 LATEST MAGAZINE ISSUE
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Welcome to our 104th issue.
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Qua Ibo Field in Race to Become Next Marginal Field Producer
If progress continues as planned, Qua Ibo field located onshore on Oil Mining Lease (OML) 13 being developed by Network Exploration and Production and Oando, will be on course to become the next producing marginal fields. All indications are that work is progressing at a good pace on the field and its facilities. The joint venture partners have been targeting first oil for Q4 of 2014 and recent developments indicate that the field located near the mouth of the Qua Iboe River in Akwa Ibom state is set to come onstream by the end of the year.
Qua Ibo was awarded to Network E&P in the 2003 marginal fields licensing round, a farm out from OML 13 held by Shell Petroleum Development Company (SPDC) and its joint venture partners. Five wells have been drilled on the field so far. 2 wells (Qua Ibo-1 and Qua Ibo-2) were drilled by SPDC in 1960 and 1971.
In 2005, Network entered into a Finance and Technical Service Agreement (FTSA) with Mart Resources, a Canadian company for the joint development of the field, with Mart funding the work programme 100 per cent. Network and Mart drilled an appraisal well (Qua Ibo-3) in 2008, which was suspended in January 2009. As a result of funding issues, Network parted company with Mart early in 2012 with not much more progress on the field.
Almost immediately after the termination, Network signed farm in agreements with Oando for the acquisition of a 40 per cent participating interest by Oando. At that time, 2P reserves were estimated at 11.3 million barrels of oil.
Two further development wells (Qua Ibo-4 and Qua Ibo-3 ST1) were drilled in 2012 soon after Oando came on board as technical and financial services partner. Two reservoirs have been identified, C4 containing heavy oil and D5 containing light oil. A successful production test was conducted on D5 and oil production from D5 is expected to commence this quarter while production from C4 is expected to commence in the first quarter of 2015.
Commissioning of the crude processing facility, which is said to be nearing completion is expected to take place soon. Pipelines and flowlines will enable production to Mobil Producing Nigeria (MPN) Qua Iboe Terminal located about 2 kilometers away. Frontier Oil's Uquo field gas project will be the beneficiaries of surplus associated gas.
Access to funding and a combination of firms with strong professionals at the helm has been largely responsible for the success of the Network/Oando partnership. Network was able to get Diamond Bank funding for its own share of costs meaning that it no longer needs to dilute its equity to fund its share of development costs.
Oando meanwhile has been able to stump up its financial contribution from its own resources. In its Q2 results for this year, Oando said its budget for Qua Ibo was set at $40.6 million for the year 2014. By the end of Q2 it had incurred capital expenditures of about $9.4 million on just the pipeline and flow station construction and other facility costs.
If the joint venture partners hit their target for commencement of production this year they will become the 9th marginal field from the 2003 licensing round to enter into production. They are likely to be followed by Sirius Petroleum does succeed in finding the funding for its own development plans.
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Sirius Petroleum Terminates Off-Take Agreement with Glencore
Nigeria focused oil and gas company, Sirius Petroleum, has terminated its exclusive off-take agreement with Glencore even before production has started on its Ororo Field in Ondo State. The London Stock Market Alternative Investment Market (AIM) listed firm, has announced that the off-take arrangement with Glencore for its crude is at an end by mutual consent.
Sirius has now entered into an agreement with BTG Pactual Commodites (UK) for the marketing of crude oil from the offshore Ororo Field its owns in partnership with Ondo State owned Owena Oil and Gas and Guarantee Petroleum Company, as well as other marketable products from other fields owned by Sirius Petroleum.
Under the terms of the agreement, BTG Pactual gets the exclusive right to market all crude oil from the Ororo Field, for an initial period of twelve months from the date of first delivery of crude, and thereafter on a rolling twelve month basis unless otherwise terminated. As a result, BTG Pactual is appointed as Sirius' exclusive representative to perform all necessary marketing, negotiation, sales and contract execution in relation to the sale of its Crude Oil, from the Ororo Field and other fields subsequently owned by Sirius, the company stated in the announcement.
The agreement also gives BTG Pactual the right to market other physical crude oil of Nigerian origin sourced by Sirius from fields which it does not wholly or partially own. Sirius has agreed with BTG Pactual to split the proceeds from the marketing of any crude oil from sources introduced by Sirius outside of its own production, equally.
Sirius entered into an exclusive off-take agreement with Glencore in 2013 but began to look for alternative marketing opportunities for its crude soon after. The new arrangement with BTG Pactual now gives Sirius rather more flexibility for its crude marketing allowing it to take advantage of market opportunities.
Bobo Kuti, Chief Executive of Sirius commenting on the deal, said: "I am delighted that we have entered into this Marketing Agreement with BTG Pactual, which offers significantly more advantageous terms to the Company and its Shareholders than previous arrangements and gives Sirius the ability to conclude its funding with other parties."
Sirius can now focus on getting to first oil on the Ororo Field after entering into a Financial and Technical Services Agreement (FTSA) with Owena and Guarantee in the marginal oil field, which is located in Oil Mining Lease 95 in October 2011. Sirius paid US$1m to Guarantee and Owena as consideration for entering into the agreement. Sirius will fund the development of the field, which sits in shallow water offshore Ondo State, Nigeria, in water depths ranging between 23 ft and 27 ft. Upon production of oil, Sirius will pay a further US$500,000 in aggregate to Guarantee and Owena and will be entitled to a preferential cash flow from the production of crude oil to recover its investment, receiving 88 per cent of net cash flows from Ororo, until full cost recovery is achieved, at which time Sirius' production cash entitlement will revert to 40 per cent.
The Ororo Field was discovered in 1986 with the drilling of the Ororo-1 well by Chevron, which penetrated 197ft of hydrocarbons in twelve sandstone reservoirs at points close to the crest of each reservoir structure. These consist of 72ft true vertical thickness ("TVT") of net gas pay and 125ft TVT of net oil pay. The Ororo-1 well tested at c. 2,200 barrels of oil per day ("bopd") from a single zone, and around 600 bopd from another. tTo further zones tested gas, and eight zones remain untested. Chevron acquired both 2D and 3D seismic over the Ororo Field. The recoverable hydrocarbons were estimated to be in excess of 20 million barrels gross in a third party report prepared in 2006. The closest producing fields are Mina, Isan, and West Isan, all of which are operated by Chevron and are situated between 4km and 6km from Ororo providing a low cost tie-in opportunity.
In a bid to boost to its financial position, the company recently put up 63,530,215 ordinary shares and subscription of up to 326,333,333 new ordinary shares, being an aggregate of up to 389,863,548 new ordinary shares at 3 pence per share in a conditional placement, raising £11,695,906 before expenses.
Bobo Kuti, Chief Executive, said of the results of the placement: "We have made significant progress with the Further Funding required to develop the Ororo field and in securing funding partners who we believe can support our strategy to build the asset base of our portfolio."
Sirius Petroleum and its partners are targeting Q1 2015 for first oil on Ororo.
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OPEC daily basket price stood at $95.19 a barrel Thursday, 18 September 2014
The price of the Organization of the Petroleum Exporting Countries (OPEC) basket of twelve crudes continues to slide and stood at $95.19 a barrel on Thursday, compared with $95.84 the previous day, according to OPEC Secretariat calculations. As sub-$100 prices seem set to stay for a long time, there is increasing speculation that OPEC may have to cut production from the current 30 million barrels per day when it holds its next scheduled OPEC Ministers meeting which takes place on November 27th.
OPEC Ministers are trying not to show too much concern over the downward trend, which must be ringing alarm bells in finance ministries across the member nations. OPEC Secretary General Abdalla El-Badri, however admitted that a production cut was likely, saying: "I think our target next year will be lower, may be by 500,000 barrels," but quickly adding: "This is an outlook, this is not a decision."
Increasingly it is looking like the decision facing the OPEC Ministers at their meeting in November will not be whether to cut or not to cut, but rather by how much to cut.
The new 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).
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Damaged Nigerian Gas Pipeline Affecting Electricity Supply in Ghana
A damaged Nigerian gas pipeline is bringing misery to Ghanaians as the country begins load shedding of electricity due to a reduced supply of gas from Nigeria. The Ministry of Energy and Petroleum in Ghana said it had to do so as the problem had affected power generation output. The problem is exacerbated by other internal issues including low levels of water in two of the nation's dams and maintenance work on some power plants.
Meanwhile, the Nigerian National Petroleum Corporation (NNPC)'s Group Executive Director, Gas and Power, Dr. David Ige, has reiterated NNPC's commitment to the supply of gas to the West African Region.
"The outstanding force majeure situation is being addressed by NGC and should be lifted very shortly. Beyond this, major interventions are being implemented to grow supply to meet the full requirements of both WAGP and the domestic power market. It is expected that much of the net supply shortages beyond the FM induced reduction, will be addressed within the next 4-5 months," he explained.
According to Dr Ige, since 2013, there have been some supply disruptions affecting gas shipped through the West African Gas Pipeline. These, he said, have been largely due to force majeure events like the outage of the Escravos-Lagos pipeline and other secondary pipelines such as the Trans-Forcados pipeline. NNPC and its joint venture partners were fined $10 million in 2013 for supply shortages.
"Nigeria remains committed to supplying the West African region. The current supply challenge is being addressed aggressively and full contractual supply should be attained within a few months," Dr Ige insisted.
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Oando Plc to Sell 60 Million Shares in OER to "Encourage Market Liquidity"
Oando Plc is putting up 60 million of its directly and indirectly held 746 million shares in Oando Energy Resources (OER) up for sale. OER, which is listed on the Toronto Stock Exchange (TSX) has announced that a wholly-owned subsidiary of Oando Plc has filed the required notice of intention to sell up to 60 million shares of OER through the TSX facilities. Oando says that the proposed sales are intended to encourage market liquidity.
Oando Plc currently owns 93.8 per cent of OER shares although assuming it exercises the common share purchase warrants issued in February, July and August of this year for additional shares, it will then own 1,071,500,707 shares representing 95.6 per cent of the issued and outstanding shares of OER following such exercise. However for regulatory reasons, Oando is restricted from the exercise of the warrants to the extent that such conversion would result in its direct and indirect ownership of OER exceeding 94.6 per cent.
Most of Oando's interest in Nigerian oil production licences are now held and operated by OER.
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Oil and Gas Firms' Indebtedness to Nigerian Banks Stood at N2.45 Trillion at December 2013
The Central Bank of Nigeria (CBN)'s recently released Financial Stability Report shows that the indebtedness of oil and gas firm to Nigeria banks stood at N2.644 trillion at the end-December 2013.
The report revealed that total bank loans and advances to the various sectors of the economy grew by 13.9 per cent to N10.043 trillion at the end of December 2013. The oil and gas sector recorded the highest growth rate, with a share of 24.4 per cent, followed by manufacturing 12.9 per cent and the general sector 11.6 per cent.
The CBN, however, warned: "The continued dominance of short-term deposits constrained the ability of banks to lend long term loans and especially to the real sector, which typically has a preference for longer loan maturities. Thus, the observed mismatch portends refinancing and re-pricing risks for the system."
With oil prices in a downward trend, the report warned that the continuing decline in oil revenues as a result could elevate market risks in 2014. The report stated: "Notwithstanding the stable rates, the continued decline of foreign reserves and decrease in oil receipts due to challenges in the oil sector, coupled with possible foreign portfolio investment reversals following the tapering of the US quantitative easing programme, could elevate market risk."
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Italian Prosecutors Investigating Eni Chief Over OPL 245 Malabu Deal
Prosecutors in Milan, Italy have begun an investigation of the Italian oil giant Eni over the oil prospecting licence (OPL) 245 oil deal involving Malabu Oil. They are investigating allegations that the company paid a bribe to secure the allocation of the block to it in partnership with Shell. Chief Executive Officer of ENI, Claudio Descalzi and another official of the company, are now under investigation. The two have denied any wrongdoing.
The allegations relate to the 2011 deal in which Eni and Shell acquired the block under controversial circumstances. The purported bribe concerns the purchase by Eni and Shell of the lucrative OPL 245 oil block in 2011. Eni and Shell insist they paid the Nigerian government directly for the oil block but prosecutors are investigating whether the money went to a front company believed to be controlled by a former Nigerian oil minister. The transaction took place when Descalzi was Eni's head of exploration and production.
The Malabu Oil deal involves Oil Prospecting Licence (OPL) 245, said to hold reserves of up to 9.23 billion barrels of crude oil, 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 dispute, a settlement was brokered by the Federal Government. Following the settlement, Shell and 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, the rest being retained by the government, including a signature bonus of $207 million.
Critics of the whole deal find it staggering that Malabu Oil only ever paid a $2 million signature bonus for the block when it was originally awarded to it, any yet was later paid $1.09 billion in compensation for the block being revoked and re-awarded to Shell and Eni.
The spinoffs from the dispute include a case brought by Emeka Obi, a Nigerian intermediary for Etete, in Britain against Malabu for unpaid fees relating to what he says was his help in brokering the Shell-Eni deal. In the lawsuit a London court held that former Minister of Petroleum, Dan Etete owned and controlled Malabu Oil "at all material times."
Following the case, the British police were reported to be looking into allegations of money laundering in connection with the transaction.
Global Witness, a London-based corruption watchdog, has also criticised the deal. In response, the Nigerian Senate mandated its Committees on Finance and Petroleum (Upstream) to look into the controversial $1.09 billion transaction last year, particularly the role of the Attorney-General of the Federation and Minister of Justice, Mohammed Adoke who is said to have written to Global Witness, saying that the House had investigated and cleared him of all wrongdoing in relation to the transaction. The House denied it had done so. The Committee recommended that the licence be revoked saying that the process for the acquisition of the OPL by Eni and Shell was "highly flawed."
NEITI said it 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.
Now, the whole messy situation has spilled over to Italy as the controversy surrounding the award of OPL 245 to Eni and Agip refuses to go away.
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Agip Ordered to Close Facility Over Bayelsa Oil Spill
Farmers from the Ayarabele and Kalaba Communities in the Okordia Clan of Yenagoa Local Government Area in Bayelsa have succeeded in getting their State government to come to their aid over a recent spill from an Agip pipeline. The communities had complained to the State Government that the pipeline was continuing to discharge oil and gas at high pressure into the area causing environmental damage and affecting the livelihoods of farmers in the area.
Responding swiftly to the appeal made by the communities, the state government has ordered that Agip close the facility immediately to enable an investigative team to go in and tackle the oil spill. In a statement, the State Commissioner for Environment, Mr. Inuro Wills, said: "Following the recent gas spillages, which occurred on September 4 at a facility operated by the NAOC in the two communities, the ministry has asked the company to temporarily shut down operations in the facility."
A meeting is now scheduled to take place between the leaders of the communities affected by the spill, State Government officials and Agip to discuss the incidence of frequent spillage which Mr Wills said had the grave consequences for the people. The State government intends to use this occasion to signal the start of the "State Government programme of raid and sustained environmental protection and enforcement," he said.
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Oil Spill Transparency and Accountability Tool in Line for Award
An oil spill and transparency accountability tool, the Nigerian Oil Spill Monitor, is in line for an award in the Successful Innovations category of the HiiL Innovating Justice Awards.
The tool designed by Stakeholder Democracy Network (SDN) is a digital mapping project that provides open, accessible and interactive mapping and tracking of Nigerian Government oil spill data.
The state-of-the art web-based tool, used by the National Oil Spill Detection and Response Agency (NOSDRA to manage their data on oil spills, makes this data public and accessible across the world. Citizens and communities can use the oil spill monitor for compensation claims and disputes, whilst government departments can gain strategic insight based on accurate and verified data.
SDN's prototype digital mapping and data visualisation software is used to quickly locate, visualise and gain strategic insight into the data it contains. The system runs in the browser (online and offline) and is designed to work across unreliable mobile data connections. It actively promotes transparency and accountability of oil spills, allowing anyone to analyse the data and take action based on the information. The entire 8,000 oil spill records and all core functions (including editing of spill records) is provided in under 2MB of data to ensure reliable use across the agency offices across the Niger Delta. More details of the Nigerian Oil Spill Monitor are available on the SDN website, http://www.stakeholderdemocracy.org.
The award is being given by HiiL, a research and development institute for the justice sector. The organisation is based in the Hague and in its information it says it is "Passionate about making justice work for both people and organisations."
You can vote for the Nigerian Oil Spill Monitor at the HiiL Innovating Justice Awards website: http://www.innovatingjustice.com
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Nigeria Joins List of Highest Paying Contract Jobs in Oil, Gas Sector
Nigeria has been included in the list of highest paying contract jobs in the oil and gas sector worldwide. The Swift Worldwide Resources report into worldwide oil and gas contract jobs pay showed that Nigeria was ranked third and fourth among the ten highest paid contract jobs in the world, with Australia occupying the first and second places.
The report shows that a Drilling Manager in Nigeria earns up to $2, 844 per day while a Project Services Director earns about $2, 817 (N450, 720) per day.
This is the first time that Nigeria has featured in the Swift's list. Chief Executive Officer of Swift, Tobias Read, said: "Both Iraq and Nigeria have seen unprecedented growth in industry activity, and workers there are compensated for the risks that come with working in the more dangerous areas, accounting for the increase in salary ranges. Salaries in the U.S. are climbing, but salaries in these emerging markets are climbing faster."
The list was compiled by analyzing Swift's 250 contract positions in the oil and gas industry in 30 locations across the globe, for a total of 7, 500 total jobs.
The complete list of the "Ten Highest Paid Contract Jobs in Oil and Gas" is as follows:
- Completion Manager in Australia: up to $3,075 per day
- Drilling Manager in Australia: up to $2942 per day
- Drilling Manager in Nigeria: up to $2844 per day
- Project Services Director in Nigeria: up to $2817 per day
- Drilling Manager in Iraq: up to $2766 per day
- Completion Manager in Venezuela: up to $2715 per day
- Project Manager in Iraq: up to $2700 per day
- Subsea Manager in Australia: up to $2692 per day
- Drilling Manager in Angola: up to $2631 per day
- Completion Manager in Iraq: up to $2624 per day
"As a global staffing company, we're able to track shifts in the way jobs are compensated in different regions," said Swift CEO Tobias Read. "High project workloads and a shortage of skilled talent have kept compensation high in Australia. Both Iraq and Nigeria have seen unprecedented growth in industry activity, and workers there are compensated for the risks that come with working in the more dangerous areas, accounting for the increase in salary ranges. Salaries in the U.S. are climbing, but salaries in these emerging markets are climbing faster."
Certain job titles, like Completion Manager and Drilling Manager, are suddenly in demand and well-compensated due to increases in upstream and drilling activity around the world. Swift experts predict that as exploration becomes more competitive across major oil companies, skilled workers in these positions will be drawing even higher compensations.
Swift Worldwide Resources is the leading supplier of manpower resources to the global oil and gas industry, with more than 25 years focusing exclusively in this sector, and a database of 200,000 skilled personnel.
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NNPC Oil Workers Begin Nationwide Strike Over Pension Issues
The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) has announced that all junior and senior workers of the Nigerian National Petroleum Corporation (NNPC) are now on strike after failing to reach agreement with NNPC over a number of issues, principally to do with their pensions and other complaints about refineries. A conciliatory meeting failed to get the union to agree terms for calling off the strike.
Staff are aggrieved over the withdrawal of the operational licence given by the National Pension Commission (PenCom) to NNPC allowing it to operate the NNPC Pension Fund as a Close Pension Fund Administrator (CPFA). PenCom is said to have withdrawn the licence after NNPC consistently failed to operate the pension fund in accordance with legislation and within the guidelines issued by the PenCom. Among the PenCom's complaint is the allegation that NNPC failed to transfer the funds and assets of the scheme to a licensed Pension Fund Administrators (PFAs) of NNPC's choice.
Whilst appealing to its workers to go back to work, NNPC admitted that there had been some funding deficits but said that it was complying with PenCom's directives and was in the process of transferring assets in equities, bonds, certificates of deposits and other marketable securities to the custody of a PFA for management.
The oil workers are also demanding the commencement of planned Turn Around Maintenance (TAM) of the refineries, the delay of which has kept the nation's refineries from functioning at peak levels for a long time. They also want crude oil supply to refineries to be maintained without any lapses.
Attempts by the House of Representatives to intervene in the matter have not yielded any results so far after the Honourable Minister of Petroleum Resources, Diezani Alison-Madueke, NNPC Group Managing Director, Joseph Dawha, the leadership of PENGASSAN and the Nigerian Union of Petroleum and Natural Gas workers (NUPENG) all failed to honour the invitation issued by the Joint Oil and Gas Committee of the House of Representatives to appear before it on the 18th of September.
As the national strike begins to bite, there is now concern that the strike may affect oil exports after the spokesman for PENGASSAN, Mr. Babatunde Oke, said that all export terminals manned by their workers could shut down.
Meanwhile, the Minister of Power, Prof. Chinedu Nebo has confirmed that the industrial action was affecting gas supply to key thermal generation plants in the country. As a result, he said: "This has inevitably led to a drastic reduction in power supply across the country."
Queues are now beginning to form in Abuja petrol stations as fears mount that supplies of petroleum products from depots may also be affected.
The House Joint Committee is still determined to play a role in resolving the matter and has asked the parties to appear before it on Tuesday September 23, 2014 at 11am. A statement from the Committee said: "Our concern is driven by the major role oil and gas plays in our economy; and the enormous damage any disruption in the system will entail for the Nigerian people."
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LATEST EVENTS
Lagos Oil Club September Edition
Oriental Hotel, Victoria Island, Lagos
30th September 2014
http://www.thelagosoilclub.org/
West 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 SummitLagos, 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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Best wishes 
Remi Aiyela
Editor-in-Chief
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