Only one block out of the 77 awarded in the 2005, 2006 and 2007 licensing rounds has been brought into production. The recently appointed Director of the Department of Petroleum Resources (DPR), George Osahon, made the startling revelation at a forum organized by the DPR to review the 2005-7 licensing rounds with the aim of ensuring that the blocks deliver what was expected when the blocks were awarded to the investors.

Giving the government perspective on the licensing rounds, he said that the failure of the 76 blocks to achieve first oil meant that the government has missed out on $40 billion in revenue as a result. He further disclosed that less than 30 per cent of the blocks are being actively worked. The situation led one puzzled potential investor at the event to ask why people are collecting licences and yet not doing any work on them.

"Several PSCs [Production Sharing Contracts] are yet to be signed, bank guarantees are yet to be put in place, work obligations are not respected, there are crossroads with concessionaires over the order of operations, while downstream obligations are not performed," Osahon said.

Other challenges operators are facing, he said, were security, technical challenges, partnerships, and financing. He added that something needed to be done urgently to resolve these challenges, although he stressed that the federal government was not looking to revoke the blocks.  

The 2005 licensing round was supposed to be the first open bid round after previous bid rounds (in 2000 and 2003 were largely criticised as being mainly discretionary and lacking due process and transparency. The 2005 bid was intended to have enabled Nigeria to increase reserves to 40 billion barrels with a target production of 4 million barrels per day.

The 2006 mini licensing round saw the award of 16 blocks, which brought in $292 million in signature bonuses. Part of the intention of the government was to attract strategic downstream investments such as the expansion of local refining capacity, gas for independent power plants, as well as the building new and the refurbishment of existing railway lines, and other investments in poverty reduction.

In the 2007 bid round, outgoing President, Olusegun Obasanjo, put up another 45 blocks for auction, out of which 17 blocks were awarded, raising around $500 million in signature bonuses.

Operators who spoke at the forum about their own experiences included Oando and Essar Energy. Among the challenges that Oando Energy Resources CEO, Pade Durotoye, listed were those in connection with Oil Prospecting Licence (OPL 270) - the difficulty of access because of security issues for seismic acquisition leading to what they believe is a force majeure position and OPL 236 - performance bond issues.

Among Durotoye's recommendations were that force majeure situations should be properly defined in contracts; performance bonds required of investors should be dropped especially for indigenous companies who already have difficult access to capital, especially in view of local banks demanding cash collateral for bonds; downstream financial obligations should be commensurate with the size of the exploration risk which is not often the case with the licences that were awarded; and an effective platform should be provided to negotiate minimum work commitment in line with current realities around the asset.

Essar Energy, operator of OPL 226, said its own challenge was that they were working in what was essentially deep water even though the OPL had been defined as shallow water and so was regarded as such by the regulators. One of their recommendations was that operators should be allowed to recover the head office costs relating to the project where the head office is located in their home country.

Osahon recommended the way forward, saying: "Awardees and operators should take advantage of forums presented by the DPR to build relationship with prospective investors and financial institutions; awardees are encouraged to build synergies where possible, as in contiguous blocks for data acquisition or conjugate development."

He added that DPR would commence entertaining the concern of awardees from Tuesday to Thursday each week for the next three weeks, where specific challenges such as evacuation and downstream project obligation and other issues or obstacles to operations will be addressed.

He advised that investors should undertake in-depth studies on prospective blocks before bidding and acquiring such blocks. It is clear that much has to be done if the government is to achieve its ambitious reserves target of 40 million barrels.

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Sources close to Chevron have revealed that the US company intends to sell the rest of the assets it has put up for sale in a spot auction. Its Oil Mining Leases (OMLs) 83 and 85 are next up for sale after its OMLs 52, 53 and 55. However, the success of the bids for the first three OMLs to be put up for sale is in marked contrast to the rather lukewarm response to OMLs 83 and 85 in shallow water offshore Bayelsa State, prompting the company's decision to dispose of them in a spot sale.   

NOGintelligence gathered that the company intends to invite bids and choose the highest bid on the day. Chevron has a 40 per cent stake in the assets with NNPC as its joint venture partner in the assets.

The company seems quite keen to dispose of the blocks as soon as possible and it is unlikely that the sale will be delayed beyond October.

Industry watchers have suggested that the lack of interest in OMLs 83 and 85 is probably because they are non-producing assets, which are relatively undeveloped. Other potential complications include the near-term expiry date and potential issues around operatorship. The successful bidder for the blocks will have to deal with the headache of renewal, with the potential for the renewal to be declined.  

One analyst is suggesting the blocks could go for as little as $10-20 million each given the low interest. This could present a good opportunity for a cash buyer with the political connections to ensure the renewal of the licences when the time comes.  

Chevron acquired OML 83 and the much larger OML 85 with its Madu field after its acquisition of Texaco. The company holds a 40 per cent interest in each of the two blocks.

Madu field in OML 85 (over 140 million barrels with nearly half of it gas) and Anyala field in OML 83 (over 200 million barrels) were originally discovered in 1993 by Texaco, but development was deferred in the 1990s because of cost calculations. However, Chevron began a new development plan in 2004, with the strengthening of oil prices but in spite of the flurry of activity, neither field has been fully developed by Chevron and neither is in production.

Shell has issued a "caveat emptor" notice in relation to offshore oil mining lease (OML) 122 located in the Niger Delta and operated by Peak Petroleum. Lead counsel for Shell Nigeria Upstream Ventures Ltd, Ani Molajo SAN issued the notice following industry murmurings that the company, which has been looking for investors, may be close to a deal. The notice, intended to scupper any deal, states that OML 122 is co-owned in undivided interests by Peak and Shell. It also states that the block is the subject matter of pending litigation between Peak and Shell.

Industry giant Shell says that in so far as it has not consented to the sale of OML 122, no valid interest can be transferred in OML 122, which has not yet achieved production.

NOGintelligence contacted the managing director of Peak Petroleum, Dr Ayo Oluokun, who refuted Shell's declaration of an interest in OML 122. Dr Oluokun said: "Shell's position is incorrect as they do not hold and have never held a participating interest in OPL 460/OML 122."

NOGintelligence has sighted a "without prejudice" letter of "Good Standing" in relation to OML 122 from the Department of Petroleum Resources dated 4th November 2010, which appears to confirm Dr Oluokun's position. The letter appears to be in response to an enquiry made by a law firm, presumably representing a potential investor.

The letter recounts the history of the lease and the background of the dispute between the two companies. The licence was granted on a Sole Risk arrangement as oil prospecting licence (OPL) 460 to Peak Petroleum Industries Nigeria Limited on 20th January 1993. After the company met its minimum obligations, the OPL was later converted to an OML on 17th May 2001 for a period of 20 years.

According to the DPR letter, the two companies entered into Heads of Agreement (HOA) on 12th December 1998, which was not definitive. A Deed of Assignment was submitted for Ministerial approval based on the non-definitive HOA. The letter continues to explain that as a result of its non-definitive nature the Honourable Minister of Petroleum Resources did not sign the Deed of Assignment but instead granted conditional consent. According to the letter, attempts to reach a definitive agreement "hit a brick wall" after Shell tried to introduce terms that were not in the HOA.

The letter goes on to state: "We therefore confirm to you that the company has fulfilled all the statutory obligations attached to the award of the block, though OML 122 is not producing yet but is in 'Good Standing'."

The letter also confirmed that Peak Petroleum is "presently operating the OML 100% and the company is meeting all the financial commitments to Government."

The original OPL had an area of 1632.72 sq. km. in the continental shelf of Niger Delta. The area was reduced to 1295 sq. km. on conversion to an OML. The company acquired a total of 1,679.9 km. of 2D and 2,450 sq. km. of 3D seismic data, drilled twelve (12) wells and established five (5) fields with an estimated reserve of 17.4 million barrels of oil, 5.15 million barrels of condensate, 654.56 million standard cubic feet of free gas and 33.16 billion standard cubic feet of associated gas.

The main objectives for the UMU-11 well are to appraise and produce proven oil reservoirs encountered but not completed in the UMU-9 and UMU-10 wells. The UMU-11 objective is to test four of these oil-bearing sands, and if successful, complete these sands for production.

The company's co-venturers in the field are Midwestern Oil and Gas Company Plc. (Operator of the Umusadege field) and SunTrust Oil Company Limited.

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The UMU-11 well commenced drilling operations on August 14, 2013 and is currently at a depth of 1,100 feet in the 16-inch upper hole section. The 16-inch upper hole section will be drilled to a depth of approximately 5,000 feet.

The next activity will include running and cementing 13 3/8 inch casing in the upper hole section. Drilling will then continue with a 12 1/4 inch section to a total measured depth of approximately 8,700 feet, followed by running 9 5/8 inch casing.

Following mounting speculation, Chevron Nigeria Limited, has confirmed its withdrawal from the Olokola Liquefied Natural Gas (OKLNG) project with effect from 31st July 2013.  

Chevron's General Manager, Policy, Government and Public Affairs, Mr. Deji Haastrup, confirmed this in a statement. The company said its decision was as a result of a review of its investment portfolio following continuous delays on a Final Investment Decision on the major project over the last 8 years. The company had a share of 22.74 per cent of the project.

The company said: "The business decision to withdraw from the OKLNG is based on a review of our investment portfolio, the lack of progress on the project and a reprioritisation of resources to focus on growing domestic gas supply."

The partners in the OKLNG venture were NNPC, BG, Chevron and Shell at inception in 2007 but BG exited the project in 2012 while Shell followed in July 2013. Chevron's share rose from 19.5 per cent after BG's departure.

"Chevron remains fully committed to Nigeria and continues to pursue its investments in the country's oil and gas industry," the statement added.

The statement also confirmed that NNPC was fully informed of Chevron's decision to withdraw and that the divestment process is being managed in accordance with the provisions of the shareholders' agreement governing the project.

Following the news of Chevron's departure from the project, NNPC has moved quickly to dispel fears that the withdrawal of Chevron could threaten the President Goodluck Jonathan's Gas Revolution Agenda.

Group General Manager, Group Public Affairs Division of the NNPC, Tumini Green, said in a statement: "The gas revolution agenda which is an integral part of the gas master plan cannot be derailed just like that. NNPC can confirm that the exit of Shell and Chevron will not impact on Mr. President's gas revolution agenda. In fact, very good progress is being made with domestic gas supply which has reached the highest level of 1500mmcf/d from about 500mmcf/d about three years ago."

She stressed that the Federal Government and NNPC remain committed to the OKLNG project.

The Olokola LNG project is located between Ogun and Ondo States. On completion, producers are expected to supply natural gas to the facility for conversion to LNG.

The price of OPEC basket of twelve crudes stood at $111.55 dollars a barrel on Wednesday, compared with $111.20 the previous day, according to OPEC Secretariat calculations

Although Syria is not a major oil producer the market is jittery over fears that any attack on the middle eastern country could spill over into other parts of the region which could then affect supply from major producers like Iraq.

The resultant price hikes should enable the Federal Government to refill its depleted coffers as the losses from crude oil theft continue to escalate.

The Federal Government says it has lost over 146 million barrels of crude oil estimated at about $11.794 billion (about N1.852 trillion) to theft, sabotage, and pipeline vandalism between 2009 and 2011, according to the latest audit report by the Nigerian Extractive Industries Transparency Initiative (NEITI).

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).   

U.S.-based exploration and production company, CAMAC Energy Inc, whose Chairman and Chief Executive Officer is Nigerian-born business man, Dr. Kase Lawal, has announced a net loss of $3.8 million, or $(0.02) per diluted share for the quarter ended March 31, 2013. For the same period in 2012, CAMAC Energy reported a net loss of $1.3 million, or $(0.01) per diluted share. The company says net loss for the current period increased primarily due to lower operating revenues.

Operating revenues for the company were $2.5 million for the quarter ended March 31, 2013, compared to $5.7 million for the same period in 2012. The decrease in 2013 was primarily due to the reduction in Cost Oil recovery related to workover costs incurred on well No. 5 in Oyo Field in 2010 and 2011 and lower sales price. Oyo was the first deepwater discovery in Nigeria, and has been online since December 2009.

Average daily gross production for the quarter ended March 31, 2013 was 2,349 barrels of oil per day, versus 2,949 barrels of oil per day during the first quarter of 2012. CAMAC Energy's net share of average daily production during the first quarter of 2013 was 230 barrels of oil per day compared to 466 barrels of oil per day during the first quarter of 2012. In the first quarter of 2013, there was one oil lifting from Oyo Field of approximately 231,000 barrels, 22,600 net to the Company's interest, at a sales price of approximately $108 per barrel. In the first quarter of 2012, there was one oil lifting of approximately 290,000 barrels, 45,800 net to the Company's interest, at a sales price of approximately $124 per barrel.

General and administrative expenses were $3.7 million for the first quarter of 2013, compared to $2.5 million for the first quarter of 2012.  The increase in first quarter of 2013 versus the same period in 2012 was primarily due to higher share-based compensation expense and higher consulting and legal expenses.

Cash and cash equivalents on March 31, 2013 were $2.3 million compared to $3.8 million at December 31, 2012. The decrease in cash and cash equivalents was principally due to cash payments made for normal operations.

In its update on operations, the company revealed that Allied Energy, operator of its co-owned oil mining leases (OMLs) 120 and 121 signed a Deed of Assignment with Transocean and Nigerian Petroleum Development Corporation (NPDC) Limited, a subsidiary of the Nigerian National Petroleum Corporation (NNPC) for the Sedneth 701, mid-water semisubmersible.

Allied Energy expected to receive the semisubmersible, which was under contract with NPDC and operated by Transocean by the end of July but the assignment of the rig was delayed due to unanticipated drilling problems at its current location. The rig will drill the Oyo No. 7 well, which is expected to both increase production from the currently producing Pliocene reservoir and explore the resource potential in the deeper Miocene reservoir.

With these dual objectives, the No. 7 well is expected to both significantly increase oil production from the currently producing reservoir and de-risk much of the unrisked resource potential in the field. Oyo, the first deepwater discovery in Nigeria, has been online since December 2009.

Camac is currently engaged in the process of re-interpreting the existing 3-D seismic data on the OMLs to identify new exploration prospects outside of the Oyo Field.The company expects this analysis to result in an increase to the gross unrisked resource potential of the OMLs, currently estimated at over 2 billion barrels of oil by independent reserve engineers.

The company's principal assets in Nigeria include interests in deep offshore blocks OML 120 and OML 121, which include the currently producing Oyo Oilfield. The company which was founded in 2005 also recently acquired six exploration blocks in Kenya and The Gambia and is pursuing further additions to its exploration portfolio in East and West Africa.   

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Forte Oil Plc (formerly African Petroleum Plc) has announced a whopping 63 per cent rise in profits for the half year to June 2013. Profits after tax rose to N1.39 billion from N855 billion in the same period in 2012. Revenue for the company rose to N59.9 billion from N49.7 billion in 2012 representing an increase of 21 per cent. Gross profit dropped 14 per cent from N5.73 billion to N6.65 billion. Administrative expenses were down.

The company's Group Chief Executive Officer, Mr. Akin Akinfemiwa, said the increase in revenue was due to a rise in supplies and depot expansion. He also said that the company has acquired the 414MW Geregu Power plant in Kogi State through its subsidiary, Amperion Power Distribution Company Limited. This move, he said, would enable the company to diversify its earnings across the energy value chain. The company intends to restructure the plant.  

Akinfemiwa said: "We plan to consolidate our market position and grow our profitability through business expansion, which would ultimately lead to increased revenue and elimination of wastages/losses and cost of operation."

Akinfemiwa said: "The fact remains that we used to have negative liquidity, but now, that has become a thing of the past. We are on the verge of ensuring that our shareholders' wealth is increased maximally."

The militant group known as the Movement for the Emancipation of the Niger Delta (MEND), has given US oil giant, Chevron Nigeria Limited till October 1, 2013 to evacuate the Escravos Terminal and Tank Farm. The group says that it will begin a mortar attack on Chevron's Escravos facility if they do not evacuate their staff by midnight on that day.

The statement from MEND states: "MEND is so far satisfied with the steady destructive progress of 'Hurricane Exodus' which has reduced Nigeria's oil output significantly through our sustained sabotage of pipelines."

In a direct challenge to the Joint Task Force which is Nigeria's main defence against incessant pipeline vandalisation, the statement added: "We will also continue to turn a blind eye to the crude oil merchants passing through our territories because their activities, apart from toll paid us, is helping to achieve our objectives of zero oil output by 2015."

The group warned Chevron Tank Farm staff in Escravos to evacuate the premises as mortar attacks will begin at 00:01 hours on 31st October.

The Movement for the Emancipation of the Niger Delta (MEND), which began its "Hurricane Exodus" campaign on the 15th of June claims that it is an operation to wage war "against injustice, corruption, despotism and oppression". The group says it will continue to carry out attacks until all its demands are met.

Mobil Producing Nigeria Unlimited (MPN), operator of NNPC/MPN joint ventures invites interested and registered Nigerian companies to respond to the opportunity for the provision of helicopter services at all its locations within the NNPC/MPN joint venture (JV) acreage. The contract is expected to commence in the last quarter of 2014. The scope of service covers the provision of helicopter logistics support services, associated tools and highly qualified specialist personnel.

Only tenderers who are registered with the 30803 - air transport services of passengers & freight product category shall be invited to submit technical bids. The closing date for this opportunity is September 23rd 2013.

Shell Nigeria Exploration and Production Company (SNEPCo) invites interested and registered Nigerian companies to respond to the opportunity for the provision of ocean bottom node 4D seismic data acquisition services for SNEPCO Bonga main FPSO area. The proposed contract will commence in the fourth quarter of 2013. The scope of service covers the provision of ocean bottom node 4D seismic data acquisition services over SNEPCO Bonga main FPSO area (undershooting the FPSO area).  

Only tenderers who are registered with NJQS2D/3D/4D Seismic Data Acquisition Services (Product Code 3.10.01) category shall be invited to submit technical bids. The closing date for this opportunity is 9th September 2013.

Chevron Nigeria limited invites interested and registered Nigerian companies to respond to the opportunity for the provision of rope access services for its work within the tank terminal and in the fields offshore Escravos, swamp location. The scope of service covers the provision of access support services for flow-line/riser and pipework repair non-destructive testing (NDT).  

Only tenderers who are registered with NJQS product/category 3.05.16 (rope access services) shall be invited to submit technical bids. The closing date for this opportunity is 13th September 2013.

Oil &Money

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