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Afren and Lekoil Shares Rise with Significant OPL 310 Discovery  

London Stock Exchange listed Afren Plc's shares are continuing to gain, at one time rising almost 30 per cent, on the 26th June announcement that it has discovered significant light oil accumulations in the Ogo-1 well on OPL 310. Newly Alternative Investment Market (AIM) listed partner, Lekoil's shares have also surged on the news.  

Oil was discovered at Ogo-1 at a depth of 10,518 ft (10,402 ft true vertical depth subsea) after a gross hydrocarbon section of 524 ft, with 216 ft of net stacked pay was encountered. The P50 prospective resources were estimated at 78 million barrels but that is now likely to be revised following indications that the resources are likely to significantly exceed previous estimates.

The partners are continuing to evaluate the well which the company intends to drill to a depth of 11,800 ft (11,684 ft true vertical depth subsea) so as to target other high potential zones. They will also drill a side-track, Ogo-1 ST, which Afren says "will test a new play of stratigraphically trapped sediments that pinch-out onto the basement." They will be targeting 124 mmboe of gross P50 prospective resources with the side-track.

The Ogo-1 discovery, testing a four-way dip-closed structure in the Turonian, Cenomanian, and Albian sandstone reservoirs, confirms the extension of the same Cretaceous sandstones that have yielded other significant discoveries along the West African Transform Margin.

Speaking of his excitement at the discovery, Osman Shahenshah, Chief Executive of Afren said:

"The discovery of oil in the Ogo-1 well opens up a new oil basin in an under-explored region and represents a possible extension of the West African Transform Margin. Based on evidence to date, targeted resources are likely to be significantly in excess of previous estimates, with some high-potential zones still to be drilled. We look forward to working with our Partners to realise the full potential of Ogo and our additional prospects on the license."

Ogo-1 continues Afren's winning streak with significant recent discoveries in Okoro Field Extension, Ebok North Fault Block and Okwok in Nigeria and Simrit-2 and Simrit-3 on the Ain Sifni Block in the Kurdistan region of Iraq.

Lekoil appears to have found the perfect partner after recently acquiring a 17.14 per cent equity interest in the block.  The farm-out agreement also gives Lekoil a 30 per cent economic interest. The company listed recently on the Alternative Investment Market, achieving the largest capital raising on AIM so far in 2013. Lekoil raised approximately $50 million giving it a market capitalisation of $112.1 million at admission.  

On 14 May 2013, Afren completed a farm-out agreement with Lekoil (subject to the consent of the Minister of Petroleum), in respect of a 17.14% participating interest in the OPL 310 licence. Under the terms of the farm out, Afren will receive a total carry of up to US$50 million in respect of an exploration well currently being drilled at the Ogo prospect and a planned side-track well.  

The indigenous Nigerian company Optimum Petroleum Development Ltd. ("Optimum"), the named Operator on the block, will continue to hold a 60% participating interest, with Afren providing technical assistance to Optimum in respect of Optimum's obligations under a Technical Assistance Agreement. Post the farm out to Lekoil, Afren will hold a 22.86% participating and 40% economic interest (once Afren and Optimum achieve cost recovery).

The designated Operator of the block is indigenous company, Optimum Petroleum Development. The partners' participating interests are Optimum 60%, Afren 22.86%, and Lekoil 17.14% while the economic interests are Afren 40%, Optimum 30%, and Lekoil Ltd. 30%.  

Afren's shares closed on Thursday at 132.50p gaining 1.90 on the previous day's trading. It has a market capitalisation of just over £1.4 billion.

Shell Begins Trans Niger Pipeline Fire Investigation

Shell Petroleum Development Company ("SPDC") has begun an investigation into the cause of the explosion on the 28-inch Trans Niger Pipeline (TNP), which resulted in a fire on the 19th of June leading to a shut down of the pipeline. The investigation is being conducted by a joint team, which comprises Ministry of Environment, community members, SPDC and independent observers. The fire is now out but SPDC has had to defer 150,000 barrels per day while the facility remains shut.

The company's Managing Director, Mutiu Sunmonu explained that in the aftermath of the incident they had to allow the fire, which has now extinguished itself, to burn out.  

Mr Sunmonu said: "Having shut down and isolated the pipeline, but with oil continuing to flow from the pipeline under gravity to the low point on the TNP, the only other practicable option in the circumstance was to allow the fire burn out naturally. To prematurely extinguish the fire without functioning containment equipment on site could have resulted in further environmental damage. We continued to monitor the fire while also mobilising replacement oil spill containment and response equipment to site. With the fire out, a residual leak was observed at the site contained within the crater caused by the initial incident. We are currently mobilising crews to evacuate the pit, access the leak point prior to the joint investigation visit and complete repair."

SPDC said the TNP has had to be shut down several times in the past to remove crude oil theft points from the pipeline. For example, SPDC had to deploy a team to Bodo West on the 22nd of May to remove illegal connections on both the 24-inch and 28-inch sections of the TNP. The company stressed that it obtained the community's permission for access. During that time, the company said, the only vessels in the area of the worksite at Bodo West were an operations support barge used to store and transport recovered oil, an environmental barge and two tug boats.  The company explained that while the repairs are going on at night to remove the illegal connections, crude thieves are operating at night to attach new connections.  

Mr Sunmonu explained why it puts the blame for the incident on oil thieves.   Apparently, two unauthorised Cotonou boats had been observed in the area at the time of the initial explosion and fire, which happened at night. All SPDC staff, contractors and regulators leave the site at the end of the day and so he explained that no SPDC authorised people could have been in the area at the time of the incident.  

Mr Sunmonu was at pains to point out that the company had nothing to hide, adding: "We are committed to operating transparently, which is why we have invited the National Coalition on Gas Flaring and Oil Spill in the Niger Delta (NACGOND) to join the investigating team as independent observers. We will continue to run our operations as safely as is possible and in accordance with both industry regulations and Nigerian laws."    

Mr Sunmonu also commented on the recent arrest of some employees of SPDC's contractors and sub-contractors who are suspected of being involved in crude theft activities. He said, "We appeal that the arrested suspects be treated in line with the principle of presumption of innocence until proven guilty, and hope for a speedy and transparent dispensation of justice for anyone found to have violated the laws of the land."

Lekoil Signs Agreement for Acquisition of Panoro Energy OML 113 Interest

London-listed indigenous company, Lekoil has concluded a deal with Norwegian exploration and production company, Panoro Energy ASA to acquire Panoro's 6.502 per cent participating interest (representing about16.3 per cent cost interest and about 12.2 per cent. revenue interest) in oil mining lease (OML) 113 for $30 million. The acquisition will be made through its subsidiary Lekoil 113 Nigeria limited.

Under the terms of the agreement, Lekoil is required to provide a $3 million bid bond for the transaction and the company has to deposit the cash consideration of $30 million into an escrow account within 90 days.

Once the funds have been deposited in escrow they will apply for ministerial consent to the acquisition, as is required under the law.

The structure of the transaction requires Panoro to continue to service Joint Venture commitments on the block while Lekoil will have to, in parallel, service the escrow account by the same amounts. Once the approvals are obtained and the transaction effective, the consideration and working capital adjustment will be released to Pan-Petroleum Aje Ltd from the escrow account.

OML 113 is located in the Benin Embayment along the West African Transform Margin adjacent to OPL310, in which Lekoil, has an ultimate 30 per cent economic interest. The OML contains the Aje oil and gas field, for which AGR TRACS International Ltd, in its recently updated CPR, estimated the unrisked 2C Contingent Resources to be 198.7 mmboe, comprising gas, gas liquids and condensate, as well as a significant oil leg in one of the reservoirs. Around 50 per cent of the 2C Contingent Resources in the Aje field are liquid hydrocarbons, comprising oil, gas liquids, and condensate.  Net unrisked 2C Contingent Resources attributable to Lekoil Nigeria will be approximately 25.3 mmboe.

Buoyed by its successful listing on the Alternative Investment Market (AIM), Lekoil is confident that it will be able to access capital to fund the acquisition and associated capital expenditure.

Commenting on the announcement, Lekan Akinyanmi, Lekoil's CEO, said: "The acquisition of an interest in the Aje field, adjacent to our existing interest in OPL310, is exactly in line with our strategy to focus on assets in corridors of interest identified in our detailed evaluation programme when we established Lekoil. It also brings us potential near term production in line with our ambition to create a producing business with higher upside appraisal and exploration assets. In addition, we continue to assess further opportunities."

He added that the acquisition would help the company realise its vision for its AIM shareholders following its admission to AIM last month.

Total Awards Saipem $3 billion E&C Contract for Egina

ENI subsidiary, Saipem, has been awarded a $3 billion contract for the subsea development of the Egina field, in Nigeria, offshore Port Harcourt, in oil mining lease 130. The field lies in a water depth up to 1,700 metres.

The contract is for engineering, procurement, fabrication, installation and pre-commissioning of 52 kilometres of oil production and water injection flow lines, 12 flexible jumpers, 20 kilometres of gas export pipelines, 80 kilometres of umbilicals, and of the mooring and offloading systems. The work is expected to be completed in the second quarter of 2017 when the field will become fully operational.

In compliance with local content laws, the fabrication activities will be almost entirely be undertaken in Nigeria. Saimpem's Rumoulumeni Yard in Port Harcourt is where the work will be carried out as it is the base for the work it is already doing for Total on the Usan Field. 

Saipem's business unit which has long experience in remote areas and deep water will perform the contract. The company said: "This very large contract confirms the leading role of Saipem in the deep water activities and in Nigeria where Saipem is present since the late 1960s."

The company says that this contract will enable it to maximise local content.

The price of OPEC basket of twelve crudes stood at $100.37 a barrel on Thursday, compared with $99.39 the previous day, according to OPEC Secretariat calculations.  The basket price is on a general upward trend since the 24th of June when it had dropped to $98.33, its lowest since April.

Introduced on 16 June 2005, 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).    

Oil and Gas Equipment Manufacturers to Invest $800 Million in Local Content

Oil and gas equipment manufacturers have pledged to invest $800 million in the oil and gas industry over the next three years. The statement came from the Nigeria Content Development Monitoring Board, (NCDMB) who said this in a statement. It added that it had issued more than 500 certificates to Original Equipment Manufacturers ("OEMs") under its Equipment Component Manufacturing Initiative. NCDMB said that the initiative is intended to get foreign OEMs to partner locally with Nigerian OEMs for the manufacturing of components and parts as well as the assembly of equipment in Nigeria.  

The initiative is to be phased in with vital equipment being allowed only after suppliers are able to convince NCDMB satisfactorily of its intention to manufacture components in Nigeria as soon as possible.  NCDMB's target is to go from 10 per cent local content in 2012 to 50 per cent in 2015. NCDMB says it has also set itself the goal of obtaining 60 per cent Nigerian ownership of marine vessels by 2015.

Shell Invites Applications for Supply, Operation and Maintenance of Deepwater Mobile Drilling Units

Shell Nigeria Exploration and Production Company Limited (SNEPCO) in its role as operator of the NNPC/SHELL/ TEPN/AGIP Joint Venture, in Oil Mining Lease 118 (OML 118) on behalf of itself and other Co-Ventures consisting of Nigerian Agip Oil Company Limited, Total E&P Nigeria and Esso Exploration and Production Nigeria ( Deepwater) Limited under a Production Sharing Contract (PSC) with Nigerian National Petroleum Corporation (NNPC) hereby invites reputable and competent registered Nigerian companies (DPR registered and licensed) with proven experience in supply , operation and maintenance deepwater mobile drilling units to apply for inclusion into the bid list of the tender.  

The scope of work comprises the provision of two (2) Deepwater Mobile Drilling Units and one (1) Top Hole Drilling unit and services. The contract(s) award and commencement dates are planned to be sometime between Q4 2014 and Q2 2016, subject to normal board approval (which will be driven amongst others by; overall project/ drilling program, economic viability, fiscal and regulatory framework etc), as well as regulatory approvals.

To be eligible for this tender exercise, interested contractors are required to be pre-qualified in the Drilling Rigs (Semisubmersibles /Jackups / Others) category (product code 3.04.01) in the NipeX Joint Qualification System (NJQS) database. All successfully prequalified suppliers in this category will receive a Technical Invitation to Tender (ITT). Further information is available at www.nipexng.org.