 


Assala Has Vivid Plans Post COVID-19

Assala Energy increased production of the Shell assets it bought in Gabon from 40,000BOPD to 55,000BOPD in the space of two years.

The London headquartered company claims it installed new equipment and brought down the cost per barrel to $12.

It is hoping to ride the storm of steep drop in prices, exacerbated by COVID-19, even with all the volatility.

Assala pumped $60Million into the five acreages in 2018 and spent $240Million more in 2019, in the process, drilling 20 new wells and optimizing 60 existing wells.

It had a war chest of $300Million for 2020, of which it had spent $70Milion in the first quarter alone.

So what will happen now?

If it survives the next 12 months, its plan is to continue from where it stopped.

The company was raring to go before COVID-19 happened. In late 2019 it acquired three onshore exploration licences from the Gabonese authorities: Mutamba-Iroru II, Nziembou II and Ozigo II, in addition to the five licences it purchased from Shell: Rabi Kounga II Toucan II Bende M’Bassou Totou II, Koula/Damier and Gamba/Iyinga. It also holds interests in four non-operated licences (Atora, Avocette, Coucal and Tsengui.

This story was originally published, for the competitive benefit of paying subscribers, in the May 2020 issue of the monthly  Africa Oi+Gas Report.

 


Kenya’s Post COVID-19 Oil & Gas Future: Some Insight

Kenya’s oil and gas industry is in a state of transition, as its major oil and gas development — Blocks 10BB and 13T in Turkana — has been put on hold, with Tullow Oil submitting a notice of force majeure to the Kenyan Ministry of Petroleum and Mining, citing complications from COVID-19.

Meanwhile, Uganda’s Lake Albert Project is moving ahead, with TOTAL announcing plans to acquire Tullow Oil’s stake in the project. The massive development in Uganda, which is set to include a pipeline and refinery, could easily have an impact on regional oil and gas developments and opportunities.

“Force majeures are reactive for companies, it is something that is beyond their means or the problem there are facing. So, it is unfortunate that this has happened in Kenya”, said Elly Karuhanga, Chairman of the Uganda Chamber of Mines & Petroleum & Chairman, Private Sector Foundation Uganda, “but it is also unfortunate that Tullow had to exercise this in their business. When you think about the reasons they faced, they had no alternative.”

He was speaking at a webinar themed ‘Moving Kenya Forward: Oil Production and New Exploration Under COVID-19,’ organized by Africa Oil & Power and the African Energy Chamber.

The webinar participants noted that Kenya has the most natural resources and is the most explored country in the East African region and argued that in order to have a knock-on effect and attract investors in this climate, East African countries need to keep exploring and looking at other projects. In Kenya, there are offshore blocks operated by ENI and hopefully with a great oil flow they will help the economy.

Toks Azeez, Sales and Commercial Director for Sub Saharan Africa for Baker Hughes, says his company expects the transition into Kenyan deep-water explorations to be less difficult, because it is already involved in offshore projects across Africa and has actively interacted with ENI in Kenya. “For us it is more about, how do we get our local partners in Kenya who have been involved in the onshore activities, to then up their game a little bit to meet the offshore requirements and that’s going to take a lot of back and forth, integration, cooperation to get them to a point where the skillset of that personnel and the equipment that they have and intend to acquire will be able to meet the requirements of deep-water play,” said.

Speakers encouraged synergies and regional collaboration to overcome the challenges faced by the oil and gas industry. Local companies as well as countries need to come together to find a solution to them. According to Mwendia Nyaga, Chief Finance Officer of Oilfield Movers. “Companies can scale up from the location at which they are based and start working in other places. For me it is cooperation, synergizing and not over complication.”

African governments are advised to think about the long-term effects COVID-19 has on oil and gas projects as well as how to regain investors’ appetite, “You should always look at fiscal incentives that allow fair and equitable taxation on revenues, but allow an investment environment that is lucrative, because every dollar in our industry can go anywhere in the world. East Africa, big companies and the small -medium sized oil and gas companies, will look at the investment climate as to where they get greater bang for their buck and that will mean that if the East African region does not have favorable fiscals then the dollars will go elsewhere, where you will get better bang for your buck, so there is a balance. When government is looking at this to be able to enable an environment where investment will be made, knowing that the risk is carried by the investors initially,” said Brian Muriuki, Managing Director & Country Chair of Royal Dutch Shell Ghana.

Doris Mwirigi, Chief Operating Officer of Energy Solutions Africa closed by sharing her belief that the oil and gas industry is in a transition, seeing that oil prices are slowly recovering to pre-COVID-19 prices. “In Kenya we are already at the forefront in terms of green energy and if you look at it, we are still very dependent of fossil fuels. So, you find that we are ahead in terms of green energy, however, I am still an oil girl and believe that oil and gas will recover, and in any case as you can see globally, the oil prices are prices are coming up and if you look at the equity market the oil prices are good for oil companies, so I think oil and gas will still play a major role in the oil and gas mix and we will be here,” she said.

Mwirigi also touched on the involvement of women and how the EqualBy30 initiative will empower more women in the oil and gas sector, “When you talk about adding women, it should not be just about diversity, but a business decision because companies headed by women do better. So, it’s not even a cry for help or diversity but business sense.”

 


Zomo-1; Likely Fifth Success or First Duster

Savannah’s Fifth Success or First Duster?

Savannah Petroleum has moved the GW 215 Rig to drill the fifth well in its exploration campaign in the Niger Republic.

Zomo-1, spudded on September 8, follows Bushiya-1, Amdigh-1 Kunama-1 and Eridal-1, all drilled by the British explorer between March and August 2018, and all of which encountered crude oil bearing zones, considered by Savannah to be of commercial size.

But none of the wells have been tested, so there is no clear handle on flow assurance.

As with others, Zomo-1 is located in the R3/R4 PSC Area in the Agadem Basin, south east of the republic of Niger. It is also, as with the rest, designed to evaluate potential oil pay in the Eocene Sokor Alternances as the primary target.

The well is planned to be drilled to a total depth of 2,438metres Drilling is expected to take between 30 and 35 days.

The Company plans to log all prospective sections within the well, with further logging employed for hydrocarbon bearing sections. “In the success case, the well will be suspended for future re-entry and further evaluation, which could include well testing”, the company says.


The State is Aware that Shell Will Sell Nigerian Acreages Upon Renewal

Officials in the Nigerian Ministry of Petroleum Resources are aware that the Anglo Dutch major Shell is inclined to divest from several of the 17 onshore acreages it asked the government to renew.

But they have gone ahead to renew most of the licences anyway, because they think it is unlawful not to do so.  The extant licences on the acreages were due to expire in 2019.

“By the regulations we are working with, all these assets we have renewed deserve to be renewed”, Ministry sources categorically tell Africa Oil+Gas Report.

“Shell can take us to court if we don’t renew”, say ranking government officials in the Ministry, who also argue that, with state sponsored bid rounds not having happened in the country in the last 11 years, the frequent Shell lease divestments since 2008 “have benefited Nigerian companies”, who have purchased the stakes belonging to Shell and other international companies in these assets.

As it is, even during the process of renewal between late 2017 and mid-2018, Shell was actively negotiating on the side, with several parties, its divestment from three of the acreages in the renewal basket: Oil Mining Leases (OMLs) 11, 17 and 25.

Shell was asked to pay $820Million for renewal of 14 of the 17 acreages it sought to renew, including OML 25, an acreage that Shell had put in a divestment round in 2014, but failed to sell because of a last minute NNPC invocation of its right of first refusal. Shell, NNPC and several parties have been involved in closing that transaction since that time.

Regarding OML 11 and 17, Shell has, for a while, been negotiating with buyers and has put a $1.2Billion invoice on the table.

It would seem that such asset should not have been renewed, since Shell had demonstrated that it was going to sell them. It would, ordinarily appear intriguing, that the state would renew the licence of an acreage to a company that had clearly shown it no longer wanted it.

Why don’t you put it in a bid basket so that the state gets the benefit of the licencing?, we asked.

But MoPR officials say that Shell has paid all it needed to pay on every asset in the 30 years since they were last renewed and had extensive work programme on each of the acreages, so it would have been illegal to say no to renewal.

Out of the 17 onshore acreages Shell submitted for renewal in late 2017, only three were revoked, at the provisional conclusion of the process in February 2018, “for lack of enough work done over the last 10 years”.

Shell requested for renewal of OMLs 11, 17, 20, 21, 22, 23, 25, 27, 28, 31, 32, 35, 36, 43, 45, and 46. It succeeded in getting everything renewed, but for four acreages.

OMLs 31, 33 and 36 were denied approval, while the government decided to cut OML 11 into three because it was too large. But Shell has contested the decision on OML 11, arguing that “the proposal would unduly punish” the company, which had conducted operations in the asset “legally and in full compliance with the law”.


Angola Needs to Drill More Oil Wells to Produce Gas

By Sully Manope, in Soyo

Angola’s LNG plant has dropped in production as a result of reduced amount of natural gas that come from the crude oil platforms that supply it.

It sounds intriguing, but the plant relies entirely on associated gas: natural gas which cohabits in the same reservoirs as crude oil.

ALNG’s production capacity is 5.2 Million Tonnes Per Annum (5.2MMTPA). The train can process up to 1.1 billion cubic feet of natural gas per day,

Diamantino Azevedo, Angolan Minister of Mineral Resources and Oil is quoted by Angolan state news agency Angop, as saying that additional investments are needed in drilling more oil wells in the country, in order to increase the natural gas that is channelled to ALNG plant “to reach the installed production capacity.” The minister reportedly added: “This is a challenge that Angola LNG and the country have to take on, in order to achieve capacity and maintain project stability over a long period of time”.

The immediate challenge to Mr. Azevedo’s wish is the immediate status of Angolan rig count. Angolan rig activity figures had crashed from robust 22 in September 2015 to 4 in August 2018, according to the August /September 2018 edition of the monthly Africa Oil+Gas Report.

Angolan LNG has had its fair share of challenges since it came on line in 2013. Barely a year after commissioning, it faced an extended plant shutdown of more than two years from April 2014 to June 2016 to fix a number of design issues that caused an incident on 10 April 2014

That situation led Chevron, the operator, to create an internal project management system to better track contractors and subcontractors on major projects. Chevron is the largest stakeholder in the facility, holding a 36.4% interest, with partners that include Sonangol, 22.8%, and BP,  ENI and TOTAL, with 13.6% each.

 


Shell Plots A Return To Angola

By Moses Aremu, Editor

Anglo Dutch major Shell is keen on purchasing the operator stake in Angola’s Blocks 21/09 and 20/11, two very prospective acreages in the deepwater Kwanza Basin. These are the assets that Cobalt Energy, the US minnow, operated in the country until 2015, when it sought to sell its 40% stake in them to Sonangol, the state hydrocarbon company, for $1.75Billion.

That transaction fell apart in 2016, and Cobalt took Sonangol to international arbitration over its failure to extend the licence deadlines. The two companies reached a settlement-Sonangol reported in December 2017- which called for Sonangol paying $150Million by February 23, 2018 and a further $350Million by July 1, 2018.  

Sonangol has now put up, for auction, Cobalt’s 40% stake and operatorship of these assets.

Observers see Shell’s interest in the blocks as a way of re-entering the country. Cobalt’s 2016 annual report indicated that it made seven discoveries in the blocks with a total of 750Million gross barrels of oil equivalent. A significant part of the volume is natural gas, the hydrocarbon fluid type that Shell is most interested in trading with.

Shell went to Sonangol’s data showroom in Houston on early June 2018, with a delegation of about a dozen officials and the company was widely speculated as the leading contender for the assets.

Shell was one of the earliest entrants into the deepwater activity in Angola between the early and late 1990s. Its Bengo-1 well, drilled in Block 16, tested 1,780BOPD in one reservoir, the first discovery in deepwater Angola. The company’s initial enthusiasm about the structure was restrained by the well’s high gas cap and pancake thin reservoirs, but Shell was willing to risk an early production. The enthusiasm waned when Bengo-2 turned out to miss even the thin bed that was of such fascinating interest in Bengo-1. Then the more it drilled, the less fortunate the company got.  Whereas other operators: TOTAL, Chevron, ExxonMobil, even BP, went on to make discovery after giant discovery, Shell got trapped in a run of ill luck, drilling nine wells in Block 16, most with marginal results. This is curious, because Block 16 is located between the two most successful leases in the country: ExxonMobil’s Block 15 to the north and TOTAL’s Block 17 to the south. The last well Shell drilled in Block 16 was Chiluango-1 which was abandoned in early November 1998 as a dry well. In 1999, the company packed out of Angola and shifted its gaze to Nigeria where, by 1996, it had become sure of the deliverability of its huge Bonga structure, located in the upper slope of the deepwater Niger Delta.


Mixed Grill in The Indies’ Camp

By Fred Akanni, Editor in Chief

Africa focused Western independents, listed in London, Toronto, Oslo and New York, have a mixture of experiences about projects they are pursuing on the continent.

While it’s true that the depressed crude oil price period of 2014 to 2017 hit them hard, and several of them were on the retreat from Africa, the overall investment narrative about this species is a lot more comprehensive.

For every Ophir Energy (who is harassed by government, spurned by partners and cold shouldered by financiers), there is a Kosmos Energy, (who is applauded by the market and hailed by government partners).

For every Tullow Oil that is counting both cost and listing its blessings to look on the bright side, there is an Africa Oil Corp. which is collecting a Landlord’s rent and is on an acquisition binge.

One challenge that is common to most independents is that the new oil and gas reserves that were discovered in the heyday of the last boom have now reached development phase.

Our question remains: Are these independents still, as a group, the markers to where the opportunities lie in Africa?

Africa Oil+Gas Report’s 2018 edition of Independents’ Day, the magazine’s once-a -year review of activities of foreign independent companies operating in Africa, pays close attention to the results of these companies’ exploration ventures in little known basins on the continent, as well as details of plans for the near term. Our job is much more than presenting the general picture. It is to ensure that wherever you are on the planet, you get such a grasp of deal flow, operational plans, and short to mid-term strategies that provide you enough understanding of what’s going on around Africa’s hydrocarbon resources to make a profitable investment.

The Africa Oil+Gas Report -a monthly trade journal-is the primer of the hydrocarbon industry on the continent.

Find out in these pages.

 


Sinopec Pays $3.1 Billion For A Chunk Of Egypt

Pompey's Pillar in Alexandria..Photo by Toyin Akinosho

Chinese behemoth Sinopec is paying $3.1 billion for 33 percent of  Apache Corp’s hydrocarbon assets in Egypt. The two companies say that this is the first step of a global strategic partnership to pursue joint upstream oil and gas projects. Apache will receive the money in cash, subject to customary closing adjustments, in exchange for Sinopec gaining a 33 percent minority participation in Apache’s Egypt oil and gas business. Apache will continue to operate its Egypt upstream oil and gas business.

The Egypt partnership is subject to customary governmental approvals and is expected to close during the fourth quarter, with an effective date of January 1, 2013.

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MODEC Wins FPSO contracts for TEN Project in Ghana’s Deepwater

Japanese contractor MODEC has won the contracts for the supply, charter and lease, operations and maintenance of a Floating Production, Storage and Offloading (“FPSO”) vessel for the Tweneboa, Enyenra, and Ntomme (“TEN”) fields in the Deepwater Tano contract area in water depth averaging 1,500m.
The contracts were awarded to TEN Ghana MV25 B.V., a subsidiary of MODEC, by Tullow Ghana Limited, a wholly owned subsidiary of Tullow Oil plc, Modec said in a statement. Deepwater Tano contract area is held by Tullow (47.175%) as Operator, Kosmos Energy (17%), Anadarko Petroleum (17%), Sabre Oil & Gas Holdings Ltd, a wholly owned subsidiary of Petro SA (3.825%), and the Ghana National Petroleum Corporation (15%).
“MODEC is responsible for the engineering, procurement, construction, mobilization and operation of the FPSO, including topsides processing equipment as well as hull and marine systems. SOFEC will design and provide the mooring system”, the statement said. “MODEC will convert the VLCC Centennial J into an FPSO. The FPSO will be capable of handling expected plateau production of 80,000 barrels of oil per day, 170 MM standard cubic feet of gas per day and has storage of 1,700,000 barrels of total fluids”.
Scheduled for delivery during 2016, the FPSO will be installed in the TEN field and is designed to remain operational in the field for up to 20 years. This is the second vessel MODEC will provide and operate in Ghana following the FPSO Kwame Nkrumah MV21 for the Jubilee Field development, which was awarded in 2008. MODEC is currently operating the FPSO Kwame Nkrumah MV21 for Tullow as Operator of the Jubilee Field.
Toshiro Miyazaki, President and CEO of MODEC said, “MODEC is very proud to have been selected by the TEN field partners and GNPC to provide and operate the FPSO for TEN, a world class facility in a world class field. We are equally pleased to be a part of the team that will provide a needed energy resource for the benefit of the people of the Republic of Ghana.”
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