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Weekly Nigerian Oil and Gas Industry News Updates               Issue 103, 12 September 2014
 

 
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Welcome to our 103rd issue. Many of you may have been wondering why you haven't heard from us for a while. We took a month's break in August but staff shortage before and after meant we were unable to bring you full coverage of Nigeria's oil and gas news. We are now back to strength and I'm sure you will all be pleased to get back to your weekly dose of NOGintelligence. 
UPSTREAM

Afren Targets 5-year Double Digit Production Growth

 

London Stock Exchange listed Afren, has announced its half-year results. Whilst profit before tax declined by 49 per cent from $260 million in the corresponding period last year to $133 million this year, profit after tax has shot up by 158 per cent. In the first half of 2013 profit after tax stood at $62 million, rising to $160 million this year. The profit after tax reflects the tax exemption, which the company won for its Ebok field after a long-running battle, which offset the reduction in pre-tax profit and revenue. The company insists that its balance sheet remains strong with net assets of $1.972 billion, up from $1.498 billion for the corresponding period in 2013.

 

Net production to Afren from the assets in which it has interests was down by 25 per cent from 44,712 barrels of oil per day (bopd) to 33,488 bopd. Production for the full year has now been revised downwards to 32,000 bpd from 36,000 bpd.

 

Highlights from the FTSE 250 company's operational update include approval from the Department of Petroleum Resources (DPR) for an initial 5-well development of Ogini where a rig is currently on location engaged in development drilling. In addition, 3D seismic acquisition on Oil Prospecting Licence (OPL) 310 is now complete and interpretation is ongoing with further drilling scheduled to commence in Q4 2014. That means that appraisal is now not scheduled to start until 2015 in the gigantic 2013 discovery. There are even murmurings of some disagreements with partner on the block, Optimum, over the valuation of Afren's interest in the farm out to Lekoil.

 

The company says it is targeting a 5-year double-digit growth in production and plans for a production ramp up will start in the second half of this year. Underpinning this target growth are Afren's plans for 6 new producers on Ebok, where oil production has been averaging 29,300 bpd. Drilling of four additional wells (including 3 producers) has already commenced and the program is expected to be completed this year. The Ebok deep exploration is expected to spud in Q4 2014, targeting resources of 50 million barrels, with production flowing through the existing offshore mobile platform unit.

 

There are plans for 1 infill and 1 side-track well in Okoro, 3 new producers on OML 26 where drilling of the first well is currently progressing, and the commencement of fast-track development drilling on shallow water Okwok with estimated reserves of 46.6 million barrels. A dedicated production facility and wellhead platform with an export pipeline tied back to Ebok FSO (some 13 kilometres away) are to be installed.

 

The DPR has also approved plans for the development of offshore Aje field on OML 113. An FPSO is being lined up for the field as the development plan calls for two subsea production wells to be tied back to a leased FPSO. The plan involves the recompletion of the existing Aje-4 well and a new well drilled close to the Aje-2 subsurface location. First oil is due in 2015 with median reserves of 32.4 million barrels expected although the completion of 3D seismic analysis on the block and on neighbouring OML 310 could lead to further prospects being identified.

 

With only 26 per cent of total discovered 2P/2C barrels in production or under development, it is no surprise that the company considers its reserves potential as transformational. Commenting, Toby Hayward, interim CEO of Afren plc, said: "Despite recent challenges Afren is totally committed to delivering on our work programme across the portfolio. With numerous growth opportunities expected to drive a step-up in near-term production, cash flow and reserves, we remain in a strong position to deliver shareholder value in 2014 and beyond."

 

The only sour note for Afren is the continued fall-out from its investigation into the receipt of unauthorised payments potentially for the benefit of former CEO Osman Shahenshah and former COO Shahid Ullah. Now, the Board has suspended two of its associate directors, Iain Writhg and Galib Viriani, as heads continue to roll in the scandal that has rocked the company. No conclusive findings have yet been reached and the investigation remains ongoing. The Board believes that this will not negatively affect the company's stated financial and operational position.

 

Back to top 

Eland Recommences Production on Opuama Field

 

Nigeria and West Africa focused Eland Oil and Gas has announced the recommencement of production on the Opuama Field, with gross production stabilising at an average rate of over 3,500 barrels of oil per day (bopd).

 

In its latest operational update, London Stock Exchange's Alternative Investment Market (AIM) listed Eland said its joint venture company, Elcrest Exploration and Production Nigeria has received payment for its August lifting from Shell Western Supply & Trading. Elcrest has now sold and received funds for a total of 46,022 barrels of crude to date according to Eland. Elcrest's next lifting is expected to take place in early September with about 38,000 barrels of crude scheduled.

 

Opuama Field, located onshore on Oil Mining Lease (OML) 40 initially restarted production under the Elcrest joint venture in partnership with the Nigerian Petroleum Development Corporation (NPDC) in February 2014 but was soon beset with problems including the closure of Shell's Forcados export terminal and some pipeline breaches. It had re-commissioned a flow station and export pipeline with a capacity to export as much as 30,000 bpd as it prepared for production. Production was soon halted after the closure of Forcados terminal.

 

Opuama field is operated by NPDC and has gross recoverable 2P reserves of 54.2 million barrels. It was original in production in 1975-2006 before SPDC undertook a controlled shutdown of the facilities at the height of its troubles in the Niger Delta. Profits are likely to shoot up on OML 40 after the company recently received approval for a 5-year Petroleum Profits Tax exemption. The company expects its end of year exit rate on Opuama to reach 7,000 bpd.

 

NPDC holds 55% interest in OML 40, with the remaining 45% interest belonging to Elcrest Exploration and Production Nigeria, a joint venture between Eland Oil and indigenous company, Starcrest.

 

News of the resumption of production comes hot on the heels of Eland's acquisition of a 40 per cent interest in Ubima Field located onshore on Shell's OML 17. 2C resources are estimated at 34 million barrels with significant 3C resource estimate of 66.9 million barrels of oil with an extra 2C resource estimate of 97 billion cubic feet (bcf) of non-associated gas.

 

Ubima has 3D seismic coverage from 1997 and 4 wells were drilled in the field between the 1960s and 1981. Hydrocarbons were encountered in all four wells. The proposed export pipe-line will be tied into the existing pipeline network and crude is to be exported through the Bonny Terminal.

 

Ubima generated some controversy last year when it was widely reported that the licence holder for the marginal field, Allgrace Energy is one of the daughters of former Nigerian Head of State, Olusegun Obasanjo.

 

Eland acquired the interest using a wholly owned subsidiary, Wester Ord Oil and Gas after paying a farm in fee of $7 million with a further production bonus of $3 million to be paid following commencement of production and receipt of Ministerial consent. Eland will fund the work programme and in return will receive and economic interest of 88 per cent from the production cash flow from the Field until cost recovery. Eland has also agreed to fund the development of viable small-scale gas utilisation projects within 30 months of production. The requirement for such projects forms part of the Federal Government's gas utilisation plan.

 

In another development, it has emerged that Les Blair, founder of Eland, has stepped down as Chief Executive Officer (CEO), making way for George Maxwell. Blair will remain on board as Strategic Advisor to the company, providing support to the CEO in specific strategic objectives. Maxwell was formerly Chief Financial Officer of Eland and is a founder director of the company but before that he was General Manager for Addax in Nigeria, responsible for finance, fiscal and commercial activities.

 

Another new appointment is Louis Castro who comes on board as Chief Financial Officer of the company.   Prior to his appointment as CFO, Castro was a non-executive director of Eland and chair of the audit committee. He has been a director of the Company since August 2012. He is said to have over 25 years' experience of investment banking with a focus on advising companies worldwide in the oil & gas and mining sectors. Most recently he has been the Managing Director of Northland Capital Partners.

 

Harry Wilson who has assumed the position of Executive Chairman commented: "With production having recommenced and the recent acquisition of Ubima, our focus is now on maximising the value of our portfolio and delivering strong shareholder returns," whilst Les Blair had this to say: "In the past four years we have succeeded in completing two very attractive asset acquisitions and bringing one, OML 40, into production. Now is a good time to refocus our individual energies into the development of these assets to their full potential".  

 

Back to top 

MIDSTREAM
NNPC To Fast Track Abuja-Kaduna-Kano Gas Pipeline Project

 

As it struggles with the critical need for major gas infrastructure development, the Federal Government is determined to demonstrate its intention to fast track the Gas Revolution Agenda. To this end, the Nigerian National Petroleum Corporation (NNPC) has set up a Steering Committee for the Abuja-Kaduna-Kano (AKK) Gas Pipeline Project. The Steering Committee has been given the mandate to accelerate the delivery of the project.

 

The AKK project will provide crucial transport of gas for power and manufacturing in the north of the country. The project, which is part of the Gas Master Plan, has already received the approval of the Federal Executive Council.

 

Newly appointed Group Managing Director (GMD) of NNPC, Dr. Joseph Dawha said the project is one of the country's National Priority Projects and is a vital plank of the transformation agenda of the administration of President Goodluck Jonathan. Other projects, which are part of the Gas Master Plan, the OB3 gas pipeline project and the looping of the Escravos Lagos Pipeline System (ELPS) are currently progressing well. The Steering Committee for the AKK Project is expected to bring that project, which is lagging behind, up to speed.

 

Dr Dawha said: "In order to strengthen this critical Government National Priority Project and have it refocused for accelerated implementation, there is the compelling need for the establishment of a dedicated AKK Project Steering Team with clear governance structure."

 

Members of the Steering Committee comprises include NNPC's GMD, Dr Dawha who will chair the committee. The NNPC Group Executive Directors of Gas and Power, Exploration and Production as well as Commercial and Investment are also members of the Steering Committee.

 

The mandate of the Steering Committee is to provide general guidance and direction for the project, grant approval for business models, equity participation, budgets and contracting strategy. The Committee will report to the Minister of Petroleum Resources.

 

A Project Support Team has also been inaugurated from various divisions of NNPC. Mallam Rabiu Bello, General Manager, Corporate Planning and Strategy, will be the Team Lead. The Project Support Team will review all existing contractual, technical, commercial, financial issues relating to the project.

 

DOWNSTREAM

OPEC Daily Basket Price Slides to $95.93 a Barrel Wednesday, 10 September 2014

 

The price of OPEC basket of twelve crudes continued its downward slide, with the basket price standing at $95.93 dollars a barrel on Wednesday, compared with $96.99 the previous day, according to OPEC Secretariat calculations. The OPEC basket price has been on a downward trend since it achieved $110.48 on the 20th of June, and then dropping below $100 to $99.94 on the 15th of August, for the first time in over a year. Nigeria, as with many OPEC countries, will be struggling to balance its budget if the price stays below $100.

 

There is rising concern among OPEC member nations about the situation, with many blaming oversupply from the USA and the recovery of supply from Libya, Nigeria and Iran, for the price drop. Brent is also on a bearish trend, falling below $100 for the first time in 16 months. Not even the geopolitical tensions in the Middle East have been able to reverse the downward trend.  

 

Analysts are saying that softening world demand for oil against the oil glut is driving the trend. China saw its import growth fall for a second month creating some concern among traders, while some 30 million barrels are sitting in floating storage waiting to go somewhere. The trend could continue for some time it seems.

 

As OPEC Ministers prepare for their next meeting scheduled for the 27th of November, the question of production cuts will once again rear its ugly head. As they wait, OPEC member nations will have to tighten their belts and continue to hope that oil prices don't go into free-fall in the meantime. Some nations remain optimistic, saying the fall in prices is only temporary, and that prices were still within an acceptable range.  

 

Prices will need to fall well below $90 a barrel for before there is serious concern over the prices, some analysts said. Not all analysts are as hopeful as the OPEC nations, with some predicting a fall by a further 10 per cent before oil prices stabilise. OPEC nations are in for a bumpy ride it seems.


The new Organisation of Petroleum Exporting Countries (OPEC) Reference Basket of Crudes (ORB) is 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).

 

FINANCIAL

CAMAC Closes $100m Loan from Zenith Bank for Oyo Development

 

Johannesburg and New York Stock Exchange listed oil and gas exploration company, CAMAC Energy has, has secured, through its wholly owned subsidiary, CAMAC Petroleum, a five-year $100 million loan from Nigeria's Zenith Bank for the development of its Oyo Field located offshore in Oil Mining Leases (OMLs) 120 and 121.

 

The facility is a five-year senior secured term loan providing initial borrowing capacity of up to $100 million. U.S. dollar borrowings under the term loan facility will bear interest at the rate of LIBOR plus 7.5%, subject to a floor of 9.5%. The security package for the term loan facility includes a legal charge over OMLs 120 and 121 and an assignment of proceeds from oil sales.  

 

Proceeds from the term loan facility will be used for the further expansion and development of OMLs 120 and 121 offshore Nigeria, including the Oyo Field.

 

Speaking about the development, Earl W. McNiel, Senior Vice President and Chief Financial Officer of CAMAC Energy said: "This new credit facility provides CAMAC Energy flexible funding at a reasonable cost to continue development of the Oyo Field."

 

"The dramatic increases in production and cash flow we expect to achieve at Oyo will drive near-term growth and enable us to pursue our high-impact exploration program," he added.

 

Only last month, the Houston headquartered company had announced that it had found four new oil and gas reservoirs in its Oyo-8 development.

 

The Oyo field, located approximately 75 kilometres offshore Nigeria in water depths of approximately 300 meters, was one of the first deepwater oil discoveries made in Nigeria. Production from Oyo-8 is expected in the fourth quarter of this year and is expected, together with the Oyo-7 well, which will be completed subsequent to the Oyo-8 well, to significantly increase production from the Oyo field.

 

CAMAC Energy, founded by Nigerian, Dr Kase Lawal, is the operator of the block in which it has a 100 per cent interest. The company is listed on the New York Stock Exchange and recently listed on the Johannesburg Stock Exchange after entering into a definitive agreement for a $270 million equity investment by South African State-owned company, the Public Investment Corporation (PIC). CAMAC was required to list on the Johannesburg Stock Exchange as part of the deal with PIC.

 

Prior to the deal with PIC, CAMAC Energy had entered into an agreement to acquire additional interests in its wholly owned subsidiary, Allied Energy, which enabled it to get a 100 per cent economic interest in the production sharing contracts covering Oil Mining Leases (OML) 120 and 121 offshore Nigeria. To acquire the interests, CAMAC Energy issued 497,454,857 shares of common stock, paid US$170 million in cash and issued a US$50 million convertible subordinated note.

 

OML 120 block was awarded in 2002 and appraisal wells were drilled between 2006 and 2007. Initial production from the two wells began in December 2009. The field produces oil and natural gas. Early seismic data estimated the probable and proved recoverable reserves at the Oyo field to be 45 million barrels of light crude oil. The proven resources were later revised to 50 million barrels. In April 2011, Netherland, Sewell & Associates produced a report which now estimates the field to have reserves of 1.9 billion barrels of crude with a high of 6.3 billion barrels of oil-in place. Recoverable and prospective oil resources are estimated 626 million barrels with a high of 2.2 billion barrels.

 

CAMAC asset portfolios include existing production and other exploration projects offshore Nigeria, as well as exploration licenses offshore Ghana, Kenya, and Gambia, and onshore Kenya.

 

Sunbird Secures $23 Million Investment for Ibhubesi Gas Field Development from Nigerian Investors
 

Australia-listed Sunbird Energy has secured an investment of A$25m ($23m) from a consortium of Nigerian and South African investors to help it advance its plans to develop the Ibhubesi offshore gas field, 380km northwest of Cape Town, it said. The Pan-African investment company, Vandasia Investments, which is providing the investment is comprised of leading business people from Nigeria and Africa and its founders include the principals of two highly successful African businesses, WTES and the Mdali Group.

 

WTES Projects Limited ("WTES") is a leading Nigerian investment company with diverse interests across frontier sectors in the Nigerian economy. WTES is leading the group of Nigerian investors into the transaction. The company is also involved in the establishment of the first large-scale pipe mill in Sub-Saharan Africa for the oil and gas Industry.  

 

The transaction is in two phases. In the first stage the Sunbird will issue Vandasia 20 million fully paid shares for an aggregate subscription amount of $5,000,000 equating to AUD$0.265 per share at a premium of 39.5 per cent. Vandasia will hold 14.9 per cent at that stage and will have the right to nominate a director to the Sunbird Board, which they say will be Niyi Oyedele.

 

Stage 2 of the transaction should be no later than the end of Setpember, following which another 23 million shares will be issued to Vandasia for an aggregrate subscription of about $9.35 million.

 

Vandasia is expected to end up with 43.9 per cent of the company's issued capital by the time the transaction completes. The shares will have been acquired at a premium of 79 per cent over Sunbird's last traded share price on 8 September 2014.

 

Sunbird CEO, Will Barker said it will develop five wells at Ibhubesi and a 400km pipeline in the first phase, followed by another five wells in the second phase. The company has a 76% interest in Ibhubesi, with PetroSA holding the other 24%.

 

Vandasia is currently seeking investments in upstream gas, liquefied natural gas and related infrastructure and gas-to-power projects.  

 

Will Barker said: "The Sunbird transaction can begin to shepherd in an era of migration to gas as a power source for Africa at large, proving both the technical and financial viability of the resource for generation input."

 

ENVIRONMENTAL
SPDC: Assa Gas Project EIA in Accordance with Statutory Requirements

 

A spokesman for Shell Petroleum Development Company of Nigeria Limited (SPDC) has spoken out in defence of SPDC's conduct of its environmental impact assessment (EIA) into the Assa North-Ohaji South Gas Development Project in Imo State. SPDC, one of the Shell companies in Nigeria, said that it has been conducting the EIA strictly in accordance with the requirements of the Environmental Impact Assessment Act No 86 of 1992 after accusations to the contrary. These allegations have been gathering force, leading SPDC to issue a denial.

 

Stressing that the company remained committed to health, security, safety and the environment, the spokesman outlined the process they have been undergoing in compliance with statute. The company said: "We registered the project with the Federal Ministry of Environment and the Department of Petroleum Resources verified the proposed project site and held scoping workshops with communities in Imo State, regulators, journalists, the National Petroleum Investments Management Services (NAPIMS), and Imo State Government officials on July 12, 2012."

 

"Field data gathering was conducted with the active participation of regulators, community representatives and Imo State Government officials. The draft EIA report was then displayed on July 14 - August 11, 2014 at centres in Egbema, Owerri and Abuja as approved by the Federal Ministry of Environment," the statement explained.

 

"The Ministry is now collating comments from the various display centres in readiness for a panel review meeting which concludes the EIA delivery process," it added.

 

CORPORATE SOCIAL RESPONSIBILITY
Seplat Donates N50 Million to Support Fight Against Spread of Ebola

 

Seplat Petroleum Development Company has donated the sum of N50 Million towards the fight against Ebola. N30 Million of that sum will go to First Consultants Medical Centre in Lagos, the clinic that treated the primary Ebola case in Nigeria. Dr Ameyo Adadevoh and a nurse from the clinic both died after contracting the deadly disease during the treatment of Mr Sawyer who arrived in Nigeria from Liberia carrying the disease.

 

Dr Adadevoh is unanimously credited with prevented the spread of the disease into the wider community after resisting pressure brought to bear on her by the Liberian government to discharge Sawyer from the clinic and allow him to travel to Calabar for a conference. But for her unwavering decision to quarantine him and institute barrier nursing, the Ebola virus would have been much more difficult to contain.

 

Unfortunately as a result of their decision to treat Sawyer, First Consultants have suffered greatly after it had to be closed to be properly decontaminated to World Health Organisation (WHO) standards. Even after decontamination, it seems that patients are taking their time to return to the hospital. The fund will be of great assistant to the clinic as it struggles to get back on its feet after losing patients in droves following its frontline role in the fight to contain the Ebola virus in Nigeria. The donation will be welcomed by the clinic after many people had been calling for donations to help the clinic get back into business.

 

The remaining N20 million will go to the Lagos Isolation Centre, which is crucial in the frontline battle to control the disease and prevent it from taking hold in Nigeria.

 

Emmanuel Otokhine, the Head of Corporate Communications at London and Nigerian Stock Exchange listed Seplat, said in a statement: "Seplat recognises the great sacrifices that this unfortunate outbreak has brought upon First Consultants Medical Centre - Lagos, the hospital where the EVD was first handled in Nigeria. Due largely to the professionalism they displayed in handling this difficult case, the nation has managed to keep the spread of the disease reasonably under control, albeit, at great cost in human and material assets to the hospital."

 

Otokhine also praised the Government for setting up the Lagos Isolation Centre, which has played a pivotal role in stemming the spread of the disease.

 

EVENTS
LATEST EVENTS
 
10th annual Global Local Content Summit  
London, UK
22- 25 September 2014
http://www.localcontentsummit.com/

2nd Africa Oil & Gas, Finance and Investment Forum 

Dubai, UAE

23 - 24 September 2014

www.aogfi.com  

 

Lagos Oil Club September Edition

Oriental Hotel, Victoria Island, Lagos

30th September 2014

http://www.thelagosoilclub.org/

W
est Africa Gas Conference and Exhibition

Abuja, Nigeria

28 - 30 October 2014

www. http://west-africa-gas.com 

 

Nigeria Oil and Gas Trade and Investment Forum

Onne, Nigeria

30-31 October 2014

http://www.nigeriaoilandgasinvest.com/

 

21st Africa Oil Week

Cape Town, South Africa

3-7 November 2014 

 http://www.petro21.com/events 

 

32nd Annual International Conference of the Nigerian Association of Petroleum Explorationists

Lagos, Nigeria

09-13 November 2014 

www.nape.org.ng 

 

15th World LNG Summit and Awards

Paris, France

18 November 2014

 www.world.cwclng.com 

 

Practical Nigerian Content

Yenagoa, Nigeria

18-20 November 2014 

 http://www.ncipnc.com/  

 

Mozambique Gas Summit

Maputo, Mozambique 

2-5 December 2014 

http://www.mozambique-gas-summit.com/ 

 

Indigenous Oil & Gas Summit
Lagos, Nigeria
2 - 4 December 2104
http://www.afrikinternationalnetworks.com/

Mozambique Gas Summit

Maputo, Mozambique

02 December 2014

http://www.mozambique-gas-summit.com

 

Nigeria Oil and Gas Conference and Exhibition

Abuja, Nigeria

02 February 2015

www.cwcnog.com

 

Ghana Summit Conference and Exhibition

Accra, Ghana

21 April 2015

www.cwcghana.com

 

Oil, Power and Mining

Orlando, Florida, USA

12 - 14 August 2015

www.oilpowermining.com/

 
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Remi Aiyela
Editor-in-Chief

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