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Former DPR Director Olorunsola Resigns as Chairman of Shell's OML 25 Winner, Crestar

 

Former director of the Department of Petroleum Resources, Osten Olorunsola has resigned his position as chairman of Crestar, the company that won the bid for oil mining lease (OML) 25 in Shell's latest onshore divestment exercise. Crestar won the block with a bid of $450 million, a clear lead of some $50 million ahead of the runner up, Green Energy. Crestar will be hoping that Olorunsola's resignation as chairman of Crestar will improve the chances of the Nigerian National Petroleum Corporation reversing its decision to exercise its right of pre-emption over the block.

 

Different reasons have been touted for NNPC's shock decision, to exercise its right of pre-emption, over 100 days after the signing of the Sales Purchase Agreement (SPA) between Shell and Crestar, and even after the deposit of the full purchase price into escrow, the first time this has happened in the history of the international oil company (IOC) divestment. Many believe that a personal rift between Olorunsola and the Honourable Minister of Petroleum Resources, Diezani Alison-Madueke, was to blame. An impression had been created in oil industry circles that Olorunsola was the main shareholder of Crestar, whereas it would appear that his interest in the company is not a large one. A number of Nigerian oil and gas professionals, some ex-Shell, own 55 per cent of the company, while James Bay Resources owns a 45 per cent interest.

 

NOGintelligence sources say that Crestar was put together by Managing Director of Crestar, Adeniyi Olaniyan, who is solidly ex-Shell. He is said to have about 25 years of local and international (Africa, Asia & Europe) experience in subsurface oil and gas, project management, asset management, new ventures, technology management, business planning and organizational performance with the Shell group. His last job at Shell was as Hydro Carbon Maturation (HCM) Manager for the Near Infrastructure Exploration (NIE) activities to deliver short-term oil along the Niger Delta Nembe Creek Trunk line. Although Olaniyan declined to speak on the issue, NOGintelligence has learned from other sources that his considerable geosciences experience in several geological basins and his intimate knowledge of OML 25, gave the Crestar team a head start, enabling them to put together their winning bid with relative ease.

 

With Olorunsola's resignation, Crestar will be hoping to have done enough to get the Minister onside. They will also be hoping that the litigation in which James Bay Resources is embroiled will not affect their chances of success.

 

James Bay Resources (formerly listed on the Toronto Stock Exchange (TSX) but after failing to get change of business (COB) from mining to oil company from the TSX, is now listed on the more junior Canadian Securities Exchange (CSE)) has been taken to court by little known Mak Mera, a Canadian registered company, owned by Nigerian Wale Olorunsola (no relation to former DPR Director, Osten).

 

Mak Mera claims it had an agreement with James Bay to Nigeria under which it would introduce assets to the company in exchange for getting some shares in James Bay's Canadian entity. Mak Mera says that it has fulfilled its part of the bargain and is therefore entitled to shares in James Bay. Getting shares James Bay would give Mak Mera a shareholding in Crestar and therefore in OML 25 if Crestar should be reinstated. Mak Mera has sued James Bay in Nigeria, joining Crestar, Shell, the Department of Petroleum Resources, as well as the Minister of Petroleum Resources asking for specific performance of its agreement with Crestar. Shell, however, was seemingly unperturbed by the lawsuit and went ahead and signed the SPA with Crestar.

 

The main defendants in the lawsuit, James Bay, are claiming that the Nigerian courts have no jurisdiction over the matter and that in any case, their agreement with Mak Mera has expired. The issue of jurisdiction is yet to be decided by a Federal High Court.

 

For Crestar, meanwhile, with Olorunsola out of the forefront, it is hoping the Minister's position may soften. Although NNPC has exercised its right of pre-emption, it still has to raise $450 million to match the winning bid and it only has 30 days in which to do it. Given that it is unlikely to have the $450 million lying around to commit to the asset at this time, Crestar will be hoping that there's a deal to be done. As they say in the opera world: "It ain't over till the fat lady sings." It could be that the fat lady hasn't yet sung in this opera.

 

As for Shell, it will be hoping for a swift resolution of the situation, so that it can put this round of divestments to bed and begin work on the next round, in its quest to raise $15 billion from a worldwide sale of assets this year. With the way things are going, and with another divestment round to be announced shortly after this one, a good chunk of that amount is expected to come from the sale of its Nigerian assets, for which there seems to be unlimited appetite.

Shell Completes Sale of Oil Mining Lease 24 to Newcross Petroleum for $600 Million

 

The Shell Petroleum Development Company of Nigeria Limited (SPDC) has confirmed the completion of the assignment of its 30% interest in Oil Mining Lease (OML) 24 and related facilities in the Eastern Niger Delta to Newcross Exploration and Production Limited for $600 million. OML 24 is the 3rd in a quartet of assets that Shell is offloading in what it calls "the strategic review of SPDC's onshore portfolio ... in line with the Federal Government of Nigeria's aim of developing Nigerian companies in the country's upstream oil and gas business." The Dutch giant confirms that regulatory approvals have been received from the relevant authorities of the sale of OML 24 to Newcross.

 

OML 24 covers an area of some 430 square kilometres and includes the Awoba, Awoba Northwest and Ekulama fields and related facilities. Although OML 24, producing 13,000 barrels of oil equivalent per day, is not the choice asset of the lot, nevertheless that level of production, with opportunities for a quick ramp up, will make Newcross a major upstream player. They are said to have quietly partnered with Sahara Energy, who have chosen to stay out of the limelight in this deal.

 

What Newcross will get for its money is 45 wells, 3 flowstations and associated gas gathering/processing plant, 120 flowlines and manifolds and various oil and gas pipeline. Oil production in 2012 averaged 21,000 bpd with peak production of 36,000 bpd. The relative newcomer, linked through its shareholders to old stalworth, Pan Ocean, is a partner in producing Egbeoma marginal field (formerly Asuokpu/Umutu) located on OML 38. It also has two production sharing contracts for OPL 283, said to be close to production and OPL 276, still at exploration stage.  The 30 million standard cubic feet per day (30MMscf/d) Egbeoma Gas Processing Plant was sold earlier this year by the Plaform/Newcross joint venture to Owei-Linkso.

 

This acquisition is clearly a game-changer for Newcross, which now moves into the major league of producers, although the deal is generally seen in the industry as an acquisition by Pan Ocean in all but name.

 

Shell had previously concluded the sale of OMLs 18 and 29. OML 18 was sold to the Erotron consortium made up of the partners in 10,000 barrels per day (bpd) Umusadege field, Midwestern Oil, Gas and Suntrust Oil and Gas and Toronto Stock Exchange listed Mart Resources. They are said to have bid $1.2 billion for the 21,000 bpd producer, which contains 9 fields and associated infrastructure that includes 7 oil flow stations, 2 gas processing plants, 3 associated gas gathering processing facilities and 200 kilometres of flowlines, in addition to a number of oil and gas pipelines. Peak production in 2012 was 26,000 bpd.

 

What many do not know is that the Erotron consortium (Notore spelt backward) takes its name from Notore Chemical Industries a leading fertiliser and agro-allied company, which took over the moribund National Fertiliser Company of Nigeria (NAFCON). The former Governor of Delta State, who is serving a 13-year jail sentence for money laundering in the United Kingdom) was reported in the UK trial to have a 50 per cent interest in Notore, although the company strenuously denied it at the time. The whiff of scandal has not deterred Shell from accepting the bid from the successful consortium, one of 9 currently producing licensees out of 24 from the marginal fields licensing round of 2003.

 

OML 29, including the vital 60 mile Nembe Creek Trunk Line, the choice asset of the lot went to a consortium led by the Aiteo Group after a fiercely contested bid. The consortium, which includes Tempo Energy Resources with a 10 per cent stake and Taleveras with only a 5 per cent stake, paid $2.562 billion although the group expects to spend $2.7 billion, including working capital. For their mammoth-spend they will get 100 wells, 6 flowstations and gas gathering facilities, over 250 kilometres of flowlines and manifolds. Various piplelines, including Nembe Creek to which all the assets will flow through to Bonny, are included in the deal. Average production is 32,000 bpd with a 2012 peak of 62,000 bpd.

 

The cog in the wheel for Shell in this round of divestments is the sale of OML 25 to Crestar, which won the bid with $450 million. Crestar had paid its 10 per cent deposit and after signing the Sales Purchase Agreement with Shell and placing $450 million in escrow, came the shock decision by the Nigerian National Petroleum Corporation (NNPC) to exercise the right of pre-emption to which it is entitled under the joint venture agreements with the IOCs.

 

Total E&P Nigeria Limited (10 per cent) and Nigerian Agip Oil Company Limited (5 per cent) have also assigned their interests in the leases in the 4 OMLs, ultimately giving the new purchasers a 45 per cent interest). The Nigerian National Petroleum Corporation (NNPC) has a 55 per cent interest in the joint venture.

FMC Technologies Commissions Subsea Equipment for Bonga Northwest Development

 

New York stock exchange (NYSE) listed FMC Technologies, Inc. has commissioned its first subsea production tree built entirely in Nigeria. In a boost for local content, the company says that the equipment, manufactured for Shell Nigeria Exploration and Production Company Ltd. (SNEPCo)'s Bonga Northwest project, marks the company's first subsea equipment engineered, manufactured, tested, installed and serviced entirely in the country.

 

Oil production from the first well at the Bonga Northwest deepwater development off the Nigerian coast began on August 5, 2014. Four oil producing wells and two water injection wells in the Bonga Northwest Phase 1 development will be connected to the Bonga Floating Production Storage and Offloading (FPSO) vessel from where oil is loaded onto tankers for shipping around the world. FMC Technologies is providing the subsea production systems to support the development, which is led by Shell Nigeria Exploration and Production Company Ltd. (SNEPCo).

 

Speaking at an event in Lagos to celebrate this achievement, Shelagh Daley, the Area Manager of FMC Technologies Africa Region Subsea said: "We have been working with SNEPCo to supply subsea systems for the Bonga Northwest development since 2010. This local manufacturing of equipment marks a significant milestone for the company and for the country's energy industry."

 

The company is particularly proud, it says, to be contributing to the employment and development of skilled local professionals. It says that it has responsibility for more than 2,000 jobs in Nigeria, including employees and through their supply chain.

 

Dangote's $9bn Refinery Delayed Till 2018

 

The $9 billion refinery, which Dangote Group is building and which will double Nigeria's refining capacity will now be ready in mid 2018. When plans for the refinery were announced last year, it was optimistically slated for completion in 2016. However, at the African Refining Summit in Cape Town, South Africa, the Operations Director for Petroleum Refining for Dangote Group, George Nicolaides, explained that the refinery is now expected to be ready in 2018. He admitted that in spite of their ambitious schedule, a completion date in 2016 was unrealistic, saying, "I'm not sure about the history of those dates."

 

Plans for the refinery are now at an advanced stage following the award in June of the Engineering, Procurement and Construction Management (EPCM) to Engineers India Ltd (EIL). EIL will also be responsible for commissioning services for the project. Contractors for the project have not yet been appointed, but clearing of the site and engineering work is said to have commenced at the site in the Lekki Free Trade Zone. The refinery was originally to have been located at the Olokola Free Trade Zone in Ondo State. However, negotiations with the local communities stalled, and the Dangote Group pulled out, citing unrealistic claims by the Olokola and Igbokoda communities. Lagos State seized the opportunity and welcomed the project with open arms, at the same time, breathing new life into the Lekki Free Trade Zone project.

 

The Dangote Group refinery was originally slated to handle 400,000 barrels of oil per day, but it seems that the capacity of the plant has been upgraded to handle 500,000 bpd. Apart from the petroleum refinery, the project will also include a 600,000 TPA Polypropylene Plant.  The main facilities of the project comprise of a Crude Distillation Unit, Single train Residue Fluid Catalytic Cracking Unit, Diesel Hydrotreating Unit, CCR unit, Alkylation Unit, Poly-Propylene Unit, Utilities and Offsites including captive power with other enabling infrastructure facilities.  There will also be crude and product handing facilities through Single Point Mooring (SPM) at Lekki.

 

The Dangote Group, which was established in the late 1970s started with commodity importation and has now diversified into oil and gas. In April last year, as he turned 55, Africa's richest man, Dangote announced that he would build a refinery and petrochemicals plant and single-handedly double Nigeria's refining capacity. Within a few days, financiers were lining up to provide the a good chunk of the $9 billion that would realise the project. Dangote was able to raise $3.3 billion by September of the same year in the single largest loan facility granted to an individual by a group of Nigerian banks. 12 Nigerian and some foreign lenders participated in the syndicated loan.

 

Nigeria, as Africa's largest crude oil producer, does not have the refinery capacity to provide for its populous nation. In spite of having four refineries with a combined capacity of 450,000 barrels, Nigeria has to import most of refined petroleum products and fertiliser products for its domestic needs, as the refineries continue to perform below capacity. In June this year, the four refineries at Port Harcourt, Warri and Kaduna performed at only 10 per cent of capacity.

 

The Dangote Group refinery and petrochemicals plants will be the largest in Africa when completed. The project will also create over 30,000 temporary jobs during construction, and 2,900 direct jobs during operations.

 

Brass LNG Partners Will Go Ahead without ConocoPhillips

 

It seems that news of the imminent demise of the Brass Liquefied Natural Gas (LNG) project, after the departure of ConocoPhillips, together with their technology, from Nigeria and thus the project, have been rather premature. This follows the revelation by, the Chairman of the board of Brass LNG, Dr. Jackson Gaius-Obaseki, that the partners in Brass LNG are to appropriate the 17 per cent shareholding of ConocoPhillips in the project. He revealed this during a recent visit to the new Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr. Joseph Dahwa.

 

Obaseki is confident that with the renewed commitment of the partners to the development of Brass LNG, the final investment decision (FID) on the two-train $20 billion LNG project could be taken soon. The Nigerian National Petroleum Corporation (NNPC) holds 49 per cent, while, Eni, the operator of the project, and Total each hold a 17 per cent interest. They now intend to split ConocoPhillip's interest between them.

 

ConocoPhillip's shock exit from the project came at a time when the FID on the project was very close, having been scheduled for April 2013. ConocoPhillip's exit meant that apart from the loss of its share of expenses, representing around $3.7 billion of the project expenditure, there was the potential loss of the technology on which the project was based. ConocoPhillips is the owner of Optimised Cascade Process, which is the technology planned for use of in the construction of the plant. The partners went into negotiations to try and secure terms for the continued use of the technology. That left the issue of ConocoPhillip's stake in the project up in the air. Now, with this announcement, it is clear that the remaining partners are committed to the project and there is now renewed hope that it will still go ahead.

 

The Brass LNG project, which will have a production capacity of 10 million metric tons of LNG per year (Mt/y) has been a long time in the making. The shareholders signed the Heads of Agreement (HOA) in October 2003 and were scheduled to take the FID 10 years later. The project will include the construction of a loading terminal and two liquefaction trains (each with capacity of five million metric tons per year). Total has said it will purchase one-fifth of the plant's output for twenty years, with most of (70 per cent) of this offtake targeted at markets in Western Europe and the rest (30 per cent) going to Asia.

 

Trafigura Commits to Transparency and Accountability

 

Swiss commodity trader, Trafigura, has announced its commitment to a new initiative by the Extractive Industries Transparency Initiative (EITI), which is designed to encourage the disclosure of payments to governments by commodities traders. One of the world's leading commodity trading firms, Trafigura says it will support EITI's efforts, as it becomes the first commodity trading company to join the 90 oil, gas and mining companies already supporting EITI.

 

Trafigura has gone a step further in its determination to support EITI's policy and has come up with a policy on payments to Governments, which it has drawn up in consultation with the EITI International Secretariat. The policy commits the company to disclosing Trafigura's payments to governments in EITI compliant and candidate countries beginning in 2015. Trafigura's decision to make these commitments follows engagement with stakeholders, including the Swiss Government.

 

The global Extractive Industries Transparency Initiative (EITI), which Nigeria signed up to in 2003 requires member countries to publish on a regular basis audit reports to acquaint the citizens with current information and data on what extractive companies paid to governments in terms of royalties, taxes, levies, signature bonuses, rents etc. The payments are to be reconciled with what governments received from the companies for their business with the extractive resources.

 

Trafigura is one of the largest traders of Nigerian crude oil. Last year its reputation took a battering, along with other Swiss commodity traders, when it was accused by an international financial watchdog, the Berne Declaration (BD), of colluding with the Nigerian National Petroleum Corporation (NNPC) to engage in fraudulent practices in the sale of Nigerian crude oil.

 

A 19-page report by BD entitled "Swiss Traders' Opaque Deals in Nigeria" leveled strong accusations at the Swiss oil traders that they were colluding with NNPC to buy Nigeria's oil at below market value thereby depriving the nation of billions of dollars in revenue. The damning report accused the traders of contrib­uting to the perpetuation of a corrupt system characterized by crude oil export allocations to "letterbox" companies, opaque calls for tenders, suspicions of crude sales at knock-down prices, unjustified use of opaque jurisdictions such as Bermuda.

 

The House of Representatives ordered an investigation into the accusations in November last year but the result of the investigation has not been made public.

 

NNPC denied the accusations at the time and issued a statement in which the Acting Group General Manager, Group Public Affairs Division, NNPC, Ms. Tumini Green, dismissed the allegations as "not only bogus but strewn with inaccurate and poorly researched data, which defies common sense and verifiable evidence on the ground."

 

At the time Trafigura also denied the accusations saying that it had "a zero tolerance policy towards corruption and well established due diligence processes." Now the commodities giant is taking steps to put its money where its mouth is, as it makes unprecedented moves to clean up its image.

 

Commenting on the new policy, the first of its kind from the commodities trading sector, Jeremy Weir, Trafigura Chief Executive Officer, said: "This policy reflects Trafigura's commitment to transparency and accountability, as core components of responsible trade and better-governed natural resource sectors."

 

Jonas Moberg, Head of the EITI International Secretariat, said: "We welcome Trafigura's support of the EITI, and more importantly Trafigura's unprecedented commitment to align its policy with the EITI Principles and transparency requirements. We hope that this will spur transparency and accountability in the commodity trading industry."

 

Nigeria has supported and enforced the implementation of the EITI policy in Nigeria through the Nigeria Extractive Industry Transparency Initiative (NEITI), which was inaugurated in February 2004. NEITI has just embarked on the 2012 audit, the fifth in NEITI's cycle of audits of the oil and gas sector since the agency commenced operations in 2004. It has previously published audits of the Nigerian oil and gas industry covering the periods 1999-2004, 2005, 2006-2008 and 2009-2011. During this process, and as a result of NEITI's interventions, the agency had succeeded in recovering the sum of $2 billion for the government and uncovering an outstanding sum of $9.6 billion as potential revenues for the federation account. Last year, NEITI won the EITI "Best Extractive Industry Transparency Implementing Country" award.

 

The scope of Trafigura's policy means that it will have to disclose payments made to or received from NNPC for crude oil and petroleum including gas. The policy will also cover corporate taxes and where relevant, licence payments to the Nigerian government. View Trafigura's new policy at http://bit.ly/trafigurapaymentstogovernmentspolicy

 

Petroleum Minister's Moves To Avert Christmas Fuel Scarcity

 

A looming fuel scarcity over the festive holidays may have been averted following the pledge by the Minister of Petroleum Resources, Diezani Alison-Madueke, to intervene in the matter of the outstanding arrears owed to petroleum marketers. She said that the outstanding sums, which add up to over $100 million would be paid to petroleum marketers before the end of November. Alison-Madueke was speaking during a meeting with members of the Depot Owners and Petroleum Products Marketers Association (DAPPMA) and the Major Oil Marketers Association of Nigeria (MOMAN) in Abuja.

 

Alison-Madueke said she was already in consultation with the Minister of Finance on the issue. She is also due to meet the Central Bank of Nigeria (CBN) Governor of the Godwin Emiefele, to discuss how to keep the banks from withdrawing credit lines to petroleum marketers on account of the delay in the payment of subsidy arrears. She also said she had briefed the President, Goodluck Jonathan on the situation.

 

The Chairman of DAPPMA, Dapo Abiodun, urged the Minister to intervene quickly while the Executive Secretary of MOMAN, Obafemi Olawore, said that stocks of petrol at the depots might soon dry up unless there is an intervention. They expressed their gratitude to the Minister for her assurance of settlement of the subsidy arrears by the end of the month. 

 

OPEC Daily Basket Price Stood at $74.03 a Barrel Thursday, 20 November 2014

 

The price of OPEC basket of twelve crudes stood at $74.03 a barrel on Thursday, compared with $74.05 the previous day, according to OPEC Secretariat calculations.

 

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).

 

Hard Times Ahead as Government Prepares Coping Measure for Falling Oil Prices

 

Falling oil prices has prompted a government warning that Nigeria will begin from this month to feel the impact of the declining price of crude oil. The fall in oil prices is also putting pressure on the Nigerian currency, as the naira slumped to a record low against the dollar on Thursday. The naira has fallen 7.4 per cent this quarter alone and after four consecutive days of declines, was down 1.9 per cent at N177.17 to the dollar on Thursday. Analysts are warning of much worse to come as consequences of the sustained fall in crude oil prices may yet lead to the devaluation of the naira, which in turn will spark inflation.

 

The Federal Government is now planning to revise the crude oil benchmark proposed in the Medium Term Expenditure Framework (MTEF) submitted to Parliament for the 2015 budget. The benchmark was set at $78 per barrel with the government optimistically expecting that the oil price, which was then hovering around $85 per barrel, would soon begin to rise. The government now accepts that there will be no quick fix and proposes to slash the oil benchmark to a rather more realistic $73 per barrel. 

 

Warning that there will have to be some serious belt tightening, Minister of Finance, Ngozi Okonjo-Iweala, said in Abuja at a media briefing on the impact of the declining global oil prices, that the revision was part of "a multi-pronged strategic response" to the situation. She said that crude oil production would be maintained at 2.27 million per barrel. The MTEF will be revised to accommodate the impact of the fall in projected oil revenue from N7.287 trillion down to N6.833 trillion.

 

Okonjo-Iweala said that some fiscal measures would have to be adopted by the government to boost non-oil revenues. Steps will be taken to improve tax collection especially among small and medium enterprises (SMEs) in the country, only 25 per cent of which are currently registered as taxpayers. Other measures could include surcharges on some luxury items, such as champagne, alcoholic beverages, yacht, and luxury cars.

 

Other measures include a curb on expenditure on new equipment, and limiting foreign travel by public officials and civil servants to only the essential ones, and reducing training to within the country.

 

Confirming that in could be a long time before prices improve, Okonjo-Iweala said: "The expectation is that oil prices will continue to go down, and may actually be a permanent shock. But, Nigeria has got to get ready to manage it. We have the capacity, the economic base, the scenario and additional measures to tackle the problem should the price fall even below the new benchmark."

 

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