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Welcome to our 129th issue of NOGintelligence.
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Ibe Kachikwu is New Group Managing Director of NNPC
President Buhari's new government is slowly beginning to take shape with the appointment of Ibe Kachikwu as the new Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC). Dr Emmanuel Ibe Kachikwu takes over from Joseph Dawha who was in the role for exactly one year. Although in the last few days it was clear that he was the front-runner, industry stalwarts consider 58 year old Dr Kachikwu a surprise appointment.
Kachikwu was Executive Vice Chairman and General Counsel for an Exxon Mobil Nigeria affiliate. He is a graduate of the University of Nigeria, Nsukka where he studied law. After qualifying as a Barrister at the Nigerian Law School, he went on to Harvard where he obtained his Masters and Doctorate Degrees in Law. He then went into law practice in the US, joining Texaco later, eventually moving on to Exxon Mobil.
Kachikwu has published a number of books, including his book on the Law and Practice of Corporate Governance in Nigeria. It may well be this, in addition to his other accomplishments that earned him the credentials to be appointed to the crucial position. NNPC has been racked with scandal over the years with accusations of failing to remit billions of dollars in revenue due to the federation account. Under Buhari's administration, which came in on an anti-corruption platform, corporate governance will be crucial to maintaining the transparency that the general public need to see in the management of NNPC affairs. Kachikwu will oversee the transformation of NNPC, which Buhari's spokesperson has recently said will be broken up into two with a regulatory arm that will be separate from the commercial arm.
It remains to be seen whether the long overdue sanitisation of NNPC will take place under the watch of the accomplished lawyer, known to many industry as a consummate dealmaker. The relationship with the future appointee to the role of Minister of Petroleum Resources will be crucial. The Minister of Petroleum chairs the NNPC board and the last Minister in particular hired and fired NNPC GMDs at will, which ensured that NNPC GMDs served only for as long as they towed the Minister's line. As a corporate governance expert, Kachikwu, much is expected of the man, who in his previous role advised ExxonMobil on compliance and anti-corruption matters.
A brief handover ceremony was held at the NNPC Towers, Abuja, to mark the change of guard. At the event, Kachikwu expressed gratitude to his predecessor, Joseph Dawha, for his hard work in heading the corporation. He pledged to work assiduously in achieving the President's growth aspiration for the oil and gas industry in the country.
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Aje Field On Track for Production By End of 2015
With the announcement that drilling has commenced on the Aje 5 Development Well located on oil mining lease (OML) 113 offshore, it seems that the Aje Field Development Plan (FDP) is on track. First oil is forecast for end of this year. The Scarabeo 3 semi-submersible rig was mobilised from its location near Lagos, Nigeria to conduct the drilling of Aje 5, which is to be followed by the drilling of Aje 4 as a re-entry production well for Phase 1 of the development plan. The ultra deepwater 6th generation semi-submersible drilling rig is expected to take 70 days to complete the Aje 5 drilling programme. The rig is able to operate at water depths of up to 10,000 feet (3,000 m).
The partners in the Yinka Folawiyo operated field are targeting first oil in December 2015 with gross production for the first two wells expected to reach 11,000 barrels of oil per day (bopd) in the first phase of a three phase development programme. Production is expected to go up to 19,000 bopd in phase 2, with an additional development of two wells. OML 113 covers an area of 835 sq km offshore Nigeria close to the Benin border and holds the Aje field as well as a number of exploration prospects.
Aje field was discovered in 1997, in water depths ranging from 100-1500m. Unlike the majority of Nigerian fields, which are Tertiary sandstones, Aje has multiple oil, gas and gas condensate reservoirs in the Turonian, Cenomanian and Albian sandstones, and as such has more affinity with the recent Jubilee and Tweneboa discoveries offshore Ghana. Four wells have been drilled to date on the Aje Field. Aje-1 and -2 tested oil and gas condensate at high rates. Aje-4, drilled in early 2008, logged significant pay and confirmed the presence of four productive reservoirs and the field has full 3D seismic coverage.
In March 2014 the government approved the Aje Field Development Plan (FDP) following which, work progressed towards a Final Investment Decision (FID) on the project. The FDP describes a development of the Aje Cenomanian oil reservoir via two subsea wells and a leased FPSO. The FDP mid-case reserves are 32.4MMbbls with production starting by the end of 2015 at a plateau of 8,000 bbls/day.
Aje 5 is a twin to the legacy Aje 2 well which was production tested at the Cenomanian level in 1997, flowing approximately 3,700 bopd. Aje 5 is being drilled from a seabed location close to Aje 4 in 300 meters water depth.
The field is expected to produce to the Floating Production Storage and Offloading vessel (FPSO), the Front Puffin, which is currently being refurbished in Singapore ahead of installation and commissioning. The partners in the field expect to complete the installation of the production manifold, flowlines, umbilicals and risers in time for commencement of production by the end of 2015.
The joint venture partners in OML 113 are Vitol, First Hydrocarbons Nigeria (a subsidiary of Afren), Energy Equity Resources, Panoro Energy and Jacka Resources, and the operator, Yinka Folawiyo. MX Oil has recently agreed to invest in a 5% revenue interest in OML 113 via Jacka Resources. FHN completed the acquisition of its own interest in July 2013.
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OPEC Daily Basket Price Stood at $50.50 a Barrel Friday 31 July 2015
The price of OPEC basket of twelve crudes stood at $50.50 a barrel on Friday, compared with $51.45 the previous day, according to OPEC Secretariat calculations. In spite of occasional spikes, the downward spiral has continued since the 6th of May, when the basket price reached a peak of $64.96.
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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National Refineries Now in Production
The Kaduna Refining and Petrochemicals Company (KRPC) is back in production. With the announcement that it is refining 60,000 barrels of crude per day, that means that all of the national refineries are now in production. This is the first phase of a planned phased rehabilitation of the refinery with a nameplate capacity of 110,000 barrels per day. The Managing Director of the company, Saidu Muhammed, said he is expecting to hit 60 per cent of refining capacity within a few months. This will throw 2 million litres of petroleum products per day into the market place with a planned ramp up to 6 million litres by early next year. The plan, he said, is to reach 90 per cent of capacity by the Q2 of 2016. The company expects to complete rehabilitation work on the remaining two production lines by March 2016.
Port Harcourt and Warri refineries had previously resumed full production after their own phased rehabilitation. That brings all of the national refineries into operation. They are together able to produce up to 445,000 barrels per day but had only been able to produce about 10 per cent of capacity after years of mismanagement and neglect.
Apart from saving the country billions in precious foreign exchange for imports of petroleum products, the resumption of operations at the refineries will also create jobs for thousands, including tanker drivers. Delivery by pipeline however remains at risk and the government has been urged to secure the pipelines in order to ensure security of delivery.
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Afren Enters Administration
The tragic story of Afren Plc now seems complete with the announcement by the company on the 31st of July that it was entering administration after "materially lower near-term production from its assets as compared to the production level assumed in the restructuring plan announced on 19 June 2015."
The cash-strapped company had hoped to obtain further funding from its bondholders, but a slash in production estimates from its Ebok field offshore Nigeria, put paid to that escape route. As a result company is no longer able to pay its debts as they fall due making it insolvent and leaving the Board with no choice but to call in administrators. The company said in the statement: "The board believes that all the possible routes have now been explored during the course of this process."
Simon Appell of Daniel Imison and Catherine Williamson of Alix Partners are the Administrators chosen by the Board. It is largely expected that Afren will be carved up and sold piecemeal.
The statement also added that so far, the company's subsidiaries remain unaffected and will continue trading, which is good news for the bondholders but not the shareholders, who have lost everything now.
It was only in April that the bondholders gave the beleaguered company a $200 million lifeline to keep it afloat as it struggled under crippling debt. The company's fortunes were not helped by pre-tax losses of $1.95 billion, down from $140 million profit the previous year, mostly due to oil prices and the reserves write-off in Kurdistan. Looking for yet more money, the company called its shareholders together to vote on a rights issue, which would have left existing shareholders with only 10 per cent of the company and bondholders owning most of the company.
It soon became clear that production targets would not be met due to delays to the completion of a new production platform and some water build up in the reservoir, some say due to over aggressive extraction techniques. The bail out deal could no longer go ahead because the financial assumptions, on which it was based were now out of the window. The EGM was called off and Afren asked for its shares to be suspended from trading. By that time its stock was last trading at 1.7p down about 90 per cent from 160p last May.
Alix Partners said: "Our role now as administrators is to work alongside all stakeholders to determine the best possible route forward under these challenging circumstances."
Whilst Alix and Daniel Imison try to keep the ship afloat until it can be broken up and sold, shareholders are asking what on earth happened. Internet bulletin boards are awash with accusations of foul play. Questions are being asked about how the company could be worth so much one minute and worthless the next, even while it still has access to a substantial portfolio of assets. One commentator said: "This has all been stage managed, transfer of assets from equity to bond holders, simple as that," while another bleeding investor said: "This has to be investigated. Isn't there some kind of body watching out for scams like this, if indeed, it was scam? So many things don't add up."
Another, bitter investor, nursing some significant losses in the former African success story, said: "If they get away with this, it will send a worrying message through the world of finance realising that it can happen to anyone at any time with absolute impunity." The company's management also came in for criticism for spending a reported $46 million on its advisors, when that amount could have serviced some debt repayments and bought the company more time.
Shareholders will now be left with nothing whilst bondholders struggle to get what they can from a sale of the company's stakes in oil licences across Africa.
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Dangote Oil Refinery Secures Training Grant from USTDA
The U.S. Trade and Development Agency (USTDA) has signed a training grant agreement with Dangote Oil Refining Company to help the company develop the critical human capacity resources necessary to successfully operate and maintain its proposed greenfield petroleum refinery located in Lekki.
The grant from the agency will go towards funding a multi-year program to train more than 100 company staff on refinery fundamentals. The grant is said to be worth around $990 million although this has not been confirmed by the USTDA.
Deputy Director of USTDA, Enoh Titilayo Ebong said they were pleased to support Dangote's efforts to increase Nigeria's domestic refining capacity.
Explaining why he decided to embark on the ambitious refinery project that is set to double Nigeria's refining capacity, Africa's richest man, Aliko Dangote said: "Just over a year ago we decided to address the paradox of Nigeria being one of the world's leading producers and exporters of crude oil but also one of the world's leading importers of refined petroleum products with our decision to invest in a 500,000 bpd refinery project."
"For a high tech capital intensive project like this investment, getting the right human capital to run the plant is considered to be possibly the most critical success factor and the USTDA grant will go a long way in helping us address this."
Dangote selected the UOP technology, a wholly owned subsidiary of US group, Honeywell, a leading international supplier and technology licensor for petroleum refining. UOP will supply process technology, catalysts and proprietary equipment for the 500,000 barrels per day capacity plant that will cost around $9 billion.
The refinery, which is expected to enter into operation in by 2018, will more than double the country's current refining capacity. The nation's four refineries with a combined nameplate capacity of 450,000 barrels have been achieving anything between 10 and 20 per cent of capacity in recent years, forcing Nigeria to import petroleum products to service the country's needs. Production had ground to a halt in all the refineries by the end of the last administration.
In addition to processing crude oil to produce high-quality gasoline, diesel and jet fuel that meet Euro V specifications for reduced emissions, the Dangote refinery facility will produce world-scale quantities of polypropylene, a key petrochemical used in plastics and packaging. Other key UOP technologies that will be used at the plant include:
The UOP Resid Fluid Catalytic Cracking process to produce transportation fuels from crude oil. It will also supply propylene, which will be used as a feedstock for polypropylene.
- The CCR Platforming™ process to produce high-octane gasoline blending components.
- The Unicracking™ process to produce diesel.
- The Penex™ process to produce high-octane gasoline.
- The crude distillation unit (CDU) design will be provided by UOP's alliance partner, Process Consulting Services.
UOP will conduct the training program in Nigeria to maximize the number of trainees, as the scope is focused on refining processes and engineering, as well as on health, safety and environmental skills.
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NEITI Executive Secretary Joins Call for Urgent and Speedy Reforms of The Extractive Sector
The Executive Secretary of the Nigeria Extractive Industries Transparency Initiative (NEITI), Mrs. Zainab Shamsuna Ahmed, has been highlighting some of the failings of the oil and gas industry as thrown up by its recent reports. She chose the occasion of a visit to the Governor of Kaduna State, Mallam Nasir El-Rufai to raise awareness of the issues and to solicit his support in her call for an urgent overhaul of the extractive sector and an implementation of the findings and recommendations contained in NEITI Audit reports. El-Rufai led the Federal Government delegation that announced Nigeria's membership of the global Extractive Industries Transparency Initiative (EITI) in London in 2003.
Among the issues highlighted from the NEITI Audit Reports, which Ahmed described as "an unfortunate recurring decimal" were:
- 160 million barrels of crude oil valued at $13.7 billion lost to crude oil theft from 2009-2012
- N4.8 trillion expended by the Federal Government on subsidy payments alone
- $1.1 billion lost to crude oil and product swap transactions between 2009-2012
- $11.6 billion in NLNG dividends yet to be remitted to the Federation Account.
- $7 billion on Joint Venture cash calls with international oil companies.
- Over reliance by the nation and States on oil revenues - some States have as little as 3% internally generated revenue, neglecting huge potentials within their States.
Mrs. Ahmed said the NEITI Audit reports of the oil and gas sector covering years 1999-2012 contained a wealth of information that further informs the need for urgent and speedy reforms of the extractive sector in Nigeria.
Some of the reforms she advocates are:
- A gradual phasing out of the subsidy scheme. Ahmed said that the scheme, which was designed to benefit the ordinary Nigerian had become "a drainpipe of government revenue by a few privileged individuals through all forms of manipulation and corrupt practices."
- Divestment of Federal Government shares in the Joint Ventures and either incorporate them and/or transit them to other types of operating arrangements like the Production Sharing Contracts.
- The unbundling of the NNPC and commercialization of the new sub-business units to free the Corporation from any regulatory functions.
Mrs. Mohammed said that the reports were in line with the philosophy of the EITI, which believes that "when the citizenry are able to ask how revenues from their natural resources are used, then accountability has been achieved"
On his part, El-Rufai extolled the boldness, courage and sterling leadership qualities of the NEITI Management led by the Executive Secretary, Mrs. Zainab Ahmed.
The visit was part of a planned sensitization programme for key officers in the new administration on the principles, methods and benefits of Nigeria's membership of the global Extractive Industries Transparency Initiative (EITI).
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Buhari Government and the Road to Oil Sector Reform
Many have accused President Muhammadu Buhari of being slow to make the changes that will shut the doors to wholesale corrupt practices in the oil and gas sector that have seen the nation's coffers depleted of revenue that should accrue to it. However, a look behind the scenes shows that much is going on behind the scenes as the new administration continues to stress its intentions to implement far-reaching reforms to boost accountability and transparency in Nigeria's oil and gas industry. After two months, whilst there is much yet to be done, it is clear that we are seeing some results.
The biggest embarassment to the nation during the Jonathan administration was the government's seeming inability to put a stop to rampant oil theft of proportions never before seen in any oil-producing nation. Now, the Nigerian Navy that had appeared incapable of stemming the flow of illegal oil, after given the task by the government, says that it has been able to reduce oil theft from 2.4 million barrels per day (bpd) to just 300,000 bpd in June. The former Chief of Naval Staff, Vice Admiral Usman Jibrin, made the revelation when he handed over to his successor, Rear Admiral Ibok-Ete Ibas. If it is true then it is indeed a remarkable achievement in such a short time.
After numerous reports and finally the PWC Audit that took place towards the end of the Jonathan administration, the Nigerian National Petroleum Corporation (NNPC) is ripe for radical reform. A spokesman for the President has stated publicly that Buhari intends to break the Nigerian National Petroleum Corporation (NNPC) up into two. This will ensure that there is a separate independent regulator from the investor vehicle. There is no indication of how quickly this is likely to be achieved and whether or not it is likely to be done within or outside the Petroleum Industry Bill reforms.
Many thought the dissolution of the NNPC board signaled the first salvo in the reform process although the President stopped short of dismissing the Group Executive Directors, although a new Group Managing Director was appointed as we went to press.
Unsurprisingly, the President has been keen to do something about the illegal flow of oil out of the country. In an attempt to control oil theft through illegal oil lifting, 113 vessels that were scheduled to lift oil were barred from doing so. The circumstances are not entirely clear, but the Group General Manager, Crude Oil Marketing Division of NNPC sent a memo sent to all terminals to stop the blacklisted vessels from lifting from 27 terminals including the most popular, Bonny, Bonga, Brass, Ebok, Escravos, Forcados, Pennington and Qua Iboe. The reason for the embargo has not been publicly revealed but there is speculation that it is intended to prevent illegal liftings.
Revenue generating agencies including Nigerian National Petroleum Corporation (NNPC) and Nigerian Liquefied Natural Gas (NLNG) have been ordered to pay all their revenue into the Consolidated Revenue Fund (CFR). This means that NNPC will no longer be able to withhold funds to meet its expenses before remitting whatever it deems fit to the revenue account. PWC had included this as one of its recommendations in the report of its NNPC audit.
Small steps some may say but in an industry where reform has been a long time coming, these are giant steps for the new administration.
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Brass Oil and Gas Free Zone in Bayelsa State One Step Closer
The Brass Oil and Gas Free Zone to be located in State Bayelsa State Governor is a step closer to reality after the Governor of the State, Seriake Dickson, set up a committee for the project. The Committee will work with the management of the Oil and Gas Free Zone Authority to work out a detailed plan for the new Free Zone. The project will transform the economy of the State, according to Dickson. He explained that the Government intends to expand the State's economy beyond oil and gas. He said: "We have formulated a lot of policies to enable us expand our economy to attract industrialists and promote industrialisation; to create wealth, jobs and a stable environment for business."
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ADDAX - Provision of Combined Insurance Services
Addax Petroleum Development (Nigeria) Limited invites interested and registered Nigerian companies to respond to the opportunity for the provision of insurance services. The scope of services involves provision of insurance services (group life assurance, marine, motor vehicle and industrial all risk) associated with all company operations. Only Tenderers who are registered with the relevant NJQS product category shall be invited to submit technical bids. The closing date for this opportunity is 7th August 2015.
SPDC - Provision of Shallow Offshore Analogue Survey and Positioning Services
Shell Nigeria Exploration and Production Company Limited (SNEPCO) invites interested and registered Nigerian companies to respond to the opportunity for the provision of shallow offshore analogue survey and positioning services. The scope of services involves the provision of analogue detailed bathymetry and debris detection surveys, acoustic pipeline inspection surveys, rig positioning services, new technologies, reporting, positioning and navigation and other miscellaneous survey services. Only Tenderers who are registered in the NJQS product/service category 3.10.03 site survey services &/or 3.09.04 geophysical & hydrographic site survey services shall be invited to submit technical bids. The closing date for this opportunity is 7th August 2015.
Chevron - Provision of Automation/Control Systems Services
Chevron Nigeria Limited (CNL) invites interested and registered Nigerian companies to respond to the opportunity for the provision of instrumentation, control and automation services. The proposed contract is to commence in the second quarter of 2016. The scope of services involves the provision of maintenance and engineering services to support instrumentation and automation, process, automation and safety system controls. The services also include engineering, troubleshooting, control philosophy development, original equipment manufacturer (OEM) engagement, control system integration as well as preventive and corrective maintenance of automation and control systems in CNL's operational assets. Only tenderers who are registered with NJQS Product/Category 30105 (electro / control instrumentation services) Category A, B, C shall be invited to submit technical bids. The closing date for this opportunity is 7th August 2015.
Chevron - Provision of HVAC Maintenance Services
Chevron Nigeria Limited (CNL) invites interested and registered Nigerian companies to respond to the opportunity for the provision of HVAC maintenance and operation services. The proposed contract is to commence in the first quarter of 2016. The scope of services involves the provision of all services, including supply of all skilled, qualified and certified personnel, supervision and provision of testing devices, equipment, tools, and other items necessary for the maintenance (predictive, preventive and corrective) and operation of HVAC system(s). Only Tenderers who are registered with NJQS Product/Category 30103 (Process / Utilities / Piping / HVAC Services) Category A, B, C and D shall be invited to submit technical bids. The closing date for this opportunity is 7th August 2015.
Chevron - Provision of Valves Maintenance Services
Chevron Nigeria Limited (CNL) invites interested and registered Nigerian companies to respond to the opportunity for the provision of valve maintenance services. The proposed contract is to commence in the first quarter of 2016. The scope of services involves the provision of services including all skilled, qualified and certified personnel, supervision, and provision of testing devices, equipment, tools, consumable materials and other items necessary for performance of the valve maintenance services (including shutdowns and turnarounds) on a call-out basis. Only Tenderers who are registered with NJQS Product/Category 30502 (valves management services including testing and repair) category A and B shall be invited to submit technical bids. The closing date for this opportunity is 7th August 2015.
Total - Provision of HSE Environmental Services
Total Exploration and Production Nigeria Limited (TEPNG) invites interested and registered Nigerian companies to respond to the opportunity for the provision of environmental services. The scope of services involves the provision of waste management services, chemical/oil spill control, and environmental sampling and laboratory analytical services. Only tenderers who are registered in the NJQS products categories shall be invited to submit technical bids. The closing date for this opportunity is 20th August 2015.
Total - Provision of General Maintenance Services OML 100 Field Production Complex
Total Exploration and Production Nigeria Limited (TEPNG) invites interested and registered Nigerian companies to respond to the opportunity for the provision of general maintenance services for the OML100 Field production complex and FSO Unity. The proposed contract is to commence in the first quarter of 2016. The scope of services involves the provision of platforms and floating storage unit associated to the OML100 field production complex. Only tenderers who are registered with 3.05.01 (construction / modification / repair / maintenance / refurbishment services) categories in NipeX joint Qualification system (NJQS) database shall be invited to submit technical bids. The closing date for this opportunity is 20th August 2015.
Total - Provision of General Maintenance Services for OML 99 Field Production Complex
Total Exploration and Production Nigeria Limited (TEPNG) invites interested and registered Nigerian companies to respond to the opportunity for the provision of general maintenance services for the OML99 Field production complex. The proposed contract is to commence in the first quarter of 2016. The scope of services involves the provision of maintenance services for the operation of the OML99 field complex which involves preparing, executing, managing and reporting the maintenance activities (including routine, non-routine, corresponding repair works, hot spare and specific tools management and CMMS data entry) for the whole complex. Only tenderers who are registered with 3.05.01 (construction / modification / repair / maintenance / refurbishment services) categories shall be invited to submit technical bids. The closing date for this opportunity is 20th August 2015.
Total - Provision of General Maintenance Services for OML 102 Field Production Complex
Total Exploration and Production Nigeria Limited (TEPNG) invites interested and registered Nigerian companies to respond to the opportunity for the provision of general maintenance services for the OML102 Field production complex. The proposed contract is to commence in the first quarter of 2016. The scope of services involves preparing, executing, managing and reporting the maintenance activities (including routine, non-routine, corresponding repair works, hot spare and specific tools management and CMMS data entry) for the whole complex. Only tenderers who are registered with 3.05.01 (construction / modification / repair / maintenance / refurbishment services) categories shall be invited to submit technical bids. The closing date for this opportunity is 20th August 2015
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Remi Aiyela
Editor-in-Chief
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