BusinessDay 28 Feb 2018

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WEST AFRICA ENERGY intelligence oil gas power Wednesday 28 February 2018 C002D5556 BUSINESS DAY interview ‘The world is rapidly moving towards an age of cleaner sources of energy’ Page 4 finance people appointments L-R: Bayo Ojulari (MD,SNEPCo); Saidu Mohammed(GED/COO-Gas & Power, NNPC); Joe Ezigbo (MD, Falcon Corporation); Sadeeq Mai-Bornu(DMD,NLNG); Ibe Kachikwu (Minister of State for Petroleum); Dada Thomas(President, NGA); Abdulrazaq Isa(MD, Waltersmith Petroman) during the gas session of the Nigeria International Petroleum Summit(NIPS2018) held recently in Abuja. Sea Trucks Group debunks WAV allegation Page 6 OPEC weekly basket price DAY PRICE 23/2/18 63.08 15/2/18 61.17 9/2/18 63.8 2/2/18 66.87 26/1/18 67.64 Source: OPEC Debrief Should NLNG model be gold standard for gas contracts in Nigeria? ISAAC ANYAOGU At the executive roundtable discussion first Nigeria International Petroleum Summit (NIPS) in Abuja, last week, Sadeeq Mai-Bornu, deputy managing director of Nigeria LNG Limited (NLNG) said the NLNG business model needs to be replicated in order to generate opportunities for the power and gas sectors in the country. “We sign a 20-year contract for the supply of molecules and we can actually go to the bank and get the funding we need. When NLNG was set up, it had guarantees and incentives that safeguarded investments and returns. There was also the sanctity of contracts. That is what has helped NLNG. This model needs to be developed in the upstream and downstream,” was quoted as saying. Mai-Bornu also said, “Moving forward, NLNG is investing in expansion with a Train 7 project. It involves a huge amount of money but because the markets are there, we are in the position to invest up to $5 to $10 billion both in the upstream for the gas supply and in the infrastructure to construct the Train. There is opportunity in that area.” It is important to note certain critical factors that have helped the NLNG achieve success. The company operates in the midstream sector which means that the bulk of the risks of gas exploration have been taken by the upstream companies. Also, International Oil Companies (IOCs) have participated in the NLNG because of strong assurances and commitments from Nigeria which literally elevated the NLNG Act to the status of a treaty. This helped to insulate the contract from the vagaries of regulatory uncertainties until now. Last year, the House of Representatives amended the NLNG Act compelling it to make contributions to government agencies including NDDC removing the assurance and guarantees it had hitherto enjoyed. This occurred at a time the NNPC is negotiating Train 7 of the NLNG with various parties to the contract. The lawmakers did not care about the bigger picture: the need for the country to monetise its gas resources using the NLNG model which has proven effective, the possibility of Trains 7 and 8 adding new 18,000 jobs. The senate has not amended the NLNG Act as the lower house has done which remains the hope of the Act for now. Nigeria was willing to forego benefits of billions of dollars in taxes and dividends just to ensure the NLNG pays a 3 percent annual budget to NDDC. It did not matter that paying a 3 percent of NLNG budget to NDDC would not create the same amount of jobs and investments. Nigeria’s LNG could not kick off after it was first proposed in 1968 because of the huge capital investment required which Nigeria did not have. Investors wanted assurances and guarantees that they will recoup their investments. In 1990 Nigeria granted the investors a ten year pioneer status as well as generous concessions that prohibited further taxation and levies.
Wednesday 28 February 2018 02 BUSINESS DAY C002D5556 WEST AFRICA Outlook Gambia: New funding for offshore Gambia FAR Ltd has signed a farmout agreement with a subsidiary of Petronas for a 40 percent interest in each of The Gambia’s blocks A2 and A5. Following the deal, Petronas will fund 80 percent of the total well costs of the Samo- 1 exploration well, up to a maximum total cost of $45 million. Petronas will also fund FAR’s share of non-well costs up to a maximum amount of $1.5 million. FAR will retain a 40 percent interest in each of the A2 and A5 licenses and will remain operator through the exploration phase. Samo-1 is expected to be drilled in late 2018 and will be the first exploration well offshore The Gambia since 1979. FAR Managing Director Cath Norman said the deal is a testament to the emerging value of the broader West African basin. “Success in this well would be of significant value to our shareholders and truly transformational for the people of The Gambia,” she said in a statement. An audit of geotechnical data show the Samo and Bambo prospects off the coast of Gambia hold combined best estimate Libya: Production may suffer on budget delays Libya’s crude oil output, which is reportedly now more than 1 million b/d, could suffer as state-owned National Oil Corp. continues to wait for its budget from the government, the company’s CEO said. “The entire sector is suffering from these problems because of the delay of the Ministry of Finance in disbursing the budgets for the corporation this year,” CEO Mustafa Sanalla said. NOC receives its budget prospective reserves of 1.1 billion barrels. The Samo prospect in particular holds substantial promise, with an estimated chance of success of more than 50 percent. FAR stays on as the operator through the exploration phase offshore Gambia, and PETRONAS has the right to become the operator once development begins. Drilling from the Central Bank of Libya, which is authorized by the internationally recognized government in Tripoli. Sanalla’s comments come after meetings with NOC subsidiary Al-Jouf Oil Technology Co. and Spain’s Repsol, a key partner which operates the 300,000 b/d Sharara oil field in the southern Murzuq basin. Al-Jouf specializes in oil field services for exploration, drilling and production. “This slowdown will have serious consequences for the entire sector, which will lead to a decline in the level of production again in large proportions in addition to having a negative impact on development projects,” Sanalla said. Sanalla has complained is expected late this year in what will be the first exploration campaign for Gambia in nearly 40 years. FAR’s permit area offshore Gambia, which covers 1,000 square miles, is adjacent to its flagship SNE discovery offshore Senegal. The initial oil discovery offshore Senegal was made in 2014 and met the minimum threshold for a commercial opportunity by the third quarter 2016. West African countries have been at odds over their maritime borders, while officials there have been vetting their corporate options as the potential for oil evolves. In October, African Petroleum said its subsidiaries in Gambia filed requests for arbitration at an international dispute chamber to protect two of its offshore licenses. about the problem before, telling a Chatham House conference in London in late January that NOC received only 50 percent of its capital spending allocation from Tripoli last year. He has also previously said the lack of money caused the loss of 90,000 b/d. Libya produced around 980,000 b/d in January, according to the latest S&P Global Platts survey of OPEC producers. This is well below the 1.6 million b/d output seen before the country’s revolution in 2011. Production has since fluctuated due to the lack of finances available, as well as disruptions from frequent protests and security threats. The lost revenues from exports have further exacerbated the country’s cash flow problems. Brief Kenya: Kenya Pipeline boosts oil-storage capacity by 22 percent with tanks Kenya Pipeline Co. will spend $52 million building four new tanks that will increase its storage space by more than a fifth, Joe Sang, Managing Director said. KPC is adding capacity to meet growing demand for fuels in East Africa, the continent’s fastest growing subregion, according to the African Development Bank. The additional tanks will accommodate increased volume from a new pipeline being built from the port of Mombasa to the capital, Nairobi that will be completed in April Sang said. “The project will enhance operational flexibility, capacity of product receipt and evacuation of product in Nairobi once the new Mombasa-Nairobi pipeline is operational,” he said. The tanks will be built in Nairobi by May oil and each hold 33.4 million liters, increasing the state-owned company’s capacity to 745 million liters from 612.3 million liters. The Nairobi-Mombasa pipeline, known as No. 5, will have a 20-inch diameter and replaces an existing 14-inch conduit. Kenya’s strategic petroleum reserves will triple to 90 days once the new tanks are commissioned and when an old refinery in Mombasa, which is now being used as storage, is refurbished, Sang said. Increased storage capacity will also save fuel-importers demurrage charges they’ve been incurring as vessels wait at the Mombasa port to discharge fuel into KPC’s system, he said. Kenya distributes fuel to neighboring countries including Uganda, Rwanda, Burundi and eastern Democratic Republic of Congo. KPC is currently building an oil jetty on Lake Victoria to improve the reliability of its supplies.
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