All posts tagged oil-blocks


East Africa: The Unfolding Story

The forward movement of the Lake Albert Development Project, and its export pipeline, is a major step forward to de-risking other potential oil & gas projects in the region.

The recent acquisition by TOTAL of Tullow Oil’s entire interests in the Lake Albert Development Project in Uganda, including the East African Crude Oil Pipeline, marks the beginning of a new chapter for East Africa’s energy industry. To dissect the deal and discuss its wider implications for the region, the African Energy Chamber organised a webinar with leading regional industry experts, held under the Chatham House Rule.

Featuring key officials and representatives from Stanbic Bank, Standard Bank, Shell, Baker Hughes and the Kenya National Oil Company, the webinar was hosted by Elizabeth Rogo, Founder & CEO of TSAVO Oilfield Services and President of East Africa at the African Energy Chamber.

Good or bad deal?

Under the agreement announced last week, the overall consideration paid by TOTAL to Tullow will be $575Million, with an initial cash payment of $500Million at closing and $75Million when the partners take the Final Investment Decision (FID) to launch the project. Under the terms of the deal, TOTAL will acquire all of Tullow’s existing 33.3334% stake in each of the Lake Albert project licenses EA1, EA1A, EA2 and EA3A and the proposed East African Crude Oil Pipeline (EACOP) System. The Lake Albert project, which consists of TOTAL operated Tilenga Project, with a production capacity of up to 190,000BOPD, and CNOOC operated Kingfisher, with a production capacity of up to 40,000BOPD, will propel Uganda in the top 5 of sub-Saharan Africa’s oil producers. In addition, the proposed 60,000BOPD refinery and some of the overarching issues were mentioned.

The deal is a win-win for all stakeholders involved. First, for TOTAL, who ends up acquiring Tullow Oil’s entire interests in the Lake Albert development project for less than $2/barrel. Then, for Tullow Oil, whose debt is rising and who is looking at raising $1Billion by selling some of its key assets. The company’s shares rose on the announcement of the deal. Finally, it is a win for Uganda’s oil industry and local jobs. After years of deliberations and debate, the closing of the sale allows the country and oil companies to move the conversation towards FID and practical project’s development. It also sends strong signals to the rest of the region, and Kenya in particular, to do everything possible to unlock their own oil & gas potential.

While visibility on the FID’s timeline remains unclear, the project is very competitive even in a depressed low oil prices environment. The cost per barrel of the integrated Lake Albert Development Project is indeed estimated at around $50. This is explained in part because the country’s hydrocarbons are within shallow deposits which are less drilling intensive and do not need as much casing, tubing and completion work. While TOTAL is following a global trend of drastically cutting expenses in light of the COVID-19 pandemic and the collapse of oil demand and oil prices, the project’s economics make it one of the most likely to get FID in the near future.

A key unanswered question for now is whether CNOOC will exercise its pre-emption rights under the joint operating agreements it has with Tullow Oil and TOTAL as a joint venture partner, like it did in the failed 2017 sale. A scenario under which the Chinese major does exercise once again its pre-emption rights is very likely, and will in fine depend on China’s overall strategy for the wider East Africa region.

Pipeline matters

The progress of the Lake Albert Development Project, and its export pipeline, is a major step forward de-risking other potential oil & gas projects in East Africa and making them attractive for investments and financing. Given the current industry dynamics and potential liquidity constraints, participants agreed that a scenario under which two regional pipelines would be laid was becoming more challenging. The size of Uganda and Kenya’s discovered reserves along with the capital and financial muscles of their operators will be factors weighing in which pipeline gets executed.

The EACOP was, however, a matter which participants thought could become contentious for the execution of the overall Lake Albert project, and the development of the region’s oil sector. Key questions remain to be answered, chief amongst them being Tanzania’s business environment and the country’s ability to provide policy certainty on the execution of such a major infrastructure venture. Whether Tanzania decides to stick to an enabling business environment and demonstrate its willingness to cooperate with international investors after years of natural resources nationalism remains another unanswered question.

The way the execution of the pipeline evolves will determine a lot of East Africa’s oil industry future. While the original northern route through Kenya was deemed less favourable, a scenario under which TOTAL would consider buying out Tullow Oil’s assets in Kenya, where several significant oil discoveries were made, could potentially re-roll the dice in the region.

Regional content, now

Finally, and more importantly, the expected first oil from Uganda in the coming years should urgently lead to local content preparations not on a national, but a regional level.

Between the two upstream projects of Tilenga (TOTAL) and Kingfisher (CNOOC), the pipeline project and the Uganda oil refinery project, the scale of upcoming projects in Uganda and the neighbouring countries represents billions of dollars of opportunities for local companies. However, given the under-developed nature of the local hydrocarbons services industry in East Africa, only regional partnerships and joint-ventures can result in maximising such opportunities. As the conversation in Uganda moves towards employability within local communities and ensuring that Uganda’s oil benefits the development of a strong local sector, the region as a whole needs to come together to support regional ventures. Unless companies across East Africa come together and leverage on their respective expertise and experience to work together, there is a fear that upcoming oil and gas projects will ultimately go to foreign contractors and deprive local businesses from tremendous growth opportunities. In this regard, the development of an African regional content is one of the top 10 measures that form Africa’s Common-sense Energy Agenda, released by the African Energy Chamber earlier this week.

In this context, the need to invest in education, training and skills transfer is greater than ever. The success of the region’s oil sector will depend on all stakeholders coming together to bring the East African energy story to investors


Sonangol Begins Second Round of Sale of Equity

Angola’s state hydrocarbon copay Sonangol has launched the second round of its widely anticipated international pubic bid for the sale of its stakes in 52 companies.

Nine companies are up for grabs in this tranche, three more than the six that were involved in the tender launched in January 2020.

The companies include Petromar, where it is divesting 30%; Sonatide Marine Limited, and Sonatde Marine Angola Limitada, 51%; Sonamet Industrial S. A and Sonacergy Services and Oil Construction Limited, 40%.

Sonangol will divest 33% from each of Paenal-Porto Amboim Shipyard and SBM Shpyard. It will sell 30% of Sonadiets Limitad and Sonadiets Services SA.

The companies for sale this time are all involved in oil and gas operations, whereas those in the January 2020 tender are enterprises in non-oil and gas functions

Bidders are expected to submit qualification documents to the Negotiation Committee for the Process of Disposal of Sonangol’s Quota in Mineral Resources and Petroleum Segment.

They are required to present a provisional bond and a value raging from $7000 to $15,000  or equivalent in Kwanzas, based on the existing foreign exchange rate.

The tender is being conducted under the terms of the country’s Public Procurement Law and applications will start to be received in mid May 2020.

 

 


ENI’s Egypt Joint Venture Announces Half A Billion Barrel Crude Oil Milestone

Italian giant ENI has reported that cumulative oil production of AGIBA, the operating joint venture company between its subsidiary IEOC Production BV and Egyptian General Petroleum Corporation (EGPC), reached 500Million barrels in mid March 2018.

AGIBA has been active since 1981 with operations mainly focused in Egypt’s Western Desert Area.

With recent development of a number of new discoveries such as Rosa North, Emry Deep and Melehia West Deep within existing conventional asset, AGIBA, leveraging on its operated infrastructures “has been able to produce and valorize oil resources amounting to around 110 MMbbls in the last five years, thus reaching the target of 500 MMbbls as oil cumulative production”, the company says in a release on its website.

“This achievement confirms the success of ENI’s strategy to focus on exploration activities which offer high value and quick development within a mature environment by optimising traditional drilling/infilling campaign and the synergies with existing upstream infrastructure and national hydrocarbons export network”, ENI explains.

The Italian payer, on a n aggressive campaign across Africa, says it plans new exploration investments in Egypt in the next four years “to valorize the deep oil potential and the gas resources of the Melehia Concession”.

ENI has equity production of more than 250.000 barrels of oil equivalent per day in North Africa’s largest economy.


Nestoil Wants To Sell Down In Neconde/OML 42

Nestoil, the oil service firm owned by Nigerian businessman Ernest Azudialu, is reportedly angling to sell part of its equity in the Neconde Special Purpose Vehicle SPV.

As such, it will be farming down in its partnership in the Oil Mining Lease (OML) 42, located in the Western Niger Delta.

Nestoil holds 80% of Neconde. What is particularly curious about the story is that Nestoil was the prime mover of the creation of the Neconde SPV, which took over Shell/TOTAL/ENI’s 45% stake in the acreage in 2012. The majority 55% is held by NNPC, the state hydrocarbon company.

Creating value from the asset takeover has been an epic struggle. While Neconde paid $585Million to buy the 45%, it has found it difficult to reach and stay on an optimum output, at an optimum price, to pay back debts and fund a sorely needed expansion. First the NPDC, the ineffectual E&P subsidiary of the state hydrocarbon company NNPC was imposed to operate the asset and that meant a low production (less than 20,000BOPD) for over three years.

It was inside that time frame that the crude oil price collapsed. And just when the prices were about to climb back up, Niger Delta militants bombed the crude evacuation facility, forcing the terminal to shut in for 16 months between February 2016 to June 2017. Out of the $585Million paid for the stake, the consortium partners (Nestoil, Yinka Folawiyo and KOV) paid $435MM as equity and collectively raised $150Million as debt. What’s not clear is how much of the $435Million equity payment was raised as debt by the members of the SPV.

What are you buying?

OML 42 was producing around ……..Details here


Libya Won’t Auction Oil Blocks Until 2014

The new government in Libya is not in a rush to have a bid round of hydrocarbon acreages in the next year and half. This much can be gleaned from statements made at the Libya Oil and Gas Summit which ran in Tripoli from September 24 and 26, 2012.

An impending review of the blocks in terms of potential risks, the type of contracts, as well as the pre-qualification of bidders will keep the government’s hands full.

Libya had total proven oil reserves of 47.1 billion barrels as of December 2011, according to BP Statistical review of world energy. The country is the largest tank in Africa, and one of the ten largest globally. Some 80 percent of Libya’s proven oil reserves are located in the eastern Sirte basin, which accounts for most of the country’s oil output. Libyan oil is generally light (high API gravity) and sweet (low sulfur content).

The transitional government which took power after the Civil war had declared intention to review all the extant contracts. The new, elected government is saying the same thing. The review, they have both sought to make clear, is not with the aim of taking away acreages from any company. It’s expected to make the new rulers themselves get a grip on the environment in which they are playing.

Under Ghadaffi, there was so much opacity in contracts.

The pre-war, 1.65MMBOPD Libyan production was achieved by nine producing companies, joint ventures and consortia including the state owned Arabian Gulf Oil Company (AGOCO),  which is the country’s largest producer, with 350,000BOPD, Sirte Oil Company (another state hydrocarbon company),  Waha Oil Company (comprising the major state company NOC and ConocoPhillips, Marathon and Hess), Akakus Oil operations(NOC, Repsol and others), Melitah Oil&Gas(ENI and NOC), Mabruk(TOTAL and NOC), Wintershall, Haroungue (Suncor and NOC), Zueitina consortium(NOC, Occidental and OMV).

The new government comes across as friendlier to Western companies, and may adopt a new contractual model that is less onerous than the current provisions. But a lot is still uncertain in the new Libya.

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