All posts tagged oil-blocks

Namibia Nods to Developing Large Scale Green Hydrogen

Section: ENERGY TRANSITION · November 16, 2021 · No comments |

The Namibian government has approved Hyphen Hydrogen Energy as the preferred bidder to develop the country’s first large-scale green hydrogen production project. The company says it plans to invest up to $9.4Billion over the next nine years. This investment is almost equal to the country’s current gross domestic product (GDP) of $10.7Billion in 2020 according to the World Bank.

If the project goes ahead, Namibia will be home to one of the largest green hydrogen projects on the African continent. The Windhoek, Namibia-based company is owned by Enertrag, a German industrial group specializing in renewable energy production, with 772 wind turbines in operation worldwide.

The investor Nicholas Holdings is also a shareholder of Hyphen. The first part of this investment, $4.4Billion, will develop 2,000 MW of clean energy capacity. The electricity will be generated from solar and wind power plants in the Tsau/Khaeb National Park on the coast in southwestern Namibia. This arid, heavily silted-up area is ideal for developing this clean energy power by 2026.

This coastal area should also facilitate the export of hydrogen produced with locally harnessed renewable energy. Hyphen says it will also use clean electricity to produce green ammonia on a large scale.

By 2030, Hyphen hopes to have 5,000 MW of power generation capacity and 3,000 MW of electrolysis capacity. The combined facilities will produce 300,000 tons of green hydrogen per year.

Hyphen says that the establishment of hydrogen and green ammonia production facilities will create 15,000 direct jobs during the four years of construction of the two phases, with an additional 3,000 permanent jobs during the operational phase. More than 90 percent of all these jobs created are expected to be filled by Namibians, the investor promises. In addition to taxes, Hyphen will pay the government concession fees, royalties, a contribution to the sovereign wealth fund, and an environmental tax.

“This is exactly the type of investment the board is looking to attract, as it fits directly into our mandate to unlock investment opportunities to grow the economy and, most importantly, improve the quality of life for all Namibians,” says Nangula Uaandja, chairman of the Namibian Investment Promotion and Development Board (NIPDB). The government agency is granting a 40-year concession to Hyphen. The company will draw on the experience of Enertrag, which has been experimenting with green hydrogen production since 2010, with a successful first trial in 2011.

Funding of E&P Business in Nigeria; Strategies for Sustainability

Section: In the news · May 27, 2021 · No comments |

By Tunde Afolabi

Twenty years ago, 90% or more of all the oil and gas licenses in Nigeria were held by the International Oil Companies (IOCs), most of them global oil majors in their own right. The rest were either unassigned or held by a sprinkle of Nigerian independents.

By 2020, about 75% of the oil and gas licenses in Nigeria were held by the IOCs while the rest were held by the Indies or unassigned. The independents came into being, largely in the 1990s, courtesy of some tenacious Nigerians with the undying support of the then minister of petroleum resources, Jubril Aminu, a Professor of medical sciences, when the concessionary block award was approved by the government of General Ibrahim Babangida.

Production capacity of the independents hovered around 2% of the nation’s total output, until the majors’ divestment exercises of between 2013 and 2016, in which several onshore assets with reserves ranging from 200Million barrels to 1.2Billion barrels were sold and purchased and a new class of independent producers emerged with some, with some having production capacity in excess of 70,000 barrels of oil per day. The determining factor of the health and well-being of the oil and gas industry is the price of crude oil.

Between 2002 and 2005, oil prices hovered between a low of $18 per barrel to a high of $40 per barrel. From 2005 to 2008, the price rose from $40 per barrel to $132 per barrel. This was followed by the 2008 crash when oil prices plunged by more than $90 per barrel to a low of $40 per barrel. The good days returned in 2009, ushering in a time of global economic recovery that lasted till 2014. During this period, oil enjoyed a robust average price of $100 per barrel. By May 2014, we experienced another crash when oil prices plunged to $50 per barrel and did not stop the free-fall until it reached $27 per barrel. Oil price started recovering in September 2015 and by 2018, had reached another milestone of $80 per barrel. Prices hovered between $80 per barrel and $60 per barrel until February, 2020 when oil took a nosedive to below $15 per barrel.

The capital spend of the oil industry is highly influenced by the robustness of oil prices. Between 2009 and 2015, when oil prices were averaging about $100 per barrel, the Nigerian oil industry was spending an average of $18Billion per annum. However, between 2016 and 2019 when the prices of oil fell to an average of $60 per barrel, capital spend during the same period fell to an average $7.5Billion per annum.

The number of exploration and appraisal wells was optimal in Nigeria between 2010 and 2019, closely mirroring the level of capital expenditure. In 2010, 2011, 2012 and especially 2013, the number of exploration and appraisal wells drilled globally were significantly higher than the previous years and the following years.

The proven crude oil reserves growth between 2010 and 2016 mirrors the price of oil during that period. The crash of 2015 significantly affected the reserves growth from 2017 and beyond.

The only aberration which I can find in the statistics of Nigerian Oil Industry activities is the decline of production from 2010 to 2016. One would have expected that as exploration and appraisal activities grew and crude oil reserves grew, so would the production activities, but that is not the case.

Fast forward to 2021: One thing is for certain, capital spend in 2020, 2021 will be significantly reduced, a situation which will impact spending on core exploration activities.

SO, WHAT ARE THE STRATEGIES FOR SUSTAINABILITY?

By the fourth quarter of 2019, oil prices were getting restless and $60 barrel oil was looking unsustainable. 2020 started with some optimism that things might turn around, with $65 per barrel average price in January and February. In fact, at a point in January, we had a $70 per barrel oil.

Then came the surprise assault of COVID-19 and the whole world was caught flat-footed. By the end of that first quarter of 2020, oil prices had crashed to $18 per barrel. The world was awash with oil, as over $100Million barrels of homeless crude roamed the seas. Tankers on the world’s main water ways were being used for emergency storages because the storage terminals were filled to capacity.

The most readily impacted by this free fall in oil prices in the Nigerian oil and gas industry were:

1 The Federal Government of Nigeria through NNPC whose revenues fell by more than 70%.

2 The independent oil producers whose income comes from near-marginal field operations and who live from month-to-month and from hand-to-mouth and at the mercies of their bankers. Some were lucky to have hedged early but none was spared the agony of budget balancing. Oil men became finance strategists overnight, sourcing for funds.

Funding problems for E&P oil and gas companies have been around for a number of years, even before the pandemic induced destruction of demand for crude.

It is important to note here that facilities granted by banks to the marketers of petroleum products, such as diesel and gasoline marketers, are included in the count of what is given to the oil and gas sector and amount to 50% of the total financing granted to the oil and gas industry.

The major oil companies which operate in Nigeria are generally self-funding for their E&P activities. They spend shareholder equity funds on technical operations, while they borrow, from local banks, mostly naira for sundry services like staff salaries and emoluments and contractor naira portion of their invoices among other things. However, you will find out that the independents depend mostly on local bank financing and very little on shareholders equities. Therefore, the ones who feel the most impact of crude oil price collapse in their businesses are the independents. Between 2014 and 2019, when the industry suffered a major price collapse, even at $60 per barrel oil, credits from banks to the oil and gas industry dropped from the high of $12.5Billion in 2014 to a low of $9.5Billion in 2019, a whopping 24% fall in available credit.

One factor that has exacerbated the credit crunch for the independents from the local banks is the Central Bank of Nigeria (CBN)’s sectorial limitation; that is, how much of a bank’s portfolio can be allocated to a particular industry, which has been falling from a high of 28% in 2014 to a low of 22% in 2019. Meanwhile, the petroleum products market (downstream activity) and the IOC naira demand drastically reduced what eventually was available for field operations for Nigerian indigenous E&P companies. This has led to high financing cost.

WAY FORWARD

Today, there are at least 13 Nigerian owned independent oil and gas companies with reserves of almost 4Billion barrels of oil and producing close to 500,000 barrels of oil per day. If these reserves are to be developed at an average cost of $5-$10 per barrel, the companies will require between $20- $40Billion. The top ten Nigerian banks all together give a total of about $5.5Billion in loans to the Nigerian oil and gas industry, including the marketers of petroleum products.

Meanwhile, more players are upcoming, as the marginal field bid round is finalized. These players will be added to the list of Nigerian independent producers who require funds to appraise, develop and produce their newly acquired assets.

There are numerous proposals on the way forward.

It is imperative for the Nigerian government to encourage licensing a purely oil and gas bank with significant subscription to the shares of the bank by the government. An oil and gas focused bank will understand the market fundamentals and the rudiments of running an oil and gas exploration and production company.

The trend in prices will be very dependent on new production development especially in the deep-water. If the past is the key to the future, let us consider events in the oil price recovery from the 2001 price dip, before the climb to $50 a barrel in 2005, which is a period of 4 years. Recovery to high prices might take longer or never as the industry competes with the challenges of low carbon emissions demand for climate change mitigation.

In conclusion, Nigeria independent oil and gas producers currently account for 25% of production of the total national output. We have not disappointed the government in domesticating the skillset of oil and gas exploration development and production. It will be a shame if we do not do all in our power to assure the survival of the independents.

There are several other mitigating options that may be considered. Most of them will require that extant laws are changed but for ones that do not require much of interference from legal constitutional challenges, I believe this proposal that has

been seriously considered about the creation of an oil and gas bank should be put into serious consideration.

It is imperative for government to encourage the licencing of an Oil &Gas Bank. An oil and gas focused bank will understand the market fundamentals and the rudiments of running an E&P business.

Abridged version of the Keynote address delivered by Tunde Afolabi, Chairman, Amni International Petroleum Development Company, at the 45^thanniversary lecture of the Nigerian Association of Petroleum Explorationists, NAPE. Mr. Afolabi a tiled Nigerian traditional chief, is a former president and Fellow of NAPE, with a distinguished oil and gas industry career spanning 47 years. The speech was transcribed to text by Bunmi Aduloju, reporter and researcher with Africa Oil+Gas Report.

First published in the January 2021 edition of the Africa Oil+Gas Report

Angolan Bid Round for Onshore Leases Starts today, April 30, 2021

Section: Tenders · April 30, 2021 · No comments |

Angola’s hydrocarbon industry regulator, the National Agency of Petroleum, Gas and Biofuels (ANPG), as an National Concessionaire, announces, under the terms of Articles 6 and 7 of Presidential Decree No. 86/18, of 2 April, the opening of the Public Tender for the bidding of new oil blocks, namely:
• Terrestrial Basin of the Lower Congo (CON 1, CON 5 and CON 6);
• Terrestrial Kwanza Basin (KON 5, KON 6, KON 8, KON 9, KON 17 and KON 20)

This announcement is located within the scope of the General Strategy for the Attribution of Petroleum Concessions for the period 2019-2025, approved by Presidential Decree no. 52/19, of 18 February
For each of the blocks mentioned above, the proposals to be submitted must comply with the following requirements:

I. TENDER RULES
1. Proposals must be submitted in Portuguese or, if in another language, accompanied by an official translation into Portuguese;
2. Proposals must indicate the company’s interest in being an operator or non-operator, as well as the participation it intends to obtain in the block (s) to which it competes;
3. The form of contract to be signed between the National Concessionaire and its Associates, will be the Production Sharing Contract (CPP);
4. The blocks that are the object of bidding are inserted in the maps available on the ANPG portal;
5. Companies, national or foreign, small, medium or large, may compete individually or in consortium;
6. In case of submission of proposals in a consortium, each of the companies that make up the consortium will be evaluated individually for the purposes of their qualification;
7. Companies competing for the position of operator or non-operator must pay a participation fee (Entry Fee) in the amount of $ US 1 000 000,00 (OneMillion United States Dollars) , which grants access the data package for the Lower Congo and Kwanza Terrestrial Basins;
8. The application and proposal submission models reproduced here will be published on the ANPG portal (www.anpg.co.ao);
9. Proposals must be delivered by 17:30 (GMT + 1) on 9 June 2021 in a closed and sealed envelope. All proposals submitted after this date will be considered invalid;
10. All proposals must be sent to the following address:

Torres do Carmo Building – Tower II
Rua Lopes de Lima, Municipality of Luanda
Luanda – Republic of Angola
5th Floor
Telephone: 22-64-28550 / 931-793-204
Att .: Hermenegildo Buila, Director of Negotiations at ANPG
Ref .: Proposal – Bidding Round 2020
All proposals will be opened in a Public Act, to be held on June 10, 2021, at a time and place to be announced in due time, in the most popular newspaper in Angola, on the ANPG portal and in at least one international publication of scope worldwide;
11. For the evaluation of the competing companies, the weighting of the proposals will be used, as presented in the attached Terms of Reference, and the evaluation of the technical and financial capacity of the companies will also be taken into account;
12. Pursuant to Presidential Legislative Decree No. 3/12, of 16 March, national companies are only exempt from the payment of the Signature Bonus and Contributions for Social Projects, and must participate, according to their share in the respective Group. Contractor, in the payment of the Contribution for Environmental Protection;
13. Companies covered by Presidential Legislative Decree No. 3/12, of 16 March, which compete as operators must submit proposals for all terms in the tender, including the elements that are exempt from payment, as referred to in the preceding paragraph.

II. REQUIREMENTS FOR NON-OPERATOR CONCESSIONAIRE ASSOCIATE
The competing entities that intend to assume the role of non-operator must prove their suitability and financial capacity, by presenting the following information:
a) Your business name or company name;
b) The place of incorporation, registration and the address of its headquarters;
c) The main activities carried out;
d) Detailed information on its equity structure, namely, the values of equity, realizable assets and fixed assets, as well as liabilities payable;
e) Letter of comfort from reputable banking institutions, which pay their financial capacity;
f) The annual reports of the activity carried out, including the balance sheet and accounts for the last 3 (three) years, or since its constitution, if the investing entity was established less than three years ago, audited by an audit entity independent and with proven experience;
g) Detailed information on his experience in oil research and production, including details of reserves and production;
h) The number of employees employed and the professional experience of management personnel in the area of research and production of hydrocarbons;
i) Detailed information on the legal and arbitration disputes that have existed against the company in the last five years (Declaration of Responsibility);
j) Detailed information on advance plans, future obligations, including work programs or risks that may impact on your ability to comply with the work program that is established for the Angolan concessions of which you will be a part;
k) Detailed information on the business activity carried out in Angola until the date of submission of the application (if applicable).
III. MEMBER REQUIREMENTS OF THE NATIONAL OPERATOR CONCESSIONAIRE
Entities wishing to assume the role of operator must, in addition to presenting the elements referred to in the requirements for non-operator, provide proof of the following requirements:
a) Be the holder of competence and experience in the management and execution of petroleum operations;
b) Have technical and operational competence;
c) Have an efficient organizational structure;
d) Present information that he considers relevant about his experience in the execution of petroleum operations, in order to enhance his candidacy, namely in the fields of safety, environmental protection, prevention of pollution and employment situations, integration and training of Angolan personnel .

IV. QUALITY, HEALTH, SAFETY AND ENVIRONMENT REQUIREMENTS (QSSA)
The entities must additionally present the following requirements:
a) Demonstrate the respective Quality, Health, Safety and Environment Policy where the commitment to the Prevention of damage to Health, the Prevention of Environmental Pollution, the Protection of Heritage and continuous improvement is evident;
b) Comply with applicable laws and regulations;
c) Demonstrate that its employees have the necessary skills to guarantee compliance with Quality, Health, Safety and Environment aspects;
d) Demonstrate the mechanisms used to assess and manage Quality, Health, Safety and Environment risks;
e) Highlight the use of methodologies that eliminate the causes of non-conformities in order to avoid repetition, and eliminate the causes of potential non-conformities;
f) Demonstrate that it has the competence to implement and maintain Quality, Health, Safety and Environment Management Systems in oil and gas exploration and production operations;
g) To present the methods to be used to control and respond to emergencies and fight spills;
h) Present the Management Indicators of the last six months and the mechanisms to be used to assess the performance of Quality, Health, Safety and Environment.

V. TERMS OF REFERENCE FOR BIDDING BLOCKS (Click)

M&P to Return to Development Drilling in Gabon’s Ezanga Permit

Section: Oil patch Sub-Sahara · April 23, 2021 · No comments |

By John Ankromah, in Libreville

Paris based, Indonesian owned Maurel et Prom (M&P) is to return to its development drilling campaign in the Ezanga permit, onshore Gabon, in the second half of 2021.

The programme continues the exploration and development drilling campaign on the permit, which started in late 2018, to support the production profile and counteract the fields’ natural depletion. The campaign has utilised two rigs so far.

In the first quarter of 2021 (1Q 2021) M&P’s working interest oil production (80%) on the Ezanga permit was 15,120Barrels of Oil Per Day (BOPD) (gross production: 18,901BOPD), more or less unchanged from Q4 2020 (15,096BOPD for M&P working interest). Production from the field was limited to 19,000BOPD (or 15,200BOPD net to M&P’s working interest) due to production cuts imposed under OPEC quotas.

M&P is, in addition to the drilling, carrying out an extensive optimization process on the field; is implementing Electric Submersible Pumps (ESPs) services as well as Pigging.

Chinese Company to Manufacture 1,000MW Capacity Solar Plant in South Africa

Section: ENERGY TRANSITION · April 23, 2021 · No comments |

By Sully Manope, in Windhoek

Shangai based LONGi Solar, is partnering with ARTsolar, a South African manufacturer based in Durban, to launch a new, state-of-the-art, 500 MW per year, solar PV panel assembly facility.

The plant is expected to commence assembly and stockpiling of panels in August 2021, for delivery starting in the first quarter of 2022.

A second 500 MW capacity assembly line is planned to follow shortly after the first commences operation, bringing ARTsolar’s new capacity to 1,000MW (1 GW) per year.

ARTsolar, an 11-year-old, 100% South African-owned company, currently runs a PV panel production line designed for a capacity of 300 MW a year. But the plant has struggled in the last five years, operating significantly below this level, largely due to the halt of the country’s renewable energy bid programme between 2015 and 2019.

The partnership between LONGi Solar and ArtSolar is, however, enabled by the return of the South African government to the renewable energy space. On March 19 2021, Gwede Mantashe, Minister of Energy, announced preferred bidders for the Risk Mitigation IPP Procurement (RMIPPP) programme, which alone will require some 2,2Million solar PV panels with a total capacity of about 1300 MW for delivery of power into the grid by the end of August 2022. To achieve this ambitious target, the projects must reach financial closure by the end of July 2021.

Two more procurement rounds of green energy from solar PV projects, each with a capacity of 1000 MW, are expected to commence in 2021, facilitated by the IPP Office of the Department of Mineral Resources and Energy for South Africa’s Renewable Energy IPP Procurement (REIPPP) programme in terms of the national Integrated Resource Plan for electricity, IRP 2019.

LONGi, a Tier 1 solar PV manufacturer listed on the Shanghai stock exchange, supplies more than 30 GW of high-efficiency solar wafers and PV panels worldwide annually, which comprises about a quarter of global market demand.

LONGi and ARTsolar have ambitions to be the major supplier of locally made solar PV panels for the RMIPPP and REIPPP programmes, and for subsequent procurements of solar power in South Africa and the region, for mainly utility-scale PV power plants.

Ghana Backs Down on Objection to Wissam Al Monthiry as Tullow’s Head

Section: Petroleum People · January 12, 2021 · No comments |

Ghanaian authorities have quietly dropped objections to having Wissam Al Monthiry as Managing Director of Tullow Oil Ghana.

The Government initially demonstrated fidelity to its local content requirements when it objected to British company’s appointment of a non-Ghanaian as the Company’s Chief Executive in Ghana, insisting that Tullow Oil’s action defeats the Government’s localisation agenda.

Tullow had initially picked Kweku Awotwi, a Ghanaian electrical engineer and businessman, in February 2020, after the retirement of Charles Darku, the first Ghanaian managing director who had served the company for five years

But in the middle of May 2020, after an extensive review of its operations in the country, which is also its heartland, Tullow appointed Wissam Al Monthiry to replace Awotwi, who was due for retirement on June 30, 2020.

“Government did not pursue this objection further as the new MD remained Tullow’s MD as at June 30, and into the second half of 2020”, says the country’s Public Interest Accountability Committee, in its latest report.

Angola Charges $1Million Entry Fee for Next Bid Round, to Launch in April 2021

Section: Farm in, Farm Out · December 31, 2020 · No comments |

Angola’s National Oil, Gas and Biofuels Agency (ANPG), as a national concessionaire, has announced its intention to hold an international tender for the award of new oil concessions in the country.

Nine blocks are on offer: three in the Terrestrial Basin of the Lower Congo and six in the Terrestrial Basin of the Kwanza. The contest opens 120 days from December 31, 2020, ANPG says. That is April 30, 2021.

This licence sale, which focuses on Blocks CON1, CON5 and CON6, of the Terrestrial Basin of the Lower Congo, and Blocks KON5, KON6, KON8, KON9, KON17 and KON20, of the Terrestrial Basin of Kwanza, “has a mandatory condition of participation the payment of an Entry Fee (Entry Free) in the amount of $1,000,000.00 (One Million United States Dollars), which will allow access to the Data Packages related to the basins to bid.

The deadline for the submission of proposals runs until June 9, 2021, in compliance with the 40 days provided for by law, and the opening ceremony for proposals will take place on June 10, 2021.

“This 2020 bid aims to relaunch the exploration and production of hydrocarbons in the terrestrial areas of the referred basins, to decrease the decline in production, by increasing the exploration and discovery of new resources, to stimulate the local creation of small and medium oil companies, to promote the incorporation of qualified Angolan labor, as well as fostering technological innovation and good governance practices. “

Paulino Jerónimo, Chairman of the Board of Directors of ANPG

The bid round is taking place under Law no. 10/04, of 12 November (Law of Petroleum Activities, amended by Law no. 5/19, of 18 April) and the aforementioned Presidential Decree No. 86/18, “to acquire the status of associate of the national concessionaire and to contract goods and services in the oil sector ”, Mr. Jerónimo explains.

“The National Concessionaire will communicate in due time the date and location of the technical presentations (roadshows), through an advertisement on the ANPG portal ( www.anpg.co.ao ), and in the national and international media”.

ENI Discovers Oil and Hooks It Up Quickly in Egypt’s Western Desert

Section: Oilpatch Sahara · December 29, 2020 · No comments |

By Toyin Akinosho

ENI announced a relatively small new oil discovery in Egypt and hooked it up within a month.

The discovery, in the Meleiha Concession in Egypt’s Western Desert, was achieved through the Arcadia- 9 well, drilled on the Arcadia South structure, which is located 1.5km south of the main Arcadia field already in production.

Arcadia -9 encountered 85 feet of oil column in the Cretaceous sandstones of the Alam El Bueib 3G formation. The well was drilled close to existing production facilities and is already tied-in to production, with a stabilized rate of 5,500 barrels of oil per day.

Following the discovery, two development wells, Arcadia 10 and Arcadia 11, have been drilled back-to-back, the Italian major says in a statement. The first one encountered 25 feet of oil column and the second one 80 feet, within the Alam El Bueib 3G formation. The three wells share the same oil-water contact in the discovered reservoir. Arcadia 11 also encountered 20 feet of oil pay in the overlying Alam El Bueib 3D formation.

“The new discovery adds 10,000 barrels of oil per day to ENI’s gross production in the Western Desert of Egypt”, the company explains.

ENI’s successful implementation of its infrastructure-led exploration strategy in the Western Desert through AGIBA, a joint venture between Eni and Egyptian General Petroleum Corporation (EGPC), allows a quick valorization of these new resources.

ENI, through its subsidiary IEOC, holds a 38% interest in the Meleiha concession while Lukoil holds a 12% and EGPC a 50% interest.

LEKOIL Asks Shareholders to Rebuff Metallon’s “Attempt to Take Control”

Section: In the news · December 27, 2020 · 1 comment |

By Macson Obojemuenmoin

LEKOIL has told its shareholders that the requisition by Metallon Corporation, proposing three names to act as directors of LEKOIL, is “no more than an ill-disguised attempt by Metallon to gain control of your Company without paying a price to all shareholders that reflects the intrinsic value of the business and assets of the Company”.

It argues, in the letter, that Metallon is a poorly run gold mining firm with no idea about how to manage the affairs of a hydrocarbon, E&P business.

LEKOIL’s briefing suggests that it has clearly scrutinized Metallon’s financials, and determined that “Metallon has identified LEKOIL’s assets as an opportunity to address its own financial challenges”. If all of Metallon’s Requisitioned Resolutions are passed, LEKOIL’s Board contends, “Metallon’s appointees would represent 50% of the directors on the Board and, if Michael Ajukwu is elected Chairman, they will also have the casting vote. The Board does not believe that it would be appropriate for a c.15% shareholder, to enjoy that level of Board representation and control over the Company”.

Background: On 15 November 2020, LEKOIL received notice from Strand Hanson of its resignation as the Company’s nominated adviser, with effect from close of business on 20 November 2020 (resulting in trading in the Company’s shares being suspended from 23 November 2020). On the same date that Strand Hanson’s resignation took effect, the Company received Metallon’s requisition notice (together with the consent of the three proposed directors to act as directors of the Company).

LEKOIL’s letter is a blistering response to Metallon’s charges, in its requisition, that “a lack of accountability of management by the Board has led to shareholder value being destroyed.”

Metallon had raised the following concerns:

LEKOIL has raised over $264Million of equity from shareholders since listing in 2013. The Company’s shares were suspended on 23 November 2020 with a market cap of $13Million.
During this period LEKOIL has spent $129Million on General and Administrative (G&A) Expenditure and invested $210Million into Oil & Gas activities but delivered no production growth at Otakikpo (marginal field) since first oil in 2017.
The Board has continually missed the market expectations it sets, with production levels at Otakikpo averaging 5,676 barrels of oil per day (BOPD) (gross) in H1 2020, despite setting targets of 10,000 BOPD by 2017 year-end and 20,000 BOPD in 2020.
Otakikpo, its only asset generating returns, has been starved of investment whilst G&A and other costs remain at extremely elevated levels.
Since its listing, the Board has awarded the CEO a total remuneration of over $10Million, close to the current market capitalisation of LEKOIL. It also recently entered into a related party transaction to extend a material part of the longstanding $1.8Million Directors loan to the CEO at a time when the Company is short of cash.

LEKOIL describes Metallon’s assertion that close to half of the equity raised has been spent on G&A as incorrect. “In fact, of the $275.5Million equity raised since listing in 2013, $166.2Million was invested in capital expenditure for the development of Oil Prospecting Lease (OPL) 310, OPL 325 and Otakikpo, with only $73.3Million (which represents, 27%) going towards G&A expenditure. To date, taking into account all sources of funding for the Company (including debt and proceeds from production), G&A expenditure would represent 28% of total funds raised or generated. Further, the Company would like to clarify that the cash component of the Chief Executive Officer’s total remuneration is $7.9Million over a period of seven years, with the balance in the form of share awards and stock options. The Chief Executive’s total remuneration since Admission of $10.6Million is included in the total G&A expenditure referred to above”.

Metallon became LEKOIL’s largest shareholder after it acquired a 15.10% interest in LEKOIL’s shares between 16 June 2020 and end August 2020. LEKOL’s share price between 1 June and 3 August 2020 ranged between 2.6p and 2.75p. The Company’s share price on the last day before suspension of trading on 20th November 2020 was 1.75p.

“Metallon has been a shareholder for less than six months”, LEKOIL notes. “Shareholders are urged to undertake their own due diligence on Metallon”.

The major areas of significant concern to LEKOIL’s board, “centre on the violation of foreign exchange control regulations in Zimbabwe; winding-up petitions from several creditors leading to a winding up order of the High Court; the distressed state of Metallon’s gold mines in Zimbabwe; and the failure to remunerate employees – all of which are a matter of public record”.

Noting that Metallon has no expertise or track record in oil and gas development, LEKOIL’s board testifies that “Metallon’s gold mining operations have fared poorly over the years and contracted from at least four mines in 2002 to just one operating mine at present”. The board also charges that “whilst Metallon claims to be a natural resources and infrastructure investment company, it is not apparent from its most recently filed 2018 financial statements that it has interests in infrastructure.

“Prior to its investment in LEKOIL, its only asset was its interest in its Zimbabwe gold mines”.

LEKOIL points to Metallon’s payables as being almost two times its 2018 revenues, going by its annual revenues of $79Million, as; “operating cash flow of $3.9Million would be negative if $51.9Million of overdue payables had been settled. If overdue payables had been settled, Metallon’s operating cash flow would be negative $48Million; one of the only reasons the company is now considered a going concern given its negative equity, is that it has sales of two subsidiary goldfields in December 2020 (possibly explaining the reason for the very late filing of the 2018 accounts

Metallon says it is categorically not seeking to take control of LEKOIL and is not working in concert with any other shareholders. “We believe LEKOIL’s assets, specifically Otakikpo, are being substantially undervalued by the market and that the value of these assets could be realised if the proposed changes are made to the LEKOIL Board. Since notice of the requisition was given on 19 November, we are aware that a significant number of shareholders have the same concerns regarding the Board’s lack of governance and oversight of management”.

Malabu: ENI’s Descalzi Has Won the Politics, but Can He Escape Judicial Conviction?

Section: Petroleum People · July 22, 2020 · No comments |

By Toyin Akinosho

ENI is wrestling with the request by the Italian Public Prosecutor for conviction of the Company, its former and current CEOs and the managers involved in the Malabu case.

The company says the pursuit of convictions “are completely groundless”.

Mr. Descalzi has held the reins of the Italian E&P major for six years. His appointment, last May, for a third term of another three years by the President of Italy, is clear indication that he has won the politics of the most important challenge to his reputation.

Sergio Mattarella’s government is either convinced that Desclazi is untainted by the Malabu case, involving alleged corrupt dealing with Nigerian officials in the course of the purchase of the Oil Prospecting Licence (OPL)245, or it would rather have a seasoned technocrat at the helm of its largest energy company to steer the country into the green economy, however smeared that technocrat is.

So, the political arm of the Italian government has signaled that it is comfortable with the 65-year-old, hard-working graduate of Physics from the University of Milan, but the country’s Judiciary has indicated, consistently, that it is not sure he is clean.

The fact that the state prosecutor is still pursuing “a conviction of the current CEO” says a lot about how it is convinced of wrongdoing.

ENI has insisted on its innocence, both in court and in public. “During its indictment, in the absence of any evidence or tangible reference to the contents of the trial investigation, the Public Prosecutor has told a story based on suggestions and deductions as already developed during the investigation. This narrative ignores both the witnesses and the files presented within the two years long and more than 40 hearings proceeding, that have decisively denied the prosecutorial hypothesis”.

Descalzi, who has been ENI’s CEO since May 2014, is on course of being the longest serving CEO of ENI in 30 years, if this case does not stop him.

He joined the company in 1981 as a young reservoir engineer. His career took off in 1994, when he was appointed Managing Director of the company’s subsidiary in Congo. Four years later he was Vice President & Managing Director of NAOC, a subsidiary of ENI in Nigeria. From 2000 to 2001 he held the position of Executive Vice President for Africa, Middle East and China. From 2002 to 2005 he was Executive Vice President for Italy, Africa, Middle East, covering also the role of member of the board of several Eni subsidiaries in the area. In 2005, he was appointed Deputy Chief Operating Officer of the Exploration & Production Division in Eni. From 2006 to 2014 he was President of Assomineraria and from 2008 to 2014 he was Chief Operating Officer in the Exploration & Production Division of ENI. From 2010 to 2014 he held the position of Chairman of ENI UK.

ENI’s press release earlier today, July 22, 2020 repeats the claim it has always made: “ENI and Shell paid a reasonable price for the license directly to the Nigerian Government, as contractually agreed and through transparent and linear means. Furthermore, Eni neither knew nor should have been aware of the possible destination of the money subsequently paid by the Nigerian government to Malabu. Moreover, the payment was made after an inquiry carried on by the UK’s Serious Organised Crime Agency (SOCA).

“So there can therefore be no bribes from ENI in Nigeria, no existence of an ENI scandal. ENI recalls the decision of the Department of Justice and the US SEC, which decided to close its own investigations without taking any action against the company.

“The multiple internal investigations entrusted to international third parties by the company’s supervisory bodies have long since highlighted the absence of unlawful conduct. ENI trusts that the truth can finally be re-established following the defensive arguments that will be presented at the end of September, pending the Milan Court’s forthcoming verdict”.