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Royal Niger To Build Nigeria's First Finished Umbilical Products Plant

 

Emerging indigenous engineering powerhouse, Royal Niger Emerging Technologies has reached an advanced stage in its plans to build Nigeria's first facility for the manufacture of finished umbilical products for the local market.Mr. Anthony Okolo, Managing Director of Royal Niger Emerging Technologies, made this known during a press conference in Lagos. The plant, currently in construction, which is expected to begin operations in the 2nd quarter of 2015, will supply flying leads in Nigeria in the first phase of its facility development. The plant located on 25,000 square metres will be capable of receiving umbilical components from multiple manufacturers in a variety of configurations, lengths and materials.

 

"The plant will be a key element in ensuring leading manufacturers of umbilical products are able to meet their Nigerian Content compliance requirements by ensuring up to 60% of the equipment tonnage is manufactured in Nigeria while offering benefits in reduced cost in logistics and operations," Okolo stated.

 

 

"The plant will also support aftermarket services including umbilicals repairs, reeler management and splicing," he added.  

 

The plant will complement the efforts of the Honourable Minister of Petroleum Resources through the Nigerian Content Development and Monitoring Board (NCDMB) to domicile in the country about 400km of umbilical contracts to be awarded by oil companies operating in Nigeria between 2015 - 2018, and as a result, will limit capital flight of approximately $400m from umbilical supply contracts.  

 

The project is expected to directly employ up 120 people, and later indirectly provide over 500 job opportunities. The plant will have an annual cable output of up to 12km per annum.

 

Royal Niger is the first and only Nigerian indigenous company to have been awarded an umbilicals supply contract in Nigeria. They expect to build on that premier status to develop the plant which will be located on a site measuring 25,000 square meters at Angel Park, Iworo, Badagry, with ease of logistics from the Apapa Port and, thus will offer optimal access to all successful tenderers of umbilical projects in Nigeria.

 

Mr Ivan Paoli, the executive director of Royal Niger, who has extensive experience in the oil and gas industry both within and outside Nigeria, expressed optimism in the project. "We hope the industry will recognize the value that this investment will bring in order to level the playing field for tenderers on umbilical projects in the future," he said.

 

"We therefore call upon the NCDMB and industry stakeholders to open up a dialogue on industry requirements in order to ensure the facility has the requisite flexibility and capabilities to serve the laudable objectives of its inception," Paoli continued. 

 

The coming on stream of the plant will see Royal Niger scoring another first in the engineering sector of the oil and gas industry. Last year in April the ambitious company achieved yet another first when it designed Nigeria's first ever wellhead and Christmas tree assembly, which is specifically suited for this local market. They are able to offer a very cost effective solution in that area, aimed at the marginal field producers, who need to bring their fields back to production quickly because it is not over-specified in terms of the components and the materials. It is also aimed at the market for obsolete goods, i.e. equipment installed in the 1950s, 60s and 70s, whose spare parts are no longer readily available, making it very difficult to maintain or refurbish them. They are currently working towards the actual manufacture of the wellheads in Nigeria.

 

According to Okolo, "We actually don't make these wellheads in Nigeria today because of the machining requirement. We have a five-year plan, which sees us doing the design here, the manufacturing in China, and then, we bring in the parts completely locked down, and we assemble, test, install and maintain here in Nigeria. So, out of the six stages related to this equipment, we are doing only one stage outside Nigeria, which complies with the requirements of the Nigeria Content Act."

 

An umbilical is a cable, which supplies fluid, power and data to drilling and production equipment. Royal Niger intends to produce size of line from 0.5" - 6" diameter with capacity to hold up to 24 lines. They will come in both thermoplastic and steel tubes while reinforcement and/or weight-gaining wires could be added. It will also afford the flexibility of inclusion of electrical and fibre optic cables.

 

Royal Niger provides hydraulics, controls, drilling and production equipment and services to the local and international energy and marine industries. Its engineering services focus on wellheads, Christmas trees, controls and distribution equipment.

 

Shell Targets Additional 40,000 Bpd from Eight New Wells in Bonga Field

 

Following the commencement of production from the Bonga North West deep-water development in August, Shell's deep-water subsidiary in Nigeria, Shell Nigeria Exploration and Production Company Ltd (SNEPCo) has announced plans for 8 new wells on Bonga Field from which it will target an additional 40,000 barrels of oil per day (bpd).

 

In a statement, Shell's Vice-President for Nigeria and Gabon, Markus Droll, said: "This programme - on top of the ongoing Phase 2 drilling and after the start up of Bonga North West barely two months ago - further underlines our commitment to Nigeria and leadership in deep-water production."  

 

The Bonga project, which began producing oil and gas in 2005, was Nigeria's first deep-water development in water depths of over 1,000 metres. Bonga North West represents a significant step forward for the project. At the time, Andrew Brown, Shell's Upstream International Director said: "This is an excellent addition to our deep-water portfolio - a key growth theme for Shell's world-wide upstream business. It's also good news for Nigeria, as it is a new source of oil revenues and strengthens Nigeria's deep-water expertise, a key driver of economic development."

 

This third phase of the Bonga Main development will yield an additional 40,000 barrels of oil equivalent per day through the existing Bonga FPSO facility, which currently produces over 200,000 barrels of oil per day and 150 million standard cubic feet of gas a day. It is an expansion of the existing Bonga Main development and will involve drilling four oil producing and four water injection wells. Bonga has produced over 500 million barrels of oil to date and drilling for Phase 3 should commence in 2015.

 

The work on Phase 3 will be executed by several contractors including Nigerian companies that have developed deep-water expertise through the provision of similar services for SNEPCo.
Bonga FPSO had earlier been upgraded to handle the additional oil flow from Bonga North-west.

 

The Phase 2 programme, in Bonga North West, which has just come on-stream has four producing wells and two water injection wells. That programme saw a number of new production manifolds, subsea umbilical systems, oil production and water injection flow-lines and subsea tree systems installed on the sea bed around 1,000 metres below the surface.

 

As a testament to the development of local content expertise, a significant part of the project was carried out by Nigerian companies, including a local contractor that fabricated and installed the FPSO topsides. The project leadership and majority of staff working on the Bonga North West project are Nigerian giving local manpower access to growing deep-water engineering experience. It is expected that the Phase 3 programme will lay a similar emphasis on Nigerian content.

 

The Bonga project is operated by SNEPCo, which holds a 55% stake. The other project partners are Esso Exploration & Production Nigeria (Deepwater) Limited (20%), Total E&P Nigeria Limited (12.5%) and Nigerian Agip Exploration Limited (12.5%) under a Production Sharing Contract with the Nigerian National Petroleum Corporation. SNEPCo was incorporated in 1993 to develop Nigeria's deep-water oil and gas resources, a new frontier for the country's energy industry at the time. The company holds interests in four deep-water blocks, two of which it operates: OML 118 (Bonga) and OML 135 (Bolia).

 

Crude Oil Reserves Declining by One Billion Barrels a Year

 

The Managing Director of the Pipelines and Product Marketing Company (PPMC), Haruna Momoh, has drawn attention to the worrying decline in Nigeria's crude oil reserves after revealing that crude oil reserves were down to 31.81 billion barrels from 37.2 billion barrels in 2011. Momoh was speaking at the Oil Trading and Logistics Conference in Lagos recently. Without further investment in aggressive policies to encourage exploration, Nigeria's crude oil reserves will be depleted by 2048 given the current rate of decline of about one billion barrels every year.

 

Also speaking at the event was the Director, Department of Petroleum Resources (DPR), George Osahon, who has stressed the need for more seismic data coverage and drilling of exploration wells, drilling for deeper oil fields to enhance recovery methods, utilisation of non-straddled reservoirs, bitumen exploration and exploitation, among others.

 

Osahon has identified some factors for the dire position and the decline in exploration, which would lead to increased exploration and production. Some of the challenges he listed were lack of access to finance, high taxes, community issues, technical competence, fluctuating assistance from foreign equity partners and low funding capacity of indigenous players.

 

With the current position, the Federal Government's aim to increase production to 4 million barrels a day and crude reserves to 40 billion barrels is looking increasingly unrealistic. The Society of Petroleum Engineers (SPE), Nigeria Council, has said in the past that the country needs $100 billion investment to achieve its 2020 aspiration of 4 million barrels per day of oil production. With the delay in passing the Petroleum Industry Bill, the pervading air of uncertainty continues to ensure that such level of investment remains elusive.

 

The price of OPEC basket of twelve crudes stood at $78.67 a barrel on Tuesday, compared with $80.64 the previous day, according to OPEC Secretariat calculations. The OPEC basket price has now broken through the $80 barrier on a downward trajectory, bringing the member nations into greater danger of not being able to balance their budgets.

 

The story is the same for other benchmark crudes. United States' benchmark, WTI, fell by 2.6 per cent to its lowest since September 2010, at $76.79 on Tuesday, whilst Brent slid to $82.63, its lowest since October 2010.

 

Oil prices started sliding in June, and most benchmark crudes and have now fallen 25 per cent in the last four months. Analysts agree that there are many issues to blame for the falling prices. Among them, growth in tight oil production in the US, softening demand from Europe and China, increased supply from Nigeria, and the failure of the violence sweeping the Middle East to significantly disrupt supplies from Libya and Iraq. Saudi Arabia has responded by cutting its prices, fuelling fears of a price war, as it fights to retain its market share.

 

Meanwhile, a Reuters survey found that OPEC oil supply in October has fallen by 120,000 barrels per day (bpd) due to lower production in Angola and Nigeria. Before that, in September, output had risen to a 2-year high. OPEC averaged 30.72 million bpd in October, down from 30.84 million bpd in September according to the survey.

 

The question now is whether OPEC Ministers who are meeting in Vienna on the 27th of November will agree to cut their production sufficiently for it to impact prices as another year draws ever closer. Some member nations are calling for an immediate cut whilst others are clinging to the hope that they can ride out the storm.

 

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).

Seplat Releases Q3 Results and Operational Update

 

Nigerian and London Stock Exchange listed indigenous oil and gas company, Seplat Petroleum has released its Q3 unaudited results as well as an operational update. The results show a modest improvement in average working interest production, reaching 29,014 (barrels of oil equivalent per day) boepd in the first nine months of 2014, up just 8% from the same period last year.

 

The company however saw a spectacular jump in gas revenue, which is up by 24% year-on-year to $16.5 million. This will be music to the ears of the government as it tries to persuade upstream players to produce gas for the Nigerian market in support of its gas to power initiative.

The company's profit after tax for the period stood at $227.9 million, and would have been $282 million but for previously reported one-off costs of $54 million for general and administration costs in relation to financing, regulatory, procurement and staff costs in 2014.

 

Given the company's strong finances with a cash position of $435 million at the end of the period and a further $453 million placed as a refundable deposit against a potential investment, the board has agreed an interim dividend of $0.06 per share. The dividend will be paid on or shortly after 24 November 2014 to shareholders on the register at the close of business on 6 November 2014. All shareholders will be paid their dividends in US Dollars.  The Nigerian shareholder register will be temporarily closed on 7th November 2014 to enable the company's registrar, DataMax Registrars, to prepare for the payment of the interim dividend.

 

Commenting on the results, Austin Avuru, Seplat's Chief Executive Officer said: "We have continued to move the business forward in the third quarter.  Production performance is strong and we are well capitalised to take advantage of the current and new growth opportunities available to us."

 

"However, like all producers, we are closely monitoring the oil price environment and have challenged ourselves to respond by redoubling efforts to improve efficiency and maximise profitability," he added. The company is now one of the first four major players in Nigeria's gas market.

 

Gross revenue for the first nine months was $592.5 million down 8 per cent from the same period in 2013 when it was $642.9 million. Of the gross revenue, crude sales generated $575.6 million, an 8% decrease from the same period in 2013 when it generated $629.6 million. Gas revenue meanwhile was up $16.5 million, a 24% increase from the same period in 2013 mainly due to increased production from well work-overs, upgrade works on the Oben gas plant and higher offtake from the Sapele gas plant.

 

Working interest sales volumes during the first nine months increased marginally to 7.1 mmboe from 7.0 mmboe in 2013.  The total volume of crude lifted in the first nine months was 5.3 MMbbls compared to 5.8 MMbbls in 2013.  The 2013 liftings includes 0.74 mmbbls of returned MoU volumes from Shell in relation to settlement of a prior underlift position.  Total gas volume sold was 10,223,406

 

The company says it is on track to deliver a full year's working interest production of between 29,000 and 33,000 boepd and with gross production of 72,500 barrels of oil per day (bopd) on the assets.

 

Production figures reflect 59 days of downtime on the Trans Forcados System (TFS) in the first nine months, of which 14 were in Q3.  Deliveries to the Warri refinery are now going via the new alternative export route, which mitigates sole reliance by the company on exports via the TFS. This helped the company to increase its gross deliveries in the third quarter.

 

In its drilling and capital projects update, the company said it had continued its high levels of rig based activity in Q3, during which it completed three oil production wells at Oben, one gas work-over well at Oben and one gas work-over well at Sapele. First oil was delivered from the Ovhor-Amukpe gas lift compressor on 11th October and commissioning work is continuing to enable continuous gas lift there.

 

Meanwhile, the new 150 mmscfd capacity gas processing plant it ordered for Oben arrived in the country and site preparation works at the field have been completed. Other work includes the modification of the liquid treatment facility, which will address issues with the composition of separated water to enable full continuous injection. Construction and installation of two 50,000 bbl storage tanks at the Amukpe field is also progressing, with the first tank nearing completion.

 

Seplat has a 45 per cent interest in oil mining leases (OMLs) 4, 38 and 41 and a 40 per cent interest in OPL 283. It has been actively pursuing new venture opportunities that will offer it near term production, cash flow and reserve replacement potential. It is focusing its search on onshore and shallow water offshore areas. Given its cash reserves, it is no surprise that the company has gone after international oil company (IOC) divestments, including Chevron's OML 53 and now, Shell's OML 25. IOC divestments would provide the cash rich company with the best scenario to achieve its ambitions plans for growth. These two attempts have not gone terribly well.

 

With regards to OML 53, Seplat has been joined in the lawsuit by Brittania-U against Chevron after Chevron sought to declare Seplat the winner of the bid. Britannia-U claims it was the highest bidder for the 3 blocks. Although Seplat was runner up by bid amount, it seems that Chevron preferred to award the block to Seplat rather than Brittania-U, a move that saw the tenacious CEO of Britannia-U, Uju Ifejika haul the Chevron and Seplat off to court.

 

With Shell's OML 25, Seplat came in at the last minute after Crestar, the highest bidder, dropped Africa Finance Corporation (AFC), which was to finance the bid, and brought Seplat on board. Seplat has deposited $453 million in escrow but once again, their plans have been thwarted after NNPC exercised its right of pre-emption over the block, a move, which, barring a U-turn by NNPC or the matter heading to court, will force Shell and its joint venture partners to sell their interests to NNPC.

 

In spite of these setbacks, Seplat is likely to find some acquisitions soon given the on-going divestment by IOCs of their onshore interests and the company's cash reserves. Shell was about to release another two assets but it may have to let the dust settle on the OML 25 fiasco before it begins another round of divestment.

 

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