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Shell Prepares To Sell 4 OMLs

Shell Petroleum Development Company of Nigeria (SPDC) has begun talks on 4 of its Oil Mining Leases (OML) in preparation for inviting bids for its sale. It follows SPDC's recent announcement that it was following a strategy of "selective divestment" and "concentrating the operating footprint into a smaller, more contiguous area." On the chopping block are onshore Oil Mining Lease (OML) 13 and OML 16 as well as the shallow offshore blocks, OML 71 and OML 72, Reuters reports.

Talks are said to be progressing with the Nigerian National Petroleum Corporation (NNPC), the 55 per cent joint venture (JV) partners in the blocks. Total and Eni are also JV partners in the blocks with 10 per cent and 5 per cent respectively. Shell owns the remaining 30 per cent interest. Total and Eni have been rather silent partners in the previous Shell divestments and they are saying nothing so far on the latest round.

The sticking point in the past divestments has been the issue of the operatorship of the block. Investors in those divestments had assumed that the operatorship of the block would transfer neatly from Shell to them but NNPC insisted that under the terms of the JV Agreements, the operatorship would revert to it. With these new divestments, NNPC is likely to similarly insist that it will operate the assets.

The international oil company (IOC) divestments have proven to be an entrée into the upstream play for indigenous companies, something that Shell alluded to in its statement that it is "supporting the Government's policy of encouraging investment by indigenous companies in the Nigerian oil and gas industry." It remains to be seen whether the indigenous companies who are looking to make their mark as upstream operators may be deterred from bidding if NNPC insists on being the operator of the OMLs.

OML 13, the easternmost of the 4 blocks is, together with its near neighbour, OML 16, in Ogoniland, an area that Shell had all but abandoned for almost 20 years. Only recently, SPDC re-entered the community, but was keen to stress that it was there to conduct an inventory of its assets in Ogoniland. At the time SPDC said its re-entry, after engagements and consultations with the Ogoni communities, was in line with the recommendations of the United Nations Environment Programme (UNEP) report on Ogoniland under which, SPDC says, it was required to conduct a comprehensive review of its assets and develop a decommissioning plan. Commentators have suggested that indigenous companies are likely to be able to forge a better relationship with the communities in Ogoniland than SPDC ever could given all the disputes, some of which are ongoing, between the company and the local communities.

Previous moves by NNPC to resume oil production from 30 or so oil fields belonging to the SPDC Joint Venture in the area were unsuccessful in the face of opposition from the Ogoni people who were said to oppose the re-entry plan due to the Federal Government's delay in implementing the UNEP report on oil pollution in their environment.

Since 2010, Shell and its JV partners have sold their interests in eight OMLs for a total of $1.8 billion but SPDC Managing Director, Mutiu Sunmonu stresses that: "Nigeria remains an important part of Shell's portfolio, with clear growth potential, particularly in deepwater and onshore gas. This strategic review marks another step in re-focusing the SPDC portfolio."

The price of OPEC basket of twelve crudes gained $1.13 to hit $106.10 dollars a barrel on Thursday, compared with $104.97 the previous day, according to OPEC Secretariat calculations.

Meanwhile Brent crude gained $1.18 to $108.88 a barrel and hit $109.45 Thursday, the highest since July 16. It ended July with the largest monthly per centage gain since August 2012.  

U.S. crude outpaced Brent, gaining $2.43 to rise to $107.46 after hitting a 16-month peak earlier in July.

Prices are holding high on the strength of the strong economic data from China and Europe, indicating a stronger outlook for demand, especially in view of the political unrest in Libya and Iraq, which could disturb supplies. Surveys of the Euro Zone suggest that the region may pull out of recession this quarter. Analysts say the concern over output from Libya and Iraq, which could be disrupted by political unrest, as well as Nigeria, which continues to see a drop in production due to epidemic levels of oil theft, is underpinning price gains. The disruptions have cut OPEC output, which is now at a 4-month low.  

US company EarthSearch, a subsidiary of East Coast Diversified Corporation (ECDC), is to supply 400 oil tanker tracking and monitoring devices to its West African Regional licensee, Halogen Security based in Nigeria for delivery to its client Oando Plc. This is one of the several phases in deploying technology to the Oando fleet of oil tankers.

Halogen Security is the exclusive licensee for EarthSearch's products and services for the West African region. Commenting on the development, Kayode Aladesuyi, CEO of ECDC said: "Working with Halogen to establish presence in the West African region has been quite exciting. Halogen is a leader in the security services industry and possesses a wealth of resources that would allow it to penetrate the regional market with our products. We look forward to many more announcements such as the one today."

Nigerian Liquefied Natural Gas (NLNG) has lifted the force majeure on its exports of gas following the end of the blockade of Bonny Port by the Nigerian Maritime Administration and Safety Agency (NIMASA). The blockade ended after NLNG finally capitulated and paid the outstanding levies of $140 million, which NIMASA claims it is owed. The payment is in settlement of levies NIMASA from October 2009 to May 2013.

General Manager, External Relations, of NLNG, Kudo Eresia-Eke said: "As at today, the 6-Train NLNG Bonny complex finally reached its normal operating capacity," adding that operations can now be fully normalised. NLNG is now supplying its customers, which include Spain's Repsol, Italy's Enel, Britain's BG Group France's GDF Suez and Portugal's Galp although the company says that after four force majeure declarations in this year alone, its customers are beginning to ask questions about their deliverability.

NLNG is continuing to pursue a judicial interpretation of the position through the courts after losing $475 million in exports. The company has said it will also continue to pay the levies that NIMASA is demanding even whilst continuing to dispute the validity of the claim. The court proceedings have been adjourned to September 29. NLNG said: "NLNG, as a law abiding corporate firm, will be guided by the outcome of the judicial process and expects that other parties will do same."

NLNG, Nigeria's largest gas exporter says it exported associated gas worth about $17 billion in 12 years. The company said it converted about 92 billion cubic meters (bcm) of associated gas to export 968 Liquefied Natural Gas (LNG) and 145 Natural Gas Liquid (NGL) product cargoes cumulatively from 1999 to 2011. NLNG says it contributes about 4 per cent of Nigeria's Gross Domestic Product (GDP) per year.

The Nigeria Liquefied Natural Gas (NLNG) Limited has increased the quantity of liquefied petroleum gas (LPG), popularly known as cooking gas that it has reserved for the domestic market. The company used to supply 150,000 metric tonnes per annum (MTPA) to local companies but has now increased it to 250,000 metric tonnes per annum (MTPA) in its effort to support the effort to encourage the general population to switch to LPG. This comes just after NLNG lifted its force majeure declaration on LPG supply to the domestic market following the end of the blockade of Bonny Port by the Nigerian Maritime Administration and Safety Agency (NIMASA).

The General Manager, External Relations, of NLNG, Kudo Eresia-Eke, said decision was taken after a survey conducted by NLNG discovered that domestic consumption of LPG had exceeded 150,000 MTPA. This represents a 43 per cent increase in demand from 2008 when NLNG began to supply LPG for local consumption.

The increase in demand is good news for the Federal Government, which has been trying to encourage the switch to the cleaner fuel from firewood and other environmentally harmful sources. The figure is however abysmal in comparison with the population of the country, the largest producer of LPG in West Africa.  

The Nigerian Liquid Petroleum Gas Association (NLPGA) has welcomed the move and the President of NLPGA, Dayo Adeshina told NOGintelligence: "I would like to express our sincere thanks and appreciation to NLNG for the recent increase in the domestic LPG market from 150KT to 225500KT. This shows NLNG's long-term commitment to deepening the domestic market and we hope the Federal Government will take a cue from this and substantially reduce the distribution of kerosene and switch the teeming populace to a cleaner healthier LPG. On our part, we will continue to work round the clock to make sure LPG is distributed to the entire nation."

The increase in supply should help bring down the price of LPG after prices escalated in the middle of the NIMASA blockade. At the height of the blockade, a 12.5kg cylinder of gas, which was sold at N2,800 was being sold at between N3,500 and N4,500 and prices have not yet begun to come down even after supplies returned to normal.

NLNG, which supplies about 70 per cent of Nigeria's LPG for local consumption, is a joint venture between the Nigerian National Petroleum Corporation (49 per cent), Shell (25.6 per cent), Total LNG Nigeria Limited (15 per cent) and ENI International (10.4 per cent). Nigeria's gas reserves are estimated at around 187 trillion cubic feet.

NEITI Presents Audit Report for 2009-11

The Nigeria Extractive Industries Transparency Initiative (NEITI) has presented its audit report the period 2009 to 2011 for the oil and gas sector.

In her welcome speech at the presentation of the report, Executive Secretary of NEITI, Mrs Zainab Ahmed, said: "In line with the EITI new standard adopted during the recently concluded global Conference of the Organization in Sydney, Australia and the focus on impacts of EITI process, NEITI has blazed the trail by embarking on Fiscal Allocation and Statutory Disbursement Audit. This is a new and novel audit, Nigeria is the first Country undertakes this nature of exercise."

The global Extractive Industries Transparency Initiative (EITI), which Nigeria signed up to since 2003 requires member countries to publish on a regular basis audit reports to acquaint the citizens with current information and data on what extractive companies paid to governments in terms of royalties, taxes, levies, signature bonuses, rents etc. The payments are to be reconciled with what governments received from the companies for their business with the extractive resources. However, Nigeria supported and enforced the implementation of the process in Nigeria with the NEITI Act 2007, which requires NEITI to do even more than their obligations under the EITI global process.

The report is to meet the statutory mandate and both aspects of the Audit constitute the NEITI 2009-2011 Oil and Gas Audit Report.

Speaking on behalf of the National stakeholders Working Group (NSWG), Chairman of NEITI, Mr Ledum Mitee said at the presentation of the report: "I wish to make it very clear that NEITI neither generates nor manufactures either information or data. The reports we are making public today are based on information and data mandatorily provided to NEITI through our independent auditors by both relevant government agencies as well as companies doing business in the sector for the period under review."

Key Findings and Recommendations of the NEITI Report  

The highlights of the NEITI report include the following findings:   

• Nigeria recorded a total crude oil production of over 2.5 billion barrels for the period, an increase of 4.8% over 2006 - 2008 period. From this production, the Federation earned total revenue of $143.5 billion from equity crude sales, royalty, signature bonuses, taxes etc.
• Flared gas reduced by 25%.
• The disparity between subsidy claims paid from the Federation account and that made by the Petroleum Products Pricing Regulatory Agency (PPPRA) was N175.9 billion during the period.
• The subsidy payments made through NNPC increased from N198 billion in 2009 to N416 billion in 2010 and nearly doubled when it rose to N786 billion in 2011.  
• During the same period, subsidy paid through PPPRA increased from N208 billion in 2009 to N278 billion in 2010 and also increased astronomically to N1.12 trillion in 2011.
• Over 136 million barrels, which estimated at $10.9 billion was lost to crude oil theft and sabotage as well as about 10 million barrels valued at $894 million as a result of pipeline vandalism in downstream. This amount was 7.7% of the total revenue accrued to the federation.
• Inadequate funding of JV operations was one of the reasons for the decline of government crude oil productions, crude liftings and revenues accruable to the Federation.
• All refineries are operating below their name-plate capacities The combined loss to Nigeria in the Offshore Processing, Crude and Products Exchange within the period under review was over $866 million.
• The MOUs for joint venture partners JV's, which expired in 2008 are yet to be renewed.
• There is no agreed pricing methodology between NNPC and the companies for the determination of fiscal values for royalty and PPT computations.
• Other key findings made by the audit include poor inventory management, which accounted for the difficulty in determining depot balances for imported products.
• The amount of N4.423 billion being over-recovery of subsidy payments collected from some marketers is yet to be remitted to the Federation account by PPPRA while NNPC and two other companies are yet to refund N3.715 billion.

Key recommendations

The Report made far-reaching recommendations on measures to remedy the situation including:

• Urgent need for Federal government's intervention to review existing agreements in the industry with the companies.
• A deliberate policy on construction of new refineries through private sector initiatives, and privatization of existing ones.
• The need for NNPC to speed up all cases of Arbitration.
• PPPRA should remit all funds amounting to N4.423 billion arising from the "over-recovery" collected to the Federation account.
• The need to install inlet-metering devices to measure production from the flow stations to the tank farms as well as measures to embrace approved standard measurement in the upstream and downstream operations in the oil and gas industry.

The Report recommended that the Federal Government should set up a committee to review and agree on a new fiscal regime and governance framework for the oil and gas industry and define a clear road map for implementation while pushing for early passage of Petroleum Industry Bill.

Execitive Secretary of NEITI, Mrs Zainab Ahmed said: "I also wish to call on development partners to support NEITI on remediation and automation of its audit process as well as on dissemination of the audits reports."

The reports were produced by two indigenous auditing Firms (Sada Idris & Co and Haruna Yahaya & Co) both of whom were chosen after a transparent international competitive bid process.

The full report is available to download on the NEITI website: www.neiti.org.ng

 Senate To Investigate Malabu Oil Deal  

Senate, has said it is to investigate the Malabu Oil deal controversy after mandating its Committees on Finance and Petroleum (Upstream) to look into the controversial $1.09 billion transaction particularly the role of the Attorney-General of the Federation and Minister of Justice, Mohammed Adoke who is said to have written to foreign environmental activist group, Global Witness, saying that the House had investigated and cleared him of all wrongdoing in relation to the transaction.  

Senate President, David Mark, said it was necessary for Senate to thoroughly investigate the case with a view to unraveling the controversial circumstances surrounding the case.

The Malabu Oil deal involves Oil Prospecting Licence (OPL) 245, which was original awarded to Malabu Oil before it was revoked and re-awarded to Shell and Eni. Malabu Oil brought a lawsuit against the Federal Government and in the ensuing lawsuit, a settlement was brokered by the Federal Government. Following the settlement, Shell/Eni allegedly paid the sum of $1.3 billion to the Federal Government and were allowed to keep OPL 245. Malabu was then paid $1.09 billion out of that sum by the Federal Government.  

In a UK lawsuit brought by a broker for unpaid commissions relating to the introduction of Shell to Malabu, a London court recently held that former Minister of Petroleum, Dan Etete owned and controlled Malabu Oil "at all material times."

The British police are looking into allegations of money laundering in connection with the transaction.  

NEITI attempted to look into the matter during its audit for the period 2009 -11 but complained that it could not get sufficient information from the Department of Petroleum Resources (DPR) to reach a conclusion.

Joint Task Force Carried Out 594 Raids from January - June 2013   

The Joint Task Force (JTF) has made some significant gains in the period between January and June 2013 according to the JTF spokesman, Lt. Col. Onyema Nwachukwu. He said they had arrested 608 suspected oil thieves in 594 raids code-named "Operation Pulo Shield," carried out in the Niger Delta in that time.

Lt. Col. Nwachukwu gave more details about the raids, saying: "So far, we have carried out 594 illegal oil bunkering patrols, and several arrests have been made. In the two quarters we are talking about, we've scuttled about 748 illegal refineries within the region and we have impounded 24 sea-going vessels; we equally arrested 133 barges involved in oil theft. And 861 giant open wooden boats popularly referred to as Cotonou boats have been scuttled over this period."

"About 910 large surface tanks, which oil thieves engaged in illegal refineries use to reserve the crude have been scuttled. We've taken into custody about 608 suspects who are involved in oil theft and oil theft related cases," he added.

 TOTAL E&P Nigeria Limited Invites Applicants for Training Scheme   

TOTAL E&P Nigeria Limited is looking for suitably qualified Nigerians for its Oil and Gas Productions Training Scheme. The company said that the invitation for applications is in support of its growth phase and that the successful applicants will be on a training contract following which they will be able to apply for jobs in the organisation following the usual recruitment process for employment.  

Only applicants who hold Ordinary National Diplomas (OND) or Higher National Diplomas (HND) at the Upper Credit level obtained will be considered. They must also have graduated from the OND or HND after the year 2009. The closing date for applications is 4 weeks from the 30th of July. Applications must be made online through the TOTAL careers website, www.careers.total.com.

The Shell Petroleum Development Company of Nigeria Limited (SPDC) invites interested and registered Nigerian companies to respond to the opportunity for the provision of Construction All Risks (CAR) Insurance coverage for the Gbaran Ubie Phase II Project. The scope of service covers physical loss and, or damage to the project property, including third party liability risks, ocean marine and inland transit risks during construction. Only tenderers who are registered with 31432 Non-Life Insurance Product/Services Category shall be invited to submit technical bids. The closing date for this opportunity is 16th August 2013.

Total Upstream Nigeria Limited (TUPNI) invites interested and registered Nigerian companies to respond to the opportunity for the provision of Offshore Inspection Maintenance and Repair (OIMR) Vessel Services. The scope of service covers the provision of an OIMR Vessel with two (2) work class remotely operated vehicles (ROV) spread and associated personnel to perform a variety of OIMR activities. Only tenderers who are registered with NJQS Product/Category 3.08.01 - Tugs/ROV Support/Diving Support Vessel shall be invited to submit technical bids. The closing date for this opportunity is 16th August 2013.  

Provision of 2014 Dollar Operational Insurance and Third Party Liability Policies

Provision of 2014 Dollar Operational Insurance/TPL

Agip Energy and Natural Resources (Nigeria) Limited invites interested and registered Nigerian companies to respond to the opportunity for the provision of operational insurance cover for its properties and third party liabilities. The scope of service covers the provision of operational insurance and general third party liability insurance policies. Only tenderers registered with NJQS in the non-life insurance service category (3.14.32) product category shall be invited to submit technical bids. The closing date for this opportunity is 7th August 2013.

Provision of 2014 Nigeria Naira Policies

Agip Energy and Natural Resources (Nigeria) Limited invites interested and registered Nigerian companies to respond to the opportunity for the provision of 2014 Nigerian naira policies. The scope of services covers the provision of personal accident, group life assurance, motor vehicle, computer transit and marine. Only tenderers registered with NJQS in the life insurance service 3.14.30 and/or 3.14.32 (non-life insurance services) product service category shall be invited to submit technical bids. The closing date for this opportunity is 7th August 2013.

Agip Energy and Natural Resources (Nigeria) Limited invites interested and registered Nigerian companies to respond to the opportunity for the provision of 2014 Nigeria naira insurance policies. The scope of service covers the provision of group personal accident, group life assurance, motor vehicle, fidelity guarantee and transit all risk policy. Only tenderers who are registered with NJQS in the life insurance service category (3.14.32) and /or non-life insurance services (3.14.32) product category shall be invited to submit technical bids. The closing date for this opportunity is 8th August 2013.

Provision of 2013/2014 Operational Insurance Policy

Agip Energy and Natural Resources (Nigeria) Limited invites interested and registered Nigerian companies to respond to the opportunity for the provision of 2013/2014 operational insurance cover for its properties and third party liabilities. The scope of service covers the provision of operational insurance and general third party liability insurance policies. Only tenderers who are registered with NJQS in the non-life insurance services category 3.1432 product category shall be invited to submit technical bids. The closing date for this opportunity is 8th August 2013.

Addax Petroleum Development (Nigeria) Limited invites interested and registered Nigerian companies to respond to the opportunity for the provision of field operation safety case and major hazard assessment & risk register. The contract is proposed to commence in 2013.This scope of services covers the development of safety case and major hazard assessment & risk register for OML 123 field operations. Only tenderers who are registered with NJQS product group3.02.02 Safety, Health and Environment Consultancy shall be invited to submit technical bids. . The closing date for this opportunity is 5th August 2013.

From the Director of Department of Petroleum Resources (DPR), Mr George Osahon comes the verdict that the country's marginal fields' programme if well managed and developed, could continue to increase the country's marginal fields reserve which currently stands at 302.62 million barrels and ultimately the total crude oil output. Osahon noted that the country's marginal fields' reserve which has risen from 141.01million barrels (mmb) in 2004 to the current figures give the assurance that these fields hold the promise for the increase in crude oil production.

Osahon, represented by Head, Upstream Division, Sam Obiorah while speaking at the Society of Petroleum Engineers' 37th Nigerian Annual International Conference and Exhibition (NAICE) in Lagos recently however said the fact that crude oil production from the nation's marginal field is put at 60,000 barrels per day and gas production at 15 million standard cubic feet per day still calls for great concern. He disclosed that marginal fields contribute as little as 2.1 per cent to the country's total crude oil production.

According to him, out of the 24 marginal fields awarded by the Federal Government in 2003, it is not encouraging that only nine are into full production with some others at various stages of development.

Osahon said that the government would ensure that the next marginal award would have clusters of contiguous fields to aid materiality.

According to Osahon, "The marginal field programme may not have evolved as intended, but it has made its mark on the industry landscape. Suitable enablers will be introduced in future marginal fields bid round."

Also speaking, Seye Fadahunsi, Executive Director of Pillar Oil Limited, emphasized the need for the Federal government to motivate marginal field operators in the country with a view to increasing production in their fields.

According to him, marginal field operators should manage their risks properly and keep their program simple in order to have headway in oil production

However, the Managing Director/Country Chair of Shell Companies in Nigeria, Mutiu Sunmonu, condemned the spate of vandalism and crude oil theft in the Niger Delta region calling it a huge crisis situation to the national economy.

Sunmonu, who was represented by the Managing Director, Shell Nigeria Exploration and Production Company (SNEPCO), Chike Onyejekwe, said the Federal Government's aspiration of growing reserves to 40 billion barrels from the sector by 2020, may be in jeopardy, unless it tackles the menace of oil theft head long.

"The impact of the activities of crude oil thieves and illegal refineries on the environment in the Niger Delta and the Nigerian economy is now a crisis situation. At some point this year, over 60,000 barrels of crude was being stolen from Shell lines daily," he stated.

AUGUST EVENTS 

International Conference on Petroleum Refining and Petrochemicals

Port Harcourt, Nigeria

28th - 29th August 2013

goddy.igwe@ipsng.org;  

goddy.igwe@uniport.edu.ng;  

goddyigwe@aol.com

Offshore Patrol Vessels (OPV) Africa

Lagos, Nigeria

27th - 29th August 2013

www.offshorepatrolvesselsafrica.com

SEPTEMBER EVENTS 

Oil and Gas Conference & Exhibition

Aberdeen, United Kingdom

3 - 6 September

 www.offshore-europe.co.uk