All posts tagged news


AfDB Is Not Supporting the East African Crude Oil Project

The African Development Bank has refuted the claims in a news article that it plans to provide financial support to the East African Crude Oil Pipeline Project.

It doesn’t name the medium, nor cite the headline, but says it “strongly refutes the claims in the misleading article, which references a letter by a group of civil society organizations and climate change advocates asking the institution to withdraw from the project due to its potential social and environmental damage”.

The facts, according to AfDB:

  1. The NEPAD Infrastructure Project Preparation Facility (NEPAD-IPPF) has not provided financing to any Private Sector Company for upstream oil or gas pipeline projects in East Africa.
  2. No commitment was therefore made to any party to fund the East African Crude Oil Pipeline Project. The project is not included in the Bank’s lending programme.
  3. The Bank is strongly committed to renewable energies.

Then the bank beats its chest

“It is important to point out that the African Development Bank Group has for more than a decade played a leading role in crafting policies and delivering investments that promote sustainable development practices on the continent, including climate adaptation and resilience.

“The Bank is committed to facilitating the transition to low-carbon and climate-resilient development in African countries across all its operational priority areas”.

 


MOMAN Outlines Agenda to Take Nigeria Out of ‘Subsidy Trap’

Nigeria’s petroleum product marketers, under the aegis of Major Marketers Association of Nigeria (MOMAN), have outlined a comprehensive agenda to take the nation out of the gasoline subsidy regime, which cost around $2Billion to service in the last one year.

The roadmap contains five clear messages, starting with the government divesting  the power to increase or decrease  petroleum prices, and including calls for annulling the Price Equalization Fund (PEF), discontinuation of Direct sales and Direct Purchase (DSDP)  programme, amending the law setting up the Petroleum Products Pricing Regulatory Agency (PPPRA) and inaugurating an open access to foreign exchange to all petroleum product importers.

This radical blueprint of reforms, from one of the several stakeholders in Nigeria’s downstream sector, is contained in a statement by Tunji Oyebanji, Chairman of MOMAN.

In it, the association requests:

  • A fundamental and radical change in legislation is necessary. The clear and obvious risk is that the country has never been able to increase pump prices under the PPPRA Act, leading to high and unsustainable subsidies and depriving other key sectors of the economy of necessary funds.
  • Purchase costs and open market sales prices for petroleum products should not be fixed but monitored against anticompetitive and antitrust abuses by the already established competition commission and subject to its clearly stated rules and regulations.
  • A level playing field. Everybody should have access to foreign exchange at competitive rates to be able to import and sell petrol at a pump price taking its landing and distribution costs into consideration.
  • Discontinuation of the Direct sales and Direct Purchase (DSDP)  programme. All foreign exchange proceeds from all sales of crude be paid into the same pool from which all importers can access foreign exchange at the same rate.”
  • The Price Equalization Fund mechanism should be discontinued and its law repealed as the cost of administration of equalization has become too high and the unequal application of payments by marketers distorts the market and creates market inequities and unfair competition. Internal equalization has been the practice with diesel distribution and sales since 2010 when diesel was fully deregulated.
  • The pricing system should allow internal equalisation by marketers which would be both competitive and equitable.
  • Fuel import should enjoy priority access in allocation of foreign exchange, again through a transparent auditable and audited process of open bidding. Conditions for accessing foreign exchange should be streamlined and specific delays before access imposed unilaterally on the downstream oil industry should be discontinued as being inequitable.”

MOMAN said it was stating its position, in the context of the announcement by Timipre  Sylva, Minister of State for Petroleum Resources, that the government would implement a policy of “price modulation”, which means, in MOMAN’s view, that the state will give effect to existing legislation enabling it to set prices in line with market realities through the Petroleum Products Pricing Regulatory Agency (PPPRA) as provided in its Act.

“The clear and obvious risk is that the country has never been able to increase pump prices under this law, leading to high and unsustainable subsidies and depriving other key sectors of the economy of necessary funds”, MOMAN stated.

MOMAN admits that “there is no country or economy where governments do not have the power to influence prices”, however, “Governments use economic tools such as taxes or interventions on the demand side or the supply side of the market and other administrative interventions to influence prices where it needs to”.

“The problem here is that government has retained for itself by law the power and the responsibility to fix pump prices of PMS which is what puts it under so much pressure and costs the country so much in terms of under-recoveries or subsidies when it cannot increase prices when necessary to do so.

”It makes sense to relieve itself of this obligation now when crude prices are low and resort to influencing prices using the same tools it does for any other commodity or item on the market”.

“Our current situation, laid bare by the challenges of Coronavirus to the health of our citizens in particular and and economy of our country in general, demands that we are honest with ourselves at this time. A fundamental and radical change in legislation is necessary.

“When crude oil prices go up, government has always been unable to increase pump prices for socio-political reasons leading to these high subsidies and we believe the only solution is to remove the power of the government to determine fuel pump prices altogether by law.”

MOMAN recommends a legal and operational framework comprising of a downstream Industry operations regulator, the Federal Competition and Consumer Protection Commission (FCCPC) or Competition Commission (for pricing issues) and the interplay between demand and supply which will ensure a level playing field, protect the Nigerian Consumer and curb any market abuse or attempts to deliberately cause inequities in the system by any stakeholder.

“In line with change management principles, consultation and engagement with market players should clearly spell out the path and final destination which is full price deregulation”.

 


OPEC still has an important role to play in Global Oil Market

By Sebastian Wagner

Scan Western news about OPEC from the last few years, and a common observation tends to appear: OPEC had a huge influence on the global oil market back in the day. Now, in the shale oil era, not so much.

I would argue that OPEC can safely state that reports of its death—or dwindling relevance—are greatly exaggerated. In fact, OPEC has been at the center of one of the biggest stories of 2020 aside from COVID-19: a historic deal that resolved the oil price war between Saudi Arabia and Russia.

From 2016 to late March, the two oil powerhouses had been part of a loose alliance of OPEC members and non-member producers known as OPEC+. Its purpose was to stabilize the global oil market through voluntary production cuts. The alliance was a success until early this year, when COVID-19 effectively shut down China’s economy and dramatically reduced its crude oil imports. To restore market balance, OPEC member Saudi Arabia asked OPEC+ member Russia to increase its production cuts. When Russia refused, Saudi Arabia stopped complying with its own production cuts and, instead, started flooding the market with oil. Russia followed suit, and plans to renew the OPEC+ agreement on April 1 were abandoned. Crude oil prices went into freefall, and U.S. shale oil producers started struggling to survive. It didn’t help when COVID-19 began forcing lockdowns around the globe, resulting in plummeting demand for crude and even lower oil prices.

The world was watching closely when Saudi and Russian leaders attended an emergency OPEC/OPEC+ meeting on April 9. After three days of negotiations, OPEC and OPEC+ members agreed to massive production cuts starting with nearly 10 million barrels per day May 1. The cuts, which will gradually decrease, will continue through April 2022. While low demand remains a concern, by stabilizing the oil market, OPEC+ will still provide economic relief and save jobs around the world. Shortly after the product-cut agreement was finalized, exhausted Saudi Energy Minister Prince Abdulaziz bin Salman shared his exhilaration with Bloomberg News. “We have demonstrated that OPEC+ is up, running, and alive.”

Indeed. Both OPEC and OPEC+ are very much alive and as relevant as ever.

A New Era?

Despite the condescending descriptions of OPEC I’ve read in American media coverage, I am seeing signs that U.S. leaders are starting to look at OPEC with newfound respect. Even one of the organization’s most outspoken American critics, President Donald Trump, had generous words for OPEC the evening before its April 9 meeting. “Obviously for many years I used to think OPEC was very unfair,” Trump said during a press briefing. “I hated OPEC. You want to know the truth? I hated it. Because it was a fix. But somewhere along the line that broke down and went the opposite way.”

Then there’s Ryan Sitton of the Texas Railroad Commission, which regulates the exploration, production, and transportation of oil and natural gas in Texas. He responded to the Saudi-Russia oil price war by reaching out to OPEC and proposing statewide oil production cuts. After a one-hour photo call with OPEC Secretary General Mohammad Barkindo, Sitton was invited to attend OPEC’s June meeting in Vienna.

While I applaud Sitton’s initiative, I couldn’t help noticing what a departure it was from America’s usual “OPEC playbook.” U.S. energy policy has been driven by a strong desire to “free” the country’s oil and gas industry from OPEC’s influence. As recently as 2018, the U.S. House of Representatives attempted to pass the No Oil Producing and Exporting Cartels Act (NOPEC) (https://bit.ly/3bpS3h5). Had this harmful bill been approved, the U.S. Attorney General would have been empowered to bring antitrust lawsuits against OPEC and its member countries. The legislation likely would have jeopardized foreign investments in the U.S. oil and gas industry and cost America valuable commercial partnerships.

How dramatically things have changed. Two years after NOPEC was proposed, we had a representative from the powerful Texas Railroad commission offering to work with OPEC to help balance the market.

While it’s unclear whether Texas will cut production, Sitton’s decision to open communication with OPEC is a positive, and I hope other U.S. industry leaders will consider the same. Instead of viewing OPEC as the enemy, dismissing it, or avoiding it, why not learn to understand this important organization and lay the foundation for a productive relationship?

Gaining Perspective

I suggest starting with Amazon’s bestselling book, Billions at Play: The Future of African Energy and Doing Deals, which includes a chapter titled “A Place at the Table: Africa and OPEC.” Yes, the chapter covers the value OPEC membership offers African nations, but its insights are relevant to everyone with ties to the oil and gas industry.

The background on OPEC’s 2016 Declaration of Cooperation is particularly timely. It was that agreement among OPEC producers and 11 non-members that resulted in OPEC+. For the first time in OPEC’s history, member countries agreed to work with non-member countries to stabilize the global oil market after increased U.S. shale oil production triggered low prices. Together, participating countries committed to voluntary production adjustments of 1.8 million barrels per day. Until the extraordinary chain of events set off by COVID-19, the OPEC+ alliance remained firmly in place.

The book also delves into the reasons OPEC membership has so much to offer African oil-producers: strength in numbers and a commitment to unity. “The organization says that every new member adds to the group’s stability and strengthens members’ commitment to one another,” the book explains. “Different perspectives create a rich culture where colleagues can learn from one another, anticipate and respond to the complexity of today’s oil markets, and ultimately, influence prices.”

It’s not always a seamless process, but OPEC continues to achieve those objectives. And as we go forward, this kind of unified approach will remain critical. Most likely, the global oil and gas industry will be forced to deal with the economic impacts of COVID-19 and low oil demand for an unknown period of time. Instead of working at cross purposes, oil-producing countries will need to continue cooperating to find solutions, embrace opportunities, and keep the industry alive.

Wagner is the Chair of the German African Business Forum and the CEO of DMWA Resources, a pan-African energy marketing & investment firm. Worked for Trafigura & affiliated companies in oil trading, responsible for managing trading operations and pursuing pre-financing opportunities in around Africa.


Austin Avuru: Three Hard Knocks in The School of Life

By Toyin Akinosho

Austin Avuru, Chief Executive of Seplat, Africa’s largest homegrown E&P firm, most vividly remembers the day the company lost the bid for Oil Mining Lease (OML) 29 in eastern Nigeria.

“That was one of our lowest points in this company because the acreage was going to be a company changing asset for us: it was going to give us the size that we seek”, Avuru reflected, in his office in Lagos, Nigeria, recently, as he prepared to celebrate a milestone that ties his own personal growth with Nigeria’s 60 year trajectory as an oil producing nation.

OML 29 is a sprawling, highly valuable property, spanning an area of 983 square kilometres (or 242,550 acres) onshore and holding some 2.2Billion barrels of oil equivalent, in proved and probable (P1+P2) reserves, in nine fields, according to a 2013 Competent Persons Report by NNS .

To put some context to the figures: Seplat, today, produces, on a gross basis, slightly higher than 60,000Barrels of crude oil and condensates and 400Million standard cubic feet of gas from five acreages, whereas OML 29 alone produces over 80,000BOPD, when there is no vandalism of evacuation pipeline.

“We had the cash on the table but we did not win OML 29. We were only a hundred million dollars away from Aiteo’s bid (to Shell, which was leading a divestment of itself, TOTAL and ENI from the tract). It was insignificant because we were talking about a $2.4Billion bid and $100Miilion was less than 5% of that, so it was insignificant”.

Avuru wonders whether the inability of Seplat to clinch OML 29 wasn’t due to “the politics of who Shell figured would more easily get the approval for the purchase” from the Nigerian government. “Otherwise they” (the company which won the asset) “couldn’t pay for one year after they got it, while we were going to write our cheque immediately because we had our money ready”.

It was the loss of OML29 that made such acreages as OMLs 25 and OML 55 important to Seplat, Avuru noted. “All these issues about OML 25 and OML 55 came because we lost the big fish”.

His disappointment about OML 29, Avuru explained, pales in comparison with a particular challenge he had faced when he was building Platform Petroleum, a marginal field operator. This was before he helped bring Platform, Shebah Exploration and M&P together to create Seplat.

“The biggest setback was the day I woke up and found out that cellar of the appraisal development well that we were drilling in Umutu had collapsed. We borrowed $10Miilion to drill that well and supplemented with our cash and in the end, the well cost us $19Million. We borrowed $20Million for the gas processing plant and our production was declining and we couldn’t borrow more. We were almost in the throes of death. This was in 2009 and that was when I scratched my head and thought ‘this is it’. The only thing that came to our aid eventually was the pipeline network that we had built all by ourselves to the cluster”, he recalled, referring to  a cluster of four oil fields in the Western Niger Delta, which evacuate their crudes into Platform’s facility. “The Ase River Pipeline was generating about $2Miilion in gross revenue in tariff every year. So that revenue stream was enough to negotiate a revolving credit facility with Skye Bank for $5Million. It was that money that we eventually used to work our way back to life”.

Not all of the huge regrets of Avuru’s life in the last 15 years were business related.

“One of the biggest potholes I have had was the day I lost my wife in 2005 after the two of us had inspected the site where we (Platform Petroleum) were building our flow station in Umutu and so on”.

Avuru remarried, several years later, and then this:

“And then the day I had to open my kitchen door to inform my wife that her 57-year-old father, who had been accidentally shot by a police man and was in the hospital, had died.

“I think those were probably my lowest points in the past 15 years”.

Otherwise, much of the path Avuru had travelled, since he left the NNPC in 1992, had been strewn with gold.

At least, so it seems.

Since he left NNPC as a star geoscientist (by his own account), Avuru had worked for Kase Lawal’s Allied Energy (which became Erin Energy, and has since ceased to be a going concern) and moved on to set up Platform Petroleum, from which platform he became the Chief Executive of Seplat, the only African indigenous E&P Company to be listed on the main board of the London Stock Exchange.

In the last 12 years he had been nominated by two successive Nigerian Ministers of Petroleum for the position of the Director of Petroleum Resources and had come terribly close to being appointed to the position of Group Managing Director of the NNPC, the hugely influential state hydrocarbon company. “I had a one-on-one interview with (President) Yar’Adua”.

To mark his 60th birthday on Friday, August 17, 2018, Seplat Petroleum’s management wove a theme around the fact that Avuru was born in the year that Nigeria first exported crude oil. An industry stakeholders lecture, at a princely venue overlooking the Atlantic, entitled 60 Years After: Preparing For A Nigeria Without Oil, was attended by over 300 people, a glittering gathering featuring the country’s top business brass, C-Suite level petroleum executives, energy bureaucrats and ranking politicians.

Full details of Austin Avuru’s career trajectory, his misses and hits, as well as blinding insights into how the world of petroleum E&P works in Africa’s largest hydrocarbon producer, is published in the August 2018 edition of the Africa Oil+Gas Report. Please click here…

This publication wishes him many more fruitful years in the service of his country.

 


Brand New Rigs For Angolan Deepwater

Angola will host two of the 60 brand new rigs expected to be deployed worldwide in 2010. Saipem 12000 is one of Saipem’s three rigs due to leave the yard this year — one drillship and two semisubmersibles — all of which are contracted. The Saipem 12000 drillship is under construction in the Samsung yard in South Korea and is expected to leave the yard by February 2010. It will work for TOTAL off Angola through February 2017, at an undisclosed dayrate Transocean has four drillships under construction; all of which are contracted. One of them, The Discoverer Luanda is an enhanced Enterprise class rig. It will be completed in early-2010 and go to work for BP off Angola for seven years ending in 2017 in the low- $430s.


Expro Wins $60MM contracts in Western, Southern Africa

EXPRO, THE OIL SERVICE FIRM, HAS won contracts valued at over $60 million in the last six months in West and South African regions. The contracts cover a range of offshore deepwater projects and services and would be delivered on phases over the next three years. The work involved include provision of offshore deepwater technology for Chevron, Agip, Shell in Nigeria as well as increased scope of work from BP deepwater in Angola, as well as for TOTALl and Noble Energy in Cameroon. Another set of contracts were secured in North Africa, including BP and BG in Algeria and Libya together with multiple well- testing contracts in Egypt.


Shell Proves Nigeria Right

MARTYN MNDERHOUD LOOKED up briefly from the presentation and faced the audience. “Somebody said that Zabazaba was a discovery”, he said. “Well, I don’t know”.

Then almost immediately Shell’s Vice President for Exploration and Production in Africa put up a series of slides, indicating that Shell considers Nigeria the best place to look in its deepwater portfolio worldwide. The scene was the banquet hail of the Sheraton Hotel in Abuja, at the conference of the Nigerian Association of Petroleum Explorationists(NAPE) in November 2006.

In the last three years (2003-2006) almost everyone has lamented the lack of success in ultradeepwater Nigeria. But not Shell. The Anglo Dutch giant has always had a successful story. Shell reported in 2006 that Bobo -l in OPL 322, encountered some 120m of hydrocarbon. Indeed, in his paper, (See illustration) Minderhoud declared Bobo-1 as a “fat cat” discovery. Bobo is located squarely in the ultradeepwater, outboard of 1 ,700m water depth, and its location is not in the Outer Toe Thrust(OTT)Belt area, which has proven quite problematic in terms of structuration for holding hydrocarbon. But if the general rule has been that the farther and deeper from 1 ,600metre water depth you get, the less likely you are to find a significant hydrocarbon tank, then Shell has proven an exception to the rule. Agip’s Dou-1 and Emein-1, OPL 244, both drilled in 2,000m of water encountered marginal gas. Chevron’s Iroko- l(in 2000m WD) in OPL 250, was as much a disappointing story as Phillips Onigun- l (2,200mWD) in OPL 318, Petrobras’s Erinmi-1(2,300mWD) in OPL 324 and Ocean Energy’s Pina-l (in 2,500mWD), which encountered some gas and Tan-1 (2,000m WD) in OPL 256.

While Minderhoud abstained from outright declaration of Zabazaba-l ( 2,000metre water depth) as a discovery, the company has gone ahead to drill Zabazaba 2, an indication that the first well, at least, opened doors to possibilities. Outside the rank wildcat area, Shell is proving up more oil in fields already established.

The January 2007 edition of AAPG Explorer, the influential in house magazine of the largest grouping of earth scientists on the globe, cites Bonga North 2X, as one of the four major discoveries in subsaharan Africa in 2006. Bonga North 2 X is the dual leg appraisal to the Bonga North 11X discovery in OML 118, where the Bonga main, (the main field of the Bonga structure) is producing over 200,000BOPD, or at least 8% of Nigeria’s entire production, today.

AAPG Explorer says that “Shell is trying to prove up enough reserves (500MMBO+) that could lead to Bonga North being developed separately from Bonga”. But Shell sources say that the Bonga North field will be tied to the FPSO of the Bonga main.

Meanwhile, plans have progressed with Chevron to develop Bonga South-West/ Aparo (Chevron’s Aparo wells probed the same sands as Bonga South West, hence a unitization proposal). This means two projects of some 1 50,000B0PD each, at peak, apart from Bonga. Translation; on the Bonga structure and its satellites alone, the company is going to be  exploiting, by 2015, three fields delivering a total of at least 500,000BOPD.

One key beneficiary of this is ExxonMobil, who holds 43.7% interest in OML 118. The company will be rewarded whenever these fields come on stream; and it doesn’t even have to lift a finger. Shell itself has 43.7% in ExxonMobil’s OML 133, which hosts the Erha and Erha North fields, producing 230,000BOPD today. The two largest oil producers in Nigeria thus currently deliver close to 500,000BOPD, roughly one fifth of the country’s total production, from deepwater. ExxonMobil’s rich pickings apart, Nigeria has made a rebound in exploration effort in deepwater, an indication that the overall pessimism that hung over the terrain two years ago, is wearing off. Eleven wildcats were spudded in deepwater Nigeria in 2006, a figure which is higher than all the exploratory wells drilled in both shallow water and land last year.

Chevron’s Obo 1 is one play that may put to lie the perception that the outer toe thrust belt is a no no. AAPG Explorer reports that the first deepwater well in the Joint Development Zione (JDZ0 between Nigeria and Sao Tome et Principe, “encountered a cumulative 45 metres of net hydrocarbon pay in multiple reservoirs”.

The magazine said: “Reserves are runmoured to be not as large as expected, leading to speculation that the well was not sited at the most prospective location but rather on the edges of a major structure to check its extent”. As new discoveries show up with less and less reserves than the first set of discoveries, in just 10 years of exploration, there is a spirited debate on the knowledge base regarding the thrust belt features in the Niger Delta deepwater.


Mauritania breaks A Dry White Season

The discovery of the Chinguetti field, nestled in 800 metres of water off Mauritania, called attention to the country as a prime destination for oil and gas explorationists. But the initial skepticism of the size of the Mauritanian play, among earth scientists, especially in major companies, seems to be returning, with the spate of dry holes witnessed in the country in the last one year.

So when the UK operator Dana Petroleum abandoned wildcat Aigrette 1 as an oil discovery in the offshore Block 7 last December, it was a welcome breath of fresh air in an environment that had started becoming suffocated with news of disappointing encounters.

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Equatorial Guinea: Progress Stalls on Exploration Front

THE MOST CURRENT NEWS on the West African fairway is that Equatorial Guinea is trying to be a large gas supplier to the United States.

It makes a lot of sense, considering that progress is not as vigorous as it used to be in the deepwater- until recently- the country’s core hydrocarbon business. There has been little significant development on the exploration front in deepwater Equatorial Guinea since 2005.
In the only exploration well drilled in 2006, operator Chevron plugged and abandoned L-2, its second (wildcat) well in Rio Muni’s Block L in May 2006, after failing to encounter hydrocarbons. L-2 was drilled on the Banyan prospect, with the hope of testing the hydrocarbon potential of a Campanian reservoir. The well is located in 1,980m Water Depth.  It went a further 2,000 meters to TD at 4,076m.  Block L is located in the Rio Muni Basin.  It covers 2,584 sq km west of Devon’s Block P and includes grid blocks I-15, I-16 and part of blocks J-14 and J-15.  The tract was reduced by 40% upon renewal in October 2005. The company almost immediately indicated that it was walking out of the block and by implication, out of the country.

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