SPDC Completes 8th Nigerian Oil Mining Lease Sale

First Hydrocarbon Nigeria Limited (FHN) has raised the reserve potentials of the Ogini and Isoko oil fields in Nigeria following the completion of an independent assessment of the reserve and contingent resource potential of the Ogini and Isoko fields.

According to data obtained by NOGintelligence, the gross remaining proven oil reserves at the fields have been estimated at 129.3 million barrels and gross contingent resources have been estimated at 75.7 million barrels.

Gross proven and probable reserves and resources are estimated at 205.0 million barrels, with 92.3 million barrels net to FHN.  This represents a 218 per cent and 12 per cent increase on proven reserves and both proven and probable volumes respectively, that were previously carried by FHN.   

FHN acquired a 45per cent interest in the Oil Mining Lease (OML) 26 portfolio of assets from the Shell Petroleum Development Company Joint Venture (SPDC) in December 2011 and raised $280 million of syndicated debt and mezzanine finance to fund the field development and further inorganic growth.  

The OML 26 portfolio of assets holds two producing fields - Ogini and Isoko, with proven oil reserves estimated at 129.3 million barrels and gross contingent resources estimated at 75.7 million barrels.

There are also three proven but undeveloped fields - Aboh, Ovo and Ozoro, with an estimated 144 million barrels of oil equivalent (mmboe) of gross contingent resources, previous operator's estimates, as well as a further 615 mmboe of gross prospective resources on the block.  

OML 26 also has gas resources of 582 billion cubic feet (bcf) and 1076 bcf (prospective) according to the previous operator's estimates.   

The Nigerian Petroleum Development Company (NPDC), the oil and gas exploration and production subsidiary of Nigerian National Petroleum Company (NNPC) is the operator of OML 26 and works closely in partnership with FHN on the re-development of the assets.

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Hydrocarbon resources in water depths greater than 7,000feet in Nigeria have remained untapped, Chevron Nigeria Limited has said. Speaking recently at an oil and gas conference in Lagos, the Managing Director of the company, Mr. Andrew Fawthrop stated that less than 20 wells have been drilled in this water depth in the Niger Delta.

Fawthrop said the Gulf of Mexico and the Niger Delta were petroliferous provinces with discovered resources in excess of 25 billion barrels of oil equivalent.

He noted that advances in technology and better understanding of the regional framework and depositional settings would lead the industry into exploring in ultra deep areas.

"Stratigraphic plays beyond slope depositional environment are another frontier for exploration in the Niger Delta and in the near future this will be a focus. Though new technologies will be required, we are well positioned to succeed by tapping into the innovation and creativity that we have demonstrated over the years in the deepwater areas," he said.

Fawthdrop, who was represented by the company's Executive Director, Mr. Supo Shadiya said with not many wells deeper than 12,000feet - subsea in the Niger Delta, the future exploration potential may very well lie below the top overpressure, within the deeper pre-miocene sections and in more structurally complex settings.  

"New imaging technology, in particular long offset Ocean Bottom Node (OBN) seismic data acquisition is providing good breakthrough in defining new plays and prospects beneath the reservoirs previously developed," he added.

The Chevron boss stated that the quest for deep liquid rich gas would continue to grow as new 3-Dimensional and 4-D seismic data becomes available.

According to him, in the Gulf of Mexico, companies are now exploring successfully in reservoir objectives between 18,000 feet and 25,000feet.

He acknowledged that this frontier would require expertise in imaging technology and drilling to greater temperature and pressure regimes, where decent porosities and permeabilities are preserved.

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The state of insecurity in some parts of Nigeria, especially the Boko Haram menace is threatening the efforts of the Nigerian National Petroleum Corporation (NNPC) to explore crude oil in the inland basins of Sokoto, Chad, Bida, Gongola, Yola and others.

Speaking recently in Lagos at the 30th Annual International Conference and Exhibitions of the Nigerian Association of Petroleum Explorationists (NAPE), the Group Managing Director of the NNPC Mr Andrew Yakubu, stated that while waiting for the security issues to be addressed, the NNPC had commenced interpretation of all the data acquired from the basins.

According to him, the recent geological successes recorded in some of these basins were indicative that more potentials abound in these areas.

Yakubu said acquisition was on-going using gravity, aeromagnetic and electromagnetic means to improve the best possible chances of finding oil and gas.

"It is instructive to note that the current security challenges in some of these regions have however slowed down the level of progress in exploration activities. This notwithstanding, we have continued to forge ahead in our quest to deliver value to our stakeholders," he said.

"Despite challenges being faced by the industry in recent times, it has remained vibrant with significant increase in exploration activities in the past years. There are more than seven exploration rigs that are actively engaged in different locations in the acreages. The preliminary reports from most of the exploration activities have indicated positive potentials with great promises of enhancing the reserve potentials of the country," he said.

Yakubu stated that in order to achieve the nation's aspiration in the sector, NNPC had re-positioned its subsidiaries, particularly the IDSL to take advantage of the opportunities presented by the National hydrocarbon reserve growth targets.    

Also speaking at the occasion, the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke praised NAPE for supporting the federal government's transformation agenda and urged the stakeholders in the industry to come up with integrated solutions to address some of the teething problems of the industry.  

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The National Refineries Special Task Force (NRSTF) set up by the President in March has submitted its report on the state of the nation's refineries. The report, which was largely overshadowed by the controversy surrounding the Ribadu report, confirms the diabolical state of the nation's refineries.  

The Task Force was headed by former Minister of Finance, Dr Kalu Idika Kalu and it had as its goal, recommendations for achieving self-sufficiency in petroleum products in the shortest time possible.  

The mandate of the Task Force included a diagnostic assessment of the nation's  refineries. They were to review all past reports and assessments and come up with a blue print for achieving efficiency and commercial viability. They  also had the mandate to review all licences issued for the new refineries with a view to assessing their operational, technical and financial viability.

The Task Force found that although Nigeria had the largest production capacity in Africa, at 445,000 barrels per day between the three traditional refineries, the country had an average utilization of just 18% of that, making them the worst performing of Africa's 42 refineries. This compares unfavourably with Egypt's 81% and South Africa's 85% for the period from 2006-9.  

The Task Force found that the reasons for the dismal performance include a culture of neglect in the maintenance of the refineries, the poor business model, supply chain, organizational and operational issues.  

The Task Force recommended urgent and far-reaching measures to turn the situation around. At the top of the list was a recommendation that the government should privatize the traditional refineries, divesting at least 51% of its interest in the refineries.  

"The core investor must assume full operatorship of the privatised refinery," the Task Force said.

The Task Force further recommended that a programme should be put in place to achieve the divestment within 18 months. The committee however warned that adequate measures to alleviate the effects of full deregulation should be put in place beforehand. The process, the committee recommended, should also take into account the transfer of skills and technology as well as local content compliance.  

With regards to proposed Greenfield refineries, the Task Force was strongly in favour of Lagos, arguing that the location was supported by the economic considerations. The Task Force suggested making the Lagos Refinery a priority over the other proposed Greenfield Refineries in Bayelsa and Kogi States.

The Task Force also predicted that if the Government did not implement these suggestions, the cost of importing petroleum products would rise to $18.1 billion in 2030 from the current $9.9 billion.

The other members of the Task Force were: Mallam Yusuf Alli (Alternate Chairman); Prof. Ayo Ogunye; Mr. Imo Itsueli; Mr. M. B. Shehu, Mr. Olumuyiwa Ajibola and Dr. N. J. D. Erinne.

The rest were Mr. Alex Ogedengbe; Mallam Bello Maccido; Mr. Emeka Ene; Mr. Stanley Lawson; Mr. Akin Kekere-Ekun; Mrs. Fatima Wali-Abdulrahman; Mallam Abba Dabo; Mr. Harcourt Adukeh; Mrs. Mayen Adetiba; Mr. Babatunde Ogun and Mr. Achese Igwe.

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The price of OPEC basket of twelve crudes stood at $106.21 a barrel on Wednesday, 14th November compared with $105.97 the previous day, according to OPEC Secretariat calculations. It is up from the same day last week when it stood at $105.21 a barrel.

Introduced on 16 June 2005,  the new OPEC Reference Basket is currently made up of the following: Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE) and Merey (Venezuela). 

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OPEC has downgraded demand forecasts for its crude in its monthly oil market report. The organization predicts that demand for its crude will fall by about 100,000 barrels a day as the world demand less from the group, in spite of its predictions that the world will be requiring more oil. OPEC expects to see an overall demand of some 400,00 barrels of oil per day.  

The next OPEC members meeting which takes place in December is expected to be rather stormy as the organization is largely expected to put pressure on its members to reduce production. Production is already falling, due in part to sanctions on Iranian oil and lower output in Nigeria due to the floods and sabotage of its pipelines. OPEC's output fell as a result for the first time below 31 million barrels per day to 30.95 million bpd.

In spite of OPEC's falling output, it is still producing more than the market needs for next year. Expected demand for OPEC crude next year stands at 29.7 million barrels a day. The group said its output fell by 66,900 barrels a day in October to 30.95 million barrels per day (bpd), the first time in a year it fell below 31 million bpd. This represents a 2% drop in output. The numbers, based on secondary sources such as shipping and oil consultancies, were driven down by lower Iranian and Nigerian output.

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The International Energy Agency has released its latest Oil Market Report in which it confirms that the Nigerian government is losing an estimated $7 billion every year due to oil theft, illegal refining and high costs. This corroborates the Nigerian government previous estimates.  

According to the report, most of the oil is lost to pipeline damage from sabotage. Nigeria's output is the lowest it has been in two and half years after production fell to 1.95 million barrels per day (bpd). 

Even with the drop in production, Nigeria remains Africa's largest producer, just marginally ahead of Angola.

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The House of Representatives has finally begun debating the Petroleum Industry Bill (PIB), which has been described by the House majority leader Mulikat Adeola-Akande as "one of the most important bills we will ever consider." The PIB is intended to harmonise and consolidate about 16 existing laws governing the oil and gas industry, some of which go as far back as 40years.

As expected, there are a number of areas that are already in contention in the House. Among these are:

• The wide range of powers given to any sitting Minister of Petroleum Resources over a wide range of issues including choosing the chair of most of the new regulatory agencies that will be created under the Bill.
• The wide level of discretion accorded the sitting President over petroleum issues, the biggest bone of contention being the discretionary award of licences.
• The unbundling of the Nigerian National Petroleum Corporation (NNPC)
• The Petroleum Host Community Fund, which gives host communities a 10% share of produced oil.

The passage of the bill is still a long way away as it still has to undergo public hearings and a final vote of the full House.  

Investment in the country has ground to a halt while investors await the passage of the Bill into law.  Analysts say passing of the PIB will unlock billions of Naira worth of investment into the industry.

Adeola-Akande said: "The non-passage of the Bill has occasioned an atmosphere of confusion and uncertainty in the oil and gas sector, leading to the loss of billions of dollars in potential revenue for the country."

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Total Nigeria Plc has published its unaudited results for Q3 ending 30th September 2012. The results showed a turnover of N166.39 billion up from N129.75 billion the previous year.   Profit before tax was N5.67 billion while profit after tax was estimated at N3.72 billion up from N4.10 billion and N2.57 respectively the previous year.  

The company is also declaring interim dividends of N1.09 billion as interim dividend. This represents a dividend of 300 kobo per share. The dividend is payable on Monday 17th December only to those whose names appear on the Register of Members at the close for business on Friday 30th November.

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Following the Eland Oil and Gas acquisition of a 45 per cent interest in OML 40 from Shell, Total and Agip for US$154 million, analyst Charlie Sharp, at Canaccord Genuity is recommending a "buy" of the company's shares at a target price of 180p. The full-service investment bank has its eye firmly on Nigeria-focused Eland. Eland's shares are up 27 per cent since its float on the Alternative Investment Market (AIM) in the UK.  

The company the only solely Nigeria-focused E&P company that is listed in the UK.  

Sharp compares the company to Heritage and Afren but says: "they are larger and have a more diverse asset base in Africa and beyond."

Eland's listing in September raised US$191 million which it has used to acquire a 45% interest in OML 40 formerly owned by Shell, Total and Agip for $154 million, making it the largest float on AIM since 2009.

The acquisition was made using a special purpose vehicle, Elcrest, with Eland holding a 45 per cent interest in the investment vehicle while Starcrest Nigeria Ltd, a subsidiary of the Chrome Group of companies, founded by Emeka Offor in 1994, holds the remaining 55 per cent. Eland has agreed with Starcrest to acquire an additional four per cent of the shares in Elcrest held by Starcrest. Also, the Eland has an option to acquire a further 10 per cent of the shares in Elcrest from Starcrest.

OML 40 is an onshore asset in the Niger Delta with 2P reserves of 71.5 million barrels but it has huge prospective resources so the shareholders will end up with much more value. Shell had certified the 2P reserves at 180 million barrels but there are some 356 million barrels of prospective resources. Nigeria's historical success rates are over 75 per cent making the interest worth more than just 20% of the 71.5 million barrels.  

The company intends to re-commission existing infrastructure and restart existing wells to re-commence production at an initial gross rate of 2,500 bopd with an ambitious target to grow gross production to 50,000 bopd within four years.

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Following its acquisition of an interest in OML 30, Heritage Oil has applied to the UK Listing Authority (the "UKLA") and the London Stock Exchange (the "LSE") for the block listing and admission to trading on the Official List of the UKLA and the Main Market of the LSE (the "Listing") of 21,276,428 ordinary shares of no par value each in the Company (each an "Ordinary Share").

Of the total number of Ordinary Shares subject to the Listing, 18,904,510 are issuable pursuant to the Company's Share Option Scheme, and 2,371,918 are issuable on the exchange of exchangeable shares of no par value in Heritage Oil Corporation, a subsidiary of the Company (the "Exchangeable Shares"), for Ordinary Shares.

The company has also issued its Interim Management Statement for the period from 1 July 2012 to 14 November 2012, in accordance with reporting requirements of the EU Transparency Directive.

"We look forward to continuing to build our presence in Nigeria through Shoreline Natural Resources which we expect to be one of the leading indigenous oil companies in Nigeria."

The Company intends to fund the OML 30 purchase partly through the sale of its shares in the Miran PSC and Miran JOA . The company has today issued notice to its shareholders that it will hold an EGM to obtain the approval of their approval for the divestment. It will transfer its 49% interest in the two assets to Genel for $294 million exchangeable loan provided by Heritage to Genel in August 2012.

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Afren updated investors on Tuesday. The company confirmed that it was on track to realise over a billion dollars of net operating cash flow in 2012 as it released its nine-month results.

The oil and gas explorer announced record sales revenue of almost $1.1 billion (£0.7 billion) and operating cash flow before movements in working capital of $787.7 million.

Operationally, year-to-date net working interest production to 11 November totalled 42,033 barrels of oil per day (bopd), in line with expectations, and on track for 2012 production guidance. At Okoro, offshore Nigeria, early production stabilised at 5,000 bopd, with a plan to replicate early production on the Okoro Field Extension with an early production well at Ebok North Fault Block.

Also in Nigeria, proved and probable (2P) reserves for Ogini and Isoko were upgraded to 129 million barrels (mmbbls). Exploration wells were drilling ahead onshore Kenya (Block 10A) and in the Kurdistan region of Iraq (Simrit-3).

"2012 has been a transitional year for Afren, one in which it has started to deliver on its potential," stated analysts at FoxDavies. "Production is in line with expectations and cash generation is strong, and with c. $500 million in cash sitting on the balance sheet, there is plenty of firepower to execute its development and exploration programme for this year and next, even if there was no further cash flow to come."

Despite Afren carrying c. $1 billion of debt, FoxDavies did not believe the company had much of an issue with securing further debt funding to support the next raft of development projects, principally Okoro, Ebok North and Kurdistan.

The broker reiterated its 'buy' recommendation and 250p price target.

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On November 28, 2012 the Financial Times will be publishing its annual report on NIGERIA worldwide in all editions of the paper and on its award-winning FT.com. This year the FT has decided to focus on one of the most compelling aspects of contemporary Africa, investments, and thus is calling the report INVESTING IN NIGERIA.

FT INVESTING IN NIGERIA responds to the country's national priority to diversify its economy and develop a host of high-opportunity sectors which should serve as a motor for increased economic growth and robust financial strength.

The INVESTING IN NIGERIA will continue to cover the main areas of national news, and continues to have a keen eye fixed on the oil and gas, telecom, and banking sectors, but also intends to cover other emerging sectors - mining, agriculture, energy and power, commodities, services, transportation and shipping, infrastructure, industry, and of course foreign direct investment. Business magnate Aliko Dangote while speaking at an investment forum during the UN General Assembly week in New York called Nigeria "the best kept secret."

The FT INVESTING IN NIGERIA report will reach 2.2 million readers on November 28, and will be launched at the12th Honorary International Investor Council (HIIC) in London with Baroness Lynda Chalker's Africa Matters, in the presence of HE Goodluck Jonathan, President of Nigeria, and a number of Nigeria's most dynamic ministers, including HE the Minister of Industry and Investment, HE the Minister of Finance, and the HE the Minister of Petroleum.

The FT report is expected to be between 12 and 16 pages depending on the extent of demand from companies interested in communicating in the report. Display advertising is available throughout the report, AND a special 8 pages in the middle of the report will be devoted to text-driven pages and half pages that are reserved for business leaders and companies who wish to either publish a statement or present themselves in a Q&A format. The space will include your approved text, logo, and one or several photos.

The Shell Petroleum Development Company of Nigeria Ltd (SPDC) has shut down the Imo River Trunkline in its Eastern operations after it found several crude theft points on the facility. Production of some 25,000 barrels of oil per day is deferred.  

The company discovered the first set of leaking points and isolated the line on the 31st of October. Later, an additional leak from the remaining oil in the pipeline led the company to discover another six theft points on the 12-inch trunkline, of which three have been repaired so far. There have been 26 spills in the Imo River area so far this year; 25 have been due to sabotage, spilling nearly 3000 barrels into the environment.

Shell's Vice President for HSE & Corporate Affairs, Sub-Saharan Africa, Tony Attah said: "Ground visits showed that the oil had impacted rivers and other water bodies even as we have managed to deploy containment booms and are now starting to recover spilled crude. The evidence is clear for all to see, that crude theft is bad for Nigeria, bad for the people, bad for the environment and bad for our business."  

Imo River Trunkline is part of the Trans Niger Pipeline which suffered a similar fate at Mogho when unknown persons installed two crude theft valves today (11th November), barely 24 hours after the last of such leaks was repaired at Biara, also in Ogoni land. The two crude theft valves have been closed and the line is being reopened.  

The largest number of spills in Imo River this year occurred in May and August, with six incidents in each month. The company said that five of the spill sites have been fully cleaned and certified while cleanup activities are ongoing in the rest.   

SPDC shut down production in Imo River in August last year because of incessant crude theft activities, and only resumed operations many months later when the broken lines were repaired and conditions had improved.  

This latest incident came just as Shell announced that it was expecting to lift a force majeure on exports of Forcados and Bonny Light grades by the end of November after it cut output by some 20,000 barrels a day due to flooding.

Crude theft is a growing problem in Nigeria and oil companies estimate around 150,000 bpd is stolen. Some of the oil is illegally refined in local makeshift refineries but the oil companies estimate that the vast majority is shipped abroad.

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Mobil Producing Nigeria, a subsidiary of international oil giant, Exxon, has reported an oil leak in a pipeline offshore, off the coast of Akwa Ibom State, following which the pipeline was shut off. The cause of the leak is unknown. The company said in a statement:

"On Nov. 9 an oil release occurred offshore Akwa Ibom State. The source of the leak was identified and the pipeline was isolated and shutdown." The company has not confirmed the cause of the leak or the quantity of oil that was lost.

The company says that it has despatched a team to commence the clean up of the areas affected. The General manager, Public and Government Affairs of MPN, Mr Paul Arinze, said in a statement:

"Our teams are being mobilized to clean up the area. We apologise for the inconvenience that it has caused."

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