 LATEST MAGAZINE ISSUE
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Welcome to our 105th issue.
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Total's $2.5 Billion Usan Deepwater Field Back on the Market
French oil giant Total said its Usan Deepwater Field located some 100 kilometres offshore in Oil Prospecting Lease (OML) 138 is back on the market after the failure of its 2012 deal with Beijing based Sinopec. Total's interest in the field was sold to China Petroleum Corporation (Sinopec) for about $2.5 billion and it is expected that Total will be seeking a similar sum in the new sale.
Total has appointed BNP Paribas to advise on the sale. With depressed oil prices analysts are saying Total may not be able to achieve that price especially given that Sinopec paid over the market value at the time to secure the assets. However, such is the interest in Nigerian assets in recent times that foreign investors and Nigerian independents looking to flex their muscles will most likely be reaching for their wallets immediately. Nigerian banks are likely to benefit from the sale as they develop greater appetite for Nigerian oil and gas deals and get more adept at financing upstream ventures.
Neither Total nor Sinopec was willing to divulge the reason for the failure of the deal. Analysts are speculating that concern about the unfavourable fiscal provisions in the Petroleum Industry Bill (PIB), which the international oil companies (IOC)'s are worried about if the PIB is passed into law may be behind Sinopec's decision to pull out. Sinopec may have baulked at the making the kind of expenditure a deepwater development will require with the uncertainty of the PIB hanging over it.
Sinopec bought Total's 20 per cent stake in OML 138 in 2012 as it sought to shore up its declining oil reserves. At the time, it was expected that the deal would bring Sinopec an additional 36,000 barrels a day of oil production at peak output. Sinopec paid a high price to secure Usan after analysts estimated it had a net value at the time of $2.1 billion. Sinopec paid $21.93 a barrel for each barrel of oil equivalent in the block, twice the industry average over the previous five years, one analyst said at the time.
Usan accounts for about 10 per cent of Total's Nigerian output. The sale to Sinopec was part of Total's global plan to raise $15 billion form asset disposals between 2012 and 2014, which it achieved. Its current target is to sell $10 billion worth of assets in 2015-17.
Total's joint venture partners in OML 138 are the Chevron (30 per cent), ExxonMobil (30 per cent) and Nexen Petroleum, owned by Chinese state company, CNOOC (20 per cent). Total is the operator and proven and probable reserves of Usan are in excess of 500 million barrels of oil.
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"Significant Upgrade" of Otatikpo Marginal Field Reserves Boosts Lekoil Shares
The London Stock Exchange, Alternative Investment Market (AIM) listed exploration and production company, Lekoil has seen its share price boosted after announcing a significant upgrade to its 2C oil reserves estimates for Otatikpo Marginal Field. The Nigeria and West Africa focused company holds a 40 per cent participating interest and has a 90 per cent economic interest in the marginal field which is located in oil mining lease (OML) 11, offshore Nigeria, adjacent to the shoreline in the eastern part of the Niger Delta.
The competent persons report (CPR) was provided by AGR TRACS International Ltd, which carried out a comprehensive review of the surface and subsurface data provided by Lekoil. Following the review, AGR TRACS reported that the gross unrisked 2C Contingent Resources for Otakikpo were estimated to be 56.75 million barrels (mmbbl). This compares to the 36 mmbbl of gross oil resources in the most recent 2C resource estimates available at the time of the company's acquisition of the interest in Otakikpo in May 2014 through Lekoil Nigeria's wholly owned subsidiary Lekoil Oil and Gas Investments Limited. The CPR increases the estimated unrisked oil resources net to Lekoil by over 45%.
The CPR has also estimated Stock Tank Oil Initially In Place (STOIIP) ranges for four exploration prospects within the onshore part of the Otakikpo acreage giving unrisked P50 potential gross aggregate Oil in Place volumes of 162.8 mmbbl. Lekoil intends to conduct further studies in the southern shallow water area of the acreage where it believes that additional prospectivity exists.
Following the announcement on Tuesday, Lekoil's shares were up 4 per cent in London trading leading stock analysts at Westhouse Securities reissue its "buy" rating for Lekoil. Lekoil shares opened at 70.00 on Tuesday after a 52-week low of GBX 40.25 and a 52-week high of GBX 81.407.
A number of other firms have also recently commented on Lekoil shares. Analysts at Oriel Securities Ltd reiterated a "buy" rating on shares of Lekoil in a research note on Monday. They now have a GBX 95 ($1.55) price target on the stock. Separately, analysts at Canaccord Genuity initiated coverage on shares of Lekoil in a research note on Tuesday, September 2nd. They set a "speculative buy" rating and a GBX 75 ($1.22) price target on the stock.
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Shell Nigeria Gas Campaigns Against Building on Gas Pipelines
Shell Nigeria Gas (SNG) has launched a campaign to alert members of the public of the dangers of encroaching on the pathway of gas pipelines. Its campaign is targeting its business areas in Ogun, Rivers and Abia States.
The exercise has already been held in Ogun State, with SNG and its Right-of-Way campaign partner, the African Foundation for Environment and Development, sensitising communities in Ijoko, Itoki and Ota in Ado Odo-Ota Local Government, on the dangers of vandalising pipelines, bush-burning, and construction of structures on and around gas pipelines.
"The campaign goes beyond our business interests," pointed out SNG Managing Director, Toyin Adenuga. "It is rather more about safety of lives and property. People who build on gas pipelines risk losing everything including their lives and things they've worked hard for. The campaign is to make them to realise that the risk is not worth it."
He said SNG would continue to engage the communities as partners to promote the company's safety culture and respect for the environment. The campaign will be taken to Port Harcourt and Aba where gas pipeline Right-of-Way surveillance contractors will dedicate one day to walk through SNG pipeline routes distributing flyers and other enlightenment materials.
SNG is a wholly Shell-owned gas distribution company which began operations in 1998. The company distributes gas to industrial consumers in Ogun, Rivers and Abia States.
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Aiteo Denies Intention to Acquire Oando's Downstream Assets
Aiteo Group has issued a firm denial after it was widely reported that the company is in the running to acquire Oando's downstream assets. Aiteo's statement referred to the publications that had listed Aiteo among a retinue of bidders that have indicated interest or are in the process of acquiring the downstream assets of Oando Plc. The downstream Africa focused emerging powerhouse said in the statement that it did not bid nor has it indicated any interest to bid for the assets and that it does not have any intention to purchase the said Oando downstream assets.
Speculation began after the Nigerian Stock Exchange (NSE) reported that Forte Oil, one of Nigeria's largest downstream companies, which is listed on the NSE, had informed the NSE, in the interest of full disclosure of discussions "still in its infancy" for a proposed acquisition.
They did not mention the target of the acquisition but all eyes immediately turned to Oando, particularly in view of its recent completion of the acquisition of the ConocoPhillips Nigerian business. Speculation is rife that it intends to concentrate on the upstream business whilst divesting part of its downstream interests.
Forte Oil has added fuel to the fire after by remaining tight lipped and refusing to confirm or deny the speculations. The company is however said to be trying to diversify its revenue and profit base after the 2013 acquisition of Geregu Power Generation Plant in Kogi State.
Oando has not issued a denial that it is divesting its downstream interests, but says cryptically that "In line with our strategy, we received shareholder approval to partially divest from our downstream business a few years ago and are constantly exploring the best approach to executing this objective."
Oando continues to maintain that partial divestment was a strategy they had looked at many years ago and which had been approved by the board. With its transformational acquisition of ConocoPhillips assets, it may now be the strategy to focus on its upstream business. Head of Corporate Communications, Ainojie Alex Irune, said: "The Oando Group remains focused on its commitment to continued value creation for its shareholders through its strategic plan to increase its investment in the higher margin upstream, to spur long-term growth for the future of the company."
The ConocoPhillips deal has turned Oando into an upstream powerhouse. It gives Oando an additional 36,000 barrels of oil equivalent per day and 221 million barrels of 2P reserves, making it the largest indigenous independent by production.
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OPEC Daily Basket Price Drops to 2 Year Low of $94.25 Per Barrel
The downward slide of the price of OPEC oil has continued, reaching a 2 year low on Thursday The OPEC basket of twelve crudes stood at $94.25 a barrel on Thursday, compared with $94.18 the previous day, according to OPEC Secretariat calculations. The price drop is said to be due to oversupply with a rise in exports from Iraq, Libya and Nigeria.
OPEC member nations will need to begin to think of tightening their belts after analysts predicted that member nations will begin to feel the effect if the price drops below $90 and most will be in trouble if it drops to $70. Many OPEC member nations, including Nigeria, rely on oil exports to balance their budget and they have been lulled into a false sense of security after seeing prices soar over the last 2 years. Many analysts predict that it is likely to get worse before it begins to get better. Nigeria will have to brace itself, as there could be worse to come.
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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NSIA Signs $100m Commitment with Seven Energy to Fund Gas to Power Projects
The Nigeria Sovereign Investment Authority ("NSIA"), Nigeria's sovereign wealth fund, has signed a commitment with Nigeria focused indigenous integrated oil and gas development, production and gas distribution company, Seven Energy, to invest at $100 million in gas to power projects. The investment is to be made through NWIA's Gas to Power Funds managed on behalf of Nigeria's Debt Management Office ("DMO"). The commitment is for an investment of at least $100 million in aggregate principal amount of senior secured dotes due in 20121 is to be issued and placed privately by Seven Energy Finance Limited.
Uche Orji, Managing Director and CEO of the NSIA explained that through this investment and future projects, NSIA is contributing to the transformation of the gas and power sectors. He said: "We expect that this investment will support the development of Calabar NIPP, Ibom Power, and other power stations. This is a further example of Nigeria's successful public-private investment in infrastructure."
Abraham Nwankwo, Director General of the DMO said they were pleased to partner with Seven Energy calling the company one of Nigeria's gas champions. "This investment underscores DMO's
Speaking of the deal with NSIA, Phillip Ihenacho, CEO of Seven Energy said: "This investment is a vote of confidence in Seven Energy's vision to be a leading supplier of gas in Nigeria. I am very pleased that we have gained the support of NSIA."
The Federal Government has been roundly criticised over Seven Energy's Strategic Alliance Agreement (STA) with Nigerian Petroleum Development Corporation (NPDC) and the lack of information regarding the finer details of the agreement. Under the STA, the company is entitled to a share of production from its 55% licence interest in OMLs 4, 38 and 41. In the first half of this year alone, the company lifted 1.3 million barrels of oil under the arrangement. NPDC is the operating arm of the Nigerian National Petroleum Company. Gross production from the three assets averaged 46,400 bopd in the first half of 2014. Production was impacted by over four weeks of shutdown at the Forcados terminal during March and April 2014.
Other highlights from the company's recently announced half-year results for 2014 include a 29 per cent growth in revenue, an increase of 80 per cent in earnings before tax and an increase in profit from $2 million in the corresponding period last year to $26.6 million this year.
The company's access to such a large production share enables it to raise funds without too much trouble. In the first half of this year it secured a $255 million facility from the International Finance Corporation (IFC) to develop its growing portfolio of assets. An additional $170 million project finance facility enabled it to complete the acquisition of the East Horizon Gas Company, which operates the 128 km 18-inch East Horizon pipeline from Ukanafun to Mfamosing, near Calabar, and has an existing gas sales agreement to supply up to 25 MMcfpd, to Nigeria's second largest cement plant. Its bulging wallet enabled it to acquire SRL 905 Holdings Ltd, which holds a 40% licence interest in OPL 905, a gas asset located in the Anambra Basin north of the Niger Delta. It has entered into a conditional share purchase agreement to acquire a further 50% interest in OPL 905.
Seven Energy has interests in two gas producing marginal fields, Uquo Field and Stubb Creek Field in the South Eastern part of the Niger Delta and seems keen to continue to develop its gas portfolio. The company's commitment to championing the development of gas cannot but help endear it to the current government who seem to have only just woken up to the criticality of the lack of gas in its gas to power plans.
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NCDMB Invites Agip and Arco Dispute to Talks over Gas Plant Maintenance Contract
The Nigerian Content Development and Monitoring Board (NCDMB) has decided to get involved in the on-going dispute between the Nigerian Agip Oil Company and Arco Petrochemical and Engineering Company over the maintenance contract for the Ebocha/Kwale/Obob gas plants in Delta State. The Executive Secretary of NCDMB is hoping that he can broker a solution in the dispute between Agip and Arco before it gets out of hand.
The dispute stems from the award of the award of the contract maintenance of the gas plants by joint venture partners, Agip and the Nigerian National Petroleum Corporation (NNPC). The original 5-year maintenance contract was awarded in 2006 to GE, with Arco, an indigenous company, as its local Technical Partner. When the initial 5-year contract expired in 2011, a 1-year stopgap extension of the contract was issued. At the end of that period another 1-year stopgap extension was granted.
Meanwhile, a new tender process for the maintenance contract was begun. It is understood that an indigenous company, emerged as the winner of the bid process. However, NNPC's board is yet to confirm the winner. Arco alleges that Agip is now trying to award a stop-gap contract to the winning company, without NNPC board approval of the winning bid.
Arco's allegations of impropriety against Agip include an accusation that when the extension of the contract was granted in 2011, Arco's role was reduced to that of a subcontractor rather than a technical partner. They say this was in breach of local content laws.
According to Arco, Agip's intention was to "forcibly remove an established indigenous contractor like Arco that can prove its mettle in the maintenance of such hi-tech equipment exclusively for six months."
Arco said it had proved its capability when it executed the contract by itself for a period of six months after GE had to evacuate its engineers at the height of the Niger Delta militancy.
Arco is a wholly indigenous company, which started business as the only Nigerian representative of Nuovo, the Italian Government owned manufacturer of Steam/Gas Turbines, Gas compressors & Pumps. It has since developed other partnerships and offers a wider range of services to the industry now.
NCDMB has confirmed that it received a letter from Arco dated 10th September 2014 from Arco about the matter. A statement from the Executive Secretary of NCDMB, Mr. Ernest Nwapa says: "The Nigeria Content Development Monitoring Board, NCDMB, has invited the Managing Director of Nigerian Agip Oil Company (NAOC), Mr. Massimo Insulla to a meeting in relation to the ongoing business dispute between it and Arco Petroleum Engineering Company Limited over the maintenance of Obob/Ebocha/Kwale Gas plants."
"The invitation followed NCDMB's receipt of a formal letter of complaint to it by Arco Petroleum on the matter dated September 10, 2014 wherein the company alleged among other things that NAOC and General Electric "are ganging up to forcibly remove an established indigenous contractor like Arco that can prove its mettle in the maintenance of such hi-tech equipment exclusively for six months," the statement continued.
Whilst hoping to help the parties resolve the dispute, Mr Nwapa said in the statement that the Board "would continue to ensure that the provisions of the Nigerian Content Act are adhered to in relation to any contract or operation in the Oil and Gas industry."
Meanwhile, another indigenous company, ISO certified, Plantgeria Nigeria Limited, issued a statement on the 19th of September, saying that it had won a contract for the Kwale Gas Plant Fire Fighting Upgrade, installation of new fire /jockey pumps & pipe network modifications. It lists Agip as one of its major clients. It is believed that Plantgeria is the company that won the bid but is yet to be confirmed as the winner by the NNPC board.
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Oil Industry Workers Call Off Strike
Oil workers are back to work after their unions, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the National Union of Petroleum and Natural Gas Workers (NUPENG) called off their national strike. The strike, which lasted 5 days, was called off after a reversal by the National Pension Commission (PenCom) of its decision to withdraw the operational licence it granted to the Nigerian National Petroleum Corporation (NNPC) to run its own pension scheme.
Before it was called off, the strike was already beginning to affect electricity generation as gas supply to power plants dropped following the walkout of oil workers. The unions had been predicting that the industrial action would affect exports of crude oil, although this prediction did not come to pass.
The strike began after PenCom withdrew the licence after accusing NNPC of consistently failing to operate the pension fund in accordance with legislation and within the guidelines issued by the PenCom. PenCom complained that NNPC failed to transfer the funds and assets of the scheme to a licensed Pension Fund Administrators (PFAs) as required. In addition, PenCom was concerned about NNPC's failure to bridge the funding gap in the scheme, which had climbed to about N85 billion between 2010 and 2014.
NNPC admitted some of the failings but said it was working to rectify the situation, including the transfer of assets and also bridging some of the funding gap.
The unions were also unhappy about lack of progress on the turn around maintenance (TAM) of the nation's four refineries leading the country to continue to waste billions importing fuel products.
Fuel queues had begun to build up in Abuja as the strike began to bite, but the biggest effect was the noticeable decline in electricity distribution as some power plants, starved of gas due to the walkout, were unable to operate at optimum capacity. Calling on the unions to call off the strike, the Minister of Power, Professor Chinedu Nebo, confirmed in a statement that the strike had cut off gas supply to major power stations, including Egbin, AES, Olorunsogo, Geregu and Sapele.
The strike also disrupted gas supply to the West African Gas Pipeline, which was already reeling from the gas supply shortage from Nigeria earlier this year when gas supply to the pipeline fell by 50 per cent of the volume Nigeria was contracted to supply. Ghanaians have had to cope with electricity outages and were preparing to shut down Asogli Power Plant, which supplies about 180 megawatts of Ghana's electricity requirements.
With so much at stake the President Goodluck Jonathan and the Minister of Petroleum Resources, Diezani Alison-Madueke, had to find a solution and following the Minister's intervention, PenCom agreed to reverse its decision to withdraw the licence. After a productive 5-hour long meeting with the unions and NNPC, the Minister said that NNPC's management would close the funding gap before August 2015. They also promised to address the issue of the TAM internally.
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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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