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Our Latest Issue/Southern Africa: New Hot Spot, Old Habits

This is our fifth Southern Africa Special since we started dedicating an edition to the annual gathering in Cape Town.

There are two such conferences now and this year, the Southern African hydrocarbon story is more compelling.

It all happened quickly, one after the other, at a time of great anxiety in the world.

Just before the year of COVID, TOTALEnergies opened a new petroleum province offshore South Africa. The discovery of the Bullfrog (Brulpadda), in the legendary “Cape of Storms”, in deepwater Outeniqua basin, was followed up late the following year, in 2020, with the discovery of the Leopard (Liuperd). The unveiling of these significant gas and condensate tanks indicate that Africa’s most industrialised economy has no more excuse for indifference in growing a gas-based industry.

But as you’d find out in those pages, the more things change, the more they stay the same.

To Namibia: In 2021, a rank unknown Canadian minnow delivered screaming headlines from around the drill bit in a rank unknown onshore frontier. ReconAfrica drilled two stratigraphic test wells onshore the country’s north, and confirmed that the Kavango or the Owambo (Etosha) Basin, a very large, previously unregarded sedimentary basin, exists beneath the sands of the Kalahari Desert.  The 6-1 and 6-2 wells intersected over 300 metres of oil and gas shows and 200 metres of oil and gas shows respectively.  The two were drilled to provide stratigraphic, sedimentological, reservoir and geochemical information.  Neither of them was tested, but Reconfrica had made a point: “There’s something here!”. As we went to press with this edition, the company was drilling three seismically defined exploration wells whose primary zone is a Permian-age Karoo rift fill sequence of sediments.  Based on the two stratigraphic wells and recently acquired high-resolution seismic, the Kavango basin is now viewed as highly prospective for conventional light oil and gas.

The bigger story from Namibia however is that two wildcats, spud back-to-back in late 2021 by two of the world’s biggest oil companies, made significant oil and gas discoveries. Shell’s Graff 1 and TOTAL’s Venus-1, drilled in deeper water Orange Basin, have been described by Rystad as some of the largest finds on the planet in the last one year. The once “disappointing” Namibian hydrocarbon scene, has certainly turned the corner.

Elsewhere in the south, Zimbabwe is currently hosting a two well campaign; a rare drilling activity, while Angola looks to two projects to top up its output by 300,000BOPD by 2026.

There is always a spoilsport: TOTAL has not returned to the site of the largest hydrocarbon project in Africa; the 13Million Metric Tonne Per Year Mozambique LNG project. The company blames the Islamist insurgency, which it says is still raging. The government pleads in response: “We are winning the war”.

Read your copy here…

The Africa Oil+Gas Report is the primer of the hydrocarbon industry on the continent. It is the go-to medium for decision makers, whether they be international corporations or local entrepreneurs, technical enterprises or financing institutions, for useful analyses of Africa’s oil and gas industry. Published since November 2001, AOGR is a monthly publication delivered to subscribers around the world. Its website remains www.africaoilgasreport.com and the contact email address is info@africaoilgasreport.com. Contact telephone numbers at the headquarters in Lagos are +2347062420127, +2348036525979 and +2348023902519.

 

 

 


GNPC Holds on to $100Million Oil Proceeds Meant for the Ghanaian Treasury

Ghana National Petroleum Corporation (GNPC) is holding, in its account, about $100Million that should otherwise have been paid to the country’s Petroleum Holding Fund.

The money is part of the proceeds of crude oil export in the first half of 2022.

Following the acquisition of 7%, interest in the Jubilee and TEN Oilfields by GNPC in 2021 (later ceded to its subsidiary, Jubilee Oil Holding Limited – JOHL), reports the Ghanaian Public Interest Accountability Committee (PIAC), “JOHL made its first lifting (944,164bbls) on the Jubilee Field in the First Half 2022, amounting to $100,748,907.95. This amount was not paid into the Petroleum Holding Fund (PHF)”.

The PIAC, in its just released 1H 2022 report, recommends that “the proceeds of liftings by JOHL should be paid into the Petroleum Holding Fund (PHF), as the Committee is convinced that the proceedsform part of Ghana’s petroleum revenues”.

The PIAC also notes that “Capital Gains Tax was not assessed and collected by the Ghana Revenue Authority in the sale of the 7% interest by Anadarko in the Jubilee and TEN Fields in 2021”, and when the committee requested for explanation, “the Ghana Revenue Authority referred the Committee to the Ministry of Finance indicating that the Ministry was exclusively in charge of the transaction. The Ministry of Finance in turn referred the Committee to the Ghana Revenue Authority for answers”.

The lack of assessment of Capital Gains Tax of upstream asset sale by revenue authorities in the land was “contrary to Section 6(e) of the Petroleum Revenue Management Act, 2011 (Act 815)”, PIAC maintained.

The 186-page report observes an overall tardiness in petroleum revenue collection in 1H 2022. “Surface Rentals outstanding continue to increase”, it points out. “As at the end of H1 2022, the balance outstanding was $2,774,702.29 constituting an increase of 7.58% percent on the surface rentals of $2,579,170.21 at the end of 2021.

“The Ghana Petroleum Funds received an amount of $390,029,916.55 for the H1 2022, which is 91.43% percent higher than the budgeted allocation of $203.75Mllion for the GPFs for the full year in compliance with Section 4(a)(iii) of the Petroleum Revenue Management (Amendment) Act, 2015 (Act 893).

“The retention of the current cap of $100Million on the GSF for the year 2022 is not in accordance with the formula stipulated in the Petroleum Revenue Management Regulations, 2019 (L.I. 2381). A proper application of the formula would have returned a figure of $460,633,074.02.

The PIAC is an independent statutory body mandated to promote transparency and accountability in the management of petroleum revenues in Ghana.

 


Saipem Wins €1Billion Contracts for Cote D’Ivoire’s Field Development

The ENI Cote d’Ivoire-Petroci consortium, a partnership of Italian explorer ENI and Cote d’Ivoire’s state owned Petroci, has awarded the major contracts for the development of Cote D’Ivoire ‘s large deepwater oil development to Italian contractor Saipem.

There are two new contracts and they are “worth approximately 1Billion euro overall”, Saipem says in a statement released September 27, 2022.

The contracts are for the Baleine Phase 1 Project, for the development of the relative oil and gas field offshore Ivory Coast located at a 1,200m water depth. “The Baleine Prospect represents the largest commercial discovery in the country in the last 20 years”, Saipem explains. The field was discovered in 2021 and it holds over 1Billion barrels of oil in recoverable reserves, ENI itself has disclosed.

The first contract entails Engineering, Procurement, Construction and Installation (EPCI) activities of Subsea Umbilicals, Risers and Flowlines (SURF) and of an onshore gas pipeline for the connection to the distribution grid. The offshore laying of flexible lines, risers and umbilicals will be executed by Saipem’s flagship vessel FDS2 and the development of the project will be on a fast-track basis. The start of operations is planned for the fourth quarter of 2022.

The second contract – also expected to be a fast-track – encompasses Engineering, Procurement, Construction and Commissioning activities regarding the refurbishment of the Firenze FPSO vessel, plus 10 years of Operations and Maintenance services of the vessel.

The award of significant contracts in a new area with great potential such as Cote d’Ivoire represents an important recognition of Saipem’s role as a contractor of excellence for the execution of complex projects requiring the integration of drilling, engineering and construction skills – both onshore and offshore – on a fast-track basis. These contracts also consolidate Saipem’s strategic positioning in West Africa.

 

 

 


Conoil to Drill New Exploration Plays in OML 103

The Nigerian independent, Conoil Producing. has moved a rig to Oil Mining Lease (OML) 103 in a swampy terrain in North Western Niger Delta, to drill an exploration well and, if successful, appraise it immediately with another well.

The Imperial rig, operated by Depthwize, is on location and about to spud.

The tentative name of the wildcat is AX#4.  The full name will come after the spud. AX#4 and its appraisal prospect are located in an untested fault block in the pan handle shaped, southern part of OML 103, directly north of NPDC/Elcrest operated OML 40.

The wells are to be drilled to as deep as 11,000feet Measured Depth subsea.

There are plans for a possible two more wells, if the campaign is successful.

AX#4 will be the second exploration well to be drilled in the Niger Delta shelf in the space of six months.  The NPDC/Elcrest Joint Venture recently finalized the Sibiri exploration well in OML 40, with initial results indicating 353 feet gross hydrocarbon pay in eight oil-bearing reservoirs, 229 feet being net pay.

Sibiri-1 is, however, located far from the AX#4 probe.

 


‘Strong Governance, Collaboration Has Kept OPTS Relevant after 60 Years ‘

Founded sixty years ago, the Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce& Industry, has become a foremost advocacy group in Nigeria, helping to shape policies that enhance growth in the country’s upstream value chain while protecting the interests of member companies. Rick Kennedy, Managing Director Chevron Nigeria and incumbent Chairman of OPTS, shares with select journalists including Africa Oil + Gas Report, factors that have kept the organisation going strong as it marks its 60th anniversary.

Sixty is such a milestone, tell us a little bit about the journey so far.

The OPTS really Is a trade group and the intent is to improve the health of the offshore and onshore oil and gas industry in Nigeria by allowing the operators to come together in a forum where we can address common issues.

Obviously, we have to respect laws on competition but, there are a number of common issues that we deal with, so we work collectively and I think the organization has been very successful in moving various things forward on behalf of industry and in partnership with the Nigerian government for the benefit of the country, as well as the oil and gas industry.

This is done through advocacy, providing input on the development of regulations. I think the other big success over that 60 years is not only contributing to enabling the success of the oil and gas industry but also being able as an industry to give back to the country in terms of direct and indirect jobs, revenue to the country and social investments by member companies. For example, we have provided funding for universities, scholarships, and other social investment activities tied to economic empowerment, health, as well as education.

At a high level, OPTS supported the government in moving forward with the oil industry bill and we are now focused on supporting the implementation of the petroleum industry act.

So what have been some of your biggest challenges thus far?

Probably the biggest issue of the day is oil theft, insecurity, and the impact on the industry’s ability to produce safely and reliably. We’ve had infrastructure that has either been damaged or forced to be shut in. And we’re all aware of the impact on production revenue to the government.

I think probably the other challenge that we have more recently given the state of the economy and the reduced revenue coming in due to oil theft, is the ability of the NNPC to pay their share of Joint Venture operating expenses in a timely manner.

And so the outstanding cash calls are building up and lack of reinvestment just further hurts the ability of the industry to deliver…

But there were efforts made by the NNPC to address these arrears, what happened?

There was a significant effort to address the historical arrears. We were able to form a great partnership between industry and the government to come up with an innovative approach to address it. That has been largely successful and I think in a few cases those historical arrears have been fully paid off.

Unfortunately, more recently, with maybe the challenges of the economic environment and then the increasing oil theft,  outstanding cash calls have became an area of concern in the latter part of 2021 and through 2022.

Investments into the Nigerian oil sector have been few and far between and many projects are yet to come on stream. As an advocacy group, what measures do you recommend to attract investments into Nigeria?

That’s a good question. Obviously, there’s probably a long list of things but in general, developing and maintaining investor confidence is key. Are we competitive, relative to other opportunities, globally?

If the government can perhaps address and mitigate factors such as the impact of inflation, unemployment, and ease of doing business. Issues around security, for example, increase in the cost of our operation. Cost competitiveness is really critical, and that’s something that we’re  doing a lot of work on.

The Nigerian upstream cost optimization program is an area where the industry is partnering with the government to try to lower the contracting cycle times and drive down costs.

We are working closely with the regulators to try to help the development of regulations that are effective and streamlined hopefully, to minimize some of the administrative burdens that may be placed on the industry which again, leads to cost.

Historically, there’s been a lot of levies and fees and various taxes applied to the industry and we are seeing that continue even in the current legislative activity. There is a discussion on even more taxes to be placed on the industry to help fund various programmes and departments across the country.

So really, this whole area around cost competitiveness and driving down costs is a critical element.

On the plus side, the passage of the petroleum industry Act has brought some clarity to the industry and a certain level of certainty around the fiscal framework. So that’s a real positive in gaining investor confidence.

 What would you say are some of the successes recorded by the OPTS in the past 60 years?

Well, I’m going to point to the passage of the PIB and that’s not all OPTS but I know OPTS was involved. This success goes back to the willingness of President Buhari and the Minister of State for Petroleum Resources and NNPC GMD to collaborate with the industry and this gave us an opportunity to make an input.

The government ended up crafting a very good bill that ultimately got passed and OPTS and the member companies spent a lot of time supporting that effort, providing input and ideas. So that to me is a very recent example of success.

In addition, we’ve had numerous scholarships given to different students in different communities. We’ve built numerous hospitals, in different communities within the nation and around the Niger Delta. During the COVID pandemic, the OPTS put forward about $30 million to support government efforts. We did a lot of vaccination and built health care facilities in the six geopolitical zones of the country.

So for 60 years, you’ve managed to stay relevant as an advocacy group, what is the secret?

I think there’s probably an element around governance. We all have a common purpose and we do have positive intentions for the country, its citizens, and the government. We have very positive working relationships with all stakeholders. The folks that first came together to form OPTS, I think, laid down a good set of governance. It’s very inclusive. It’s very collaborative. We follow all the  relevant anti-trust and competition laws in how we conduct our activities.

It is several factors and right now we have 29 members, including five IOCs, plus some other larger exploration and production companies and many of our indigenous companies. So we work hard to really bring in all the perspectives and collaborate very closely across the member companies.

There is a mindset of true partnership and collaboration, not only within the member companies but with all stakeholders in the country.

 

 


No Guarantees Over Libya’s Return to Daily Output of > 1Million Barrels

There is no assurance that Libya could sustain its return to producing crude oil in excess of 1Million Barrels of Oil Per Day.

Since mid-July 2022, when Khalifa Haftar, strongman of the East of the country, got his wish to replace Mustafa Sanalla with Farhat Bengdara as head of the National Oil Corporation, he has ended the three-month blockade and allowed production to resume at close to optimum.

Mr. Haftar seems to be capable of closing and opening Libya’s crude oil taps at his whim.

He had simply, in April 2022, repeated the 2020 shut-in which crimped more than 1Million Barrels per Day of output.

What this simply means is that Libya will get optimum output only if General Khalifa Haftar wants it.

Between April 2022 and the end of July 2022, Haftar, and his eastern allies, instigated the shutdown of several key oil facilities under the guise of local ‘protests, effectively seeing  550,000BOPD of output shut in.

Mr. Haftar’s blockade caused the closure of

  • The Repsol-led 300,000BOPD El Sharara Field
  • Eastern ports of Zueitina and Marsa El Brega exporting 180,000 BOPD
  • The 70,000BOPD El Feel field operated by ENI

Now production is back and Mr. Bengdara, the new head of the state hydrocarbon company, has visited Rome to see ENI ‘s CEO Claudio Descalzi to assure him of safe investment. But an oil industry that depends on the might of a militia is not sustainable.


A New Agenda for Nigeria’s Oil & Gas Industry

By Tony Attah

Nigeria has had a very long history with “oil” starting from the very agrarian era of the 19th century, when palm oil was the main “oil” of the economy even though we have now lost our edge on this front to other nations like Malaysia, and Indonesia who have been more deliberate in deploying technology to scale up the integration of the entire palm oil chain for optimal value.

I choose to open with this analogy hoping that we can draw some parallels with our crude oil and gas industry to see if there are any lessons, we can learn therefrom hoping that we will not lose our edge in Deja-vu, as we have seen in the case of Palm oil industry.

While the 1950s/60s were characterised by the palm oil trade, the 1970s to date have been largely about crude oil and more recently gas.  I do not need to repeat the history of Nigeria’s oil and gas industry, but you will all remember the journey from Oloibiri and the emergence of the IOCs onshore and Nigeria becoming a member of OPEC nations in 1971 through to the recent foray into deep offshore and the growth of Nigeria as a recognised Oil Nation to now becoming, as some would say a Gas Nation with some oil. It is however important to put a few things in perspective in respect of the enablers that underpinned the growth we enjoyed largely between the mid-80s and early 2000s – from the Petroleum Act 1969 (as amended) through the IOC partnerships that underpinned the likes of the 1986 MoU and the 2000 MoU; without which it may have been difficult to realise the kind of growth that Nigeria experienced in that period.

All through the ’80s and ‘90s the global focus was on oil as the major source of energy and a key component of the energy mix and indeed revenue earner for producer nations. This energy mix was underpinned by the demand from western economies, predominantly for transportation, residential and commercial heating as well as support for massive industrialisation, and a key source of competitiveness for western economies. Indeed, Oil and Gas guaranteed the Energy security for western economies over the last century and more.

Nigeria’s case is no different, but even more so that oil became the country’s major revenue and foreign exchange earner to date. Nigeria’s oil activities were always underpinned by the partnerships with western IOCs and more recently, the independent and indigenous producers, heralding the era of the joint ventures which largely was dominated, and still is, by the federal government with an average of about 57% of the entire onshore JV equity and strong holder-ship of most of the concessions offshore which are modelled as Production Sharing Contracts (PSCs). The JVs by their nature are designed such that you contribute and distribute earnings according to equity holding, which essentially means government by implication is required to contribute about 57% of the entire cost of running the onshore JV business as well as entitled to take commensurate value in return.  As you may recall, the industry over time struggled with government cash calls for funding its share which subsisted till very recently when creative solutions were developed by NNPC leadership working with the IOCs to resolve the cash call. Since then we have seen the advent of some creative options like the “Outright Carry arrangements, Modified Carry Agreements, Strategic alliances and more recently the Financial and Technical Services Agreements (FTSA).

“Some of the proffered solutions on the crude oil theft debacle are largely about detection of the criminality rather than very robust response and deterrence to ensure full consequences for these illegal activities.”

The hydrocarbon industry is highly capital intensive. The creative solutions of the 1990s and early 2000s largely addressed the issues of funding and incentivising the IOCs; but also facilitated the emergence of smaller indigenous players to diversify the game, noting the importance of the industry to Nigeria as a key contributor to both GDP at about 10% and over 80% Forex and more than 75% of government’s revenue. This perhaps is why the industry was referred to as the goose that lays the golden eggs!

While the 90s and 2000s were characterised by the issues of funding, cash calls, and trust deficit between partners, today’s industry in Nigeria is facing more local challenges and globally interwoven issues of higher complexities and dimensions requiring more collaborations and broader creativity if Nigeria is to remain in reckoning globally. There’s need for a  new agenda that is robust and consistent with current realities. Permit me to dimension the current issues broadly as internal and external; but first, lets start with the external.

Most of the external issues are largely around the global interconnectivities of the world and the integration of energy systems beyond geographical boundaries. A  butterfly flaps its wings in Australia and floods happen in New York, Hurricanes charge up in Florida, Tsunami rattles Japan and earth quakes shake Africa in the chaos theory and butterfly effect also known as the  Edward Lorenz theory of deterministic chaos.

Global energy integration has become intertwined with geopolitical power to the extent of becoming an instrument of economic and political weaponization, as we are currently experiencing in Europe.

“A school of thought suggests that Energy transition will switch to over-drive mode once the dark cloud above the uncertainty around Russia is lifted, giving clarity to policy makers in the EU. For this reason, Nigeria needs to brace to respond to an even steeper trajectory in the energy transition journey but note the tempered refinements including accepting Gas as the credible transition fuel as against the blanket castigation of all fossil fuels as dirty and harmful to the planet.”

The global consequences of climate change has heightened the consciousness for decarbonisation of the energy systems resulting in energy transition with a fast-changing energy mix. Even though the world needs more energy as a result of global population growth from the current 8Billion to 10Billion people by 2050 (Nigeria expected to double; 400Million). The world no longer needs energy at all costs, thus instigating the current dilemma on energy. Yes, the world needs more energy, but it, also needs it cleaner, cheaper and in abundant supply.  The requirements for “cleaner” and advancement in technology have led to the quantum growth in renewables which remain the cleanest but unfortunately is still costly and constrained by intermittency in most cases and unable to meet the full energy demand growth thus making gas, the next best option of a global transition fuel to power the world. In all of these, the key considerations of Availability, Affordability and Accessibility must be maintained to guarantee sustainability, which gives gas a crucial edge in the energy mix, even though Hydrogen is fast gaining ground on the back of improvements in technology. As the demand for energy prioritises electrons over hydrocarbons to meet the projected 30% demand growth, suppliers need to prioritize which hydrocarbons will bridge that transition before Hydrogen takes centre stage. On balance, Gas meets that standard and checks most of the boxes today.

Energy transition is also exacerbating the issue of how we secure funds for new projects development, including new exploration scope, especially for gas and being able to produce at capacity consistent with our massive oil and gas reserves. Securing funding remains a key challenge for the industry with the international banks, Export Credit agencies and Multilateral Institutions no longer keen on financing fossils/oil and gas projects that are either outside of their territories or perceived as contributing to further CO2 emissions.  This in addition to the introduction of carbon taxation portends very grave impediments to the viability of oil and gas projects going forward, even though the ongoing Russia and Ukraine crisis is slowing down the overall pace of the energy transition in Europe.

The Domestic Environment

The internal dynamics, of course responds to the global issues of Climate change, Nigeria’s market share is constrained by the twin  challenge of reduced funding for oil and gas infrastructure developments across the world and the emergence of new global energy powers with the shale revolution in the US and new major discoveries around Africa in places like Mozambique, Senegal, Namibia, Tanzania and Ghana.

Outside these external dimensions, local above-ground risks, such as crude oil theft, Pipeline Vandalism, Insecurity, Community development and agitations, Infrastructure deficit, are perhaps the biggest obstacles for investment for our industry today. They are compounded by value attacks due to multiple agencies/ministries with cross functions, which collectively make the ease of doing business in the industry more cumbersome compared with the  new frontiers in Africa.

That said, it is commendable to see the progress made to approve the PIA; at least we now have a clear basis to go forward on the fiscals to attract new investments into the industry. There however, has been some critique on how long it took to pass PIB to PIA; some believe it has come rather late and may not have taken full cognisance of the emergent global circumstances in the world of energy where the energy mix is fast changing, and the energy system balance is shifting both in joule terms and the extremes of political power. Moreso, they argue, asserting that the PIA fiscals may not be inspirational enough to lure back investors and attract the requisite level of investments needed to unleash the potential of the industry again.

Irrespective of our thoughts, the fact remains that the PIA indeed took so long and while waiting, Nigeria lost quite some grounds and opportunities noting that, of the over $70Billion investments that came into Africa between 2015 and 2020, only about 5% made it into Nigeria, 5%! ($4Billion)! Essentially the rest of the world continued to move on while we were vacillating on the passage of the PIB over the last 20 years. That said, I personally think the PIA is a welcome development which will go down in history as one of the key legacies of the President Muhammadu Buhari’s administration even though the real value addition will be tested by how well we are able to operationalise and make it effective to attract new investments while protecting the existing ones through preserving the sanctity of contracts and agreements.

Operationalising the PIA and being able to sort out the now near cancerous issue of crude oil theft and its attendant impact on the industry, environment and indeed the nation’s economy, will have to form the key pillar of whatever new agenda will be developed in order to have a fighting chance of regaining our position as industry leader and a force to reckon with in Africa.

“I see a future where there will be mainly 3-5 major independent producers in Nigeria with capacity to manage the onshore scope against all odds while also playing a crucial role across the African sub region alongside the now commercial NNPC Limited.”

The industry in Nigeria continues to be plagued by massive and industrial scale crude theft which is now becoming endemic and on the brink of completely getting out of hand if extraordinary steps are not taken to stem this ugly situation. But while it is debatable whether the recent exits of the IOCs from the onshore plays in Nigeria is linked to this issue of chronic crude oil theft, the resulting divestments could portend a hint of opportunity to deepen and grow more local content participation and capacity building with more independent and indigenous players emerging as part of the new agenda. Essentially, we are beginning to see the advent of indigenous companies’ consolidation on the back of IOCs divestments which could also mop up some of the recent marginal fields in whatever guise of partnerships, merger or outright takeover for scale. I see a future where there will be mainly 3-5 major independent producers in Nigeria with capacity to manage the onshore scope against all odds while also playing a crucial role across the African sub region alongside the now commercial NNPC Limited.

The future of Nigeria’s oil and gas industry will not be complete without ensuring the consolidation of the independent and indigenous players. It is instructive to note that the indigenous producers have grown tremendously over the last decade to be accountable for about 30% of national production (from just about 2% in 2010) with capital and development investment of over $20Billion within the same time frame. The role of the indigenous players has got to be a  critical element of the new agenda.

Against the backdrop of the foregoing, permit me to put some stakes in the ground in respect of what should be the main building blocks of the new agenda for Nigeria’s oil and gas industry going forward:

Let me start with the PIA as an opportunity:

The opportunities offered by the approval of the PIA which is designed to deliver effectiveness, efficiency, accountability, competitiveness, and safety are immense if the Act is conscientiously and diligently applied as the new foundational basis for a reset of the Nigerian oil and gas industry; it could become a key enabler to win back investor confidence and restore Nigeria’s hitherto vantage position in Africa. This should inspire the unbundling of the full industry value chain, thus creating an improved enabling environment for Nigeria to become the investment destination of choice once again.

While we are at it, it is very heart-warming to see NNPC Limited emerge as a key product of the PIA, repositioning it as a commercial entity under CAMA regime, consistent with the realities of other private entities in the industry. This can only serve to increase the much-needed transparency to boost investor confidence in the overall governance of the oil and gas industry in Nigeria.

 

“As the demand for energy prioritises electrons over hydrocarbons to meet the projected 30% demand growth, suppliers need to prioritize which hydrocarbons will bridge that transition before Hydrogen takes centre stage.”

Another critical component of the new agenda linking to the PIA must be the focus on Energy transition, the fast-changing energy mix and the new global direction with respect to Energy systems. Even though the ongoing geopolitical situation in Ukraine seems to have slowed down the initial momentum of the transition, this is seen in some quarters, as just a temporary but necessary desperate measure to focus on the survival of Europe which needs to manage its over dependence on Russia while working to create new avenues to guarantee security of supply to wean itself from Russian oil and gas. There is however, another school of thought which suggests that Energy transition will switch to over-drive mode once the dark cloud over the uncertainty around Russia lifts giving clarity to policy makers in the EU. Hence, we need to brace to respond to an even steeper trajectory in the energy transition journey but note the tempered refinements including accepting Gas as the credible transition fuel as against the blanket castigation of all fossil fuels as dirty and harmful to the planet. This may also catalyse the acceleration of further state backed investments in renewables which holistically could accelerate the pace of transition but either way, gas remains a  credible partner to renewables and hydrogen as the transition fuel of choice.

Let me touch on the Role of Gas in this new agenda.

The new thinking of gas as a global transition fuel has got to be a second opportunity for Nigeria to reposition and take advantage of the new demand and supply gaps to deploy our gas reserves as the catalyst for development and industrialisation while taking centre stage as a leading gas nation supplying most of Africa, Europe, and rest of the world. Nigeria currently has over 206Tcf of proven gas reserves with massive potential to become top five in the league of Qatar, USA and Russia as a gas superpower. We must crank the engine on gas to bring about massive developments deploying and taking advantage of the PIA but also being very deliberate about the focus on gas with thoughts around exclusive moratorium to create more gas development incentives and waivers to inspire new investments in the gas value chain. We must take advantage of the ongoing work on the declared “Decade of Gas” programme which is meant to form the bedrock of how we transition Nigeria into a full-fledged gas economy as a national priority and a key element of the new national agenda for the oil and gas industry.

Therefore, the other key components of the new agenda must be hinged on gas development, specifically on deliberate gas exploration to rebase our gas reserves, and consideration for more attractive fiscals to incentivise further gas developments, infrastructure investments and cost reflective pricing for the domestic and export gas supplies. Essentially government needs to do everything including granting additional and far-reaching fiscal incentives focused on gas development as the main pillar on which our industrialisation will be built and also for global exports as a key forex revenue earner for the nation. The potential Five Billion standard cubic feet per day 5Bscf/d local market for gas is huge and we must domesticate a significant part of our gas development to drive our national economy. This focus on gas should also result in a structural improvement of the current ministerial portfolios to create a critical position solely to focus on gas development – the “Minister for Gas” should be tasked with doing every and anything possible and necessary to ensure all the gas policies and guidelines cum initiatives are brought to fruition as part of the call to declare emergency on gas and power development in Nigeria.

This story will not be complete without addressing the issue of Crude theft

Against the backdrop our current reality, whatever agenda we design will be inconsequential if it cannot resolve the issue of the massive industrial scale crude oil theft and illegal artisanal refineries plus pipeline vandalization currently going on. This is of major concern both locally and internationally. Worryingly, there does not seem to be any quick fix solution in sight without government rising up to its responsibilities of securing lives and livelihoods. I have followed active debates on the subject and note some of the proffered solutions including the socio-political ones and deployment of technology which largely are about detection of the criminality rather than very robust response and deterrence to ensure full consequences for these illegal activities. Government at all levels and across all arms need to, in unison, declare a state of emergency on crude oil theft and deploy technology to fight the crises and deal more decisively and transparently too as a deterrent to those involved in the nefarious activities and economic sabotage. This singular issue threatens our economic and energy security and so must be dealt with as a consequential security emergency.

In summary we need to press the reset button as part of the new agenda to galvanise the oil and gas industry in a post PIA world. The basic components of the new agenda can be encapsulated in the following suggestions:

  1. First and foremost, we need to take back control and secure our oil and gas production territories to create a more enabling environment by declaring a security state of emergency on crude oil theft and illegal artisanal refining activities in the Niger Delta.
  2. While it is encouraging to read about government’s recent push towards tackling the crude oil theft menace, this needs to be sustained and underpinned by fresh thinking including deployment of geo referencing and geo-spatial tracking technology and diplomatic cooperation across the Gulf of Guinea. This new drive should include active Gulf of Guinea regional and international cooperation and partnerships especially with the EU, USA, and the Britain to help proffer and implement sustainable solutions including fingerprinting our crude oil, following both the molecules and the money in order to tackle crude theft once and for all.
  3. Fully operationalise the PIA by deploying all the enabling fiscal incentives therein to boost investor confidence and attract new investments to stay relevant in Africa and globally.
  4. Focus on gas as a strategic imperative to drive the ongoing Decade of Gas declaration to cause the implementation of very deliberate moratorium and gas focused incentives cum waivers to instigate massive exploration and development of our gas reserves for both domestic and export markets.
  5. As part of the strategic imperative on gas, create a focused position for the “Minister for Gas” to ensure laser pointed focus on gas matters including actionable policies, fiscals and investments to reposition gas as the bedrock of Nigeria’s industrialisation
  6. Take advantage of the ongoing global demand and supply imbalance to partner with the EU, towards unlocking the requisite funding and technology needed to develop our gas reserves within this decade of gas agenda.
  7. Encourage government to bite the bullet on the petroleum subsidy issue by enabling more modular refineries to scale up alongside the much-anticipated Dangote Refinery and the rehabilitated NNPC refineries to supply the domestic market and the sub region as a net exporter of petroleum product thus eliminating smuggling.
  8. Deliberately focus on more human capacity development and skills acquisition to international standards to make Nigeria a net exporter of skilled engineers and technicians across emerging oil and gas markets in Africa. Our over 60 years of operating a functional oil and gas industry has got to count for something to restore our dignity as the giant of Africa one more time!

Signed: Amaopusenibo Engineer Tony Attah (FNSE), Lagos, September 13, 2022

The article is an abridged version of the keynote address delivered at the Richardson Oil & Gas HSSE Forum. Attah, a former Managing Director of the NLNG Ltd, is currently an independent Energy Consultant.


Our Latest Edition/ Stepping on The Gas Annual 2022

A Burgeoning Domestic Market and the Scramble by Gas Importers

We are in the middle of a scramble for Africa’s gas resources by Europe. We warn that the rush is only for the short to medium term.

No one should stretch the assumption that European decarbonization will be held up for an inordinately long period of time.

It is also a period when the continent’s largest producers (Egypt, Algeria and Nigeria) are demanding more gas in their economies.

We highlight the issues around both the European scramble and African domestic needs, but we strive as much as possible to provide a market intelligence -led perspective to all sides.

ENI, the Italian explorer and producer, is crisscrossing the continent, signing deals, inaugurating projects, and drilling prospects aimed at evacuating gas to Europe; Equinor “suddenly” agrees to come to the negotiating table for FID on Tanzanian LNG; and the once reluctant bp will do more gas projects in Northwest Africa.

Nigeria locates increased domestic demand in the declaration of a decade of gas.  Senegal, Mauritania and Mozambique, with low industrialization and little homegrown appetite for gas, see income from export mostly feeding the treasury.

Our STEPPING ON THE GAS ANNUAL 2022 also contains the traditional features: updated activity maps of Angola, Ghana and Mozambique. Crude oil export data (operating company level) for Angola. Rig activity spreadsheets for Angola and Nigeria. Oil and Gas production listings for Nigerian indigenous companies and Activity maps of Marginal Fields and Independents.

Read your copy here.

The Africa Oil+Gas Report is the primer of the hydrocarbon industry on the continent. It is the market leader in local contextualizing of global developments and policy issues and is the go-to medium for international corporations, local entrepreneurs, technical enterprises or financing institutions, for useful analyses of Africa’s oil and gas industry. It has been published by the Festac News Press Limited since November 2001, and, since the COVID -19 season, as a monthly digital (pdf) publication, delivered to subscribers around the world. Its website remains www.africaoilgasreport.com and the contact email address is info@africaoilgasreport.com. Contact telephone numbers in our West African regional headquarters in Lagos are  +2347062420127, +2348036525979, +2348023902519.

 


Who is in charge of Regulating Nigeria’s Crude Export Terminals?

By Macson Obojemuinmoin

Crude oil producing companies operating in Nigeria used to report to the Department of Petroleum Resources (DPR) to obtain export permit for the commodity.

Until the Petroleum Industry Act (PIA).

The overarching law of the Nigeran hydrocarbon sector, enacted in September 2021, created two regulatory agencies out of the DPR: the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).

The legislation inadvertently authorised both agencies to be in charge of regulating crude oil export terminals.

Section 7EE of the PIA empowers the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) to:

  • Issue certificates of quality and quantity to exporters of crude oil, natural gas or petroleum products from integrated operations and crude oil export terminals established prior to the effective date and the commission shall have the power to monitor and regulate the operations of crude oil export terminals and the responsibility of weights and measures at the crude oil export terminals shall cease to exist from the effective date.

And Section 32ii of the PIA empowers the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) to:

  • Issue certificates of quality and quantity to exporters of crude oil, LNG and Petroleum products.

These two clauses have created a conundrum. Which agency is the rightful authority to issue export permit?

“This issue was one among several that the PIA implementation team saw and pointed to both agencies in our interactions with them and they promised to resolve implementation via the presidential steering committee”, a ranking manager at an International Oil Company told Africa Oil+Gas Report.

The two agencies fought out the issue of export permit during the third quarter (Q3) 2022 permitting round as they both insisted on issuing the permits and actually did. “This points to serious implementation hiccups in the law than ever envisaged”, the manager said.

Operators had to apply to both agencies but after much haggling, paid the fees only to the downstream agency as operators refused to pay twice for same permit.

Some analysts have wondered how storage and export of crude which is produced through upstream operations be a midstream to downstream activity.

But the PIA also explicitly defined upstream operations as terminating at the crude oil production Platform, such that there is validity in the argument that the NMDPRA should be the agency to grant export permit to terminals.

Prior to the enactment of the PIA, permits were issued by the midstream and downstream divisions of the DPR, which constitute a significant part of the NMDPRA, but those permits were dependent on clearance by the upstream divisions of the DPR, where the technical allowable and proof of royalty payment were checked.

Even so, there are terminals and there are terminals. In the deepwater terrain, where about half of Nigeria’s crude oil output is delivered, the FPSO is both the production facility and the terminal. In several shallow water fields, the FSO or a Production Platform, is effectively the terminal. From most onshore (and swamp) fields however, the commodity is transported to terminals at the edge of the Atlantic.

Based on this geography of supply, the Minister of Petroleum and the deep divisions, the Minister of Petroleum has directed that the NUPRC will issue permits for export from deepwater as well as those shallow water assets for which their FSO or Production Platform sere as their terminals.

But some still kick against the Minister’s directive, in private, arguing that “dual regulatory powers” are not the intent of the PIA.

“Segregation clauses are meant to resolve the matter but segregation is not immediate”, a Nigerian owned operating company staff explained to Africa Oil+Gas Report. “From late 2021 to end of the 2nd Quarter 2022, operators were taking export permit from NUPRC but this was probably because NMDPRA was still finding its feet then as NUPRC was able to take off more effectively because it took over most of the structure and activities of DPR”.

The PIA is not a straight forward document the makers thought it is and so much unforeseen issues have come up and are coming up.

“Some of the segregation clauses were written by those who are not industry practitioners and operators seem to have paid more attention to the fiscal clauses in their advocacy such that there are several confusions in the operations clauses”, several analysts say.

So, what should be the way forward?

Everyone seems to agree that poor drafting is the big issue and this is clearly one area where some amendment will help.

“A literal reading of  the provisions of section 7 of the PIA would suggest  that the NUPRC remains responsible for any existing terminal”, says Adeoye Adefulu, Managing Partner at Odujinrin & Adefulu, a full service commercial law firm, “the NMDPRA would only be allowed to supervise the terminals which are established afterwards”.

In the long run, however “to address the conflict on regulations between the two regulators, the PIA needs to be amended to ensure that the full upstream value chain from acreage management to crude oil export is regulated by the upstream regulator while the midstream regulator is focused on midstream and downstream”, argues an asset manager at one of the International Oil Companies, who has had oversight function on regulatory permits. “In the interim until PIA is amended”, he argues, “the minister of petroleum/ President should issue a policy directive to effect the change”.

 


Cameroon Earns Far Higher Revenue from the Chad-Cameroon Crude Pipeline

The Cameroonian Treasury gained a revenue increase of over 9% year on year in transit rights for Chadian oil via the Chad-Cameroon pipeline between January and June 2022.

22.76Million barrels of crude oil produced in the Chadian oil fields were transported to the Kome terminal in Kribi, in the southern region of Cameroon, in those six months.

The $28.7Million income from the evacuation facility is slightly more than 9% higher than that collected during the same period last year.  Over the period reviewed, data from the Pipeline Steering and Monitoring Committee (PSMC) indicates.

Cameroon could earn more than the $49Million gained during Financial Year 2021, if this production volume is maintained throughout the year, According to the PSMC, last year’s revenue was generated through the transit of 42.92 million barrels of Chadian crude through Cameroonian territory.

Over the first 10 years of operation (2003-2013), the Chad-Cameroon pipeline only generated $132Million in revenue, an average of $17Million a year. In 2013, Cameroon undertook to renegotiate the royalty, and in the event increased the revenues earned from the infrastructure. The transit fees are now renegotiated every five years, the last one being 2018. The next reevaluation is expected take place in September 2023.

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