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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”.

 


TOTAL Starts First Oilfield Development on Angola’s Block 17/06

French major TOTALEnergies has announced the final investment decision for Begonia, the first development on block 17/06, located 150 kilometres off the Angolan coast, in agreement with concession holder Agência Nacional de Petróleo, Gás e Biocombustíveis (ANPG) and its partners on Block 17/06.

The Begonia development consists of five wells tied back to the Pazflor FPSO (floating production, storage and offloading unit), already in operation on Block 17. After commissioning, expected in late 2024, it will add 30,000 barrels a day to the FPSO’s production.

After CLOV Phase 3, another satellite project that produces 30,000 barrels a day and was launched on Block 17 in June 2022, Begonia is the second TOTALEnergies-operated project in Angola to use a standardized subsea production system, saving up to 20% on costs and shortening lead times for equipment delivery.

The project represents an investment of $850Million and 1.3Million man-hours of work, 70% of which will be carried out in Angola, the company says in a release.

 


Angola’s Oil Revenues Rise, Crimp China Debt by 2%

Angola’s revenues rose from $1.4Billion in April 2022 to $2.1Billion in May 2022, the government data says, owing to the doubling of crude prices compared with 2021.

Payments to Chinese creditors began in the first quarter of the year, 18 months ahead of schedule, as the suspension of debt service meant that payments would only resume at the end of the first half of 2023.

Angola’s debt to China fell by $351Million in the first quarter, to $21.4Billion, according to data from REDD Intelligence.

Angola’s debt to China, estimated at 40% of registered external debt, is mostly derived from loans contracted with Chinese banks, especially Exim Bank and BDC, in the view of Africa Monitor Intelligence,

Angola ´s debt to Chinese creditors had threatened to reach $22Billion between 4th Quarter 2019 and 4th Quarter 2021, but the Angolan Government had vowed to start bringing it down and now it is doing so.

Chinese loans, which represent about a third of Beijing’s claims on all African countries, were essentially intended to finance infrastructure projects (construction or reconstruction) and others, of an industrial nature.

Under a mechanism called “Angola Mode”, Angolan oil supplies, carried out under special price conditions, are intended to pay off Chinese investments in these projects.


Standard Bank: Big Lender in Uganda, Small Player in Oilfield Project

Standard Bank is the largest lender in Uganda.

The Bank had been keen to be a part of the funding for the country’s basin wide oil development project

But, under pressure by activist shareholders and environmentalist groups to desist from funding fossil fuel development, the Johannesburg headquartered Bank has thrown its hands in the air, explaining that the project does not depend on its participation.

“While we are the biggest lender in Uganda, we are such a small player in the $10Billion project that if Standard Bank does not participate, the project can still be funded by more well-heeled financial firms”, the company’s management sources say.

TOTALEnergies, the project leader, declared in a release after the Final Investment Decision (FID) on the project in early February 2022, that the FID was in line with the company’s “strategy of only approving new projects if they are low-cost and low emissions”. In particular, TOTALEnergirs said, “the design of the facilities incorporates several measures to limit greenhouse gas emissions well below 20 kg CO2eq/boe, including the extraction of Liquefied Petroleum Gas for use in regional markets as a substitute for burning biomass, and the solarization of the EACOP pipeline”.

The French major’s emission numbers stand in stark contradiction to the figures thrown up by groups like Just Share, which says the pipeline would pump enough oil to generate up to 34.3Million tonnes of carbon dioxide – about seven times the emissions of Uganda and Tanzania combined. It’s not clear whose numbers are correct, but TOTALEnergies has not lamented scarcity of funding for the project and it continues to announce first oil in Uganda by 2026.

South African banks like ABSA, Nedbank and Investec have been scared away from oilfield development projects by the loud protestations of such groups.

 


OML 11 is the Biggest Asset in NPDC’s Portfolio

The Oil Mining Lease OML 11, novated to the Nigerian Petroleum Development Company NPDC by the parent company Nigerian National Petroleum Corporation (NNPC), is considered the largest asset, in value terms, in the portfolio of NPDC, in the opinion of several members of the company’s management.

“It has over 11 flowstations and the Ogoni Bodo field is largely untapped, NPDC managers say.

The export terminal for the crude is at Bonny, although Shell didn’t agree that the terminal is part of the OML 11 asset. At $3.5Billion, the value of investment committed to, in the Finance and Technical Service Agreement (FTSA) is the highest of the three FTSAs….Click here to read full article


TOTAL: First Oil in Uganda in 2025, First Gas in Mozambique in 2026

TOTALEnergies has announced the proposed dates for commissioning of its two ongoing hydrocarbon field development projects in East Africa.

The company’s Tilenga project, which monetises a cluster of onshore fields the company is developing in Uganda, is expected to reach first oil by 2025, according to TOTALEnergies Strategy Outlook 2021. The French major does not say there are any complications in delivering the project which, along with CNOOC’s Kingfisher field development, is a 230,000Barrels of Oil Per Day (BOPD) project, ferried to the Indian Ocean though a 1,400km pipeline.  TOTALEnergies notes, however, that the entirely onshore project is delivered in a sensitive environmental context and with a significant land acquisition programme.

In Mozambique, the French Supermajor has postponed the likely date for the first cargo of Liquefied Natural Gas expected from the Area 1 project from 2024 to 2026. The company does not say anything about insurgent attacks, which, primarily, was the reason for the setback.

 


Massive Production Drop in Nigeria’s Western Onshore

Crude Oil output crashed to significant lows in five acreages held by Nigerian independents in the western onshore Niger Delta, in August 2021, according to field data seen by Africa Oil+Gas Report.

These acreages, operated as Joint Ventures with state oil firm NPDC, produce the bulk of the hydrocarbons in Nigeria’s western onshore as well as most of the natural gas for the country’s electricity supply.

NPDC/Neconde’s OML 42 output fell to 23,000 Barrels of Oil Per Day (BOPD), from 38,669BOPD averaged in July 2021.

NPDC/NDWestern JV grossed…Read more

 

 

 


NIGERIA: The Big Asset Sale Season

Nigeria is back in a big asset sale season.

This is like mid- 2013 all over again, a half-year after RoyalDutch Shell completed a significant asset sale and was about to conduct another. But this time, the scale is humongous, and the above headline is closer to the narrative than it was when we ran it in 2013.

Our latest edition, just released to our global pool of paying subscribers, covers the asset sale with full disclosure.

Shell is about to sell acreages. ExxonMobil is in the midst of selling and Chevron has almost concluded a sale.

But again, the really big disposer is RoyalDutch Shell.

When the European major concludes the imminent sale of its equity in 18 joint venture assets in Nigeria, it will be left with just one operated acreage and two non-operated assets, all of them in deepwater. Midstream, it will still hold the largest non-state share in the NLNG plant, but it will no longer be in direct control of the feedstock.  The company whose name was, for most of the last 65 years, synonymous with the phrase ‘Nigerian Oil industry’, will have retreated into the background.

In our last monthly edition, released in mid-July, 2021, we explored the likely beneficiaries of these sales. We have updated the analysis in this edition.  In that issue, we worried about the impairment to the state coffers and debated whether the overall divestment picture was a good or bad sign, on balance to the fiscus. In this edition, we ask, why is the state company deeply concerned about this sale?

Elsewhere in the magazine, our regulars are of course included: who is getting to first oil; who is drilling what and where? Where in Africa is gas being commercialized and how can our subscribers benefit from such opportunity? Where else is opening up and what are the new technologies?

The Africa Oil+Gas Report  is the primer of the hydrocarbon and the growing new energy 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 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 by the Festac News Press Limited 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 in our West African regional headquarters in Lagos are +2348038882629, +2348036525979, +2347062420127, +2348023902519.

 

 


South Africa Sprouts New Shoots

In the last five years, several E&P companies, primarily owned by South Africans, have left the upstream market, such that it is tempting to declare the end of the growth of South African E&Pindependents. 

JSE listed SacOil, badly burned by its dealings in Nigeria with local partners Transcorp and NigDel, has turned into a downstream company and changed its name to Efora. 

Thombo Petroleum, owned by Trevor Ridley, former Petroleum Advisor at BHP Billiton, disappeared into the folds of Canadian owned Africa Energy Corp.

But apart from Sasol Exploration and Production International, which is the most visible and best resourced South African bornE&P company, there are a number of companies to consider:

JSE and ASX listed Renergen describes itself as an integrated alternative and renewable energy business that invests in early-tage alternative energy projects.

But it started its project life six years ago by acquiring an onshore natural gas acreage from Molopo South Africa Exploration and Production. Renergen holds the first, and currently only, onshore petroleum production right in South Africa. 

Several homegrown independent South African companies, including Tshipise Energy (Pty) and Sungu Sungu Petroleum, are exploring for natural gas, in coal beds, in the Karoo and offshore Orange Basin, but their distance to development is, at best, far off. 

Renergen is the only one pumping natural gas from subsurface reservoirs into the local market. It has been supplying compressed natural gas to transportation companies since May 2016.

South African National Petroleum Company (formerly PetroSA), the only other natural gas producer in the country, is a state-owned enterprise.

Renergen is working on ramping up production from its acreage, which holds an estimated 142Billion standard cubic feet of proven and probable reserves, near Virginia, about 300km southwest of Johannesburg. It has moved intoliquefied natural gas (LNG) production, “primarily serving the growing domestic heavy duty truck market across Africa and emerging markets”, it says. Renergen has signed an offtake agreement with South African Breweries (SAB) for the supply of liquefied natural gas to power its delivery trucks. For this project, it initially rolled out compressed natural gas to a small fleet of SAB trucks in Gauteng, the country’s major commercial province.

A POTENTIAL STAR IN THE SOUTH AFRICAN E&PFIRMAMENT is Sunbird, a gas explorer and developer which owns a 76% interest in the Ibhubesi Gas Project, Block 2A, offshore of the west coast of South Africa and is the operator of the block. The company was originally owned by Australians, and was sold to South Africans in 2016. The Ibhubesi Gas Project is the country’s largest, undeveloped gas discovery, in the opinion of Sunbird and the local media. Theindependently certified gas reserves are 540 Bcf (2P) with “best estimate” prospectivity of close to 8 Tcf of gas, according to the company. The immediate focus of the project is provision of gas to the Ankerlig Power Station, an 11 year old, 1,338MW capacity thermal plant, designed to be fired by natural gas, but instead, utilizing expensive diesel fuel.Sunbird’s JV partner PetroSA, holds the remaining 24% in Ibhubesi.

Sunbird, for now, remains no more than a potential.

Five years after the Department of Environmental Affairs (DEA) issued an Environmental Authorisation (EA) for the project, the company is not anywhere close to concluding the gas sales negotiations with Eskom, the South African state power utility which owns the Ankerlig power plant. Nor is Sunbird seen to be progressing any deal to sell gas for industrial uses like Renergen is doing.  


TOTAL Boosts Gross Angolan Output With a 40,000BOPD Development

French major TOTAL, has announced the start of production from Zinia Phase 2 short-cycle project, in its prolific Block 17, in deepwater off Angola.

The field is hooked up to the existing Pazflor’s FPSO (Floating Production, Storage and Offloading unit). 

The project includes the drilling of nine wells and is expected to reach a production of 40,000 barrels of oil per day by mid-2022. 

TOTAL operates Block 17 with 38%. Partners include Equinor 22.16%, ExxonMobil 19% and BP 15.84% and Sonangol P&P (5%). The contractor group operates four FPSOs in the main production areas of the block, namely Girassol, Dalia, Pazflor. 

Gross crude oil volume exported from Block 17 in March 2021 was 10, 455,209 barrels, amounting to 337, 265BOPD, according to Angolan government statistics.

Located in water depths from 600 to 1,200 metres and about 150 kilometres from the Angolan coast, Zinia Phase 2 resources are estimated at 65Million barrels of oil. 

 

 

TOTAL said that the project’s entire development “was carried out according to schedule and for a CAPEX more than 10% below budget, representing a saving of $150Million. 

“It involved more than 3Million manhours of work, of which 2 million were performed in Angola, without any incident”.

The Block 17 production license was recently extended until 2045.

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