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Nigeria’s Ongoing Turnaround Maintenance: Refining Economics 101 and why it matters

By Dimeji Bassir

In April 2021, the Nigerian government announced it had let out a $1.5Billion contract to Italian Marie Technimont for the rehabilitation of its 210,000 barrels a day portharcourt refinery which became operational in 1965. The news generated a lot of furore within the citizenry with a prominent Nigerian Banker stating the government was about to embark on a brazen and expensive adventure.

About the same time, the global oil and gas multinational, Shell, announced it had taken the decision to scale back its global refinery footprint by greater than half, having permanently shuttered its 240,000 barrel-a-day convent refinery in Louisiana a few months earlier.

The coincidence, and contrast in strategy between one of the largest global international oil companies and the eleventh largest OPEC country by reserves size couldn’t be more stark.

For Shell, the objective of downsizing its downstream business is to prioritize its most profitable assets while divesting from businesses that no longer align with its strategic objectives. Basically, a move towards strategic optimization.

In the case of Nigeria, a country which at best could be described as a sleeping oil giant that consistently underutilizes a lot of the things it is naturally endowed with. The West African OPEC nation has consistently underperformed its OPEC quota for close to ten years. Despite having an installed production capacity of two million barrels a day, its average daily oil output in September 2023 was 1.35 Million barrels per day, the highest it had been in the entire year.

The context of the outrage surrounding the announcement of the $1.5Billion rehabilitation contract lies within the May 2023 report which showed that the government had spent $25 Billion between 2013 and 2023 on fixing the refineries and yet had spent $10 Billion on petroleum subsidies in the year 2022. Juxtaposed with reporting from an ICIR report which revealed that the Port Harcourt refinery had posted losses five years in a row (2014 – 2018) totalling ₦206Billion. The story of the Nigerian refineries cannot be told without invoking raw emotions among the country’s  citizenry who are desperately yearning for available and affordable petroleum products.

To underscore the absurdity of Nigeria lacking everything it has, the country which has been described as oil rich and energy poor is blessed with an abundance of natural gas—north of 200Trillion cubic feet—which represents about a third of Africa’s total gas reserves. Yet commercializing its gas molecules to meet domestic power demand in a sector begging for critical structural reforms remains a mirage. 45% of the country’s two hundred million people remain without access to the power grid.

The passage of the Petroleum Industry Bill in 2021 birthed the Petroleum Industry Act (PIA) with one of its core mandates being the transformation of NNPC, the government-controlled agency, to a commercially driven limited liability entity. Theoretically, the impact of this transformation is expected to manifest in a restoration of operational oomph which had been lacking in the NNPC going by its track records of under-performance over the years.

Delivering capital projects with speed and efficiency has always been a major challenge, both for private and public corporations. Project performance data studied across governments and organizations globally shows that projects delivered under budget and ahead of schedule are the exception, not the norm. Data presented in Figure 1 below supports this point.

Figure 1:

Projects don’t go wrong but in many instances simply just start wrong. But it’s seductive to think that the only thing that separates us from the project delivery results we desire is one unique secret sauce we are yet to learn. Whereas in reality, there are a number of missteps which conspire and eventually derail capital projects, having been left unfettered for so long along the way.

Figure 2: Some causes of project derailments Source: PWC

While all megaprojects are susceptible to veering off track, some are more vulnerable than others, particularly those under the wrong stewardship. Project controls help, but they must be kept very tight. Due to the mission-critical and costly nature of the ongoing revamp works at the Nigerian refineries in Warri and Port Harcourt, the least desirable scenario is where project owners and managers are consciously or unconsciously stuck in a state of ineptitude and/or profligacy, what the writer refers to as the “Naija factor,“. The affliction of the Naija factor and its close cousins; cronyism, political meddling etc is rife. But those are not the focus of this article and will not be dwelt upon.

NNPC did not do much construction of any sort in the thirty years between 1990 and 2020 and a lot of organizational knowledge has certainly been lost in this period. We can infer therefore that the refinery revamp projects being spearheaded by NNPC are much bigger than the individuals leading them, particularly with little to no operational history to leverage—in planning and executing the projects—along with ingrained cultural inefficiencies to contend with. In the context of the three plants’ dismal operational performance over the years as earlier outlined, it’s no surprise that there’s been more than a few promised completion days albeit all botched.

Refining Economics 101 and why it matters:

Refining operations are complex with extremely tight unit economics. Financial performance is largely driven by two variables- the cost of feedstock i.e. crude oil, and price of refined products e.g. gasoline, jet fuel etc. The difference between a barrel of crude oil and the petroleum products refined from it. This concept, called the crack spread provides an indication of refining margins. Like most commodity play, a refinery operator has no influence on what it pays for feedstock or the price it commands for finished products. Refineries simply fill the market with products until margins, or profits, for refining the products drop. At this point, operators scale back on production to induce supply versus demand balances. This balancing act inevitably separates out those operators who are able to run their facilities efficiently from those who can’t. One of the biggest differentiators between the two groups is reliability which can mean the difference between operational excellence and mediocrity, perhaps even profitability versus bankruptcy.

In short, reliable operations are the strongest correlative indicator to profitable operations as reliability drives utilization which in turn drives profitability.

There are about 700 refineries globally with less than 300 of them accounting for 80% of the world’s approximately 100Million barrels per day refining capacity. Data gleaned from the global refining economics of reliability report shows that North American operators are the paragon of executing optimal reliability programmes. This is primarily driven by the fact that they are 100% private sector owned and operated, do not receive subventions or support from the government, and are driven mostly by a singular incentive which is to consistently deliver value to shareholders.

There are variable and fixed components to refining costs. 80% of the costs in a refinery go to feedstock. Operations & maintenance-related costs are independent of the quantity of crude processed and are fixed regardless of the plant’s overall utilization.

The difference of what is left over after backing out a refiner’s single largest cost from its theoretical revenues is what is available to cover the rest of its costs. Narrow crack spread implies that refiners have fewer resources to invest in sustaining their plants’ operations.

Better reliability enables increased utilization, lowers downtime, and significantly lowers operations and maintenance costs.

The prudent approach to refinery revamp:

Maintenance is the lifeblood of refinery operations, given the extreme degradation that physical assets are subjected to during the course of operations. But it’s important to establish that assets undergo non-age related functional failure. Over 70% of equipment studied in industrial plants experienced the phenomenon called infant mortality whereby there is a high probability of equipment failure shortly after being commissioned to service. While this data is not representative of industry in general, it challenges existing belief of a correlation between asset reliability and operating age, which led to the idea that the more an item is overhauled, the less likely it is to fail. This belief had formed the basis of designing preventive maintenance schedules but is now known to be largely untrue in the world of modern maintenance. Converse to that debunked idea, scheduled overhauls could actually increase overall failure rates by introducing infant mortality into otherwise stable systems. This is why a broadly defined reliability framework that synthesizes all the critical components of modern-day understanding of how machines function and knowledge of maintenance best practices should be adopted by every operator of asset-intensive plants.

Figure 3: Equipment failure shows no correlation to age Source: Reliability Centered Maintenance Book by Nowlan & Heap

In the intricate world of refining, a scheduled revamp aka turnaround, or shutdown, is a large-scale maintenance activity where the entire process unit is taken off stream for comprehensive maintenance related activities. The primary objectives are inspection of equipment, completing replacement of deteriorated parts, installing new facilities, upgrading or revamping the processes or capacities to restore the overall health of the plant and improve safety, health, and environmental conditions. Increased reliability correlates positively with the profitability of refineries.

Think of a revamp as a megaproject consisting of several thousands of integrated tasks that must be completed within extremely tight timelines and stringent specifications in order to restore the plant back to production timeously. Preparation for refinery revamps should ideally take anywhere between six to twenty four months. Avoiding false starts on these complex projects should be the goal of the organization and it means beaming a laser on discovering the unknown unknowns early on at the preparation stage.

A typical 120 thousand-barrel-per-day refinery would have tens of thousands of unique SKUs in equipment count. Any revamp, such as those ongoing in the Nigerian refineries, which had been moribund for years prior to the initiation of revamp works, required that a comprehensive, granular, reliability-based audit (gap analysis) is conducted to determine the as-is condition at each system, equipment, and component level. The deliverable from that molecular exercise should then serve as input into the detailed scoping of the rehabilitation works.

But very often, missing data—e.g. equipment health (obtained from predictive / condition monitoring technologies), equipment operations and maintenance history, etc.—prevents the conduct of a thorough and granular level equipment reliability-based gap analysis as needed. In such an instance, scoping the revamp is done blindly or based on assumptions rather than being data-driven. In addition to a detailed gap analysis as mentioned above, critical to the success of a revamp is the development of a comprehensive plan that identifies precise worklists, establishes realistic schedules, resources needed, and accurate cost estimates. Important to capture with precision the work to be done and in addition, have the work sequenced correctly. Rigour in risk analysis as well as scope challenge sessions that test for various scenarios on paper should be incorporated into the planning process preferably facilitated by experienced independent third-party consultants.

Recognize the value of experience: Leadership is the key to success on any project or major task. Given the immense responsibility, a refinery revamp manager must be a highly experienced, focused, creative minded and dynamic professional who continually strives for excellence. He must exhibit a leadership style that shows decisiveness, a clear methodology and approach to problem solving and bring a breadth of successful delivery of several revamp within the domain. They must have an innovative, entrepreneurial bent with an open-mindedness to accept divergent thinking and explore new technology that can drive revamp efficiency. They must be someone with deep domain practical experience and a proven track record of success. They will be tasked with assembling the right team, establishing a cohesive team culture, and cascading the project philosophy and ethos throughout the execution team.

Plan slowly, execute swiftly: When it comes to megaprojects, haste makes waste at the start. Bent Flyvbjerg avers in his book ‘ How Big Things Get Done ‘ that planning is the safe harbour as costs of its iteration are relatively low. Furthermore, he talks about the window of doom stating that projects that fail tends to drag on and those that succeed zip along and finish. The author advocates the maxim: ‘Think slow, act fast’ throughout the book. Errors are cheap and often fixable during planning. At execution, they are often fatal. This might seem intuitive but the data suggests that the 0.5% of 16,000 projects studied that succeeded were those where slow and meticulous planning preceded speedy execution.

“The irony of megaprojects is that many are late because not enough time is spent planning.”

Project controls underpin flawless execution: The complexity, notoriously tight timelines and high dependency of tens of thousands of maintenance tasks to be coordinated and completed on a refinery revamp project mandates it to be managed and organized with sound project management and advanced project control techniques. The sheer volume of activities and resources involved, along with millions of manhours, high costs, tough deadlines, a multitude of stakeholders all portend extremely high risks. However, the global best practices to replicate are in the open and available for the open-minded to adopt. Data from the aforementioned pinnacle study shows that the most profitable refineries are those in North America primarily due to the sustained high utilization and lower per barrel spend on reliability.

Figure 4: Correlation between refinery Utilization & Profitability Source: Pinnacle Study

It is no coincidence that the use of robust project controls software applications purpose built for turnarounds in process facilities is highly prevalent in North America. Effectively, these tools, which facilitate efficiency in turnarounds, help to build work packages, dynamically pull in engineering, equipment, BOM and cost data, manage logistics, facilitate management of change, document control etc. within one cloud based application. They are customizable to any project’s unique needs, make it easy to track project progress and enables forecasting with accuracy. They enhance project governance and controls, provide excellent visibility and reporting and obviously correlate positively with operational excellence.

It is immensely difficult to proactively recognize the onset of project challenges and understand the right levers to deploy in order to correct course. Without the right tools, processes and systems, incoherent coordination and ad-hoc decision making prevail, ultimately becoming an albatross on the project. This confluence of ills, have been responsible for derailing even the best planned projects leading to significant cost and schedule overruns.

North American refineries have consistently scored high in those metrics that correlate with top reliability performance such as maintenance cost and inventory value as a percentage of the plant value, percentage of assets on BOMs, work split between predictive and preventive maintenance etc.

Operational readiness facilitated by experts from independent third-party outfits underpins the ability to wrap up a revamp project efficiently and transition effectively to commissioning with the least amount of surprises during startup.

Setting the business up for long term success: Broadly speaking, the refining process encompasses the following steps; The separation of crude oil into different fractions – The improvement of quality of some cuts – The transformation of heavy cuts into light cuts – Blending to derive the finished products.

A refinery consists of several distinctly disparate parts; The process units where crude oil is separated to fractions or cuts and additional processing takes place to improve the grade of products – The Utilities i.e. where fuel, power, steam etc. necessary for the refining process are generated – The storage, blending and shipping facilities. A refinery could sit on several tens of hectares with majority of this space comprising of the storage facilities.

The most commercially viable refineries globally are of the fluid catalytic cracking (FCC) type (or equivalent process units), which are capable of transforming heavy distillation fractions into lighter fractions—gasoline, jet fuel etc. While these facilities have the dual advantage of high fuel efficiency and moderate investment cost, they introduce an order of magnitude of complexity into refineries as they became relatively more sophisticated. The introduction of capabilities for deep conversion (residue hydrocracking, coking with coke gasification etc) increased the complexity of the refining system (and of course the equipment spread required to achieve the detail of processing became more advanced).

Capital, whether in the form of investment in a new refinery or the cost of replacing systems / units in an existing one must be recovered as depreciation.

A combined projected spend of over two billion dollars on the ongoing revamps of Port Harcourt, Warri and Kaduna refineries is reflective of the depth of intervention being undertaken and the new administration’s laser focus on completing the protracted turnarounds sooner than later to abate further revenue losses from deferred production, along with costs and schedule completely run amok could not be a more urgent imperative.

The oldest of the four Nigerian refineries was commissioned in 1965 but have barely operated in the last decade. The oldest continuously running refinery in North America was commissioned one hundred and forty two years ago. Refineries that old would ordinarily be fully depreciated. But the four Nigerian plants had been moribund and in some instances cannibalized prior to the commencement of the revamp projects. This means the intervention works to be undertaken are of a very extensive and invasive nature involving system level replacements on a relatively broad scale. This introduces depreciation costs that could triple operating cost per barrel. For example, total refining costs for a 160,000 thousand barrel a day refinery could be as high as $10 per barrel of crude processed (assuming 100% utilization) as opposed to $2 – $3 for a fully depreciated asset.

A plant’s technical limit is an unattainable state where it runs 100% of the time and spends zero dollar on maintenance or repairs. Equally inconceivable is the contrasting scenario exemplified by Nigerian refineries, where tens of billions of dollars have been expended on “ maintenance and repairs “, yet the facilities scarcely operated over the past decade.

Constantly shifting revamp completion deadlines provide the strongest evidence that the ongoing revamp projects are in jeopardy and that the sponsors remain stuck in a state of unconscious incompetence, hence, flailingly grasping at straws.

The influence of existing paradigms prevents humans from embracing novel concepts and has the potential to obscure new opportunities for business leaders. Driving sustained operational excellence requires a paradigm shift, particularly at the leadership level. In order to mirror the operational performance of North American refiners, the entire organization need to adopt a philosophical volte-face and expand beyond their traditional thinking and maintenance work practices. In short, the thinking “ that got us here simply will not get us there “. And to the dismay of ired Nigerians, they will soon learn that the monstrosity of refinery operations & maintenance does not succumb to conjured operations commencement dates. Any startup dates promised in the future, again pulled out of thin air, will equally pass with nothing to show for it.

Stakes are incredibly high and refinery leadership should have the incentive to embrace new philosophies and thinking. It’s impossible to correct course without transitioning through conscious incompetence to conscious competence. This will be evident when they adopt the holistic use of the right tools, systems, techniques and methodologies needed to get the protracted revamps in Warri and Port Harcourt back on track, avoid startup and commissioning hiccups whenever the time comes, and offer the opportunity for Kaduna to start on the right footing.

Adopting a reliability-based maintenance strategy is the key to setting the business up for success in the long term and unlocking value on a sustained basis in Nigerian refineries. This involves instituting foundational elements; (establishing corporate standards for work management in line with best practices, stores and inventory optimization, defining equipment hierarchy/classification/naming convention, accurate equipment master list development, criticality ranking, adoption of RCM techniques, effective use of CMMS, PM/PDM optimization, addressing culture change etc.). These activities, when holistically weaved together and implemented will eventually bring the plants’ operational DNA in line with those of top performers globally. From past experience and also looking at several case studies over the years, value begins to manifest in savings on maintenance spend, increased uptime, higher throughput, reduced fuel costs etc. The right work is being done right, relevant performance indicators are developed and tracked with rigor, time-based preventive maintenance is optimized (PM) to only be performed on no more than 25% of the asset population and over 50% of daily work activities are driven by asset condition data obtained from a robust predictive maintenance (PdM) program.

With several exogenous factors outside of a refinery operators control, the sweet spot is learning to master the balancing act of achieving consistently high utilization at the lowest operations and maintenance—including turnaround—cost.

In conclusion, good refinery operations start with efficient turnaround execution which starts with in-depth understanding of how best-in-class reliability practices enhances refining operations economics. Combining enhanced technology-enabled project controls with a realibility-centric maintenance approach better attuned to new knowledge of machine health, and of how equipment functions, and fail, is the way out of the ongoing revamp fiasco and the way to set the refineries up for sustained success.

If nothing else, the opportunity to alter the narrative buoyed by a sense of accountability to its 200Million Nigerian shareholders, and perhaps personal ambition, should incentivize the project owners to seek outside help in steering the adrift revamp projects back on course, lest they perpetuate the status quo—abundance of promises and bereftness of delivery. Hope is never a strategy, neither is optimism.

Bassir is an oil and gas industry executive with international experience managing a range of major capital projects of varying complexity and scale along with experential knowledge spanning the entire Exploration and Production (E & P) lifecycle. He manages Ofserv, an independent consultancy specializing in subsurface engineering, project management, process improvement and reliability services. He is a certified maintenance and reliability professional (CMRP).

FEDA Invests in Cabinda Refinery

The Fund for Export Development in Africa (FEDA), Afreximbank’s impact investment subsidiary, has announced an investment into Cabinda Oil Refinery, an integrated modular oil refining platform in Angola being developed by Gemcorp Holdings in Joint Venture with Sonangol.

The exact amount of money put in by FEDA was not disclosed in the statement made by Afreximbank, which has, itself, earlier provide a facility o for the project.

Cabinda Oil Refinery is a 60,000 barrels of oil per stream day (BPSD) high conversion refinery, with a first phase of 30,000BPSD in the Cabinda Province of Angola, one of Africa’s largest crude oil producers. The Refinery is targeted at processing Angola’s crude oil into a variety of petroleum products including diesel, gasoline, naphtha, and jet fuel for both local and export consumption. Upon completion, Cabinda Oil Refinery will double Angola’s refining capacity, enabling the country and the wider region to gradually reduce their reliance on the importation of refined petroleum products.

“With this investment, FEDA confirms its commitment to support Africa’s industrialization and economic development, while ensuring environmental sustainability”, Afreximbank explains in the statement. “The transaction will support Angola’s energy transition by enabling the production of cleaner, high value refined products to cater for up to 20% of the domestic demand, as well reducing emissions by decreasing the need of transportation for both the exportation of locally produced crude oil and the importation of refined products.

“FEDA’s investment comes shortly after Gemcorp, Afreximbank and Africa Finance Corporation successfully led the debt raising of a $335Million project financing facility in July 2023.

“With this additional investment from FEDA, the Afreximbank Group demonstrates its unique ability to invest across the capital structure and therefore provide unparalleled support to the development of critical infrastructure across the continent”, Afreximbank concludes.



Forty Functional Modular Refineries, on Forty Marginal Fields, Will Eradicate Crude Oil Theft

By: Abdulwaheed Sofiullahi, in Abuja

The Crude Oil Refinery-owners Association of Nigeria (CORAN), has presented a solution to the incessant crude oil theft, which threatens to choke off investment in the country’s oilfield development.

The proposal involves the installation of one 10,000 Barrels Per Stream Day refinery per marginal oilfield, leading to 40 such refining plants on 40 marginal fields in the Niger Delt basin.

These 40 plants on forty fields will have a combined 400,000BPSD capacity to service different regions in the Niger Delta basin, CORAN has suggested.

About 20 members of the advocacy group, led by its chairman, Momoh Jimah Oyarekhua, were received at the office of the Minister of State for Petroleum Resources (Oil), Senator Heineken Lokpobiri, in Abuja last week.

“This approach will enable the processing of a minimum of around 400,000 barrels of crude oil for refining, subsequently impacting petroleum prices and alleviating the current economic pressures faced by the country on foreign exchange”, Oyarekhua said.

There are currently five functional Modular Refineries operating in the country, with a total nameplate input capacity of 34,500BPSD.

But the actual input into these five plants is no more than 15,100BPSD and those numbers are very optimistic.

Out of the five, for example, only two have dedicated oilfields supplying volumes of crude in excess of 3,000Barrels of Oil Per Day. They are:

  • Aradel Holdings’ Three Train 11,000BPSD Ogbele Refining Facility, which has utilized, sometimes, as high as 6,600BPD of crude from the Ogbele field in the last three months.
  • Waltersmith Petroman’s 5,000BPD refining plant, which receives 3,000BPD supply from Waltersmith’s own Ibigwe field, as well as between 2,000BPD and 3,000BPD from Seplat’s Ohaji field in the vicinity.
  • The OPAC refinery, which receives, on average, 1,500BPD from Pillar Oil’s Umuseti marginal field
  • Edo Refinery (published: 6,000BPD capacity) and Duport Midstream Refinery (advertised: 2,500BPD), both in Edo State, collectively receive, at the most, only 500Barrels per day, by trucks from Millenium Oil & Gas/ Decklar Resources’ Oza field in Abia state of Nigeria.

What CORAN wants, is for government to help guarantee the supply of crude to modular refineries which lack “stand by”, crude oil supplies. CORAN is hoping that the government, through with the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) will engage the group “based on the regulation that has been passed for domestic crude obligation. That obligation compels crude oil producers to supply a share of their crude to local refineries”.

The NUPRC has once claimed in a media release that it had supported modular refineries with crude oil supplies through the Domestic Supply Obligation, but CORAN members vigorously deny this claim, in private, as they do not want to be seen as wrangling with the country’s most powerful petroleum regulatory  agency, in public.

CORAN has also advocated for intervention fund for modular refining business the way government has intervened in the natural gas business. “The buzz everywhere now is about clean energy and government has created funds that people who want to build infrastructure for gas will be able to access; and recently we hear of auto gas and some of those few things that they are trying to do in the gas space”, Oyarekhua told Africa Oil+Gas Report.  “It is impossible for you to think that gas is going to solve all the problems that people or the society will require for their energy. Fossil fuel will still be with us for a long period of time so once you’re creating some form of succour for gas to be produced, which of course will also take a period of time, you also have to support the existing energy producers like us who are in the refinery space that are providing refined products for the society, part of which is diesel, fuel oil and kerosene until such a time where the gas industry is ripe enough. I think gas and fossil fuel are going to be ranked side by side continuously for a very long period of time. But as of today, the focus is on PMS and we are saying that the kind of funds that people who are creating or building gas infrastructure could access, there should also be that kind of fund created for the refinery industry or refinery owners to access in that space. This is what we advocating for”.

At the meeting in Abuja with the Minister of State for Petroleum (Oil),  Oyarekhua  stressed: “Our foreign earnings today are being significantly affected by the importation of roughly 30 to 40 percent of refined products into the country. These are the issues we have come to discuss with the minister, seeking government intervention through reliable supply and guarantees for those in the modular refinery sector”.


Ghana Grows Modular Refining Capacity

Ghana’s 45,000Barrels Per Stream Day (BPD) Tema Oil Refinery is not functioning. But the country has had two modular refineries in the last five years: the Platon Refinery and Akwaaba Link Investment Refinery, which collectively have combined nameplate capacity of 8,000BPD.

Under construction is another modular facility; the 40,000BPD Sentuo Oil Refinery (Phase 1) now reportedly 80% complete and would be commissioned before the end of 2023.

The Refinery’s expansion phase is expected to add an additional 20,000BPD or 1Million Tonnes Per Year, (taking full capacity to 60,000BPD) but that is after the First Phase is delivered. Total investment at the 60,000BPD mark, is expected to reach around $3Billion.


NUPRC Has Enabled Close to 4 Million Barrels of Crude Supply to Nigeria’s Small Refineries

By Abdulwaheed Sofiullahi Adeniyi, AOGR Reporter, covering  Regulatory Authorities/SOEs

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has written to debunk allegations that lack of access to crude oil supply is inhibiting investment in mini-refineries, especially by companies who are non-producers of crude oil.

The commission says it has enabled the supply of 3,614,936 barrels of crude to three local refineries between September 2021 and May 2023, using the instrumentality of Domestic Crude Supply Obligation.

This, the commission declares, is “contrary to insinuations from some operators in the refinery business in Nigeria that the continued failure to supply local refineries with crude oil is capable of destroying members’ investment and stifling growth in the sector”.

The NUPRC indicated, in a statement, that only refineries that comply with the relevant requirements of Section 109 of the Petroleum Industry Act, 2021 are entitled to crude supply.

“Between January 2019 and August 2021, the period before the PIA came into effect, 1,726,049 barrels of oil were supplied to two refineries that met the requirements of the law as at the time. The two refineries are operated by Waltersmith and NDPR (now Aradel Holdings). The post PIA supplies were made to Waltersmith, NDPR and OPAC refineries”, NUPRC stated.

The Commission said it recently granted approval for Millennium Oil and Gas Limited to supply by trucking 60,000 barrels of crude oil at the rate of 20,000 barrels per month for three months to Edo Refinery and Duport Refinery in Edo State in Nigeria’s midwest. “In addition, alternate evacuation routes such as trucking of crude oil to refineries has been approved to forestall potential downtime during refinery operations which might arise due to non-availability or vandalism of pipelines”.

NUPRC insists it remains steadfast in delivering on the mandate stipulated by the PIA and will not relent in ensuring that a conducive and suitable supply of feedstock to all licensed refineries operating within the country is sustained. It further stated that any refinery operator or group of refinery operators in Nigeria not receiving or claiming not to be receiving feedstock from appropriate agencies are yet to satisfy the mandatory requirements as stipulated by law.

“The NUPRC wishes to state the facts to provide insight and clarity to the general public as follows: Section 109 of the Petroleum Industry Act (PIA) 2021 mandates that the Domestic Crude Supply Obligation (DCSO) be placed on all holders of Petroleum Mining Leases and Oil Mining Leases in Nigeria in a bid to ensure crude oil supply to local refineries. Under Section 109(2) of the Petroleum Industry Act, the Commission gazetted the Production Curtailment and Domestic Crude Oil Supply Obligation Regulations which provides clarity on the obligations of the stakeholders of the domestic crude oil supply value chain.

“The PIA prescribes its implementation mechanism requiring the Nigerian Midstream and Downstream Petroleum Regulatory Agency (NMDPRA) to furnish the Commission with domestic crude requirements of licensed operating refineries on an annual basis which would form the basis for the Commission to issue the crude supply obligation on the producing companies in the upstream sector. It also mandates the requirement for the transaction to be on an arm-length commercial basis between the producer/supplier and the refiner.

“The Commission has provided an enabling framework for the supply of crude oil to be negotiated between the lessee and the oil refining licensee, having regard to the prevailing international market price for similar grades of crude oil as stipulated in section 4 (7) (b) of the Domestic Crude Supply Obligation (DCSO) regulations in either the Nigerian Naira or the United States Dollar or a combination for flexibility to be agreed by the parties.

“Consequently, the Commission placed priority on developing this regulation for the operationalization of the mandate and developed the regulation to ensure the availability of a regulatory framework for DCSO. The Ministry of Justice has gazetted the Domestic Crude Oil Supply Obligation Regulations developed by the Commission, which provides the framework for placing crude oil supply obligations to operators of petroleum mining leases and Oil Mining Leases in Nigeria.

“Section 4(8) of the DCSO regulations states that “A lessee who has not complied with his DCSO where a willing buyer(s) exist shall not be granted an export permit for the export of crude from his lease area.” This further reaffirms the Commission’s drive to enforce DCSO to holders of oil leases within the country.”, the NUPRC concludes.

NDEP, in a Profit Surge, Acquires a New Field, Announces a Name Change and Finalises Drilling Campaign

Nigeria’s top homegrown E&P firm, Niger Delta Exploration & Production Plc (NDEP), has announced a 28% year on year increase in revenue, proposed a large dividend for its shareholders, is finalizing an upstream asset acquisition, wrapping up an infill drilling campaign, and has determined it wants to rebrand with a name change.

The company’s gross profit increased from $39Million in 2021 to $100Million in 2022. Its operating profit more than doubled year on year from $30Million to $69Million, with operating margin in ascent from 23% to 41% in US dollars.

Profit after tax (PAT) crashed from $73Million to $35Million and return on equity plunged from 10% to 5%.

This relatively healthy balance sheet was achieved in the context of a significant drop in hydrocarbon output in NDEP’s sole producing field-the Ogbele field-as a result of the nine month outage of the Trans Niger Pipeline, (TNP), the crude oil export pipeline.

Average daily crude oil output dropped from 8,761Barrels of Oil Per Day (BOPD) to 3,945BOPD and accompanying gas production headed south to 6.51Billion cubic feet (Bcf) in 2022, 31% lower than the 2021 9.39Bcf  in 2021.

Still, based on the result of front-end studies commissioned in anticipation of further development of the Ogbele Field, NDEP commenced a four-well drilling campaign in September 2022 -right in the midst of the uncertainty wrought by the pipeline outage. That campaign has been largely successful and it is expected to be completed in Q4, 2023.

The company is also in the final stages of an upstream asset acquisition (and subsequent development) which is expected to be completed in 2023. NDEP did not provide the name of the asset.

While the upstream business was massively constrained, the downstream unit practically took off. NDEP says that the focus of realizing value in 2022 was the company’s 11,000BPSD capacity refinery complex. Refined delivery volumes rose 105.0% to 152.84Million litres (MMlitres) relative to 74.53MMlitres in 2021, “driven by debottlenecking the refinery production from upstream oil production and actively pursuing its monetisation strategies. Capacity utilisation improved to 24.0% from 12.5% in 2021; underscoring further upside potential as well as additional opportunities that exist to further optimise the refinery business”.

NDEP apparently feels good about its place in the sun and has determined that it is time for a rebranding and official name change. It is the first name change in 27 years. NDEP was incorporated on March 25, 1992 (as the Midas Drilling Fund) and assumed its current name in November 1996. The company plans an elaborate coming out party in August 2023 to unveil its name change to Aradel Holdings Plc “as part of a strategic rebranding initiative aimed at better reflecting the Company’s current portfolio and positioning it for future growth”, its management says in a release.

The integrated indigenous energy company says that the name change underscores its commitment to repositioning itself as a leading African company, dedicated to providing sustainable energy solutions that drive economic growth now and in the foreseeable future.

“This unique name honours our heritage and 30-year legacy as an industry pioneer while reflecting our current portfolio and future ambitions”. ‘Gbite Falade, Chief Executive Officer of NDEP, enthuses.

“Over the years, our business has evolved significantly, and we have successfully expanded our presence across the entire value chain of the oil and gas industry, including renewable energy. The new brand, Aradel Holdings Plc, not only represents our present endeavours but also encompasses our future aspirations”, the company explains





Angola Moves Ahead with Chinese Builders on Lobito Refinery

Angola’s state hydrocarbon company, Sonangol, has signed a memorandum of understanding with China National Chemical Engineering (CNCEC) to construct the Lobito Refinery in the coastal Benguela province.

Sonangol’s CEO, Gaspar Martins, signed the document in Beijing, in the presence of minister of Mineral Resources, Oil and Gas, Diamantino Azevedo.

The MoU follows a public tendering process launched in late 2022 for interested companies and individuals to invest in the Lobito refinery, in the country’s southwest. Private investors will own 70% of the company, the tender advised, with Sonangol controlling 30% stake, according to the proposed corporate governance structure.

Angolan news agency ANGOP reports that “the infrastructure will supply the domestic market and the countries of the Southern African Development Community (SADC) region”.

The Lobito Refinery, the largest of Angola’s four planned refinery projects -as newbuilds or overhaul- has the capacity to process 200, 000 barrels of oil per day.

Angola’s oldest refining facility, the 65 year old Luanda Refinery, underwent a refurbishment in the last three years; increasing gasoline production from 395,000 litres to 1.5Million litres per day.

The Cabinda refinery, under construction, with a capacity for 60,000BPSD, will enter the first phase of completion in late 2023, with the second phase expected to be completed in 2025. In this project, Sonangol holds 10% and GEMCORP 90% in terms of corporate structure.

In Soyo, Zaire province, the American company Quanten leads a consortium constructing the 100000BPSD Soyo Refinery under a build, own and operate (BOO) contract. Sonangol holds 10% in the corporate structure, while the Quanten led consortium retains 90%.

As recently as the end of December 2022, Quanten reported on its website it had completed the “Demining of the entire 712 hectares of the Soyo Refinery project site”.

Expectations about Dangote Refinery Inauguration are Extremely Exaggerated

By the Editorial Board of Africa Oil+Gas Report

The ceremony around the planned visit by the Nigerian President to the Dangote Refinery on May 22, 2023, will peak with a cutting of the ribbon, ‘inaugurating’ the 650,000Barrels per Stream Day Plant, located in the eastern flank of Lagos, the country’s commercial city.

Everyone, it seems, looks forward to production of petroleum products from the plant after that symbolic activity.

But it will not happen.

As President Muhammadu Buhari leaves office a week after “commissioning” of one of the largest, single train hydrocarbon processing plants on the planet, he could be forgiven for believing he had had his wish to be in such a large place, but technology does not sit well with politics.

The ongoing technical commissioning process has not gotten anywhere close to the point of introducing raw hydrocarbon into the plant, let alone delivering petroleum products.

One key challenge of Nigeria’s chattering classes is that they hardly look up the regulation. Hydrocarbon will be introduced only when the Nigerian Midstream Downstream Petroleum Regulatory Agency (NMDPRA) approves and issues License To Operate the Refinery to Dangote.

Speculations about ‘inauguration’ and ‘commissioning’ are just, well, speculations. Both words do not appear anywhere in the ‘Procedure to License A Refinery’ in Nigerian law. The three stages are:

  1. License to Establish a Refinery
  2. Approval to Construct the Refinery
  3. License to Operate the Refinery.

Nowhere does inauguration or commissioning appear. So, the Refinery can be inaugurated or commissioned as the Licensee desires, as long as no attempt is made to operate the Refinery by introducing crude oil and make products For Sale, it does not concern NMDPRA.

The claim that some “large sub-sea pipeline infrastructure connected to Oil and Gas blocks in the Niger Delta region for supply of crude feedstock” is a false narrative. What’s in the plan is that Single Point Mooring (SPM) buoys will play the transportation role in input crude delivery and output petroleum products.

We live in a society where optics trumps everything. Buhari has been President for 8 out of the 9 years that the Refinery Project has been on. What is wrong with Dangote asking President Buhari to inaugurate the Refinery, so his name is on the marble when the facility becomes fully functional? Afterall no law will be breached by such a gesture?

That said, Aliko Dangote, the billionaire owner of the refinery, is determined that the $19Billion project, the second of his three, hydrocarbon processing mega projects (Fertiliser, Refinery and Petrochemicals) is delivered by end of 2023.

The technical work has gone far: involving trial-running every single equipment, which has taken a while because of the length time of mechanical construction. Some equipment were installed six years ago, and were just standing there, in the air, water or even underground. Anything, literarily, could have happened.

As of February 2021, the installation of the Crude Distillation equipment had been completed.

So had the kitting up of the Residue Fluid Catalytic Cracking Unit (RFCCU).

Supply chain challenges thrown up by the COVID- 19 did slow down work, but the construction of Africa’s largest hydrocarbon processing factory picked up steam again in mid-2021.

“The electricals and instrumentation works are usually invisible to the gaze of non-refinery workers, but they are key: their installation needed extreme care and it consumes over 30% of the refinery construction time,” say several  managers familiar with the project.

“A lot of our contractors are Chinese. Those who went home couldn’t come back quickly, but the project workflow recovered and those installations, especially that of the Crude Distillation Column, which arrived Nigeria in December 2019, were expedited”.

“We will have 15 process units in the refinery, and they must all work together”, the managers tell us.

The operations planning will emphasize the mantra at the commissioning: “We must flow everything out with air, then do it with water, then with steam, then with air again”.  This is all to ensure that the likelihood of moisture absorption is zero, as the contrary will lead to cracks.

“The equipment must be pickled. What that does is that it oxidizes the facility”.

The Dangote Refinery is significantly an Indian supervised operation.

But a significant percentage of the 1,000 Nigerian engineers sent to training in India for the eventual operations of the facility, have returned and are currently engaged on site.

The relationship between the Nigerian crude oil refining sector and Indian engineering expertise goes back as far as 1988, when the second (larger) refinery in Port Harcourt, the major city in the country’s oil producing Delta region, was being constructed.

“Some of the experts working on ‘Operations Planning’ were part of the construction of the Port Harcourt Refinery 35 years ago”, our sources say.

Mr. Dangote initially announced the likelihood of the project in 2013. But it was at the All-Convention Luncheon at the annual conference of the Nigerian Association of Petroleum Explorationists (NAPE) in November 2014, that he provided the first relatively comprehensive details of the facility. He told the roomful of geoscientists that the capacity had increased from 500,000BSPD to 650,000BPSD

Dangote Industries was advised by Jacobs Engineering and it licensed the Honeywell UOP for the basic engineering design. On a daily basis, the facility will have the capacity to produce 59 Million litres of gasoline; 20Million litres of Kerosene, Nine Million litres of Diesel and others.

The construction has taken a while and has been though the most excruciating economic challenges Nigeria has ever faced. Would Dangote Industries have delivered this project much earlier if it had awarded it to a world-class EPC contractor like Bechtel, TechnipFMC, Siemens, KBR?

“Yes”, said Alex Ogedengbe, a retired Group Executive Director (GED) at the NNPC, who was involved in the construction of the Warri and Port Harcourt Refineries in the 1980s. “There are just about six or seven such EPC contractors in the world”, he explained. Mr. Ogedengbe was speaking at a private webinar, organized by oil and gas analyst Ronke Onodeko, in April 2020.

Dangote sources maintain that the cost would have been at least 30% higher if that route had been taken. And while it could be argued that Dangote Industries could have had good value for money if a Bechtel or a KBR had handled the construction, multiple sources argue that the delay could have been minimized if the current structure had been in place since inception. The company went into this project with the mindset of constructing a cement plant, which was its major competence before this huge assignment. “We wasted the most time at the engineering stage”, one manager recalls. “A reputable EPC contractor would still have hired expertise from outside like we are doing and subcontract several units. Dangote Industries bought brand new equipment for this work; an EPC contractor might not even have done that, but it would have coordinated things better at the outset”.

One more advantage of building it yourself: all the equipment you purchase for logistics and construction purposes are yours.

Everyone we spoke to agreed that things began to take very good shape when Giuseppe Surace came along. The Italian engineer who had been Chief Executive of Saipem in Nigeria and Brazil, joined the project in June 2017 as Chief Operating Officer. “On the factory floors, in the executive offices, everywhere on site, the consensus is that one of the best decisions that Aliko Dangote made was Surace’s appointment”, said our sources. “He saved the project”.

A highlight of the swirling speculations around President Buhari’s impending visit is the description of how crude oil will be pumped into the refinery. One widely circulated message confidently talks of a “large sub-sea pipeline infrastructure connected to Oil and Gas blocks in the Niger Delta region for supply of crude feedstock”.

That’s a false narrative.

The truth is that Single Point Mooring s (SPM) buoys will play a huge role in input crude delivery and output petroleum products. There are three of them either way. Three SPMs will deliver the input crude oil from vessels into a jetty from which it is pumped into the plant. And three SPMs will ferry petroleum products out to vessels on the sea for export. “We have facility to evacuate through roads, we have a large loading capacity (103 loading terminals) and we can evacuate 75% of our production through road and we can also evacuate 75% of our production through the sea so that if we want to export”, Dangote officials have repeatedly explained.

“Within Nigeria we can evacuate to Warri, Port Harcourt, Calabar and so on, those options are available”, the officials say.


On the table is the idea of a six-lane road through Epe, a town in the east of Lagos. But what of the supply of the product to Lagos? Will some of it be through the Lekki Expressway?  The subject of the quality of Nigerian roads to take in the products, through land tankers, is still a fraught one.

GEOPLEX: ‘We Are Early Movers in the New Marginal Field Development’

As part of our C-Suite Series of interviews with active leaders in Africa’s energy space, Africa Oil+Gas Report engaged WOLE OGUNSANYA, Geoplex’s founder and Chief Executive, in a long conversation. The company has taken substantial interest in a marginal field offshore Nigeria. That’s where the discussion began.

Below, Paul Kelechi Akpelu summarises the chat:

Now that you have acquired equity interest in a marginal oil field, tell us about your journey as an E&P independent; your proposition as an oilfield operator…

We have interest in one marginal oil field, which is the Indibe field. We did not go forward with the second field that we had interest in, because of the result of our evaluation. We were awarded that second field (during the bid round) but the Net Present Value (NPV) and the (development) requirements of that field didn’t look very good. So, we replied back to the Nigerian Upstream Regulatory Commission (NUPRC), to let them understand that it was too much of a burden for a small company like us to take on. But with Indibe, yes, we are part owners of Indibe because we farmed into it and we Have finished drawing up our field development programme. We actually had to take on Baker Hughes to do all these studies for us to make sure that if we invest more in this field, what we think is there, what the prognosis says will make economic sense. So, we’re into that and most likely sometimes in mid to late 2023 we will be drilling the Indibe field.

They ran double completion inside a seven-inch pipe with gas lift… and the whole thing jammed up. The well was finished. But we cut those tubings eleven times and picked them out like spaghetti to salvage that well. This is how passionate we are because this is a Nigerian thing

When should we expect First Oil?

We have been engaging with the NUPRC , reviewing all of the regulations in place that we have to meet. Part of it requires that you have your facility ready and we are offshore. This asset is in OML 67 which is owned by ExxonMobil. With the regulations that we have and the meetings that we have had with the NUPRC, they are going to allow us do what is called Extended Well Testing. It allows you test the well over a number of days and the volume, temperature, and pressure information that you gather will be used to determine or predict the production that you would have over say five to ten years. And of course, when you are doing that, you can keep and monetise the production you had during the extended well test period. That is the way we are intending to get to First Oil hopefully in 2023.

What are the maximum allowable days you could do an extended well test?

The law allows 90 days for extended well test and a one-time renewal of another 90 days.

In the past, some companies have essentially used extended well tests to produce and over the course of say two years, they keep saying they are doing extended well test.

NUPRC is focused to help us, including getting support from the multinational company that owns the OML where these fields are to deliver value. If you put in $20Million to drill a well and complete it; if you are efficient, your ability to flow that well even at a 1,000 BOPD for 90 days helps everybody. It helps you to generate some revenue and it helps you to raise finance because the banks now understand that the oil is there and that the well is completed. If you are lucky to get a renewal, after another 90 days you already have certain level of cash flow and you shut in that well and come back in another six months with the permanent facility, it makes sense. That is what the government wants, for us to get more volumes out of the ground.

There is a lot of gas in Indibe. What are you going to do with that? For a new company like yours, gas could be a bit of a challenge.

We are aware of that and we are working very closely with ExxonMobil on how to handle the gas production. There is also the Ibom Power opportunity in [that sector] and a number of people that will offtake gas in Eked. We are hoping we will offtake with ExxonMobil because it is in their field. If we are able to put the infrastructure in place and get NGL [to offtake], we could consider that for a good price as far monetising is concerned. All that gas monetisation issues we have to [solve] otherwise the project will not be viable.

Geoplex has an interest in the FPSO business and you have equity shareholding with Yinson Holding. Is Yinson Operations & Production West Africa Ltd(YOPWAL)- looking at any opportunities outside Nigeria at the moment?

Yes, we are the partner for Yinson in the country at the moment and there’s a number of FPSOs that we operate. The uptime of our FPSOs, how many days our FPSO was running without any shut down is probably the highest in the world. The FPSO partnership that we’re running with Yinson is strictly in Nigeria. Geoplex is the majority owner of the local company [but] there are other opportunities that they have within sub-Sahara Africa that could be an advantage to Geoplex and we could partake in future.

What we have with YOPWAL is strictly a relationship for Nigeria and of course in Nigeria, we’re looking for further opportunities.

Will YOPWAL  provide the FPSO for Amni’s Tubu Field?

I am not aware of that. What I can tell you without mentioning any names is that we’re looking at another client that has solicited us to provide FPSO for them based on our record that they are aware of. It is important that that end of the spectrum is handled at the highest competency level and that is what we have been able to do with Yinson.

The Nigerian  National Content Development & Monitoring Board (NCDMB) is worried that local companies like yours do not invest in research and development. What’s your take sir?

In Geoplex, we do a number of research, local simulations and we document them. This is deliberate because we have the local know how that helps us in some of our services to deliver better than the multinationals and that’s where we actually are today. There are some services that Geoplex can do better in Nigeria than any multinational company.

If you don’t build capacity, if you don’t invest in equipment, if you don’t train people, if you don’t develop, you cannot do research. There would be nothing for you to research because for you to do research, you must have certain level of know-how and what you’re doing in research is expanding that know-how in a scientific manner. It is important for indigenous companies to build our capacity to that level that we can do a lot of research within the country. In Geoplex, we’re already doing a few things in our own way. We have a test well in Port Harcourt where we simulate operations and have records that help us when we’re going to the well site to deliver those services as good as anybody in the world.

Why did you decide on acquiring a fleet of rigs, and becoming a drilling rig investor?

So that we derive value across the value chain of oil and gas services in Nigeria. It’s not the first time we will expand our portfolio of services, drilling rig is just one of them. We started as a monolithic service company providing electric wireline services, [then] we rolled into many other services: MWD, LWD, coil tubing, cementing, slake line, surface well testing and even completion. So the rigs are just one of the other services  [and] we have capacity to deliver turnkey projects on land.

One of the clients for whom we delivered turnkey projects, made a presentation at the conference of the Nigerian Association of Petroleum Explorationists (NAPE)  and declared that turnkey service is the path that Nigeria’s small field operators should be traveling  because it saves them cost, it is more efficient and it avoids a long supply chain process. This client had raised production to more than two times of what they previously had and the job we did for them, we did  within budget. If an E&P company chooses to set up a supply chain to drill one well [on its own], it supply chain department will award 33 contracts. That’s how many contracts you need to deliver that well. So you can imagine the efficiency or lack of in that system.

We are saying look, we have the rig, we have the services and here’s our international partner. We deliver this core value at double digits lower percentage than you will if you do it yourself.

We delivered in joint venture with one of our multinational partners but Geoplex rigs drilled the wells and Geoplex equipment did some of the services such as coiled tubing,  cementing and so on. We supplied all the long lead items like the pipes, the well head and installed all of that. Our partner, the international company, also carried out some of those services to deliver those wells. So, it was a turnkey JV project that we delivered.

 Who are your international partners?

We work with all the international companies in Nigeria. In the oil and gas service space, there are some technologies, some know-how that some indigenous companies have not attained, including us. The local content Act of 2010, is to ensure that we increase capacity, [but] it will take time to be there, 100 percent.

What’s your general idea of the rate of return on your investment?

The rig business is cyclical. When the price of oil is good, most oil companies in Nigeria would want to drill and get more oil but in other countries, it is really done the other way around; they drill when the price of oil is cheap because the services will be cheap from the service companies. There is nothing wrong when the prices are $80 or $90 and I drill a few more wells to get more oil because even if I’m paying a little bit more for the services, I’m also selling my oil at a reasonable price. The only thing is that because the rigs are more expensive in terms of servicing and maintenance, when the upside is there, you have to take advantage of it. When the downside comes, that depends on how you prepare yourself for that.

In Geoplex, we have learnt to take advantage of the upside and preserve ourselves on the other side. When our rig is working, the business is very profitable. Right now, we have a number of contracts that these rigs are already lined up for, apart from the work that we’re just completing.

When you deploy one of your rigs to Asa field, will it be a multi-well campaign, and how many wells are you looking at drilling and what is the time frame?

On that one, since we’ve not heard anything from the client. [But on another], we are mobilizing our 3,000-horsepower rig to Shell. Preparing a rig can take 2-3 months. The Shell contract is a contract that we have and we have signed off on. The 3,000-horsepower rig can drill a very extended well, meaning we can drill both horizontal wells and extended wells with it. When you have the spec of the rig, 1,500hp, 2,000hp or 3,000hp, it just tells you how much they can pull and the deeper you go the more you need to pull that pipe back. So, With Shell, we got this two years contract plus a possibility of one year extension and they needed that rig because they’re going for deeper wells. There are only two of those rigs in the country and we own one of them.

Baker Hughes is known, for example, for making tools for the industry. Do you envisage several Nigerian companies manufacturing a range of oilfield tools?

That’s happening today. There are actually companies that are already doing that when it comes to mechanical equipment. Even in Geoplex, we design stuff, we design crossovers and we go to machine shops in Nigeria and make them. On other high-level technology, there is not a lot going on in Nigeria yet but it is not impossible. What will make them happen [is] that you have to have a certain know how and that you must developed to a certain level, then with a little bit of research, you can raise the bar. Even Baker or Schlumberger don’t build those tools, they design them.

The beauty of the world supply chain systems is, when you do your designs, there are patents and there are agreements so that whoever you are outsourcing your design components to or the equipment that you are building are bound by that agreement. At Geoplex, we are partnering with a UAE company for some specific downhole tools, to integrate some of our equipment so that instead of having a 40ft length of equipment, we can reduce that to 10ft. In oil and gas industry, the more things you put in the well the more risk you are exposing that well to by introducing lots of junk in it all of that.

Which companies are utilising GEOPLEX’s subsurface service the most?

We’re working for everybody. We work a lot for Seplat, NDEP, (as I speak with you our team are there helping them complete a well that they are drilling right now),  Heirs Holdings. We work for Waltersmith and we are preparing to support them with some remedial work that they have with their well and we also work for Midwestern. For the multinationals, as I am speaking with you, we have more than four crews in Chevron right now, with Shell, we also have people out there working and we are preparing our rigs for them. We recently finished the work we have with ExxonMobil but we are still working for TOTALEnergies. 

If you acquire equipment, it ties down funds when nothing is happening, but you say there is a need to have that equipment yourself

Halliburton, Baker Hughes and Schlumberger have been doing this for 95 years now.  The way they have succeeded is to develop and own equipment. Of course, it is not easy to own equipment and have that equipment not put to use all the time in delivering those services for which they were bought. To compound the issue, you borrowed money to buy them and if they don’t work you don’t make the money and you need to service that debt. But if you plan and structure yourself properly, there is no other way to survive in this industry without owning equipment. The local content law was established for us to build capacity and have capacity within country to produce our oil and gas. If you don’t have equipment, you are not building capacity.

As a service provider, who your worst offenders are in terms of payments and how frustrating is it before you get your money?

People are owing us quite a lot and it is very painful because when you have debts that run into tens of millions of dollars, it doesn’t matter how strong you are because even the multinational partners that we work with, when we are not paying, they too are feeling the pain. We are always in conversation with them on how we can get the end client to pay us. We are hopeful that the PIA will help solve that though.

You had a joint bid with Baker Hughes in Angola recently, how did it go?

They were the ones that bid and asked us to support them. We are in conversation with them right now on how we can mobilise our equipment and personnel from Nigeria to go and support those operations.

How is your interest in bitumen going and what are the challenges with that?

We were invited for the bitumen opportunity, it wasn’t something that we had in our schedule. We are working with one or two state governments to see how we can support them to exploit the bitumen that they have in their states. We are at the bid round stage right now and this exercise is conducted by the Ministry of Mines and Solid Minerals Development.

This country imports about $300Million worth of bitumen every year. To exploit bitumen, you have to drill. Because it is on land and Geoplex owns land rigs, we have a major capacity to exploit bitumen. The other capacities that would be required would likely include a lot of surface processing and we have a foreign partner that can support us. So, it is for purely economic reasons and purely national reasons that we think, if we can invest in bitumen exploitation in Nigeria and make money out of it and at the same time reduce the money, we spend to import that material into the country.

Are you working with the power sector too?

We are working with the Transmission Company of Nigeria (TCN) to support some of the electricity distribution companies to upgrade their distribution capacity. This will involve building sub-stations and we already have the contract to do that and we are involved in working with them right now to see how we can place orders for some of the materials. We think we can leverage our engineering know how, our discipline, and our approach to business to make this a success.

Are you working with TCN as an enabler to them?

No as a contractor. There are three distribution companies that we are going to work with to help upgrade their distribution network.

Is that part of the Presidential Power Initiative, aka Siemens project?

No, this is a completely different arrangement that TCN made. Nigeria’s installed capacity is about 12,000MW but the production capacity is no more than 6-7,000MW because of gas availability issue. Also, within that production capacity, we could barely maintain 4,000MW. Part of the problem is caused by the distribution network because it is not robust enough to [deliver] what we are producing. As the generating companies are ramping up production, they are not able to have it distributed through the national grid and down to the end users through the sub-stations. So TCN designed a programme with the CBN and we are one of the lucky ones to win that contract.

There’s talk that Geoplex plans natural gas supply to some projects in Southwest Nigeria

We are not supplying gas. We have a growing interest in embedded power. The power sector regulations allow you to have embedded power, which means that the distribution companies [discos] can by themselves or in partnership with others, generate power within their disco network and I think the maximum power they can generate as embedded power is 10,000MW. If the national grid is not able to supply you enough power and you have your own embedded power, you would need less from the national grid. It is all about having more because we do not have enough power as a nation. Geoplex is interested in embedded power with one of the discos. We have done a lot of engineering work; feasibility studies and we have even identified the kind of turbines that we will need and the capacity that we are going to build within this disco network. We are in talks right now with the disco and we are going to site it along one of the gas routes that we have across the country.

We are working on an agreement with the Nigerian Gas Company to tap into their gas supply area in the Southwest of the country. The power that some of these big factories are using is enough to power half of Victoria Island, (an upmarket, mix residential and office suburb of Lagos). So, if I have property in VI  and there is a gas pipeline in the vicinity and I buy a piece of land along that route and secure it, go to the water front and put my micro turbine in there and hook it up to the network, VI has constant power.

Your 13 years at Schlumberger is relatively a short time. What was the trigger for you to leave?

When I joined Schlumberger, I think we were 16 in our training school and probably half didn’t make that training school and before I left, we were probably just two left in the company after 12 years. The job was extremely difficult and the attrition rate was high. Some of us had the attitude that we were going to do our job to the best of our abilities and we did. But we also thought, if they are going to ask us to go, then we were prepared to go. And of course, there was also some rule changes when I was 12 years in the company which might affect your pension. If you left at a certain time, you got a lot of money. if you left at a certain window, you didn’t get pension at all until you are 50 or 55 years old.

NNPC had formed a local content policy, the NOGIC Act of 2010. That was visionary for the national interest and the industry interest to have Nigerians carrying out these services. I got aware of it and said well, if they are going to give me the job, I am already doing it here for Schlumberger. I already manage people and I work in different countries and I have trained a lot of people. So, if the Nigerian government decided to give me this job, I was very confident that I would deliver on it. That was actually the catalyst for me to leave.


Where do you see the oil industry in the future?

Foreign subsurface service operators charge that companies like yours are pushing them out of the market.

When we were colonised by the British, they came with their cars but Nigerians did not know how to drive. So, the Britons drove the cars. Now imagine if we still don’t know how to drive today. There is going to be a time when those multinationals will not want to work in this country and that time is not going to be decided in one day; it is going to be transitioned. That is the whole purpose of the Local Content policy, to develop capacity. So, what I see is a value chain plain where we are creating value for ourselves as Nigerians and we are not pushing any multinationals out. There is a niche, there is a value space for these multinational service companies to be part of this industry and we are doing it with our partners and they are partnering more with us because they have seen that working with us also gives them value that is better than they working by themselves.

You don’t think that Schlumberger would be saying:” these guys are trying to take our job”s?

We think we can leverage our engineering know how, our discipline, and our approach to business-in the oil industry to make a success of our foray into electricity distribution sector

We work with Schlumberger and everybody else. In fact, our first partnership in the industry was with Schlumberger in electric wireline. The first contract we had with Shell was with Baker but since then we have always worked with Schlumberger on electric wireline.

In the oil and gas space, because of who we are and because of our integrity, many of them want to work with us. We partnered with Halliburton and they sold us their bulk cement plant in Escravos. Geoplex is the only Nigerian company that can do cement job in Escravos today because of the capacity that we have built. Halliburton is still partnering with us and their senior vice president has come and we have put an agreement in place. They see that there is an interest to work with Geoplex. So, it is not just with Baker, Schlumberger or Halliburton, we are also working with Weatherford in some areas. The whole purpose is that you have to ensure that your partner has a space in the value chain and you have to have the integrity that is required and the due diligence that the multinational companies are very strong about because of the laws in their home countries that cannot be violated.



‘Based on your CAPEX Performance, NUPRC May Ask You to Drill or Drop’

Gbenga Komolafe, Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), spoke exclusively 
to Africa Oil+ Gas Report’s Toyin Akinosho, on a range of issues, focused on increasing the country’s hydrocarbon output.

Excerpts from the conversation…

AOGR: The NUPRC has been reported as holding new licence awardees by the hand and brokering relationships between them and financiers and suppliers and offtakers. That’s a unique engagement in the annals of the industry. How is that coming?

Commission CE: The NUPRC is putting the government’s reputation on the line in asking banks and service providers to support marginal field operators, hence the regulator wants to ensure that the companies involved in the engagements have their corporate governance framework in place before it introduces them to third parties. .Awardees Will Be Helped to Meld their Corporate Governance Framework.

The commission has midwifed the unity of the multiple awardees in each SPV, and encouraged the pulling together of funds.  We brought them together through Petroleum Prospecting Licence (PPL) but development fund needs to be sourced jointly.  Otherwise, weak ones will need to go into carry agreement voluntarily,

If funders don’t see a United front; they will be less compelled to engage he That’s why the commission developed a corporate governance framework for upstream petroleum operations currently at an advanced stage of internal review and stakeholder engagements required for its finalization.

You addressed this issue online at Schlumberger’s 70th Anniversary ….

I took the opportunity of my online address to Schlumberger’s 70th Year Anniversary Parley in Nigeria to ask the company to get on board and participate in services for newly awarded marginal fields. I was asking them to get involved in some sort of pre-export financing. As service providers, they get settled through the crude proceeds.

Schlumberger responded that they don’t do two things: 1) They don’t take equity for services (2) they don’t do commodity. I told them I appreciated the feedback and believe there is room for partnership.

Now, if they (Schlumberger) are not in the business of commodity, who is. We’d talk to Vitol, we’d talk to Trafigura. We’d get everyone around to the table. I worked with commodity traders at the time I headed the NNPC’s Crude Marketing Unit, we bring our legal background, our commercial background to the table. The lesson here is that a regulator must be multi-disciplinary.

Mini Deepwater Bid Round Terminal Date -34 companies, including four oil majors, are prequalified for the ongoing bid round for seven deepwater acreages. The bid round was inaugurated in January 2023 and the final awards were expected to be announced latest by end of April 2023

That terminal date is no longer cast in stone: We work with feedbacks and we are on an ongoing conversation with stakeholders. The Bid round was not timed to end before the exit date of the outgoing administration. There is no transition in the PIA. What the PIA says is that there should be bid rounds. If we get to a point today that we are sure that everything is going smoothly with the awardees of the last bid round, we will put out notice for another round and open the market. Let me repeat this for emphasis: We are not doing this bid round around the political transition.

There are industrywide misgivings about several operators (especially Nigerian independents)  not sweating their assets and as such contributing to dwindling output

 The commission will take operatorship of E&P assets seriously as it determines addition or subtraction to the output of hydrocarbons. We will ask companies to upload their financials on dedicated portals for economic regulation. We will discourage keeping assets stranded in our regulatory focus to optimize oil and gas production through enforcement of the drill or drop provisions of the PIA. Let us know your CAPEX on E&P projects. The PIA allows the regulator to make such an instruction. It enables the commission to measure a company’s financial viability. We want to know what Companies have committed to their assets as CAPEX.

Editor’s note: President Muhammadu Buhari approved the amendment of Deep Offshore Oil block Bid Round calendar after this interview had taken place. The president made the approval in his capacity as the Petroleum Resources Minister.

The NUPRC explained, in a statement, that the move was to accommodate the concerns expressed by both local and international investors over the closeness of the schedule to the terminal date of the present administration in the country. 

The deadline for the submission of Technical/Commercial bids was extended to May 19, 2023. The timeline for concluding activities of contract negotiations and signing is now between July 3 and 28, 2023. The outstanding activities for the conclusion of the exercise include the Technical/Commercial Bid Submission and the Ministerial Consent/Contract Negotiation and Signing. The technical/commercial bid submission involves data access, purchase, evaluation, bid preparation and submission; bid evaluation and publication of results as well as commercial bid conference and announcement of winners,” he added.

The NUPRC statement reiterated that the commission was fully committed to conducting the bid round in a manner that guarantees the achievement of the objectives of the exercise, pointing out that participation is both robust and beneficial to key stakeholders.   

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