Accounting Course for CFOs of Upstream Oil and Gas Companies
17-21 March, Dubai
Closing date for SIAO's course
in Dubai on Accounting for Upstream Oil and Gas Operations Under IFRS
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Welcome to our 85th issue.
Are you a CFO of an upstream oil and gas company? If so, you really must get over to Dubai as audit firm, Siao holds an Upstream Oil and Gas Operations workshop there from the 17th of March. The course is totally free to Nigerian participants. Note that the closing date is on Monday 10th March. You really have to get in touch with David Raggay NOW for more details if you want to get on this course which I am sure will be over-subscribed. You can also call him on 0817 510 3826. And don't forget to drop us a line after the course to let us know how it went.
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Oando's Acquisition of ConocoPhillips Assets: Too Big to Fail?
Nigerian downstream giant, Oando and its exploration and production (E&P) focused subsidiary, Oando Energy Resources, have won yet more time to complete their long running acquisition of the ConocoPhillips Nigerian assets. Given the number of extensions that Oando has won so far, many are now asking if it has become a deal that is too big to fail. The official line is that the extension is to "enable the companies to satisfy all closing conditions including the anticipated consent of the Honourable Minister of Petroleum Resources in Nigeria."
Oando was the highest bidder in the big sell-off after bidding a reported $1.79. Following the announcement in December 2012 many were cynical about Oando's chances of pulling it off. After putting down a deposit of $450 million, Oando embarked on a marathon fund raise. Analysts complained that the assets were not worth that much and predicted a difficult fund-raise. In typical fashion, Oando was bullish about its chances, keeping firmly focussed on the opportunity to raise its E&P footprint from 4,500 barrels of oil per day (bpd) to 45,000 bpd.
At the end of November last year, just as Oando was about to run out of time the American giant extended the close date by 60 days to expire on the 31st of January 2014. At the end of January, Oando put out a statement that it had secured the loans it needed for the final tranche of funding to close the deal. Oando said it had been able to secure a $350 million corporate facility agreement with a syndicate of Nigerian lenders, as well as a $450 million reserves based lending facility. When the transaction failed to close at the end of February, rumours surfaced that Oando subsidiary, Oando Energy Services, was up for sale to raise the final tranche of funds required to close the deal but Oando has firmly denied this.
Following the execution of the loans for $800 million, the longstop date was extended to 28th February 2014 but it came at a steep price as Oando had to pay an additional $50 million.
Now, the end of February has come and gone and the deal has still not closed. Cynics were beginning to say that this was now the end of the road, but with the revelation that Oando has won another month's extension to the 31st of March, it seems that the American giant, ConocoPhillips is prepared to wait however long it takes for the deal to complete.
Analysts are saying that if Oando should fail in their acquisition of ConocoPhillips, it could cripple the heavily leveraged company, which would have serious repercussions across the industry. Plus, it would not look good at all for ConocoPhillips and its lead arranger, BNP Paribas, Failure is not an option for all parties involved, it seems.
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Glencore and Mercuria in Final Bids for Shell Assets
As the process for the sale of Shell's four onshore oil mining leases (OMLs) 18, 24, 25 and 29 begins to near conclusion, it has been revealed that commodities traders Glencore and Mercuria are among those to have submitted final bids for the assets. Also in the running is the Dangote group who recently announced that they were interested in upping their upstream game in a bid to ensure sufficient production for their soon-to-be-built $9 billion 400,000 barrels of oil per day (bpd) capacity refinery and petrochemicals plant.
The four oil mining leases, which together averaged 90,000 barrels oil per day (bpd) and 60 million standard cubic feet of gas per day (scf/d) production are being sold by Shell and its joint venture partners, Total and Eni, which together own 45 per cent interest in the assets. The remaining 55 per cent is owned by the Nigerian National Petroleum Corporation (NNPC).The reserves of the 4 blocks is 4.6 billion barrels of oil equivalent.The Nembe Creek Trunk Line (NCTL), which has been the subject of incessant attacks from oil thieves, is also up for sale.
Of the four OMLs, 29 is the choice asset with peak production of 62,000 bpd from 5 fields, 40 million scf/d and reserves of 2.2 billion barrels. Analysts say this block alone, holding the Oloibiri, Nembe Creek, Santa Barbara and Odeama Creek fields could fetch up to $2 billion for the partners. Also part of this package is the NCTL, which is said to have hundreds of punctures along its 97-kilometre length. Many analysts think it is more trouble than it is worth and in the past Shell has threatened to shut it permanently.
The other three blocks are smaller producers. OML 25 has one producing field delivering an output of 33,000 bpd and 2 million scf/d of gas while OML 24 produces 25,000 bpd 8 million scf/d of gas from three 3 fields and OML 18 has a production of 21,000 bpd and 12 million scf/d of gas from six fields.
The Shell joint venture has raked in just under $2 billion so far from its Nigerian divestment as international oil companies (IOCs) continue to maintain that they are not leaving Nigeria but only realigning their interests. They see the offshore area as relatively easier to operate in, being free from host community problems. They are however not making any new investments offshore as they wait to see what will happen with the stalled PIB. The latest sell-off will be the largest by far.
The assets for sale are said to be worth around $3 billion together. However, experts predict that they could go for more going by the kinds of bids that the ConocoPhillips and Chevron divestment attracted. Many have questioned the basis on which indigenous companies, which the IOC divestment tends to attract, are evaluating the assets before submitting their bids.
With one eye firmly on the ConocoPhillips deal, which Oando is still trying to close and the Chevron sale, which is now mired in litigation Shell will have been careful to shortlist only those companies that it is sure have the capability to close the deal. With the likes of Glencore, Mercuria and Dangote in the mix they will be expecting a bumper harvest.
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SIAO is holding a comprehensive 5 day workshop on
Accounting for Upstream Oil and Gas Operations Under IFRS.
The workshop will be held inDubai from the17th to the 21st of March.
The course is FREE to Nigerian participants.
Registration closes on the 10th of March.
For further information get in touch with David Raggay on 0817 510 3826 or email him at david.raggay@siao-ng.com. SIAO is a one-stop shop for audit and assurance, tax and advisory service. _________________________________________________________________
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Fuel Scarcity Grips Lagos and other Cities
Cities across the country are gripped by a crippling fuel scarcity that is now threatening commercial activities. The situation in Lagos is particularly bad with motorists having to queue up for about 3 or 4 hours to get petrol. And when they do get there they are so relieved that they are only too happy to pay the inflated selling price of between N100 and N150 per litre, well above the subsidized official price of N97.
As queues grow around the nation's commercial capital, businesses are beginning to bear the brunt of the shortage with many having to shut early, thereby losing valuable man-hours. This is because public transport is now affected and those relying on buses to get home have a long wait to find buses. An eyewitness reported that CMS, one of the busiest bus hubs in the city of Lagos, was almost empty two days ago.
Last week, Nigerian National Petroleum Corporation (NNPC) denied that there was a petrol shortage even as petrol queues were beginning to form around Abuja. The Petroleum Products Pricing Regulatory Agency, PPPRA joined the denial saying there was sufficient stockpile of products in depots across the country to last for weeks. Now they are left with egg on their faces as the nation's commercial capital is brought to its knees.
What is particularly frustrating for motorists is that no one seems to know exactly why the fuel shortage has occurred and there is no consistent statement from the regulatory agencies.
Only on Wednesday, after giving appearing before a joint house committee, the Group Managing Director of NNPC, Andrew Yakubu, attributed the current fuel scarcity in the country to the disruptions in the pipeline network leading to its depots. He said that the breaches are only temporary and that normal fuel distribution will be restored once the breaches are fixed. If that were truly the case then we have a very long wait as the incessant pipeline vandalism means that new pipeline breaches are occurring almost as soon as they have been repaired.
He predicted that by the close of business on Wednesday, "we would begin to see a change in the fuel scarcity situation in Lagos." So where are we now? Wednesday has come and gone and the situation is even worse.
Meanwhile, the Zonal Operations Controller of the Department of Petroleum Resources, Aliyu Halidu, told the same committee that the current fuel scarcity was caused by the non-renewal of contracts of independent marketers, which created a delay in the importation of petroleum products into the country. He also blamed the government's failure to make subsidy payments to importers.
He said that the fuel shortage in Abuja is however due to the fact that they are monitoring the petrol stations to scrupulously enforce the regulated pump price. As a result, many marketers are choosing not to bring the product into Abuja. Lagos is however not profiting from this as fuel queues continue there.
Petrol marketers and tanker drivers for their part sided with the delay in issuing import permits. They say importers only got their licences for the first quarter last week and so are only just now able to import products for this quarter. They say that it could be weeks before the situation is back to normal.
Yet other sources say that the situation should be back to normal next week as the first cargoes of Premium Motor Spirits (PMS) arrive in the country. The Major oil Marketers Association of Nigeria (MOMAN) had predicted earlier in the week that the situation would get worse before the cargoes of PMS arrive.
A National Union of Petroleum and Gas Workers member, who heads the petrol truck drivers' arm of the union, said depots ran out of fuel supplies two weeks ago. As a result they have had to ration what little supply of products they have left. He said depots are loading only 25 tankers a day where they were loading 200 tankers before the crisis. The empty tankers are now causing a complete snarl up in Apapa where many depots are located, as tankers with nowhere to go are parked on the roads, making life a misery for Apapa residents.
Shortly before going to press, NOGintelligence gathered that more petrol stations were starting to sell fuel and that queues were now reducing to about 1 hour's wait.
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OPEC daily basket price stood at $104.37 a barrel Thursday, 6 March 2014
The price of OPEC basket of twelve crudes stood at $104.37 a barrel on Thursday, compared with $105.24 the previous day, continuing the steep drop from $107.80 on the 3rd of March.
Meanwhile OPEC output from January to February dropped to its lowest 2½ years according to a Bloomberg survey. The survey reported that production fell due to a drop in production in Saudi Arabia, the ongoing political conflict in Libya and the oil theft in Nigeria. Production dropped by 11,000 barrels per day to an average of 29.877 million barrels per day, the lowest it has been since June 2011
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).
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GTB Increases Mart Resources Term Loan to $175 Million
Mart Resources reports that it has been able to secure an increase in its $100 million facility with Guaranty Trust Bank Plc. The company said it had been able to arrange an increase of its existing secured term loan credit facility to US$175 million. The increased facility is going to fund field development activities on the Umusadege field, as well as its commitments in the construction of Umugini pipeline, which is over budget and struggling behind schedule. The company also wants some money left over in the kitty to fund new acquisitions.
The secured loan facility has a term of five years and bears interest at 90 days LIBOR plus 4% (floor of 8.25%), which is unchanged from the terms of the Company's prior facility with Guaranty Trust Bank PLC.
Wade Cherwayko, Chairman & CEO of Mart Resources said: "The increase in the facility with Guaranty Trust Bank PLC provides Mart with greater financial flexibility to evaluate and participate in new opportunities in the Nigerian oil and gas sector."
The Umusadege marginal oil field in Delta State is being developed in partnership with Midwestern Oil and Gas Plc and Suntrust Oil. Since initial production of 2,250 bopd (on re-entering UMU-1 in 2008), the field now produces from 7 wells at daily production rates in excessof 12,000 bopd.
Further near term development and exploration drilling is planned to maximise the potential of the Umusadege field and surrounding areas.
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GMD Defends $11.505 Billion Budget for NNPC
The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC) has appeared before the Joint National Assembly Committee on Petroleum Resources Upstream to defend the Corporation's $11.505 billion 2014 budget. He explained to the Committee that of that amount, $5.5 billion will be spent on operations including the Chad Basin exploration programme. He explained that the programme had been delayed as a result of the insurgence, leaving 10 out of 20 projects with zero performance.
Yakubu confirmed that the exploration programme also includes other sedimentary basins, such as Yola, Bida, Sokoto and Dahomey.
Yakubu said: "In line with government's aspiration of opening up all known sedimentary basins for exploration, a seismic acquisition contract was awarded in 2010 in respect of the Chad basin and several studies as well as community projects are also ongoing in the basin."
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Italian and Nigerian Navy Partner in Training Exercises in War on Oil Theft
The Italian Navy has been visiting its Nigerian counterpart on a training visit. With a convoy comprising of an aircraft carrier, a supply ship, a frigate and a patrol ship berthed at the Nigerian Ports Authority, Apapa, Lagos, and a crew of 1,200, the Italian Navy is expecting on this visit to help train the Nigerian Navy in the fight against oil theft. The Gulf of Guinea is now seen as one of the most dangerous waterways in the world as growing oil production in the region means that crude oil laden oil tankers are plying the route much more frequently. Their valuable cargo leaves the vessels vulnerable to attacks from pirates.
The Naval Group Commander, Rear Admiral Paolo Treu said, "One of our objectives is to promote joint exercises and training in order to develop the capabilities of some of the navies of the visited countries to boost their effectiveness in surveillance activities and maritime security in their operational environment, which partly results in global security."
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CORPORATE SOCIAL RESPONSIBILITY
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Chevron Joint Venture Celebrates Global MoU with Communities
Chevron recently held a Global Memorandum of Understanding (GMoU) Fair and Exhibition. The two-day event featured panel discussions and presentations and an exhibition in which eight Regional Development Committees (RDC) from Ondo, Delta, Rivers, Bayelsa and Imo States, where Chevron operates, showcased their achievements and success stories.
Chevron pioneered a new social performance strategy in 2005 "to support the socio-economic development of communities around its area of operation in the Niger Delta area." The strategy called the GMoU is hinged on a tripartite agreement with RDCs, representing host communities, the Chevron/NNPC joint venture and the respective governments in the 5 states in which Chevron operates.
Under the GMoU, the communities identify and select the projects they want and use the funds provided by Chevron for the execution of the projects. The exhibition was a culmination of 9 years of successful operation of the GMoU strategy.
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Shell: Provision of Professional HSE Support Services
Shell Petroleum Development Company invites interested and registered Nigerian companies to respond to the opportunity for the provision of professional HSE support services for SPDC operations. The proposed contract will commence in the second quarter of 2014. The scope of service covers the provision of professional HSE support services in areas of behavioural safety & competence development support. Only tenderers who are registered with the JQS Safety Health and Environmental Consultancy Services (product code 3.02.02) category shall be invited to submit technical bids. The closing date for this opportunity is 11th March, 2014.
Chevron:Provision of Engineering, Procurement, Construction, Installation Services
Chevron Nigeria Limited invites interested and registered Nigerian companies to respond to the opportunity for the provision ofengineering, procurement, construction and installation for the onshore and offshore scopes of the Escravos export system. The scope of service covers the provision of engineering, procurement, construction, installation and commissioning activities. Only tenderers who are registered with the NJQS product/category 4.04.04 (pipeline systems) shall be invited to submit technical bids. The closing date for this opportunity is 14th March, 2014.
SPDC: Provision of Specialty Medical Services
Shell Petroleum Development Company invites interested and registered Nigerian companies to respond to the opportunity for the provision of specialty medical services. The scope of service covers the provision of well trained medical professionals (doctors, nurses & other specialties). Only tenderers who are registered with the NJQS Medical Services Category (3.99.12) shall be invited to submit technical bids. The closing date for this opportunity is 17th March, 2014.
Shell: Provision of Well Completion Equipment and Services
Shell Petroleum Development Company invites interested and registered Nigerian companies to respond to the opportunity for the provision of well completion equipment and services. The scope of service covers the provision of general pumping and sand control services, general completion services and general wire line services and well-testing services. Only tenderers who are registered with the NJQS product/categories (3.04.21) Well Completion Services, (3.04.30) pumping services, (3.04.19) liner float, hanger and running equipment services and (2.07.12) completion fluids and additive shall be invited to submit technical bids. The closing date for this opportunity is 19th March, 2014.
Shell: Provision of Geotechnical Investigation Services
Shell Petroleum Development Company invites interested and registered Nigerian companies to respond to the opportunity for the provision of geotechnical investigation in various SPDC locations. The scope of service covers the carrying out of soil boring below ground surface and collecting disturbed and undisturbed samples for various tests. Only tenderers who are registered with the NJQS product/category; 30903 - Geotechnical Services product/services category shall be invited to submit technical bids. The closing date for this opportunity is 24th March, 2014.
Shell: Provision of Electric Wire-line Logging Services
Shell Petroleum Development Company invites interested and registered Nigerian companies to respond to the opportunity for the provision of electric wire-line logging services. The scope of service covers the provision of open hole logging (memory / wireless or wire-line) services,cased hole electric wire-line logging services and production logging and formation testing services. Only tenderers who are registered with the NJQS in the product/service category: Wire-line Services 3.04.24 shall be invited to submit technical bids. The closing date for this opportunity is 26th March, 2014.
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Accounting for Upstream Oil and Gas Operations Under IFRS.
SIAO is holding a comprehensive 5 day workshop on Accounting for Upstream Oil and Gas Operations Under IFRS. The workshop which will be held in Dubai from the17th to the 21st of March is ideally suited for CFOs in upstream oil and gas companies. The course is FREE to Nigerian participants but registration closes on the 10th of March.
For further information get in touch with David Raggay on 0817 510 3826 or email him at david.raggay@siao-ng.com. SIAO is a one-stop shop for audit and assurance, tax and advisory service.
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Nigeria Oil & Gas Strategic Conference & International Exhibition (NOG 2014) Postponed
The annual CWC conference, the highlight of the Nigerian oil and gas industry calendar has been postponed. The annual conference had to be postponed due to a clash with the Centenniary Celebrations being hosted by the Federal Government in Abuja.
The conference and exhibition will now take place from from 17 - 20 March 2014 at the ICC, Abuja. CWC says it has been able to get the support and commitment from their partners, speakers, sponsors and exhibitors. As a result, the conference programme remains unaltered.
The company says it regrets any inconvenience caused by the programme change. have arisen.
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Nigeria Oil and Gas Conference
Abuja, Nigeria
17 - 20 March
www.cwcnog.com
Mozambique Mining, Oil and Gas and Energy Conference and Exhibition
Maputo, Republic of Mozambique 26-28 March 2014 http://www.mozmec.comGhana Oil and Gas SummitAccra, Ghana 8-10 April 20th Western Africa Oil, Gas and Energy
Windhoek, Namibia
14-16 April 2014 http://www.petro21.com/events/?id=858
The Republic of Congo's Second International Hydrocarbons Conference & Exhibition
Brazzaville, Republic of Congo 14 - 16 April 2014 http://ciehc.com/englishhome/ Oil Spill Conference Nigeria 2014 Accra, Ghana April 23-25 2014 www.oilspillconferenceng.com 5th Eastern Africa Oil, Gas and Energy
Nairobi, Kenya
28-30 April 2014 http://www.petro21.com/events/?id=851
Oil Technology Conference Houston, USA 5-8 May www.otcnet.org Somalia Oil and Gas Somalia 9 June 2014 http://www.somalia-oil-gas.com East Africa Oil and Gas Summit London, UK 10-12 June http://eastafrica-oil-gas.com
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Don't forget to join our mailing list if you haven't done so already. Remember, you won't have to look anywhere else for your weekly Nigerian oil industry updates, and it's free to join.
Best wishes 
Remi Aiyela
Editor-in-Chief
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