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Shell Finalising Sales Purchase Agreements with Winning Bidders

 

Dutch major, and Nigeria's largest producer, Shell, is close to finalising sales purchase agreements (SPAs) with all the buyers of its assets in its latest round of onshore divestments. Already, Shell has concluded the SPA with Taleveras for oil mining lease (OML) 29, the choice asset in the current divestment round, NOGintelligence has independently established. The Taleveras consortium, which includes Aiteo, is paying over $2.5 billion for the asset, being sold in conjunction with the troubled Nembe Creek Trunkline. The vital 60-mile pipeline has been targeted by oil thieves frequently in the last few years, even in spite of a recent $2 billion upgrade by Shell. OML 29 produces 58,000 barrels of oil per day (bopd) from 5 fields and 20 mmscf/d of gas. It supplies gas to the Nigerian Liquefied Natural Gas company (NLNG).  

 

Shell's current round of divestment includes interests, which it owns (30 per cent interest) jointly with joint venture partners Total (10 per cent) and Eni (5 per cent) in OMLs 18, 24, 25 and 29. The company, which, along with its partners have been divesting their interests in a steady stream of onshore assets, has declined to name the winners of the bids until it has signed the sales purchase agreements for all 4 blocks.  

 

OML 18 is understood to have been won by Erotron, a consortium made up of Mart Resources, Midwestern and Suntrust Oil after bidding $1.2 billion. OML 18 produces 21,000 bopd from 6 fields and 12 mmscf/d of gas. Pan Ocean is understood to have put in the highest bid of $900 million for OML 24, having decided to go it alone. As a long-term indigenous producer of 7,500 barrels per day from its OML 98, it had the credibility to pull off a sole bid. OML 24 has 25,000 bopd production from 3 fields and 8 mmscf/d of gas.  Crestar, made up of a consortium of indigenous professionals and a leading financier is said to have won OML 25 with a $500 million bid. The block is producing 33,000 bopd from 1 field and 2 mmscf/d of gas.  

 

The bids for the assets are said to have surpassed the initial estimates of analysts. Bidders seem to have been undeterred by the insistence of the Nigerian National Petroleum Corporation (NNPC) (owners of a 55 per cent stake in the assets) that operatorship reverts to it following divestment by Shell and its partners. Such is the appetite in the market for Nigerian assets that anytime international oil companies (IOCs) seek to divest their interests, investors flock to the table with bids that leave analysts confounded. It does not seem to matter to them that operatorship will be in the hands of NNPC's exploration and production arm, the Nigerian Petroleum Development Company (NPDC), which is continuing to scoop up more and more assets from the unending divestment rounds.

 

In view of recent history, the winners can have little hope of being able to secure a deal with NNPC that will allow them to operate the assets, even as NPDC's catalogue of operated assets continues to grow but with no corresponding investment in the capacity it needs to be able to operate all those assets. Seplat is the only company that has been able to gain operatorship of a divested oil block, which it managed to do before NPDC woke up to the idea of wresting operatorship from investors in the blocks. Since then, NPDC has claimed a reversion of operatorship of divested assets where the operator is divesting its interests.  

 

Shell has so far raked in more than $1.78 billion over the last few years as it continues on its mission to sell off its Nigerian onshore assets. The company plans to raise $15 billion from the sale of assets worldwide this year.

 

ExxonMobil and Tenoil Petroleum To Begin Ata Field Appraisal Well Drilling

 

Tenoil Petroleum and Energy Services, a subsidiary of Heirs Holdings, has reached agreement with Mobil Producing Nigeria Unlimited (MPN), an ExxonMobil subsidiary, to commence drilling on Ata Field. They will drill an appraisal well on Ata Field in order to evaluate whether there is an opportunity to jointly develop the field, the indigenous company said in a statement.

 

Ata Field, which is located on Oil Mining Lease (OML) 68 in shallow water offshore of the Eastern Niger Delta was discovered by MPN in 1964. MPN is the operator of OML 68, which it owns jointly with the Nigerian National Petroleum Corporation (NNPC). Ata Field straddles the borders of OML 68 and Oil Prospecting Licence (OPL) 2008 also owned by Tenoil. The agreement means that the field can be developed jointly if found to be commercially viable.

 

The commencement of drilling at Ata Field, the company said in a statement, represents a further milestone in Tenoil's emergence as one of Nigeria's leading indigenous field operators. The company said that, together with the development of OPL 281, which Tenoil operates on behalf of Transnational Corporation of Nigeria Plc (Transcorp), these field developments are important steps in Heirs Holdings' integrated energy strategy, encompassing power generation, oil production and refining, petrochemicals and fertilizer production.

 

Tony O. Elumelu, Chairman of Tenoil, commended MPN, saying, "This is an exemplary demonstration of genuine commitment by an international oil company to the development of indigenous capacity in Nigeria's oil and gas sector."

"MPN is collaborating with Tenoil to provide technology expertise in the successful execution of this first drilling project," he added.

 

Nolan O'Neal, Chairman and Managing Director of Mobil Producing Nigeria Unlimited noted that, "The agreement demonstrates the Nigerian National Petroleum Corporation/Mobil Producing Nigeria JV's continuing commitment to working with Nigerian companies to develop the country's oil and gas resources."

 

Incorporated in 2005, Tenoil currently serves as the platform to manage and operate Heir Holdings' investments across the energy value chain, as well as extractive minerals sector. OPL 2008, located in Akwa Ibom State, was awarded to Tenoil in the 2007 bid round under a Production Sharing Contract (PSC) with NNPC. The PSC was signed in 2011 and the company has since acquired and evaluated 3D seismic dataset over the block. In addition to a number of deep prospects, the subsurface evaluation established the extension of the Ata field in neighbouring OML 68 into OPL 2008, and this straddle structure was identified as a potentially commercial candidate for joint development.

 

Tenoil says of the joint development: "This operation of the Ata Oil Field provides an opportunity to demonstrate Mobil's local content development in Nigeria through their partnership with an indigenous company, the development of human capital and their significant contribution to the economy."

 

ExxonMobil's OML 68, along with OMLs 67 and 70 were renewed in 2012 for a further term of 20 years after some controversy over a purported renewal in 2009. Whilst ExxonMobil claimed that the licences had been renewed, the Ministry of Petroleum Resources said the renewal was invalid. At the time ExxonMobil vowed to vigorously protect its right to the licences.

 

Fortunately, the parties were able to reach a resolution in 2012, and following the renewal of the leases, the Minister of Petroleum Resources, Diezani Alison-Madueke said that they had been renewed "on mutually fair basis for which to work together for the next 20 years."

 

Also pleased with the outcome, Mark Ward, then head of ExxonMobil's Nigerian operations, said: "This has been a long journey and some would say a difficult journey to accomplish what we have done here today."

 

Seadrill Launches Drill Ship for Total's Egina Deep-Water Project

 

Seadrill Nigeria Limited has commissioned the sail away of its sixth-generation drill ship, the West Jupiter, bound for Nigeria for the Total's Egina project located in deep-water OML 130. The West Jupiter is the latest addition to the Total Upstream Nigeria Limited fleet of ultra-deep water vessels operating in Nigerian waters. The drill ship is expected to arrive in Nigeria in November and drilling on Egina is slated to begin in December.

 

The submersible deep-water drilling rig, built in South Korea by Samsung Heavy Industries for Seadrill Nigeria, has the capacity to operate in 12,000 feet of water. The $1.1 billion contract to operate the ship for an initial 5-year period, was awarded to Seadrill Nigeria by Total as part of the Egina deep-water project. The drill ship will be operated by Seadrill using a Nigerian crew.  

 

During the official sail away ceremony in Geoje, South Korea, Mr. Elumelu, Chairman of Heirs Holdings, a significant investor in Seadrill Nigeria, and also Chairman of the Board of Seadrill Nigeria, said: "The partnership between Heirs Holdings and Seadrill is an important part of our strategy of investing in Africa's long-term economic development and today, we celebrate an inspiring example of global collaboration."

 

"It represents a genuine commitment to knowledge sharing and indigenous participation in Nigeria's resource sector and is a milestone that we can all be proud of," he added.

 

Also speaking at the event, Seadrill's Senior Vice President for Middle East and Africa, Eduardo Antonello said, "In Brazil, we have 80 per cent local staff in the field and I would like for us to achieve the same in Angola and in Nigeria. We are heading to sixty per cent in Nigeria, but the only way to get that number up to eighty, eighty-five per cent is to train people. We and our partners, Heirs Holdings, are very keen on investing in training local crews; and long term contracts, like Total's, give us just the opportunity to do that."

 

Mr. Ernest Nwapa, CEO of the Nigerian Content Development and Monitoring Board (NCDMB) emphasized the Nigerian government's growing insistence that local-international partnerships become the model for engagement in the Nigerian oil industry.

 

"The only reason I'm here is because Heirs Holdings is involved - because of the partnership between Heirs Holdings and Seadrill. My organization's role is to ensure that the government's aspiration to significantly increase Nigerian participation in the oil industry is fulfilled and I am confident that Mr. Elumelu and his colleagues will do this and I am happy they are leading the way in making it a reality," said Mr. Ernest Nwapa.

Eland Oil CPR Upgrades 2P Reserves on OML 40 to 81.4 MMB

 

Nigeria and West Africa focused Eland Oil has announced a significant upgrade in the reserves and resources of OML 40, following a new competent persons report (CPR) provided by Netherland, Sewell & Associates Inc. (NSAI). The results, say Eland, demonstrate a material increase in the value to Eland of the reserves and resources of OML 40 as at 30 June 2014 as compared with the previous Report dated 30 June 2013.  The values in the new Report takes into account the recently granted Petroleum Profits Tax incentive, awarded to Elcrest Exploration and Production Nigeria, a joint venture between Eland Oil and indigenous company Starcrest, in May 2014, which results in a significant increase in cash flows and net present value.

 

Listed on the London Stock Exchange's Alternative Investment Market (AIM), Eland Oil said that OML 40 gross Proved plus Probable ("2P") reserves had been upgraded from 54.2 million barrels (mmb) to 81.4 mmb, with 25.3 mmb net to Eland (before royalties), and 20.2 mmb net to Eland (post royalties). Eland's Net (Entitlement) Present Value at 10 per cent 2P amounts to US$649 million, US$679 million with financing arrangement, an increase of 52.4%. The values were based on a base Brent oil price of US$100 per barrel and is adjusted for a regional price differential where Nigerian crudes typically trade at a premium to Brent.

 

The contingent resources were also updated to reflect the company's purchase and review of additional off-block well data as well as the reprocessing of 3-D seismic on the Western flank of the license block. The largest change was due to the changed structural location of the Polobo-1 well on the reprocessed seismic data.

 

In June, Elcrest Exploration and Production Nigeria, Eland's joint venture company, was awarded approval of a five year petroleum profits tax exemption meaning that until 30 April 2019 Elcrest will only be liable for withholding tax and VAT but not PPT.

 

In the light of an ongoing review of operations and some consequential changes to the company's work programme and delays in dredging, the Company now anticipates that development drilling on new production wells will begin in Q1 2015. As part of the review, the company will also evaluate the potential for additional production through the re-entry of existing non-producing wells (Op-4, 5 and 7) on Opuama field. The re-entry work will be carried out before or in conjunction with the revised development drilling programme.

 

The company is currently in production and working towards satisfying debt accessibility, which is anticipated in the near-term. The company, which on 30 September 2014 had cash reserves of $18.2 million, has no immediate need to draw down the debt facility. However, accessing the debt provides greater flexibility and optionality with regard to the work programme, the company said.

 

Mr George Maxwell, CEO, commented: "The updated Competent Person Report highlights the value of the tax incentive to Eland and demonstrates a material increase in the value of the reserves, increasing the NPV per net 2P barrel by over 75%."

 

He added: "The increase in prospective resources high estimate to over 750 million barrels confirms our belief that OML 40 truly represents a portfolio within a single licence."

 

As a result of current market conditions in Nigeria the values do not include gas or natural gas liquid volumes. However, the company has rights to monetise gas volumes and is currently discussing and assessing the market potential for development.

 

Trelleborg Wins Contract to Supply Thermal Insulation Material for Erha North Project

 

UK company, Trelleborg Group's offshore operation has won a contract to supply its high temperature thermal insulation material for phase two of the Erha North project. Appointed by subsea engineering, construction and services company, Subsea 7, Trelleborg will supply several tonnes of its high temperature advanced silicone insulation solution, Vikotherm S1, to the numerous oil and gas flowlines in the field. Manufactured using room temperature vulcanization technology, the coating is ideal for the high 300 °F / 149 °C temperature.

 

Acim Rezig, SCM Engineer at Subsea 7, commented: "As the offshore industry continues to get more complex, we're more frequently searching for products which not only meet the specification, but also provide added benefits such as time saving and increased efficiency. Trelleborg's Vikotherm S1 insulation was the ideal choice for the project, as it caters to the water depths and temperatures to guarantee flow assurance."

 

Lee Roskell, Proposals Team Manager within Trelleborg's offshore operation, said: "We developed a high temperature, microsphere free product to improve overall performance of the insulation system. This provided an added assurance that the product has been installed properly and is fit for purpose; verifying both the cast insulation and substrate."

 

In a statement, Trelleborg said it had designed the product to cater to the harsh environment at the Ehra field, incorporating a unique silicone compound. The system can operate at ocean depths of 9,832 feet / 3,000 meters and temperatures as high as 300 °F / 149 °C, so that the flow of oil and gas is not compromised.

 

The Erha and Erha North projects consist of 32 subsea wells tied back to a Floating Production, Storage, and Offloading vessel (FPSO). The Erha North phase two development sits at 3,960 feet/ 1,200 meters deep and is an extension of the existing Erha subsea system and infrastructure, which is currently producing to the existing Erha floating production, storage and offloading (FPSO) vessel located offshore Nigeria. Trelleborg is expected to complete its supply of thermal insulation by quarter four of this year.

 

The Erha North project located in Oil Mining Lease (OML) 133 had been stalled for several years due to the inability of NNPC and its international oil company partners to reach an agreement on their costs. The Erha North II project, recently got a boost after the Nigerian National Petroleum Corporation (NNPC) approved the award of the three engineering, procurement and construction (EPC) contracts for the project to Luxembourg-based Subsea 7 SA. Esso Exploration and Production Nigeria Limited (EEPNL), a subsidiary of ExxonMobil operates the block under a Production Sharing Contract. Shell Nigeria Exploration and Production Company Limited (SNEPCO) is a partner in the venture.

 

Independent Petroleum Marketers Acquire Land for Kogi and Bayelsa Refineries

 

The Independent Petroleum Marketers Association of Nigeria (IPMAN) has acquired 1,000 hectares of land in Kogi and Bayelsa States on which they propose to site their $3 billion refineries. The Chairman IPMAN Bestman Inekwe, had announced plans in July for the two new refineries which the organisation said it would partner with South American investors to build. The refineries, which will have the capacity to process 200,000 barrels of oil per day, will take two years to complete.

 

In demonstration of its commitment to building the refineries, IPMAN has now completed the purchase of land at Itobe in Kogi State and Abbe in Bayelsa State where the refineries will be sited. The IPMAN National President, Chinedu Okoronkwo, said that the foreign investors had conducted feasibility studies on the project in August. He said that they had received the support of the Minister of Petroleum Resources, Diezani Alison-Madueke for the project.

 

Explaining the rationale for the determination to build the refineries, Mr. Okoronkwo said: "The cost of taking crude and bringing it back as refined products will be reduced." He urged the government to issue the operating licences without delay and also to ensure the enabling environment in which to operate.

 

OPEC Daily Basket Price Stood at $88.32 a Barrel Wednesday, 8 October 2014

 

The price of OPEC basket of twelve crudes stood at $88.32 a barrel on Wednesday, compared with $89.37 the previous day, according to OPEC Secretariat calculations. OPEC oil price is now below $90 for the first time since June 2012 after ending the last week in freefall.  

 

Slower predicted growth, ample supplies and the growth of the United States shale production are all being blamed. US production is at its highest in 3 decades while the International Monetary Fund (IMF) lowered its estimates for global economic growth for 2014 and 2015. "Tight oil" production has turned the U.S. into the world's largest producer of liquid petroleum.

 

With oil prices at under $90 most OPEC nations will be starting to feel the effects. Some nations have called for an immediate cut in production whilst others want to tough it out in the hope that it will soon improve. Saudi Arabia has reacted with a cut in its official selling price sparking fears of a price war. It is roundly expected that OPEC output currently at 30 million barrels a day will be cut when the Ministers gather in Vienna for their next scheduled meeting. If prices continue to tumble they may have to call an emergency meeting before then to consider cutting production sooner.  

 

Member nations, which supply 40 per cent of the world's oil consumption, continue to hope for a turnaround before they meet with many refusing to believe that it will hit $80, the point at which many of the petrodollar-reliant nations will begin to find themselves unable to balance their budgets. For Nigeria, as prices slip towards the budget benchmark of $77.5 a barrel, the country has reason to be seriously worried.  

 

Brent crude prices were down to $92.45 per barrel early on Thursday morning while West Texas Intermediate (WTI) crude dropped to $88.18 per barrel.  

 

The OPEC Reference Basket of Crudes comprises Saharan Blend from Algeria, Girassol from Angola, Oriente from Ecuador, Iran Heavy, Basra Light from Iraq, Kuwait Export, Es Sider from Libya, Bonny Light from Nigeria, Qatar Marine, Arab Light from Saudi Arabia, Murban from the United Arab Emirates and Merey from Venezuela.

 

NNPC Issues Warning Against Fake Letters of Authorisation for Oil Lifting

 

The Nigerian National Petroleum Corporation (NNPC) has issued a warning to members of the public regarding the proliferation of fake letters of authorisation from NNPC for the lifting of crude oil. In a statement, the Group General Manager, Group Public Affairs Division of the NNPC, Ohi Alegbe, said there were fake letter circulating, in particular one, which refers to contractual arrangements with a Lavi International Corp.

 

The statement draws attention to the usual wording of the fake letters of authorisation, with one company mentioned in particular: "We hereby confirm that the Nigerian National Petroleum Corporation (NNPC) has entered into contractual arrangements directly with Lavi International, Corp, to supply Bonny Light Crude Oil to the Lavi International Corp Associated Refineries and or Global Traders, and that the Lavi International Corp, has the power and authority to sell or otherwise deal with the Bonny Light Crude Oil, the subject of those contractual agreements."

 

Mr Alegbe stated that Lavi International Corp was not one of the awardees of a term contract for the 2014-15 period and therefore had no such authority. Drawing attention to the published list of off-taker for the 2014-15 annual term contracts, he pledged NNPC's determination to ensure that guilty parties are exposed. "We are working closely with relevant security agencies to track and bring to book all those behind these nefarious activities," he stated.

 

Jacka Resources Granted Halt Pending Nigeria Update

 

Australian Stock Exchange (ASX) listed Jacka Resources, which owns a 5 per cent net revenue interest in oil mining lease (OML) 113 which contains the Aje Field has been granted a trading halt by the ASX. The trading halt will remain pending an announcement to the market relating to an update on the Final Investment Decision on the Aje Field, offshore Nigeria (licence OML 113).

 

Jacka holds a 2.667 per cent participating interest in the licence, a 6.675 per cent contributing interest and a 5.0006 per cent revenue interest in the Aje Field. In August a competent persons report confirmed 23.4 million barrels of gross 2P oil reserves for the Aje Field. This gives Jacka booked net 2P reserves of 1.3 million barrels of oil, with the company looking to book a further 12.1 million barrels of oil equivalent (boe) contingent resources, an increase of 1.6 million boe.

 

Jacka shares are currently in pre-open and the halt will remain in place until the opening of trade on Friday 10th October 2014, or earlier if an announcement is made to the market.

 

The Aje Field joint Venture consists of Yinka 25 per cent (Operator), Chevron 33.75 per cent (Technical Advisor), Vitol 24.05 per cent, Panoro 12.19 per cent and Jacka.

The Aje field has had 4 wells drilled into it with wells Aje-2 and Aje-4 available for use in future developments. The JV is currently assessing development options, which could include an early oil scheme as well as a larger gas/oil development.

 

Jacka Resources also holds oil and gas assets in Australia and Tunisia and is currently looking at assets in Tanzania.

FIRS Recovers $2 Million in Unpaid Taxes From Oil and Gas Firms

 

THE Federal Inland Revenue Service (FIRS) has recovered around $2 million in unpaid taxes from the oil and gas sector in a two-day tax recovery exercise. The News Agency of Nigeria (NAN) reports that the two-day exercise by the FIRS involved many leading oil and gas firms.

 

Mrs Olaitan Adediran, the Director, Tax Department, FIRS, confirmed to NAN that they were able to secure documented promises to pay from some of the companies and that one had made a N148 million payment. Another company promised to pay N70 million following the long holiday weekend.

 

Mrs Adediran vowed that the tax recovery team would continue the exercise to ensure that government received what was due to it through taxes.

 

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