All posts tagged oil


Kenya Makes $14 Million From ‘Trickles’ of Oil Export

By Toyin Akinosho

Kenya’s Bureau of Statistics says the country earned $14Million from 324,000Barrels of crude oil it exported from oilfields in Turkana County.

The government had devised an unusual production scheme, involving trucking of small volumes of crude from the oil fields in Turkana in the north of the country, to Mombasa, the southern coastal port town on the edge of the Indian Ocean.

The so-called Early Oil Pilot Scheme (EOPS) at Ngamia and Amosi fields was commissioned in June 2018. The scheme is operated as part of an agreement between the Kenyan Government and the E&P partners, including the operator Tullow Oil, TOTAL and Africa Oil Corp.

The Uhuru Kenyatta government said that the scheme was designed to comprehend the reservoirs’ flow assurance, prior to the commencement of full-blown commercial development

Kenya started exporting the commodity from Mombasa in August 2019, with the value of inaugural shipment of 200,000 barrels, bought by ChemChina UK Ltd, for an estimated $12Million.

The scheme “continued to register improved production with daily transportation, increasing from 600barrels of oil per day (BOPD) to 2,000BOPD  in the review period”, the Kenyan Bureau of Statistics said in the report: Kenyan Economic Survey 2020 released Tuesday April 28, 2020.

But in January 2020, which is outside the scope of the report, Tullow Oil reported it had suspended the transport of crude oil from Turkana to Mombasa due to incessant rains that caused severe damage to roads. While the scheme lasted, the London listed company used over 100 tankers to move 2,000 barrels per day over 1,000 kilometres.

The decision to call the trucks off the road meant that the government was unlikely to meet its shipment target of 500,000 barrels of oil.

Kenya had projected crude oil export target for this year at 500,000 barrels before the partial lockdowns related to COVID-19 pandemic were enforced.

In March 2019, President Kenyatta signed into Law the Petroleum Act of 2019, which allocates 75% of state-designated oil profits to the central government, 20% to oil-producing counties and five percent to local communities.

 


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


Chevron Advances Process of OMLs 86 and 88 Sale

The sale of 40% equity held by Chevron on Oil Mining Leases (OMLs) 86 and 88, is in top gear. Companies who have shown interest in acquiring the asset are expected to make full disclosure of their financial and operating capacities by the end of April 2020.

OMLs 86 and 86 are located in shallow waters at the mouth of the current Niger Delta Basin.

OML 86 contains the Apoi fields; the largest being North Apoi.

It also holds Funiwa , Sengana and Okubie fields. One recent discovery: Buko, straddles Shell Nigeria operated OPL 286 and is either on trend with, or even on the same structure as the HB field in OPL 286. OML 88 holds the Pennington and the Middleton fields, as well as the undeveloped condensate discovery, Chioma field.

If Chevron manages to sell off its holdings in OMLs 86 and 88, it would have disposed off all the legacy shallow water assets it acquired when it purchased Texaco in 1999.

Between 2013 and 2015, Chevron sold its stakes in OMLs 83 and 85, both of them former Texaco Nigeria assets.

It’s instructive, then, that Chevron’s largest producing asset in Nigeria, the Agbami field, was “inherited” in  that same turn- of –the- century merger with Texaco; this deepwater field alone produces 165,000BOPD, more than a third of Chevron’s total operated crude oil production in Nigeria.

 


VFuels wins bid for a Modular Refinery FEED in Equatorial Guinea

Equatorial Guinea’s Ministry of Mines and Hydrocarbons, supported by its strategic partner Marathon Oil Corp., has awarded VFuels Oil & Gas Engineering (VFuels) the feasibility study for the construction of a modular refinery in Punta Europa, Malabo.

The study will include the engineering and design of a 5,000Barrels Stream PerDay (BSPD) modular refinery to supply refined products for the country’s domestic consumption. The study is expected to be delivered within 12 weeks of the contract’s signature.

Equatorial Guinea is seeking investments for a modular refinery in the continental region, storage tanks and the promotion of other projects derived from methanol, among others, according to a government statement.

“This is an important step when it comes to implementing this project with an important goal to prevent stock outs, and provide refined products of higher quality to economic operators and the general public,” stated Gabriel Mbaga Obiang Lima, Minister of Mines and Hydrocarbons. “The experience and track record of VFuels in engineering and design of modular refineries at an international level, could be beneficial to this project and Equatorial Guinea.”

The award follows up a meeting in January between President Obiang Nguema Mbasogo, Mr. Gabriel Mbaga Obiang Lima, Marathon Oil Chairman, President and CEO Lee Tillman and Executive Vice President Mitch Little, during which Marathon Oil reiterated its commitment to Equatorial Guinea and towards the development of the country’s Gas Mega Hub. Marathon Oil had then declared its support to construct a modular refinery in Punta Europa by undertaking a conceptual study on the Ministry’s behalf.

Both parties had also agreed to immediately commence feasibility studies related to methanol to gasoline and other methanol derivatives, in coordination with the Ministry of Mines and Hydrocarbons.


TOTAL Swallows Tullow A whole in Uganda

The drawn-out deal is concluded at $2 per barrel

French major TOTAL and Irish independent Tullow have entered into an Agreement, through which TOTAL shall acquire Tullow’s entire interests in the Uganda Lake Albert development project, including the East African Crude Oil Pipeline.

The overall consideration paid by TOTAL to Tullow will be $575Million, with an initial payment of $500Million at closing and $75Million when the partners take the Final Investment Decision to launch the project. In addition, conditional payments will be made to Tullow linked to production and oil price, which will be triggered when Brent prices are above $62/bbl. The terms of the transaction have been discussed with the relevant Ugandan Government and Tax Authorities and agreement in principle has been reached on the tax treatment of the transaction.

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 transaction is subject to the approval of Tullow’s shareholders, to customary regulatory and government approvals and to CNOOC’s right to exercise pre-emption on 50% of the transaction. “We are pleased to announce that a new agreement has been reached with Tullow to acquire their entire interests in the Lake Albert development project for less than 2$/bbl in line with our strategy of acquiring long-term resources at low cost, and that we have an agreement with the Uganda government on the fiscal framework,” said Patrick Pouyanné, TOTAL’s Chairman and CEO. “This acquisition will enable us, together with our partner CNOOC, to now move the project forward toward FID, driving costs down to deliver a robust long-term project.”


Shell at the Brink: Never Let A Good Crisis Go to Waste

By Gerard Kreeft

Since April 1 2020 Elisabeth Brinton was appointed Executive Vice President of Shell’s New Energies business, steering the company’s work in power, renewables and lower-carbon technology. According to her Linked-In site, ”this role covers Shell’s work in wind and solar, new mobility options such as electric vehicle charging, and laying the foundation for an integrated lower-carbon power business” .
Brinton is a former Silicon Valley entrepreneur and utility industry veteran… She joined Shell in 2018 from AGL Energy, Australia’s largest integrated energy company, where she was Executive Vice President, New Energy.  She “helped to increase adoption of renewable energy, build the world’s first residential virtual power plant and grow and sell a profitable smart metering business”. Brinton also
was previously the Corporate Strategy Officer for PG&E Corporation, the US utility company that specialises in renewables, customer solar, energy efficiency and electric mobility.

She has a monumental task of developing Shell’s renewable energy strategy. The situation is grim, especially from a shareholder’s perspective. Shell’s share  price has plummeted. Earnings season is fast approaching and shareholders are anticipating their golden share dividend. Not since WWII has Shell reneged paying out such a dividend. Will it be able to continue this tradition?

The signs are not good. Shell’s cash deficit between 2010 and the 3rd Quarter of 2019 was $22.9Billion, based on a study released by the Institute for Energy Economics and Financial Analysis. The other majors- BP, Chevron, ExxonMobil, and TOTAL- included had similar cash deficits. In total more than $200Billion! With a continued lower oil price, the future scenarios are bleak.

Shell plans to invest $2 – $3Billion a year on its power and low-carbon business compared with an overall spending budget of $30Billion per year between 2021 and 2025.

Prior to the current oil and gas crisis BloombergNEF estimated that investments in renewable energy in the period 2010-2019 was $2.6Trillion. Through 2025, $322Billion per annum would be spent, almost triple the $116Billion invested in fossil fuels. With most E &P budgets locked down future investments in the oil and gas sector look grim.

If there ever is a motivation to move on and recognize that renewables are the new boys on the block the time is now. To think that Shell, who are doing symbolic spending on renewables will survive is also an illusion. Shell continues to give a gold dividend and this will be paid for by debt financing, i.e. redundancies and the selling of more assets. In the meantime the share price continues to sink like a stone.

If you make a net comparison between Orsted, the Danish the Offshore Wind Farm giant and Shell then the following:

Shell’s latest share price (6 April 2020) was US$ 39

In May 2018 the share hit a high of $70

In other words, the share has lost almost half of its value.

Orsted’s share price on April 6, 2020 was $108

Orsted’s share price on July 1, 2016 was $35

In this period of time the share price has tripled, while Shell’s share lost almost 50% of its value.

True the Shell share continues to give shareholders a golden dividend of some 6%. Orsted for the last 4 years has only had a dividend of 1.68%.

Yet the true investment return must surely be seen in the spectacular and continued rise of the Orsted share which has tripled and has only had a small blimp in the current economic crisis. How long can Shell  afford this current policy? Simply throwing money at it will not solve the problem. What is missing is a strategic vision…and simply appointing a new EVP for Renewable Energy is too little too late. Shell can possibly choose two options:

Continue on its present course paying out its current dividend and financing this through assets sales and redundancies; or

Become a truly dedicated energy company increasing its new energy budget five-fold to at least $10- 15Billion per year. At the same time decrease the dividend and ensure that the Shell share can gain a true value. Ensuring true shareholder value will depend on creating a renewable business model that meets the requirements of todays’ shareholders.

P.S.

Since this article was written, Shell has announced its commitment to take significant additional action on climate change, including a commitment to achieve net zero emissions. There’s no clarity, however, on how that commitment is tied to day to day business.

Gerard Kreeft, BA (Calvin University, Grand Rapids, Michigan, USA ) and  MA (Carleton University, Ottawa, Ontario, Canada), Energy Transition Adviser, was founder and owner of EnergyWise.  He has managed and implemented energy conferences, seminars and master classes in Alaska, Angola, Brazil, Canada, India, Libya, Kazakhstan, Russia and throughout Europe. He writes on a regular basis for Africa Oil +Gas Report.


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.


ExxonMobil Heralds Reduction of Nigerian Rig Count

With its widely publicized notification of early termination of the contracts for the jackups Gerd and Groa offshore Nigeria, ExxonMobil has effectively inaugurated the widely anticipated reduction of the Nigerian rig activity.

Gerd and Groa, owned by Borr Drilling, were on locations in Asasa and Oyot fields in Oil Mining Leases (OMLs) 67 and 70 respectively, as of early April 2020.

Now other announcements of terminations of rig contracts by other companies are expected to follow, as market conditions worsen.

The two Borr rigs were under contracts originally committed until April 2021 and May 2021. The contracts for both rigs require 180-day notice for early termination.

Borr, a New York Stok Exchange listed company, says it is in discussions with ExxonMobil with regards to planning the discontinuity of operations.

Nigerian rig activity was at a three year high in January 2020, with 32 rigs in various stages of operations on as many locations.

But the combination of COVID-19 and a price war has, since then, has gutted the hydrocarbon industry worldwide, with cargoes of crude oil sloshing around looking for buyers.

 

 

 

 

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