THE GUARDIAN, Monday, May 27, 2013
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Oil & GasWeekly Remi Aiyela, Editor-in-Chief
editor@NOGintelligence.com www.NOGintelligence.com
UPSTREAM NEWS
Economic interest: Optimum: 30 per cent; Afren: 40 per cent; Lekoil: 30 per cent. Commenting on the new acquisition, the Chairman of Afren, Mr. Egbert Imomoh, said: “We are delighted to have successfully concluded a farm-out on OPL 310, offshore Nigeria and welcome Lekoil as a Partner in exploring the significant potential of this underexplored region of the West African Transform Margin.” The exploration well being drilled at the Ogo prospect includes a side-track well and the drilling programme using Transocean’s drilling rig, Monitor, which began in April the drilling is expected to last 90 days. OPL 310 extends from the shallow water continental shelf to deep water, in close proximity to the Tano Basin. Detailed evaluation of the block has identified several prospects lying in the same Turonian, Cenomanian and Albian sandstone intervals that have yielded significant discoveries in Ghana and Côte d’Ivoire.
Shell, NLNG Declare Force Majeure On Gas Supplies
Marginal Fields Licensing Round To Be Announced Within Two Months
HE Minister of Petroleum Resources, Diezani T Allison-Madueke has confirmed that the next marginal fields round will be announced within two months. She confirmed this while speaking at a special lecture at Oxford University hosted by St Anthony’s College in conjunction with the Oxford Institute for Energy Studies and the African Studies Centre at Oxford University. The lecture was entitled “The Future of African Energy in a Changing Global Market.” During the lecture she spoke about Africa’s rich resource and its prodigious reserves, stressing the fact that, as the largest producer and exporter and the second largest economy in Africa, “Nigeria has been at the heart of every conversation on African energy for the last five decades.” During the question and answer session of the lecture, Remi Aiyela, the editor of NOGintelligence asked the Minister for a specific timescale for the announcement of the next marginal fields licensing round. Remi pointed out that the Director of the Department of Petroleum Resources had stated at the official launch of NOGintelligence that the Department had completed the work necessary for the commencement of the next licensing round, including mapping out the fields and preparing accompanying the data packages. Responding to Remi’s question, the Minister explained that the delay in announcing the licensing round was because the government was keen to ensure that the mistakes of the last round were not repeated this time. She then went on to confirm that an announcement would be made within two months. The Marginal Fields Programme was devised to bring meaningful indigenous participation into the upstream landscape particularly given the large number of reported oil and gas discoveries in the Niger Delta, which over time had remained undeveloped, unproduced and, in some cases, only partially appraised by the international oil companies (IOC’s) which deemed them uneconomic. The first marginal fields licensing round, which was held in February 2003 and in which 24 licences were awarded, brought smaller indigenous players into the upstream sector of the industry. Unfortunately, out of those 24 licences only 9 are producing. The government is keen to ensure a higher level of success with this licensing round, which the Minister explained, was the reason why the announcement had been continuously delayed.
Shell Petroleum Development Company (SPDC) has declared force majeure on its Liquefied Natural Gas (LNG) supplies following a leak in its Eastern Gas Gathering System (EGGS-1) right-of-way (RoW) pipeline near Awoba in Rivers State. As a result of the leak, Shell shut down its gas production at Gbaran Ubie as plant in Bayelsa State and reduced production at its Soku gas plant in Rivers State. SPDC, said the pipeline, which carries some 1.5 billion standard cubic feet per day (SCF/D) of gas, would necessitate the shutdown of the Gbarain Ubie plant, “until the source of the leak is identified and necessary remedial actions are completed by SPDC, to ensure safe operation.” SPDC supplies LNG to the Nigerian Liquefied Natural Gas (NLNG) company through the pipeline and as a result of the disruption in supplies, the 22.5 million tonnes per annum capacity NLNG plant has also had to declare force majeure on its exports of LNG. The Soku plant provides up to 40 per cent of the company’s gas supplies and with the disruption in supplies its overall exports are now down by up to 50 per cent. NLNG’s General Manager in charge of External Relations, Kudo Eresia-Eke said in a statement: “NLNG not being able to meet its contractual commitments fully, declared Force Majeure to its customers on the 15th of May 2013.” Eresia-Eke said in the statement that NLNG was working with SPDC and its other gas suppliers to mitigate the effect of the disruption, having delivered over 3000 LNG and natural gas liquids (NGL) cargoes to its customers in Asia, the US and Europe. NLNG is a joint venture company whose shareholders are the Nigerian National Petroleum Corporation (49per cent), Shell Gas BV (25.6per cent), Total LNG Nigeria Limited (15per cent) and ENI International (N.A) NY (10.4per cent). The force majeure declaration has compounded the problems of NLNG. Only two weeks ago, its faced a blockade of its vessels at Bonny Channel after a face off with the Nigerian Maritime Administration and Safety Agency (NIMASA) which was trying to collect a 3 per cent statutory levy on freight leaving or entering the channel. NLNG had argued that it was exempted from paying the levy by the NLNG Act. The dispute has now been resolved in NIMASA’s favour with the Government directing NLNG to pay the statutory levies, possibly going back to 2009, that are determined to be owed to the agency. Both parties have been directed to meet to work out the outstanding fees and modalities for payment. The pipeline leak comes barely a couple of weeks after SPDC released a progress report on its GbaranUbie project, saying it was testing the potentials of five gas wells as it progresses implementation of the project in Bayelsa State. The Imiringi Power Plant in Ogbia Local Government Area in Bayelsa State was expecting the Gbaran-Ubie project to provide a boost in its gas supplies once tests were successfully completed. It is not known whether the pipeline leak was
MIDSTREAM NEWS
Afren Completes OPL 310 Farm Out
ONDON Stock Exchange (LSE) listed Afren Plc has Lagreement announced the completion of its OPL 310 farm out with Lekoil Limited. At the same time, the company also announced the commencement of exploratory drilling at the Ogo prospect. Lekoil, recently listed on the LSE’s Alternative Investment Market (AIM) will acquire a 17.14 per cent participating interest in the block, subject to Ministerial consent. The agreement will enable Afren to obtain a total carry of up to $50 million in respect of the exploration well. Indigenous company, Optimum Petroleum Development’s 60 per cent interest remains unchanged. Optimum, which acquired the block in 2008, is the “Operator” of the block and the company will continue to receive technical assistance from Afren under a Technical Assistance Agreement between the two companies. Following the farm in by Lekoil, the companies’ interest in the block will be as follows: Participating interest: Optimum: 60 per cent; Afren: 22.86 per cent; Lekoil: 17.14 per cent.
Gas Infrastructure To Attract N2.4 Trillion In Four Years
IGERIA’S gas infrastructure development programme will attract an investment of over N2.4tn ($16bn) within the next four years, in line with the three-point strategic focus of the Gas Master Plan (GMP). The Group Executive Director, Gas and Power, Nigerian National Petroleum Corporation, Dr. David Ige, stated this at the 4th annual Oil and Gas Free Trade Zone conference in Lagos recently. Ige who was represented by the General Manager, Pipelines,
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NNPC, Mr. Sam Ndukwe also disclosed that NNPC was set to build on the achievements of the free trade zone with the establishment of the Ogidigben Gas City, the largest of its kind in Africa. He stated that the GMP will deliver gas to power for at least a threefold increase in generation capacity by 2015; achieve a reasonable level of gas-based industrialisation by positioning Nigeria as the undisputed regional hub for gas-based industries such as fertiliser, petrochemical and methanol plants by 2014; and achieve high value export via Liquefied Natural Gas and regional export drives. Ige said the ongoing work to consolidate the agenda had thrown up investment opportunities in the gas sector to the tune of $16 billion. “Opportunities for investments exist in the areas of financial services, gas transmission pipelines, pipe milling and fabrication yards, upstream gas development, LNG and LPG plants and gas processing facility/gas-based manufacturing industries,” he said. On the proposed Ogidigben gas-based industrial park, the NNPC GED said investment opportunities were available in the areas of Free Trade Zone infrastructure, port infrastructure and real estate devel-
in association with
sold through term contracts while the rest of its oil is sold through its IOC production sharing partners. Last year many of the large oil traders such as Vitol, Glencore and Trafigura lost out as their usual allocations were cut in half. Asian traders, mainly Chinese and Indian, are expected to fare well this year as they did last year when Unipec (China’s Sinopec Corporation’s trading arm) and Indian Oil Corporation saw their allocations increased. The 20 successful Nigerian companies last year included the usual suspects, Oando, Masters and Sahara.
FINANCIAL NEWS
DOWNSTREAM NEWS Lekoil Lists On London Stock Exchange’s AIM Market
EKOIL has been admitted to the London Stock LInvestment Exchange after listing on its Alternative Market (AIM). The company raised
OPEC Daily Basket Price Stood At $100.36 A Barrel Wednesday, 22 May 2013
HE price of OPEC basket of twelve crudes stood T at $100.36 a barrel on Wednesday, compared with $101.39 the previous day, according to OPEC Secretariat calculations. The OPEC daily basket remains under pressure and has been falling since the 20th before which it had been rising for a few days. 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).
NNPC Invites Applications For Crude Oil Term Contracts
HE Nigerian National Petroleum Corporation T (NNPC) has announced the beginning of the application process for its annual round of term contracts for lifting Nigerian crude oil for the period starting 1st August 2013 to 31st July 2014. The Nigerian government has very stringent rules about who can be awarded a contract. It is generally intended that only end users are awarded term contracts and so only refinery owners or retail outlets and large volume traders are to apply. The applicant has to show details of its facilities, markets and volume of crude processed over the previous 3 years or, in the case of traders, evidence of its global network, activities and volume of crude oil handled over the previous 3 years. Indigenous companies are excepted however from these stringent entry requirments, and only need to show that they are engaged in Nigerian oil and gas business. The low entry bar will make it easier for indigenous companies to qualify. The financial requirements are quite steep and are likely to take all but the most serious players out of the running. Applicants must have not less than $500 million annual turnover and a net worth of not less than $100 million. Many indigenous companies will not be able to scale this hurdle and will probably fall out at his stage. Successful applicants also have to make an immediate payment of $2.5 million, which will be treated as a deposit against the first cargo. Other criteria are that applicants must comply with the Nigerian Content Act including demonstrating a strategy to grow Nigerian equity in the tankers to be used to lift the allocated crude oil. Applicants must also submit commitments for sub-contracting insurance and legal services, banking and financial services as well as training and capacity building. In addition, applicants are to include investment plans for investing in any of a number of areas of the Nigerian economy including upstream, downstream, gas utilisation, independent power plants, agriculture, railway construction, solid mineral development, healthcare sector development and real estate development. The deadline for applications is 4pm on the 18th of June. Last year, to the surprise of many industry observers, and in spite of the $600 million annual turnover requirement, Nigerian firms won a large share of the contracts. Almost half of the $60 billion worth of oil contracts went to Nigerian companies. Nigeria normally allocates about 75% of its daily production for sale through term contracts that last for a year. About 580 million barrels of oil a day will be
approximately $50 million giving it a market capitalisation of $112.1 million at admission. The Lekoil listing is remarkable, as it is the largest capital raising on AIM so far in 2013. It follows the recent admission by another exploration and production company, Eland Oil & Gas. Lekoil was welcomed to market by Alderman Roger Gifford, Lord Mayor of the City of London, who presented a commemorative plaque to the company to mark the occasion. Ibukun Adebayo, Head of Primary Markets for Africa, London Stock Exchange Group, said: “We are delighted to welcome Lekoil to AIM. This is the third Nigerian company in eight months to raise money and issue shares on our markets, highlighting London’s role as the leading international equity finance centre for the economic development of Nigeria.” AIM is the London Stock Exchange’s international market for smaller growing companies. A wide range of businesses including early stage, venture capital backed as well as more established companies join AIM seeking access to growth capital. Lekoil was founded in 2010 as an indigenous Nigerian company focusing on Africa. It currently has assets in Nigeria and also offshore Namibia. Commenting on its successful listing, Lekan Akinyanmi, Chief Executive of Lekoil, said: “This is an important step for Lekoil on our journey towards becoming a leading E&P company with an aim of shaping the future of oil exploration and production in Africa.” Lekoil is the fourth oil & gas explorer with significant operations in Nigeria on London’s markets. Since 2007 oil and gas companies have raised over US $21.6 billion on London’s markets. The company is now in a position to fund the exploratory well being drilled at the Ogo prospect on offshore block OPL 310, in which it has acquired a 17.14 per cent equity interest and a 30 per cent economic interest.
Nigeria’s $1 billion Sovereign Wealth Fund To Start Investing In June
IGERIA’S Sovereign Wealth Fund (SWF) is preparN ing to begin investing as from June. The Nigerian Sovereign Investment Authority (NSIA) said this in a statement this week. The Authority said it would allocate 32.5 per cent of the fund to infrastructure investment, and the same for a future generations savings pot. Two per cent, it said would be used to protect against commodity price shocks, while 15 per cent would remain unallocated. “This formula aims to balance the infrastructure need of the current generation and the need for savings for the future generation of Nigerians,” said the statement. Investment in the infrastructure fund will be delayed while further details are worked out. However, investment in both the future generation and the stabilization fund will proceed in June, according to the statement.
NNPC, MPN Considering Bond Market Alternative Funding
HE Nigerian National Petroleum Corporation T (NNPC) and its Joint Venture partner, Mobil Producing Nigeria Limited (MPN) are considering going into the bond market as an alternative source of funding by the year 2016. This was disclosed by the NNPC’s Group Executive Director, Finance and Account, Mr Bennard Otti at the opening ceremony of a 3-day workshop titled: “NNPC/MPN JV Project Bond Workshop” held in Abuja. In his opening remarks, the GED stated that: “NNPC is meeting with her JV partner to brainstorm on alternative sources of funding such as bond market in order to enhance the revenue and also create employment opportunities.”