Orient Energy review, Feb / March 2016 by Orient Energy Review

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Vol. 5 No. 02/03 Feb - March, 2016

DEALING WITH THE NEW NORMAL

Can African Petroleum Producers Survive The Oil Price Slump?

NNPC to Be Unbundled Into 30 Subsidiaries – Kachikwu

FPSO Professor John Evans Atta Mills Arrives Ghana

Sacoil Reorganises Interests in Block III, Democratic Republic Of Congo

CNL Concludes Handover of Producing Assets in OMLs 53 & 55 to Seplat and Belema oil

The Electricity Sector is Dying – NERC Boss

PUBLISHER/EDITOR-IN-CHIEF: Nneka Ezeemo EDITOR: Margaret Nongo-Okojokwu PRODUCTION: Pita Ochai CORRESPONDENTS: Shola Akingboye (Abuja Bureau Chief) Vivian Osuji Isreal (Head, South-South Bureau, Port Harcourt) Pita Ochai (Lagos) Gilbert Boyefio (Ghana Correspondent) Business Development Executive: Uche Ezea Ruth Muo (South Africa) CREATIVE: EtimSkill CIRCULATION MANAGER: Ajayi Kayode

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CONTENT

ORIENT ENERGY REVIEW has emerged to be the platform and voice for the growing local content policy across the world. It is a monthly publication of Orient Magazine, Newspaper and Communications Limited 5, Dipo Dina Drive, Abule Oshun, Badagry Express Way Lagos. www.orientenergyreview.com email: info@orientenergyreview.com

Welcome!

EDITOR’S NOTE

he low oil price has brought in its wake a number of challenges for oil and gas producing countries in Africa. These countries are faced with declining foreign exchange reserves, dwindling revenue, rising expenditure, declining growth and risk of a number of oil companies defaulting on their loans with some in danger of going bankrupt. The question we are asking is, can African Petroleum Producers survive this? Our correspondents Godspower Ike and Margaret Okojokwu sheds more light on this. Also in this edition, we try to x-ray the various opportunities available in the industry in the midst of this precarious situation; As analysed by Pita Ochai, could the fall in oil prices be a blessing in disguise? Let’s find out. Meanwhile, the long awaited FPSO Prof Atta Mills finally arrives Ghana, as our Ghanaian bureau chief, Gilbert Boyefio gives us the details. There are other interesting stories in this edition. We’d also like to welcome all participants of the 6th African Producers Congress to Nigeria, we hope you all have fruitful and productive deliberations. Please send us your feed back, we’d love to hear from you. Thanks and do have a great read! Cheers!

INDUSTRY NEWS 4 LOCAL CONTENT 6 POWER 8 10 COVER 16 SPECIAL REPORT 20 - 21 PHOTO GALLERY 23 INTERVIEW THE 27 FROM NIGER-DELTA 28 GHANA REPORT / 31 EXPLORATION DRILLING 34 ALTERNATIVE ENERGY 35 MARITIME/LOGISTIC 37 GAS

Margaret Nongo-Okojokwu Editor, Mobile +234-8136329948

36 Orient Energy Review Feb. - March, 2016

INDUSTRY NEWS

resident Muhammadu Buhari in Doha, Qatar, has stressed the need for member states of OPEC and non members to unite and find a common ground to stabilise crude oil prices. The president labelled the current market situation in the industry, which had seen oil prices plummet by 70 per cent since mid 2014, as “totally unacceptable’’. “As members of OPEC and Gas Exporting Countries Forum (GECF), our relations in the areas of oil and gas, which our two nations heavily rely on, need to be enhanced and coordinated for the benefit of our people. “We must cooperate both within and outside our respective organisations to find a common ground to stabilise the market, which will be beneficial to our nations,’’ he emphasised. President Buhari noted with delight the existing cordial bilateral relations between Nigeria and Qatar. He, however, invited prospective Qatari investors to take advantage of the abundant opportunities in Nigeria and invest in the key areas of energy, ag-

Buhari Urges OPEC Members To Unite And Help Stabilize Oil Prices riculture, real estate development, banking and finance. President Buhari said in the course of his visit, the delegations from Nigeria and Qatar would formalise at least two bilateral agreements to boost economic cooperation between both countries.

He also weighed-in on the situation in the Middle East, commending the role Qatar was playing in resolving the present Syrian crisis, the Palestinian course and efforts in reconstructing Gaza. -bizwatchnigeria

‘Nigeria produces 2.2mbd of crude in February’

inister of State for Petroleum Resources and Group Managing Director of the Nigerian National Petroleum Corporation, NNPC, Dr. Ibe Kachikwu, says Nigeria’s oil production would be 2.2 million barrels a day for the month of February. Kachikwu, who said the country would keep striving to increase crude oil production to meet local demand and not to essentially sell it in the 4

international market, stated that the figure for February would be unchanged from the month of January. “Nigeria will continue to look at the possibility of increasing production, not to sell it, because we have local consumption that is essential for us. Right now, we are not even exporting the quantity that OPEC has given us,” he said, adding that demand from domestic refineries was at least 500,000 barrels of crude oil a day. Kachikwu also announced Nigeria’s backing of Saudi Arabia and Russia in freezing oil production, while giving Iran and Iraq a way out to regain some of their lost market shares due to sanctions and war. According to Kachikwu, “Countries like Iran and Iraq have been out of the market for a while, and if they are to come back, you shouldn’t freeze them out where they are; you should freeze them at a higher level. By June, we will come very close to tightening the market.” Saudi Arabia, Russia, Venezuela and Qatar agreed last week to keep production at January levels, as long as others followed suit, in an effort to revive prices from a 12year low. Iran’s production has slumped since international sanctions were imposed on its exports, and Iraq is seeking to rebuild

Orient Energy Review Feb. - March, 2016

following years of war and underinvestment. *Sweetcrude Reports

ExxonMobil Terminates Rig in Angola T

ransocean has joined the ranks of several other firms that over the past couple of months has seen early termination notices for their rigs. The US supermajor sent Transocean a notice of early termination notice for the GSF Development Driller I semi-submersible rig that it has been using offshore Angola. According to Transocean the drilling contract will end in May, with demobilization to be completed in June. The company said it will not receive compensation for the remaining contract term.

INDUSTRY NEWS

Oando Shareholders Approve OER Buy-Out Offer S

hareholders of Oando Energy Resources, OER, Inc- the Toronto Stock Exchange (TSX)-listed exploration and production subsidiary of Oando Plc, have approved the proposal by Oando Plc to buy out the outstanding minority shareholdings in the exploration and production subsidiary. OER announced recently that at a special meeting on February 25, 2016 in Vancouver, British Columbia, a total of 550.46 million votes were cast by shareholders, representing 69.15 per cent of the total issued and outstanding common shares. A 100 per cent of the votes cast were voted in favour of the resolution. However, the plan of arrangement remains subject to the final approval of the Supreme Court of British Columbia and subject to satisfaction or waiver of various other conditions specified in OER’s management information circular dated January 19, 2016. The parties have agreed to extend the outside date to March 25, 2016. As part of the transaction, OER has notified the TSX and applied for the delisting of the common shares upon completion of the arrangement. In addition, in accordance with Section 720 of the TSX Company Manual, the company has applied to voluntarily delist the common share purchase warrants it issued from the facilities of the TSX upon completion of the arrangement. An exemption from the requirement for security holder approval of such delisting is available pursuant Section 604(f) of the TSX Company Manual because Oando Plc holds more than 90 per cent of the common shares. However, the completion of the transaction, including the delisting of the common shares and warrants from the facilities of the TSX, will be subject to, among other things, approval by the syndicate of lenders in OER’s $450 million senior secured facility. Oando had entered into a definitive agreement with OER to sell the outstanding minority shareholdings in the OER to another wholly-owned foreign-based subsidiary, Oando E&P Holdings Limited. Oando E&P Holdings Limited will also subsequently take over shares held by Oando Plc and other institutional shareholders in OER, making OER a wholly-owned subsidiary of the Oando E&P Holdings Limited, a private company incorporated under the laws of the Province of British Columbia as a wholly-owned subsidiary of Oando Plc. Earlier regulatory filing at the Nigerian Stock Exchange (NSE) indicated

that Oando E & P Holdings Limited would acquire all the outstanding minority shares under a plan of arrangement for a cash consideration of $1.20 per share. Oando holds, either directly or indirectly, 746,107,838 of the common shares of OER, representing approximately 93.7 per cent of the issued and outstanding common shares. Pursuant to the plan of arrangement, Oando E & P Holdings Limited will acquire all of the common shares that are held either directly or indirectly by the institutional shareholders and Oando. In consideration for such transfer, Oando and the institutional shareholders shall receive such number of shares of Oando E & P Holdings Limited as reflects the number of their contributed common shares for the purposes of completing the transactions contemplated by the plan of arrangement. The referenced institutional shareholders are M1 Petroleum

Ltd, West African Investment Ltd and Southern Star Shipping Company Inc. The consideration represents a 177.2 per cent premium to the 20-day volume weighted average price of OER’s common shares on the Toronto Stock Exchange for the period ending December 21, 2015, using the Bank of Canada US$ to CDN$ closing exchange rate of 1.3965 on December 21, 2015. The transaction provides total consideration to holders of minority shares of approximately US$13.7 million and implies an equity value for the company of approximately US$955.3 million.

NNPC to Be Unbundled Into 30 Subsidiaries – Kachikwu

*Dr. Emmanuel Ibe Kachikwu.

igeria’s Minister of State for Petroleum, Dr Ibe Kachikwu, says the Nigerian National Petroleum Corporation (NNPC) will be unbundled into 30 competitive revenue generating subsidiaries in the coming week. He made the disclosure at the Oloibiri Lecture Series and Energy Forum organized by the Society of Petroleum Engineers. It was the 25th in the series of lectures aimed at bringing key players in the oil and gas industry together to brainstorm on issues that will ensure profitability and economic advancement through oil and gas.

The focus was on global oil price and the use of technological advancements in hydrocarbon exploration and exploitation. Dr Kachikwu told the petroleum industry experts that an overhaul of the foremost government oil firm, NNPC was imminent, to ensure the return of profitability and stability in the sector. In what the Minister said would be a major overhaul of the system, the positions of Group Executive and Managing Directors as existed in the NNPC would be replaced by Chief Executive Officers who will head each of the companies. He said that the move, which would be concluded within the next seven days, would reposition the corporation to bring in huge profits which has been impossible to achieve in the past 15 years. However, other experts at the lecture noted that for Nigeria to be able to get over its financially challenging times occasioned by the instability in the oil market, advanced technology in the sector is a must to reduce costs and maximize profit. The experts said that several sub-sector practices must be ratified and enhanced, including joint venture structures, gas exploration, oil production and refining chain among others.

Orient Energy Review Feb. - March, 2016

LOCAL CONTENT

CNL Concludes Handover of Producing Assets in OMLs 53 & 55 to Seplat and Belema oil … Reiterates its Commitment to Nigerian Content

hevron Nigeria Limited (CNL),operator of the joint venture (JV) between the Nigerian National Petroleum Corporation (NNPC) and CNL (the “NNPC/CNL JV) has formally handed over the producing assets in OMLs 53 and 55 to Seplat Petroleum Development Company Plc. (Seplat) and Belemaoil Producing Limited (Belemaoil) respectively, at a brief but impressive ceremony in CNL’s Lekki Headquarters. A similar handover and induction exercise was conducted at the Jisike Flow Station, near Owerri, Imo State. These events conclude the asset sale transaction between CNL and Seplat for OML 53, and between CNL and Belema oil for OML 55. Clay Neff, Chairman and Managing Director, CNL, who received Austin Avuru and Nedo Osayande the CEOs of Seplat and Belema oil respectively at CNL’s Lekki headquarters said: “We are pleased to conclude the handover of the producing assets in OMLs 53 and 55 to Seplat and Belema oil respectively. This affords these companies an opportunity to grow their production, while also confirming our commitment to developing Nigerian content.” In response, Mr. Avuru acknowledged that “The acquisition of these

assets is in realization of our carefully designed strategy to create long-term value and shared prosperity for our shareholders and other stakeholders.” He confirmed that “Seplat will leverage its core strengths and expertise to capitalize on growth opportunities available to them across the upstream value cycle.” In his own response, the founder of

Clay Neff (in the middle), Chairman & Managing Director of Chevron Nigeria Limited (CNL) exchanges the agreement of the sale of CNL’s interest in OMLs 52, 53 and 55 with Austin Avuru (third right), Chief Executive Officer, Seplat Petroleum and representative of the Seplat Consortium comprising of Seplat, Amni and Belemaoil -yesterday in Lagos. Others are: (left to right) - Mirian Kachikwu, General Counsel, Seplat Petroleum ; Stuart Connal, Chief Operating Officer, Seplat Petroleum; Nedo Osayande, Managing Director, Belemaoil; Roger Brown, Chief Financial Officer, Seplat Petroleum and Chioma Nwachukwu, General Manager, External Affairs and Communications, Seplat Petroleum.

Belema oil, Mr. Jack-Rich Tein said “we are pleased that the acquisition of OML 55 by Belema oil is now concluded and we will now proceed with our long-term strategy to maximize value for all stakeholders.” CNL signed a Sales and Purchase Agree-

ment in November 2013 for the sale of its interests in OMLs 52, 53 and 55 to The Seplat Consortium comprising Seplat, Belema oil and Amni International Petroleum Development OML 52 Company Limited.

‘Total FPSO Will Boost Local Content Devt.’ T

he fabrication of the Floating Production Storage Off-loading, FPSO, for Total E&P Egina oilfield project is estimated to boost local content development up from current levels of 10 percent to about 15 percent. The Managing Director, Lagos Deep Offshore Logistics, LADOL Base, Dr. Amy Jadesimi, who disclosed this in Lagos, said upon the completion of the facility, other FPSO’s can berth there. According to her, “this is a huge milestone; what it means is that every FPSO from now on can come to Nigeria and local content can finally reach beyond the 10 to 15 percent level. “We have been stuck at that 10 percent level, why? Because of capacity, if you do not even have a place where the FPSO can berth, then what are you talking about? So we have to first

build the capacity and this FPSO is very critical because this is the most complicated, most expensive facility you have to build. “Once you build the facility, other people can now come in to invest millions and they can contribute and benefit from this whole exercise we are engaged in to make Nigeria a hub.” The Egina FPSO is expected to be one of the largest in the world with the capacity to store about two million barrels, and the first FPSO to be integrated onshore in Nigeria. She said: “The value of the whole Egina project is about $14 billion – $15 billion, but Samsung’s part of it is about $3.8 billion. “What we are saying is now that we have this facility at LADOL, we will be able to achieve up to 50 percent local content. So not only are we creating jobs, we are domesticating activities and therefore conserving foreign currencies because we are now

Orient Energy Review Feb. - March, 2016

Egina FPSO charging in naira. “This facility is a game changer; once you change the game, it is just a question of making sure that we have enough additional investment, more

LOCAL CONTENT

ednesday the 24th of February, 2016 marked the official launch of the BV Marine and CSIA Certified Panel Shop, the only shop certified in Nigeria for marine rated Industrial panels. The shop is a further show of our demonstrated local competence in Automation and Electrical equipment manufacturing in Nigeria. The event was well attended by numerous customers from 19 companies across Oil, Gas, Power, Food & Beverage, Breweries and the cement industry. We also had the pleasure of having representatives from PETAN, DPR, NAPIMS, NNPC, MAN and NCDMB. At the launch, the MD/CEO-Lawal Gbolahan welcomed all who had made time to come for the event. A delved a little into the company’s history and every effort made to be a certified panel shop. He also encouraged patronage from all stakeholders. He described the facility to be a hub were Nigerian young Engineers would be able to grow into specialist in areas such as welding, design and fabrication of Electrical and control panels etc. Closely following the CEO was a representative of the Nigerian Con-

participants, particularly from the indigenous side so that we can increase our capacity enough to meet the demand. “The other thing that we are looking at which is very important is the human capacity development. This is very important; the work we are doing in LADOL has never been done in Nigeria before. “In a low oil price environment they are looking for cost savings and Nigerians are cheaper than South Koreans. Also, these projects are necessary to support the diversification away from oil and gas. The facility in LADOL can be used to do any kind of steel fabrication – we can do railways, we can do pre-fabrication steel for hospitals, we can build bridges and we can also do for factories. “The cranes we have inside the facility are the heaviest in the whole of Africa, even if you go to South Africa; they do not have what we have in Nigeria now. So when we say this is a game charger, this is a real game charger”. • Vanguard

Official Launch of GIL Automations BV Marine and CSIA Certified Panel Shop

tent Development and monitoring board – NCDMB Mr. Frank Ibi – Manager Capacity Building gave a goodwill message on the need for supporting companies who work hard in ensuring the Nigeria content act is followed. He commended GIL Automation for achieving this prowess and encouraged others to do same. A representative of Total Nigeria provided customer testimonial on how GIL Project team have delivered panel projects to specification, timely and safely. The AGM, Project & Services Olawale Akande talked extensively on the various processes of the panel shop including the software and hardware involved and the relevant IEC compliance of our cabinets. The GM –Sankalp Singh was delighted to facilitate the tour of the facility which saw the staging area where panels are

staged after fabrication for FAT and preparation for packaging and shipping. Then they went to the fabrication area and then to the workshop were metal sheets are fabricated and bended, the bus bar machine and loading area. The event continued after lunch with a question and answer section which was co-anchored by the GM and MD. ‘Following the launch, GIL Automations opened its doors to their clients to make out time and come for a tour anytime. Be rest assured we are glad to take you round because we are proud of it. We look forward to working with you on your next enclosure project’, Singh said.

Orient Energy Review Feb. - March, 2016

POWER

AU Sinks Sh138 Million in Kenya Geothermal Exploration

kiira Geothermal Ltd has signed a Sh138.9 million ($1.37 million) grant agreement with the African Union Commission (AUC) to extend exploration of steam power. The company is currently undertaking drilling in Akiira Ranch, south of Ol Karia geothermal fields, Naivasha sub-County of Nakuru in Kenya. With the funding Akiira will embark on its second stage exploratory drilling works with an aim of finding at least 77MW of steam energy sufficient to drive the power plant for 25 years. “Akiira commenced exploratory drilling in August 2015 and is today about to kick off on drilling its third geothermal well,” Centum said in an announcement recently. The grant is part of its Geothermal Risk Mitigation Facility that is aimed at mitigating financial risks that early stage private sector developers bear when drilling in the search of geothermal steam suitable for power production. The initial stages of geothermal exploration can be the most risky, with costly investment sometimes being lost when drilled areas do not produce enough steam or heat, causing projects to be discontinued. SUPPLY POWER This facility is part of the AUC’s commitment to support Africa’s infrastructure investment objectives. In August last year, the firm signed a Power Purchase Agreement with Kenya Power and Lighting Co Ltd to supply base load power from a 70MW power plant that it will construct once exploratory drilling has been completed. Kenya is one of the leading coun8

tries in the world in investments in renewable energies in wind, solar, hydro, biomas and geothermal energy according to London based audit firm Ernst and Young (EY). EY’s Renewable Energy Country Attractiveness Index (RECAI), Kenya was placed in a category described as ‘markets which show no signs of slowing down and continue to offer far-reaching energy investment opportunities’. Akiira is owned by Frontier Investment Management a Danish renewable energy Private Equity fund manager and Centum Investment a Nairobi Securities Exchange listed investment company. Two other shareholders, Marine Power Generation of Kenya and RAM Energy of the United States are the developer companies for the projects. By Otiato Guguyu, Daily Nation, Kenya

NERC Signs MOU with CPC to Expand Metering For Electricity Consumers

he Nigerian Electricity Regulatory Commission, NERC, and the Consumer Protection Council, CPC, recently sealed a Memorandum of Understanding, MoU, to ensure that consumers get meters as prescribed in the service agreement electricity distribution companies (Discos) had with the Bureau of Public Enterprises, BPE. A statement obtained from NERC noted that the Acting Chairman, Dr. Anthony Akah, regretted that gas pipeline vandalism was on the increase and called for stiffer measures to check the menace. The two organisations are also to work closely with consumers to ensure that those who volunteered to pay for meters under the Credit Advance Payment Metering Implementation (CAPMI) scheme get their meters within 60 days or not to be billed until meters

Orient Energy Review Feb. - March, 2016

Gas Pipelines Vandalism Truncates Power Generation – Eko DISCO T

he current erratic power supply in the country has been attributed to the increased vandalism of gas pipelines and transmission towers. According to Eko Electricity Distribution Company or Eko DISCO, the situation has led to power rationing and intermittent outage within its network. Head, Corporate Communications, Mr. Idemudia Godwin, in a statement, said ‎the drop in the national generation level is “as a result of incessant acts of vandalism on gas pipelines and transmission towers. He explained that the attacks have resulted in inadequate bulk electricity load allocation to the company from the national grid, occasioning acute power rationing in all areas within the company’s operational territory. Areas affected by the power rationing, according to the statement, include Surulere, Lekki, Ajah, Ibeju, Mushin, Apapa, Yaba and their environs. The company appealed to its customers to bear with the situation, assuring that it was doing well to ensure equitable distribution of available power to all customers pending improvement in the power generation level.

were provided. Akah said, “It is our belief that with this collaboration with the CPC, complaints that may arise in the course of the implementation of the good tariff and other electricity consumers related ones would be effectively managed and addressed in line with the Commission’s redress mechanism. According to him, “The CPC has a member in each of NERC’s consumer forums located nationwide; we intend to intensify enforcement of consumer protection regulations on metering, billing and the perennial complaints of estimated customers. There shall also be concerted efforts aimed at reducing the incidence of estimated billing and eventually eliminating them completely. “The increasing incidents of vandalism of electricity infrastructure, energy theft, hostility to operators are also issues we hope to jointly address.”

COVER

DEALING WITH THE NEW NORMAL

Can African Petroleum Producers Survive The Oil Price Slump? By Godspower Ike, Margaret Nongo-Okojokwu

he declining crude oil price has plunged oil producing countries in Africa into serious economic dilemma and it is also threatening the social and political fabric of these countries and the continent in general. These countries are 10

faced with declining foreign exchange reserves, dwindling revenue, rising expenditure and declining growth. Analysts are also unanimous in their views that the decline in oil price has thrown Africaâ&#x20AC;&#x2122;s oil and gas industry into dire straits, a situation exacerbated by factors such as uncertain regulation, corruption and the prospect of

Orient Energy Review Feb. - March, 2016

political and social instability. According to analysts, it is a particular burden on those economies most reliant on the industry for revenue, and could have far-reaching socioeconomic results. It is estimated that with almost 90 percent of African countries now exploring hydrocarbons, the

COVER STORY

global decline in oil prices would throw up extra hardship for those countries, especially as investors are averse to taking risks in the midst of the global turmoil. Nevertheless, report stated that despite the fact that a number of African countries are already diversifying their economies, it is impossible for them to escape the global turmoil in markets and growing insecurity brought about by low oil prices. Already, it is common knowledge that many currencies have performed badly against international currencies. Particularly, the South African rand plunged

to its lowest level in the last 13 years, while the Zambian kwacha also fell to a record low price against the euro and the dollar. Duncan Clarke, Chief Executive Officer of Global Pacific and Partners warned that with oil prices dropping by more than 50 percent, many African economies are in deep trouble. He declared that the industry is under a global shock and all oil producing countries, as well as non-producing countries are going to witness less capital coming in for exploration into their countries. Clarke stated that projections in Africa that were done in the past were oversold. According to him, there is still growth and opportunity in the continent, but only countries that adjust quickly will do best. However, he said, “The market has adjusted to the crude oil prices overnight. The companies have taken a little bit longer but they have all adjusted on portfolios, on layoffs. Now it’s up to the governments.” In the same vein, the International Energy Agency had said that African crude oil exports will fall by 600,000 b/d over the next six years as production from its biggest producers’ slips and rising regional refinery activity absorbs more domestic output, Africa will observe the steepest absolute decline by a major crude exporting region, with regional crude production set to decline by 400,000 b/d mainly due to fall in output in Nigeria, Algeria and Angola, according to the IEA’s Medium-Term Oil Market Report, as published by PLATTS Africa Energy Outlook, February 24th 2016.

n this report, the IEA said that West African oil producers are likely to have problems marketing their crudes over the next couple of years due to the existing global glut of sweet crude, which has made this region a new “swing producer.” According to the report, the Dangote refinery project in Nigeria which is expected to start-up by 2021, will process Nigerian crudes and thus reduce the volumes for export. Crude

runs are expected to reach 300,000 b/d in 2021 with the full 500,000 b/d nameplate capacity reached in subsequent years. Algeria is expected to post the biggest loss in crude production in Africa and in OPEC over the six year forecast period because exploration and development of new Algerian oil fields has ground to a halt. IEA said that Algeria’s oil production will fall by 170,000 b/d to 990,000 b/d in 2021 as a lack of investment pushes aging oil fields into decline. Declining Nigerian, Angolan oil

he IEA said the oil price collapse was causing “particular pain” for Africa’s two largest oil producers Nigeria and Angola, as oil output is expected to slow down along with declining state revenues. Nigeria’s oil production is expected to decline by 70,000 b/d by 2021 to 1.85 million b/d as investment slows in the country’s high-cost deepwater projects and “large-scale oil theft and pipeline sabotage in the Niger Delta continues unabated.” Africa’s second largest producer Angola will see its crude production fall to 1.8 million b/d in 2021, a fall of 20,000 b/d over the sixyear forecast period, according to

The market has adjusted to the crude oil prices overnight. The companies have taken a little bit longer but they have all adjusted on portfolios, on layoffs. Now it’s up to the governments.

Orient Energy Review Feb. - March, 2016

COVER STORY the IEA. The IEA said that Angola’s official 2 million b/d target looked unachievable even before the fall in oil prices due to technical problems besetting its deep water projects. “The country’s aging offshore oil fields need continuous support from new and costly projects to offset steep declines and since output peaked in 2008, Luanda has struggled to stem the drop,” the report added. West African Crudes under pressure

he report said that WAF oil producers like Nigeria and Angola may be forced to cut prices to sell barrels, with low prices, oversupply and high stocks projected to prevail until at least early-2017. There is currently a glut of WAF crude in the global market and a lot of these cargoes have been unsold leading to excess barrels being stored on tankers. But the IEA said WAF producers have the geographical flexibility to sell oil east or west as demand requires. It also said that customers for African crude will remain relatively similar over the forecast period. Europe is expected to remain the main demand outlet for WAF crude, but imports of African crude to OECD Europe are set to decline by 500,000 b/d accounting for 2.2 million b/d in 2021. The IEA added, however, that if Libyan production rose, “incremental volumes are expected to be shipped to traditional European markets likely backing out similar light, sweet crudes from West Africa.” By 2021, Chinese imports of African crudes are set to inch up by 200,000 b/d to about 1.5 million b/d with the bulk of these coming from Angola. While corroborating this stand point, another report by Gulf

Dr. Duncan Clarke, Founder and Chairman, Global Pacific and Partners International Ltd

Intelligence declared that the collapse of oil prices at the start of 2016 had comprehensively dashed hopes that a brief bounce in prices in mid-2015 heralded the beginning of the first uptick since June 2014.

ccording to the GI report, oil prices sank below $30 per barrel in mid-January – hitting a 12-year low, ensuring that governments and companies with oil revenues at the heart of their economic security will spend the rest of 2016 grappling with budget-crippling prices. The report further stated that the United States’ decision to lift a four-decade ban on crude exports, bar the 500,000 barrels per day that is largely already exported to Canada, will fuel a change in African exporters’ routes this year. The report explained that over a third, about 38 per cent of respondents to its survey, expect Africa’s dominant producers – Nigeria, Angola, Algeria, Egypt – to focus on local markets across the continent, which are backed by a population boom and up to six per cent economic growth. It also added that Africa’s shift away from US markets could create more competition between African and Gulf producers for market share along the new Silk Road and wider Asia.

Orient Energy Review Feb. - March, 2016

Austin Avuru, CEO Seplat Petroleum Development Company

It, however, stated that Africa’s annual appetite for gasoil and gasoline is expected to Climb by as much as eight per cent over the coming year, while demand for liquefied petroleum gas (LPG) hit double digits. The report noted that Africa’s expanding home-grown energy supply will help satisfy some of the swelling demand. But East Africa, it said, is elbowing its way under the spotlight and will change Africa’s energy map in 2016 – a move easily justified by its wealth of oil and gas assets. For example, Tanzania hopes to use its 55 trillion cubic feet (tcf) of natural gas reserves to become a LNG exporter by 2025, while Tullow and Canada’s Africa Oil have identified 600m barrels of oil reserves in Kenya’s South Lokichar basin.

riceWaterHouse Coopers (PWC) in its latest oil and gas review, stated that the countries that have been most affected by the dramatic decrease in crude oil price are those that are highly dependent on oil exports. The countries that would be hardest hit, according to the report include Nigeria, Cameroon, Chad,

COVER STORY

Wale Tinubu, CEO OANDO Plc

Sheperd, CEO Azonto Petroleum

Angola, Republic of Congo, DRC, Gabon and Ghana. The report stated that the situation may require governments to implement austerity measures and develop realistic budgets based on a significantly lower oil price. Particularly, the report said Angola’s economy will suffer from significantly lower oil prices, adding that the risks to the Angolan economy are not just limited to the implementation of austerity measures. “A reduced budget could mean the government is not able to pay civil servant salaries and a reduction in the provision of social services. This could increase the risk of social instability– which makes its appearance as the third most likely factor to affect business,” the report noted. In the case of Nigeria, PWC explained that the non-passage of the Petroleum Industry Bill (PIB), has had less of an impact on funding than expected as many companies have factored in the country’s risk. According to the report, it would also appear that the risk is relativity high, and IOCs are divesting, while international financiers may also look at funding other capital projects and shift more invest-

ment into the ‘new frontier’ countries that have fledgling oil and gas industries. It projected that an estimated $50 billion has been lost in oil and gas capital investment in Nigeria. There is also the risk of increasing non-performing loans in Nigerian commercial banks, heavy indebtedness of indigenous and international oil companies and high risk of default by indigenous companies that acquired the assets of oil majors a couple of months ago. In the area of South Africa, the report said, “Investment in South Africa has stalled for another year as lawmakers work to approve amendments to the Mineral and Petroleum Resources Development Act (MPRDA). “Companies have put spending on hold until there is clarity on the Act. A new clause entitles the state to a 20 per cent free carry in exploration and production rights and an ‘uncapped’ further participation clause enables the state to acquire up to a further 80 per cent at an agreed price or under a production sharing agreement. This bill is now up for re-evaluation and is expected for release later in 2015.” As a growing oil-producing state the Republic of Sudan was pumping 500,000 barrels-per-day prior to 2011. Since the partition both Khartoum and the Republic of South Sudan have both suffered growing economic

difficulties. Reports alleged that South Sudan was receiving the lowest price internationally for its oil. This is in part the result of a negotiated deal with the Republic of Sudan where additional costs were placed on the export of each barrel of oil in order to compensate Khartoum for its ownership of the pipelines and the potential damage done to its economy resulting from the partition. According to Financial Times, wartorn South Sudan is receiving what traders say is arguably the lowest oil price in the world, $20-$25 a barrel, because of falling prices and unfavorable pipeline contracts. It claimed that South Sudanese revenues have now fallen to about $100 million a month, equal to an oil price of about $20.5 per barrel based on output of 160,000 barrels a day. The report further stated that oil executives believe South Sudan could become an example of how falling oil prices can exacerbate political risk as countries are forced to slash budgets. In addition, the report stated that the discovery of large-scale oil deposits in East Africa fuelled speculation centred upon phenomenal economic growth dependent on increased exports where prices would remain above $100 per barrel. Moreover, BP Plc, in its latest annual Statistical Review of World Energy, wondered how energy companies in West Africa are coping with the ever-declining oil price. Specifically, Panoro Energy ASA’s second quarter results for 2015 revealed a $34.13 million operating loss at the Earnings Before Interest and Tax (EBIT) level, which was a significant drop from the EBIT level operating loss of $2.19 million posted during the second quarter of 2014 and $1.93 million in the first quarter of 2015. In spite of the losses however, the company reported a cash balance

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COVER STORY

Companies have put spending on hold until there is clarity on the Act. A new clause entitles the state to a 20 per cent free carry in exploration and production rights and an ‘uncapped’ further participation clause enables the state to acquire up to a further 80 per cent at an agreed price or under a production sharing agreement. This bill is now up for re-evaluation and is expected for release later in 2015.

of $33.3 million as at June 30, compared to $36.1 million at March 31. Around $26 million of this cash was earmarked for the development of the Aje Cenomanian oil field, located in Nigeria, which is on schedule for first oil at the end of this year, according to Panoro’s second quarter 2015 results statement. Also, Mart Resources Incorporated, which focuses its activities in the Niger Delta region of Nigeria, posted net loss of $24.30 million for the six month period ended June 30, 2015 compared to a net income of $13.07 million registered in the first half of 2014. Net loss rose to $6.8 million in second quarter 2015 from $1.4 million in second quarter 2014 and one of the main reasons for this increase in loss was the lower oil price experienced by the oil and gas industry at the time, according to Mart Resources. Seven Energy, which has two core areas of operation in the northwest and southeast Niger Delta, posted an operating loss of $13.68 million in first half 2015, which was $67.85 million less than its first half 2014 operating profit of 14

$54.17 million.

ôte d’Ivoire and Ghana-focused oil and gas company Azonto Petroleum Limited reported a similar waning trend in its second quarter 2015 results, reporting that its cash at the end of the quarter stood at $2.57 million, compared to $3.64 million at the end of first quarter 2015 and $5 million at the end of fourth quarter 2014. Azonto also recently sold its entire 35 per cent stake in Vioco Petroleum Limited, the operator of the CI-202 block offshore Côte d’Ivoire, to Vitol E&P Limited for $4 million, effectively ending its activities in the West African country. Azonto claimed that the increased cost growth experienced by the CI-202 Block’s Gazelle project in recent months was one of the reasons for the planned sale of its asset, as was the ‘increasingly challenging’ oil and gas sector environment. Oando Energy Resources, which largely concentrates its activities onshore and offshore Nigeria, posted a loss of $50.35 million in the first half of 2015, while first half 2014 financial statement shows a $177.54 million loss, which highlights a significant year on year improvement. Oando’s revenues more than tripled

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during this timeframe too, going from $62.60 million in first half 2014 to $222.65 million in first half 2015. African Petroleum, which holds ten licenses across Côte d’Ivoire, Liberia, Senegal, The Gambia and Sierra Leone, reduced its yearto-date second quarter loss from $8.93 million in 2014 to $8.08 million in 2015, despite the fact that its revenue decreased from $2.93 million to $350,000 during the same period.

ccording to its most recent comprehensive results statement, Nigeria-focused energy company Eland Oil & Gas Plc also improved its losses from $26.14 million, for the year ended Dec. 31, 2013, to $16.29 million for the same period in 2014. In a separate financial statement, Eland revealed a cash balance of $13.1 million as of June 30, which was $4.9 million higher than the cash balance of $8.2 million as of March 1. Indigenous Nigerian upstream exploration and production company Seplat Petroleum Development Company Plc managed to buck the

COVER STORY

trend of recording losses and registered a $71 million operating profit for the first half of 2015, despite suffering a 59 per cent decrease in operating profit compared to the previous year. The Managing Director of Seplat Petroleum Development Company Plc, Austin Avuru, at the 13th Aret Adams Annual Lecture Series in Lagos recently, said that Nigerian independent oil companies were most affected by the drop in price of oil globally. Speaking on the topic: “Low Oil Prices: Challenges and Opportunities,” Avuru said: “We all borrowed to fund acquisition and growth capex. Many are now cash negative and yet need more investments for production increase to survive,” According to him, an average of $60 per barrel was required for most companies to survive in 2016, adding that the nation needs to embrace effective domestic utilisation of fossil fuels to survive. The Seplat boss said that because Nigeria heavily depends on oil to balance its economy, the drop in oil prices was a huge blow to the country’s major revenue.

owever, with the decline in prices, there may be some benefits for non-producing states but this fact poses serious problems for those who have planned to focus development plans on increased drilling and exports. Some analysts are of the view that the falling oil prices can turn to the good for some African countries. According to Ese Avanoma, Managing Director of Brade Consulting said, “There is less corruption, because there is no money to support it. The little we have is just to take care of basic things. People will understand that we have to weather the storm. There is not much to waste. “The oil industry sees this downturn every six years. It is a time for recalibration. It is time to look at all the projects and to look at what is viable. It’s a time to strategize for the future. So it is a good time to meet.” Despite the lull in crude oil price, PWC projected foreign direct investment into the continent to come from the three main regions with North America and Europe continuing to invest and China entering through the likes of Sinopec, CNOOC and CNPC aggressively targeting the African market. It explained that the Chinese Government is reliant on oil produced in Africa, especially Angola, which is now the second-largest exporter after Saudi Arabia to China. There is concern that Chinese funding might be detrimental to other investors. To succeed in these tough times, analysts are of the view that African oil producers should strengthen their local content laws and concentrate on empowering indigenous companies as this will help fast-track the growth of the economy. The Gulf Intelligence report also stated that African producers can cope by creating greater opportunities for partnerships between Africa and the Middle East on the emerging South-South energy corridor and also create competition for market share in Asia between African and Gulf producers. It added that African producers will increasingly find markets locally, with a population boom and six percent Gross

Domestic Product (GDP) growth across the continent. In conclusion, drawing from arguments posited by experts, it is obvious that the best safeguard for the shocks brought about by low oil price is for the affected countries to diversify their economy away from dependence on oil, deepen local content laws and place increased emphasis on investment in renewable energy. There is also the need for continued investment in the oil and gas sector while attempt should be made to increase the competitiveness of the continent in global oil and gas market.

ike Nigeria’s Minister of State for Petroleum Resources and Group Managing Director of the Nigerian National Petroleum Corporation, NNPC, Mr. Ibe Kachikwu said, there is the need for oil producing countries to position themselves and ensure they play a strategic role in the Organisation of Petroleum Exporting Countries, OPEC and in the global petroleum industry in general. Kachikwu, who stated this in Abuja when announcing the commencement of preparations for the African Petroleum Producers Association’s, APPA, 6th Africa Petroleum Congress and Exhibition (CAPE VI) to be hosted by Nigeria, had maintained that the volatility in the global oil industry has made it imperative that smaller producer countries in Africa huddle together to be able to find ways and means of encouraging and pushing forward their agenda. This, it is believed, is going to be critical in the 2016 timeframe when obviously, the strategic movements and realignments over the issue of oil pricing would be happening.

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SPECIAL REPORT

Low Oil Price: Opportunities In The Midst Of Challenges By Pita Ochai ‘You never want a serious crisis to go to waste.” Barack Obama’s former chief of staff Rahm Emanuel used this familiar aphorism when discussing the 1973 oil shock, and it applies again now. But today’s crisis is the reverse – plunging rather than soaring prices. And of course what is a crisis for some is a mild inconvenience to others and an opportunity for still others. The fall in the price of crude oil in the international market is sending economic and political shocks around the world. The hardest hits are countries whose economies depend largely on oil for appreciable percentage of their foreign exchange earnings. According to statistics, crude oil accounts for about 95 percent of Nigeria’s foreign exchange receipts. The reality of possible crippling budget shortfalls also stares many oil exporting countries in the face as the priced commodity has hit its lowest price level in four years. The prices of crude oil have now fallen by more than seventy per cent since June 2015, when the commodity was being sold for $110 per barrel 16

to less than $30 per barrel. Analysts have blamed weak global demand and booming U.S shale production as reason behind the price plunge and with the Organisation of Petroleum Exporting Countries (OPEC) reluctant about cutting output. Having carefully studied the market situation, the World Bank has predicted that the international crude prices may go as low as $20 per barrel. The impact of the falling oil price has been seen in the dwindling oil bench mark for the national budget of Nigeria. In 2014, the budget was based on 78 dollars per barrel, in 2015 it was lowered by about 17 percent 65 dollars per barrel, but the 2016 budget seems to be the worst hit with a drop of 41.5 percent which is 38 dollars per barrel. While the sustained low oil price is having its toll on government revenue, oil companies are not also spared. Most companies have reacted by reducing cost through sack of workers, and reduced investment as there are less fund do that. According to Raoul Restucci, Managing Director of majority state-owned Petroleum Development Oman (PDO), governments that are dependent on high oil prices to balance budgets will generally be concerned over the source and distribution of funds and emerging fiscal deficits, while executives of exploration and production companies

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will increase their efforts to enhance and drive business efficiency. However to Restucci, there is a silver lining in falling prices. “Operators tend to revert to more rigorous activity-based pricing and escalate efforts towards contract optimisation and efficiency. The decline compels the industry to reassess the incremental value generated across every facet of expenditures, and often to reinvent itself where returns are inadequate. This helps the company become more robust, sustainable and efficient,” he said. According to Restucci, many opportunities can emerge from the current oil prices that simply reaffirm the need to get the basics right. Leveraging operator and contractor resources, rebalancing the apportionment of risks and aligning procurement efforts are some of the practices that will, no doubt, be implemented more effectively across the industry to generate savings and sustain profitability and investment return goals at lower price levels. Osaze Benson, an energy expert, told Orient Energy Review that the global drop in oil prices has analysts mulling over the shrinking profitability of the oil industry. But it is not

SPECIAL REPORT all doom and gloom. On the contrary, companies may be in a stronger position today to negotiate better deals with host governments, compared with when prices were high. “Oil prices are the most obvious drivers of change in the relationship between the two key players: host governments—the owners of resources; and companies—the holders of capital and technology. The price level significantly determines the degree of bargaining power each party has at the negotiating table. Typically, when the oil price is high, the government has the upper hand; when the price moves in the opposite direction, the pendulum swings in favour of the companies,” he said. Adding that even before the oil price started to weaken, some governments introduced drastic changes to improve their investment outlook, such moves further toughen competition between countries for international capital. It is, however, a question of time before the pendulum swings again. Experience shows that periods of high oil prices are not always good news for the industry. On the contrary; they typically attract higher taxes, contract renegotiations, tougher regulations and, in extreme cases, expropriation and nationalization as host governments demand a bigger share of the additional returns. These changes are seldom implemented easily or peacefully, and often result in lengthy litigation. As shown by London-based think tank Chatham House, the higher incidence of arbitrations in the oil sector correlates strongly with the commodity price boom. A contract signed when oil prices were $30/bl may well be viewed as simply too generous to the industry at $100/bl. The period between 2002 and 2008 is a good illustration. Over that period, oil prices were rising steadily and more than 30 countries revised their petroleum taxation systems to increase their share of profits. From Angola to Argentina, China, Ecuador, India, Kazakhstasn, Libya, Nigeria, and the United States (Alaska), governments increased the tax rates oil companies pay. Today’s low oil prices have pushed some governments to go in the opposite direction. This is most notable in countries which have been struggling to increase production and attract investment. Low oil prices will only exacerbate an already dire situation and therefore prompt anxious gov-

Mr Raoul Restucci, Managing Director, Petroleum Development Oman.

ernments to implement drastic measures to stop conditions from worsening further. For instance, energy giant BP and its oil and gas partner, RWE Dea, recently made headlines after signing a historic deal with the Egyptian government. The contract has been described by some critics as the “great Egyptian gas giveaway.” While such a statement is surely an exaggeration, it indicates the Egyptian authorities’ willingness to try different means, even completely new schemes, to improve the country’s challenging investment outlook. The agreement shifts away from a production-sharing model—long used by Egypt whereby companies are paid a share of production as compensation for their efforts—to a concessionary system where the companies own all the production and pay taxes in return. The Managing Director, Total Exploration and Production Nigeria Limited, Mr. Nicholas Terraz has said the oil price fall is responsible for the challenging economic environment in Nigeria, and noted that the harsh environment required oil companies to adapt and quickly take actions, while identifying three critical factors for sustainability of the petroleum industry. Terraz, who spoke at the recently-concluded 20th Offshore West Africa Conference (OWA), in Lagos, elaborated on the three critical factors that will be key for future development in the industry. He noted that safety, irrespective of all issues, cost efficiency in company operations and adequate petroleum laws and regulations which provide a robust framework that is conducive to investment and flexible enough for the varied economic climates linked to the price of oil, were all absolutely essential. Terrez, further hinted that, “If we are able to achieve these conditions and put in

place laws that create a win-win situation for all stakeholders, our countries would have laid a solid foundation for a sustainable future.” “This will also stabilise investors’ confidence, ensures attractiveness and respect of the contractual and fiscal terms, cost efficiency is critical in the current context. Irrespective of all these issues, high safety standards must not be compromised” he added. In response to the decision by the Organisation of Petroleum Exporting Countries, (OPEC) not to cut production, oil prices plummeted. Prices may fall further, or may stage a modest rebound, but it seems clear that expectations of a new floor of $100 per barrel were misplaced. So what should producers, governments and consumers do in preparation for an extended period of weak prices? Olisemeka Obeche, an energy economist said: Firstly, they should not think of current prices as “low”. Since the birth of the modern petroleum industry, the inflation-adjusted oil price has averaged above $70 for just 16 of 153 years. Prices in a range of $60 to $80 would be enough to keep oil competitive as energy source and industry profitability still strong. So if you are a government official, this fall should not come as a surprise. The wiser states have already been trimming their budgets; for others, the time of consequences is approaching. Cutting wasteful subsidies now makes even more sense – the required hike to reach market prices is less. “If you are an executive in an oil company, remember that the industry

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SPECIAL REPORT

Terraz

has overreacted to such boom-andbust cycles so often before – overspending during the early 1980s in expectation of relentlessly rising prices, gutting research and the workforce in the 1990s, then suffering for it from rising costs and skills shortages in the 2000s, before repeating the mistake during the financial crisis. Is it too much to hope for that this time may be different? Of course oil companies will seek to halt unprofitable projects and squeeze suppliers,” he said. Obeche said this should also be an opportunity to invest in technology and in building a younger and better-skilled workforce. For the bolder chief executives, this is a chance to make acquisitions. The supermajor oil companies may seek to fix their problems by delivering growth; the smaller independents may consolidate to build the scale to compete. The low oil price also creates opportunity in the downstream sector in some countries like Nigeria. For decades, the downstream sector has always sat in stark contrast to what had always been a thriving upstream oil and gas industry in the country. The downstream sector was very much the sick child of the Nigerian oil and gas industry, defined and plagued by chronic fuel scarcity. During such times of scarcity, the petrol stations across the country would be littered with never ending queues of cars while jerry-can carrying touts held court in the thriving black market, 18

the price of petrol often selling at five times the going rate. A large chunk of energy policy in Nigeria has always focused on the upstream sector, that may be with good reason - the breadwinner of the family with energy sales accounting for up to 80 percent of the Nigerian government’s revenue and 90 percent of the country’s export. In the first quarter of 2014 alone (obviously before the oil price plummetted), Nigeria realized N2.432 trillion in oil revenue compared to N299.2 billion realized from revenues from non-oil sector sources. This has meant that the current low oil prices has hit Nigeria hard because the government’s income is not diversified. Between June 2014 and January 2015, oil prices fell by nearly 50 percent, and the oil price has remained low since then despite one or two upticks. Oil exporters are said to be receiving about 54 percent less than what they received in 2013. The Managing Director, Chevron Nigeria Limited, Clay Neff said Nigeria had the opportunity to improve its competitive position in the global oil and gas industry. He noted that in this current situation, the country should restore investors confidence by providing competition in the oil market, adding that the security of lives and properties, and control stability and speedy approval processes should also be institutionalised. The Chevron chief said the country should address its Joint Venture (JV) funding challenges and pay the arrears, adding that Nigeria had an attractive resource base. While the upstream has been hit very hard by the current oil price, the downstream in a lot of countries, has enjoyed a boost in revenue. The low oil price environment has meant that the cost of feedstock has also fallen materially. Could this be the blessing in disguise? According to Idahosa Andrew, an independent fuel marketer, the root cause of the Nigerian downstream sector’s travails can be traced back to high crude oil prices (and the weak Naira). This made it more attractive to export crude for foreign exchange rather than supply the domestic market. Further, high crude prices meant a higher cost of feedstock (which wasn’t even readily available because most, if not all of the crude was exported). This invariably meant that it was easier to import refined petroleum product than to refine the crude in Nigeria. Let’s not forget the eye watering amount of government subsidies made available to petroleum marketers for the import of refined product. With such a huge pay day available to importers of refined product, why go through the hassle of refining? As a result, Nigeria’s refineries were brought to a grinding halt, operating

Orient Energy Review Feb. - March, 2016

far below capacity if not dormant for extended periods of time due to prolonged states of disrepair. Now with the decline in government revenue as a result of the plunge in oil prices, it was difficult for the government to pay subsidies due to oil marketers. The month long fuel scarcity in May 2015 was as a result of non-payment of subsidies by the government. The new government finally announced the removal of the fuel subsidy and fixed the pump price at N86.5. The truth is that the new government can do without paying out huge fuel subsidies which is rumoured to be in the region of N2 billion per day. Another point is that the outlook for Nigeria’s downstream sector has been bleak for quite some time, prompting major players such as Oando to exit the downstream business all together. Oando in July 2015 announced to its investors and journalists that it would be divesting its downstream business to focus on its upstream and midstream business. Without a doubt the uncertainty in the sector has led to this point. At a time when there is so much gloom about the sustainability of economic recovery and about the putative limits to monetary policy, the fall in the price has come as manna from Heaven for all those Western economies, and Japan, that were hit badly by the successive oil shocks of the 1970s. The logical effect of the fall in oil prices means that the cost of feedstock for refining has also fallen. The decline in feedstock should hopefully signal to the downstream market to invest more in refining, whether or not the subsidy regime will continue. Nigeria cannot afford to pay these subsidies if the price of oil persists at this level). Therefore, making imports less attractive to oil marketers. The market should realize that it is just as lucrative (perhaps even more so) to supply crude to the domestic market for refining instead of exporting. Nigeria, with over 180 million people, cannot not be said to be lacking in demand for refined products. Nigeria consumed 305 000 bpd of petroleum in 2014. The fact that there is a problem of illegal refining is testament to the fact that there is a market there (albeit a black market. low oil prices should signal investors to invest in the infrastructure required to provide the much needed supply to meet the demand for refined product.

SPECIAL REPORT

Nuweld to Expedite Project Delivery, Enforce Quality By Godspower Ike

uWeld Incorporated has reiterated its commitment to safety and quality, stating that it has put in place a highly capable management team with craft resources that would help expedite projects anywhere in the globe. Nuweld in a presentation after a tour of its facilities, titled, ‘Fabricating the Future of Energy,’ disclosed that the company has a proven track record of performing projects on time and within budget. The report noted that the company understands the importance of being responsive and focusing on its customer, while it has developed a fabrication facility with capability and capacity to handle any over the road project. Continuing, the report said the company has, “Field group with inhouse capability to perform structural, mechanical and civil scope and a management team that can provide turnkey construction services. It also has a fully staffed quality assurance/ quality control and engineering departments with quality assurance programs to perform most projects, while our facilities have the capability to provide a turnkey project once initial design has been provided.” The company further stated that it is proud to provide its customers with over 280 years of combined experience in welding, engineering and fabrication, adding that its main facility encompasses 211,000 square feet of high capability manufacturing on 24 acres with direct rail access. “Located in the Industrial Park of Williamsport Pennsylvania, our fabrication shop is equipped with 13 over head cranes with capacities up to 20 tons. Currently offer an extensive variety of field and shop services to the nuclear, natural gas and power industries,” the company said.

The company maintained that over the years, it had adopted a zero accident/zero injuries policy, engaging accredited safety trainers, while it also provides extensive job-specific safety training for its new staff. NuWeld noted that its welding segment is in line with approved welding procedure specification and it has the ability to qualify new welding procedures based on customer requirements and specifications with rapid turnaround. The company said its specialty welding processes include: plasma arc welding; automatic welding; orbital welding and hard facing and corrosion resistant overlays, adding that its over 100 welding procedures qualified for various metals including: carbon steel, stainless steel, low alloy steel,

titanium and aluminum. The company maintained that it is the fabricator that has the capabilities and capacity to successfully complete projects courtesy of in-house and onsite project management and project engineers. It noted that it has a fully staffed purchasing/ procurement team with approved vendor list and a full fleet of earth moving equipment and trucking capabilities. “NuWeld Inc. offers a variety of specialized mechanical services worldwide. Our qualified team of engineers, technicians, and craftspeople are standing ready to carry out nuclear safety related and non-safety related work, complete natural gas and oil distribution services, individual & complete turnkey services, and ongoing inspection & post-project maintenance. We are committed to our customers, and we ensure their satisfaction by being committed to our employees and their safety. We believe our professional dedication and personal integrity have established the values to our success. Our commitment to those values is what sets NuWeld apart from other companies which makes us stronger, our growth sustainable, and our future unlimited,” the company stated further.

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PHOTO GALLERY

Offshore West Africa 2016

Mr. Alexander K. M. Mould, Chief Executive Officer, Ghana National Petroleum Corporation, giving the opening remarks

Mr. Nicolas Terraz, Managing Director & Chief Executive, Total E&P Nigeria, Nigeria,

he 20th Anniversary of Offshore West Africa Conference and Exhibition, from the 26-28 January 2016 at The Eko Hotel & Suites, Lagos, Nigeria, played host to a record-breaking attendance for the 2nd year in succession. With over 2,700 visitors and delegates from more than 40 countries around the world, the 20th anniversary of this prestigious event was well received

Official Opening Of The Exhibition

Cross Section Of Participants

Dr. Gloria and some PETAN Executives

PETAN Chairman, Engr. Emeka Ene in a chat with Dr. Gloria Elemo, Director General, Federal Institute of Food and Industrial Research Oshodi, who also represented the Minister of science and Technology, Ogbonnaya Onu

Panel Discussion on Strategies for Local, Regional and International Collaboration and Effective Local Content Delivery.

Dr. Ibilola Amao, Principal Consultant, Lonadek Nigeria Ltd, Nigeria.

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PHOTO GALLERY

Mr. Paul Zuhumben of the NCDMB

jide Jadesimi and Dr. Amao

Kwaku Boateng from GNPC and Dr. Amao

Special award presented to Mr. Bayo Ojulari, Managing Director, Shell Nigeria Exploration and Production Company (SNEPCo) as thank you for 20 years of support for the Offshore West Africa event.

Hind Geo from India

Mr. Oshintokun. MD Richardson oil and gas.

Shell

Chevron Nigeria Ltd, during an interactive show

Atlantic Blue Water

Staff of Total plc

Jadesimi, delivering a speech at the Offshore West Africa Conference in Lagos.

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SPECIAL REPORT

CORE PA’S WORLD MEDIA TOUR 2015 Pennsylvania Coal, Oil Sectors Attract $1.25bn Dollar FDI

By Margaret Nongo-Okojokwu,

he Pennsylvania coal, oil and natural gas sector has attracted $1.245 billion Foreign Direct Investments (FDI) according to data obtained from FDI.Com, a cross-border investment monitor. FDI.com said the investment in the sector was over a period of about 12 years, from January 2003 to July 2015. Specifically, the company explained that 10 FDI projects had been undertaken within this period in the region, with about 1,005 jobs created. In addition, the report stated that the average project size in terms of jobs created translated to 100 jobs per project, while the average investment in each of 10 projects translated to $124.5 million. The company, however, noted that the report includes estimated values on capital investment and the number of jobs created in cases where information was not available at project announcement. Giving a breakdown of investments in the region over the period, the report stated that in 2012, EmberClear, a company in Calgary, Canada, announced the investment of $400 million in Allentown, Pennsylvania, in an electricity project in the Coal, Oil and Natural gas sector of the state. According to the report, EmberClear investment, which created an estimated 11 jobs, was for the building of a natural gas-fired power plant in Allentown, Pennsylvania, capable of producing 300 megawatts of electricity for 300,000 local households when 22

it is commissioned. Furthermore, in the same year, ArcelorMittal, a company based in Luxembourg invested $50 million in a manufacturing project aimed at modernising and upgrading its coke operations in Monessen, Pennsylvania. According to the report, the investment was designed to enable the company restart coke production at the facility helped created 113 new jobs at the site. The facility is capable of producing 370,000 tons of metallurgical coke per year. In 2011, the report stated that PBS Coals, a subsidiary of Severstal, a company based in Cherepovets, Russia invested an estimated $356.4 million, in an extraction project in Friedens, Pennsylvania, with plans to double output at the unit by 2015. The report said the company is currently investing in a number of mining projects worldwide, adding that PBS Coals site provides metallurgical and steam coals from both surface and deep mines for the metals, energy and industrial sectors.

Orient Energy Review Feb. - March, 2016

Continuing, the report stated that, “Talisman Energy, based in Calgary, Canada, is investing $15.7 million in the United States, in the Coal, Oil and Natural Gas sector a in Sales, Marketing and Support project. Canada-based energy company, Talisman plans to occupy an additional 2,045 square meter at the Pennwood Commons office complex in Cranberry Township, Pennsylvania. “Talisman already occupies 4,645 square meter at the complex and the expanded space will accommodate 100 additional employees, with the company planning to hire between 60 and 100 more people in the future. “The office oversees all of the company’s US operations, including its exploration activity in Texas.” Also, in 2011, Shell invested $20.8 million in a sales marketing and support project in the Pennsylvania Coal, Oil and Natural Gas sector.

INTERVIEW

The Electricity Sector isDying â&#x20AC;&#x201C; NERC Boss The incumbent acting Chairman of the Nigerian Electricity Regulatory Commission, NERC, Dr. Anthony Akah, in this interview with our Abuja Bureau Chief has berated the recent nationwide protest organized by the Nigerian Labour Congress on the recent upward tariff review, saying the protest is unnecessary. He called on workers union to avail itself of the right channel in addressing their submissions, while insisting that the less privileged are not affected by the increased tariff. Shola Akingboye reports:

he recent hike in electricity Tariff still remains fresh in the memory of most Nigerians, particularly owing to the country-wide protest against it. Has NERC come to terms with the reality on what the Nigerian Labour Congress and other civil society groups are asking for? Well, we welcome some submissions from NLC and other interested groups in line with our regulations and the Act, that any aggrieved party is given the sixty days to file their protest before the commission and those areas will be looked into by the commission in the most passionate manner and ensure that we come up with the most fair adjustment if need be or to sustain what we have if we feel that it is expedient. Therefore, we implore all Nigerians, agencies or association to avail themselves that opportunity rather than going on public protest.

the DISCOs and the GENCOs before the commission. We on our part will then look into that, but we have to understand the fact that electricity is a product, just as we have any other tangible product in the market place. So, electricity is also affected by the changes in the micro-economic indices just as the foreign exchange rate, as well as the inflation rate. And the critical factor is in getting both the quality of power and the quantity of power that we are looking at and to also give a market reflective tariff that will encourage investors going into the business. No investor will go into any venture that will not produce Return on Investment (ROI), neither would any financial institution give you any loan if from day-1 there are no proof that there is going to be a Return on Investment.

What else would you have expected from the Labour Union in times like these? There are avenues for any interested group to file submissions against

Is NERC speaking for the Discos? At NERC, we are also mindful of the plight of the Nigerian electricity consumers, and to ensure that in the tariff order, strong consumer protection mechanisms

are tie to that order. We also look forward to a constructive submission from members of the public and see if there is need to make adjustments, but in the absence of that, we make use of the data at our disposal, covering the market in ensuring that the tariff we have is market reflective in line with the reality on ground. What we need to do is to come with initiative and part of that initiative is cost reflective management and energy efficiency driven. How will you do that? We as regulator have just consulted with the Energy Commission of Nigeria- ECN, NESREA, NOA as well as SON, so that Nigerians will have more efficient way of using power and that will reduce their bill as much as 35 percent and thus

Orient Energy Review Feb. - March, 2016

INTERVIEW

increase access for more Nigerians on those energy they save. So we have the initiative that will help Nigerians deal with this. Like what? We have the Power Assistance Consumer Fund as we are mandated under the Act to take care of the less privileged. As soon as we have wrapped up the meter levering method, we should be able to get the Minister to help us implement those frameworks. But most importantly, as Nigerians, we have to accept the fact that this is also a business, just as those individuals who have adjusted their cost in reality of what is accruable to them in the market, so do this group of people. But as regulator, we make sure that the only tariff that we approve are the tariff that are strictly cost incurred based on prudency and are absolutely necessary for the production and the distribution of power. You mentioned that you act when you get submission, are you saying NERC does not act until it gets submissions from the public and what action have you taken since the NLC tariff protests? Submissions should be based on fact; the tariff order is there on the NERC website for all to see and we are available to continue to give clarifications where need be. And you can only say that the inflation rate is this and we use the wrong inflation rate, not in criticizing the tariff structure. So, based on that critical condition, we can now make informed decisions. But when you make a protest and you don’t submit in concrete and clear terms, it becomes difficult to make any informed judgment. For example, last year we got submissions and representations from the Manufacturers Association of Nigeria, MAN, and we took a decision to zero down the collection loss; though we realized that it wasn’t the best decision that should have been taken under that circumstance. The regulation’s time is not yet filed out; we were given sixty days to submit. For example, saying line A under the old tariff, ‘we feel it should be this is because of these factors; but we have not gotten such from NLC and we are hoping to get that within the sixty days window. 24

Does that mean something can still be done by NERC? We are open to continue to engage them and we are confident that based on the reality and the fact before us. For example, foreign exchange is now going for as far as 318 Dollar to a Naira and every producer is adjusting his cost; the inflation rate on cost of gas is there, it does not gives incentive to the cost of producing gas, and under this tariff we have adjusted it to the reality of the market cost of gas, which is $3/30cent plus a willing charge of 80 cent, so such adjustment certainly is going to affects the tariff. So let’s face the reality and see what we can do within the circumstance to build a more vibrant economy through a vibrant and productive power sector. We cannot continue to pretend that electricity is not a product, for as long as you continue to see electricity as a social commodity that is free, so long that we are pretending that the sector not dyeing; the sector is dying. But we as regulator, consumer interest must be protected while the distribution companies must adhere to their performance agreements, and we

The distribution companies on their own are delighted and more eager to meter Nigerians, because there is a factor that is in-built in the tariff order; that factor means that Nigerians have power. have given them a market reflective tariff and no excuse whatsoever for them not to do what they have to do in order to give Nigerians value for money. Though, they also have expressed concern that we gave them five years period to do that based on the performance agreement, we are now saying that we give you an order of one year with their submitted concern to us, and in sixty days, we are going to look into it. We are not looking at anything

Orient Energy Review Feb. - March, 2016

that is more than two year timeframe. But what is NERC doing against the Discos on metering gap? The distribution companies on their own are delighted and more eager to meter Nigerians, because there is a factor that is in-built in the tariff order; that factor means that Nigerians have power. For example, if you are a metered customer and you are given a bill that you feel is unrealistic, you know you are not going to pay it until that particular time that the bill under dispute is resolved, so you only pay the bill that you last agree to pay. What that means is that the distribution companies now have a trigger to work so hard to meter the whole Nigerians rapidly as much as possible, simply because they won’t have more Nigerians protesting on their bills. So, we have done the right regulatory framework to protect Nigerians. And it is important that I plead that everyone should understand that the less privilege Nigerians are not affected by this tariff. The R1 Customers tariff still remains at four naira as of last year. It is not correct those with those re saying the poor are going to be make poorer. Two, the tariff order takes care of the poor, the R1 is still at four naira, the tariff mechanism is a cross subsidy mechanism where some of us who are more affluence should bear more of the burden, not our less privileged. What happens to other class of consumers? The R2 Class has a little bit increase in tariff, we have the commercial class, which eventually will pass through the cross to help the poor, but the poor are more protected on this tariff. The poor also have a mechanism for the window on the long run to be protected through the Power Assistant Consumer Fund. The commission is working so hard to come up with it. We want every Nigerian to understand that for the first time, we have got a good market reflective tariff that will trigger the much desired growth in the industry and trigger a better quality of life. There is no need coming out in public protest, when you do public protest, you heat up the polity.

FROM THE NIGER DELTA

Stop Sabotaging Oil Facilities, Lawmaker Warns N’Delta People B

ayelsa State lawmaker and prominent member of the All Progressives Congress, Mr. Israel Sunny-Goli, has warned the people of the Niger Delta against sabotaging oil facilities in the region. Sunny-Goli, who is the member representing Brass Constituency 1 in the state House of Assembly, rather solicited support for the current efforts by the Minister of State for Petroleum, Dr. Ibe Kachikwu and the Federal Government to re-position the oil industry. The lawmaker, who spoke in Yenagoa on Friday, said such support would assist the Muhammadu Buhari administration to rid the region of corruption that had afflicted the country over the years. Consequently, he pledged to mobilize the people of his constituency and

the Niger Delta to support the current efforts of the Federal Government to sanitise the oil industry. Part of the support, he promised, was to provide information that would expose economic saboteurs in the coastal communities of the Niger Delta region. Sunny-Goli, who is the Minority leader and House Committee chairman on Niger Delta Development Commission, said since Kachikwu’s appointment as the Minister of State for Petroleum, he had demonstrated that the reformation of the oil industry was a top priority of the Buhari administration. According to him the people of the Niger Delta region need to support the current efforts of Kachikwu to re-position Nigeria oil industry as the people of the region would be the greatest beneficiaries in terms of development and empowerment. Sunny-Goli stated, “President Muhammadu Buhari has provided another opportunity to re-position the oil industry through Dr. Ibe Kachikwu and we the people of the Niger Delta, especially in Bayelsa, must

support the efforts of the current administration. “The recent decision to build mega filling station in each senatorial district is a welcome development. Aside the fact that it will ensure efficient distribution and country-wide penetration of petroleum products, for us in coastal communities of Bayelsa it is a welcome development as we would now have access to petroleum products. “Also the decision to discuss and negotiate with international oil companies and banks to raise capital for new drilling which would raise Nigeria’s output to 2.5 million barrels per day is a laudable idea which the people of the region must support.” On pipeline vandalism and attack on oil facilities, Sunny- Goli commended the recent moves by the Federal Government to mobilise the military to prevent sabotage. He stressed that other security agencies should collaborate with the military to rid the Niger Delta region of economic saboteurs. • Punch

Orient Energy Review Feb. - March, 2016

GHANA REPORT

FPSO Professor John Evans Atta Mills Arrives Ghana By Gilbert Boyefio

he FPSO Professor John Evans Atta Mills, a Floating Production Storage Offloading vessel, which will produce and store oil from Ghana’s Tweneboa-Ntomme-Enyenra (TEN) offshore oil fields, has arrived Ghanaian waters on Wednesday March 2, 2016. The vessel, which was constructed in Singapore and named by the First Lady, Mrs Lordina Mahama, in September 2015, is expected to start producing oil from the TEN fields by July/August 2016. A statement from Tullow Oil said

the FPSO began its voyage from Singapore to Ghana on 23rd January 2016 with almost zero “carry over”, meaning only 2,000 man hours of work remained to be

New Ghana Gas Board Visits Atuabo Gas Processing Plant

he new Board of the Ghana National Gas Company (Ghana Gas) has assured staff of their readiness to work with management of the gas processing company to resolve immediate challenges facing it. During its maiden visit to the gas facility, the Board said it will outline policies to make Ghana Gas financially independent and to ensure settlement of indebtedness by off-takers of the Company’s products. The Volta River Authority (VRA), main downstream off-taker of lean gas, owes Ghana Gas over US$250 million for processed gas. Chairman of the Board, Mr. John Armstrong Yao Klinogo, made this assurance during a visit of the Board to the Atuabo Gas Processing Plant to familiarise themselves with operations of the Company Tuesday. Other members of the Board on the familiarisation tour were Dr. George Sipa-Adjah Yankey, CEO of Ghana Gas, Mr. Alexander Kofi-Mensah Mould, CEO of the Ghana National Petroleum Corporation (GNPC), Ms. Vivienne Gadzekpo, Director of Legal Affairs at the Ministry of Petroleum and Awulae Amihere Kpanyinli III, Paramount Chief of the Eastern Nzema Traditional Area.

The new Board, which replaced the first Board of the Company, was sworn into office on February 4, 2016. It is expected to shape the future of Ghana Gas and oversee the implementation of the second phase of the gas project. The Board also paid a courtesy call on the chiefs and people of the Eastern Nzema Traditional Area and assured the community of its commitment to address the concerns of the communities in which Ghana Gas operates. The CEO of Ghana Gas and member of the Board, Dr. Sipa Yankey, said Ghana Gas plans to roll out a series of corporate social responsibility interventions to support the developmental needs of the communities within its areas of operation. The chiefs, in response, assured the Board of their support and affirmed their continuous cooperation for the success of the gas project and its associated community projects.

Orient Energy Review Feb. - March, 2016

completed during the voyage. This was a very significant industry achievement. The FPSO will move directly to the installation phase when it arrives on station, the statement said. This will be followed by the hook-up of subsea facilities via flowlines, risers and control umbilicals, much of which had already been pre-installed. In addition, six wells have already been completed, and the completions of the remaining wells were on schedule. The integrated facilities would undergo final commissioning and testing during the second quarter of this year before first oil. The development of the TEN fields was being led by Tullow Oil along its partners the Ghana National Petroleum Corporation (GNPC), Kosmos Energy, Anadarko Petroleum Corporation and PetroSA (the TEN Partners). Tullow Ghana Ltd Managing Director, Charles Darku, commented: “We are extremely pleased and proud that Ghana’s second FPSO has arrived safely here on our shores. It is a source of pride to note that many of the component parts of both the FPSO and the subsea infrastructure were built and supplied by Ghanaian companies. “Tullow and its partners remain at the forefront of unlocking Ghana’s oil resources for the mutual benefit of the nation and shared prosperity. We can look forward to first oil from the TEN fields by July/August this year”. The FPSO Professor John Evans Atta Mills was constructed by MODEC and will be operated by MODEC Ghana Ltd on behalf of the TEN Partners.

GHANA REPORT

GNPC Take Over Of Ghana Gas Still Drags On

Alexander Mould, CEO, GNPC

wo years after the Government of Ghana’s plans to have the Ghana National Petroleum Corporation (GNPC) to entirely takeover the management and operations of the Ghana Gas Company Limited (Ghana Gas), the process still lingers on. Though the GNPC insist that the Corporation has signed an agreement with government on the takeover long ago, there are still administrative and legal issues that needed to be addressed before the takeover materialize. Perhaps the closest attempt by government to bring this plan to fruition was the dissolution of the old board and the appointment of a new board of directors. Checks by Orient Energy Review on the ongoing process indicates that the new board is yet to pass a resolution that would address the necessary legal and administrative changes at the Registrar General’s Department to enable the process to be completed. The decision to cede the management and operations of Ghana Gas to the GNPC attracted a lot of controversy with the old board of Ghana Gas, led by Dr Kwesi Botchwey challenging that decision. “While the board has become aware of government intention,

Dr. Kwesi Botchwey, former Board Chairman Ghana Gas

through its announcement in the Budget and Financial Estimates of 2015, to transfer its ownership of Ghana Gas to the GNPC, as a limited liability company, the board of Ghana Gas has as of today not passed any resolution nor has the board filed the necessary papers to effect the change in ownership. Statements that the takeover has been concluded are therefore surprising and premature. The board and management of Ghana Gas have not held any meeting with the Transaction Advisor (who a statement from the Minister of Finance said has been appointed), neither has the Transactional Advisor requested the company to provide it with any information. It cannot therefore be said that the process has been undertaken and concluded. We are yet to receive any written indications from either the Minister of Finance or the Minister of Energy on the takeover decision and the way forward as the company prepares to meet the Transactional Advisor,” a press release signed by Dr Kwesi Botchwey lamented. But the GNPC has argued that the takeover makes sense because Ghana Gas was originally part of the GNPC. The Kwesi Botchwey led Ghana Gas Board At a meeting on January 13, 2016, the Dr Kwesi Botchwey led board by resolution, announced the retirement of the non executive directors of the Ghana Gas

Company from its role as the policy making and policy direction arm of the Company effective February 4, 2016. The non executive directors are Dr Kwesi Botcway, Dr Valerie Esther Sawyerr, Mr. Eric Nathaniel Yankah and Mr. Patrick Tawiah. Many believed that the decision of the board was tied to their strong opposition of the intended takeover of the Ghana Gas by the GNPC. The Dr Kwesi Botchway led board, which assumed office on July 2011, is accredited for successfully establishing the administrative and operational structures of the company from scratch, and superintending on the recruitment of key staff. The old board following the review of the Gas Task Force Report and the options for the development of gas infrastructure, decisively choose a configuration of having an onshore gas processing facility to process raw natural gas and produce various products including liquefied petroleum gas and other natural gas liquids for domestic and industrial use. The board implemented the Western Gas Infrastructure Project and successfully brought the Gas Processing Plant, associated pipelines and auxiliary equipments into operations

Orient Energy Review Feb. - March, 2016

GHANA REPORT

GNPC, Quantum Power Announce Construction And Operation Of Tema LNG Import Terminal Ghana National Petroleum Corporation and Quantum Power agree terms for the construction and operation of the Tema LNG Import Terminal.

Matty Vengerik, CEO of Quantum Power and Alexander Mould, CEO of GNPC

hana National Petroleum Corporation (GNPC) - Ghana’s National Oil Company, and Quantum Power, the pan-African energy infrastructure investment platform, are pleased to announce that they have signed Heads of Terms for the construction and operation of the liquefied natural gas (LNG) storage, regasification and delivery facilities at Tema, Ghana (the “Tema LNG Project”). The Tema LNG Project will have the scalable ultimate capacity to receive, store, regasify and deliver, at steady state, of about 3.40 million tons of LNG per year, equivalent to 500 million standard cubic feet of gas per day, utilizing a state-of-the-art dedicated floating storage and regasification unit (FSRU) moored off-shore Tema. An associated sub-sea and onshore pipeline will deliver the natural gas to GNPC and its customers onshore. The Tema LNG Project, comprising a capital outlay of over $550

million, will be implemented on a build-own-operate-transfer (BOOT) basis with the assets transferring to GNPC after the Project’s 20-year term. Commencement of operations is scheduled for the end of 2016 and, given its design, the Tema LNG Project has a built-in scalability, which would make it play an increasing role in meeting Ghana’s growing energy demand; providing the Ghanaian power generation industry with a highly reliable and clean fuel supply to meet projected power and industrial needs over the next 20 years. The Tema LNG Project will provide GNPC with the flexibility to manage volatility in power demand and fluctuations in domestic gas supply, while mitigating the effect of unpredictable rainfall on Ghana’s power balance. The Tema LNG Project has been under development for three years, involving some of the world’s most experienced engineering teams collaborating on an innovative design to address the specific maritime challenges in the Gulf of Guinea, while assuring optimal year round operability. The terminal, which will be located 12 kilometres off Tema’s

Orient Energy Review Feb. - March, 2016

shore allows for cost efficient refuelling and regasification without affecting maritime and port traffic. Alexander Mould, CEO of GNPC, stated, “We are pleased to announce our agreement with Quantum Power. As the national gas sector aggregator, GNPC is leading Ghana’s efforts to develop the gas-to-power value chain supporting the Government’s vision of energy security for accelerated economic growth. The Tema LNG Project is a critical component in achieving this vision as it allows for the diversification of fuel supply sources, enhancing flexibility and reliability. It guarantees GNPC contracted capacity of 250 million standard cubic feet of gas per day, for regasification of competitively priced LNG.” Matty Vengerik, CEO of Quantum Power, added, “We are delighted to Partner GNPC to deploy this cost-efficient and clean fuel supply infrastructure solution to Ghana. This is the first such project to be implemented in sub-Saharan Africa. The combination of increased certainty-of-supply with the cost savings inherent in LNG supply has a significant multiplier effect on the economy at large, as it reduces risk for commercial and industrial activities and increases Ghana’s attractiveness as an investment destination. Furthermore, the project will spur directly and indirectly technology and know-how transfer, and maritime and energy employment opportunities, in addition to its highly leverageable indirect contribution to economic activity and employment in the country. Quantum Power is proud that GNPC has selected our project as one of its national strategic initiatives”.

DRILLING/ EXPLORATION

Sacoil Reorganises Interests in Block III, Democratic Republic Of Congo Semliki for nominal cash consideration, thus resulting in Semliki becoming a wholly owned subsidiary of DIG. Semliki shall assign a portion of its future rights and obligations under the Farm-Out Agreements (‘FAs’) to SacOil DRC with the consent of Total. This assignment represents a transfer of SacOil’s rights and obligations attached to the 12.5% effective participating interest in the PSC now held through SacOil DRC pursuant to the disposal highlighted above. The rights and obligations to be assigned include:

acOil has announced proposed reorganisation changes to its indirect participating interest in Block III, Albertine Graben, in the Democratic Republic of Congo, currently held by its indirect subsidiary Semliki Energy. The reasons for the reorganisation of the ownership structure are to enable SacOil to represent its interest in Block III directly and to have direct line of sight to the activities of Block III. The impact of the reorganisation is that the assets and liabilities related to fellow Semliki shareholder,Divine Inspiration Group (‘DIG’), will be retained in Semliki. Background Semliki has a direct 18.3% participating interest in Block III alongside partners Total E&P RDC(66.7%) and the DRC government (15%). Semliki is currently 68% directly owned by RDK Mining with the remaining 32% held by DIG. RDK is a wholly owned subsidiary of SacOil whose effective interest in the asset is therefore 12.5%. The operator of Block III is Total. Proposed Reorganisation The proposed reorganisation will separate the respective interests of SacOil and DIG in Block III via a change in ownership of Semliki. SacOil has formed a new wholly owned subsidiary, SacOil DRC, being a company incorporated in the DRC, which will be directly owned by RDK. Semliki will dispose of a 12.5% participating interest in the PSC and a proportionate interest in the Block III Joint Operating Agreement and Exploration Permit to SacOil DRC for nominal cash consideration. Concurrently Semliki will repurchase the entire shareholding of RDK in

• The right to receive bonuses totalling US$54 million pursuant to the provisions of the FAs upon the attainment of First Investment Decision Date and First Oil Date; • The right to require Total to pay SacOil DRC’s share of carried costs; • The right for Total to recover the carried costs and interest thereon from SacOil DRC’s share of cost oil; • The right to receive payment from Total of an amount equivalent to SacOil DRC’s share of the Sell On Premium as defined under the FAs; and • The obligation to pay SacOil DRC’s share of costs to Total under the provisions of the FAs. Carried and other costs associated with future operational activities cannot be quantified at this stage. Semliki shall delegate to SacOil DRC its payment obligations in respect of loans owed to SacOil and South Africa Congo Oil amounting to $2.5 million and R41.3 million respectively, which arose from historical transactions relating to the acquisition of SacOil’s effective 12.5% interest in the PSC. As part of the reorganisation SacOil has agreed to reimburse DIG operational costs of $150,000, which are primarily representation fees as SacOil does not have an office or presence in the DRC. This reimbursement will be paid on the closing date of the reorganisation. Payment of the reimbursement amount will constitute full and final settlement of all and any claims by DIG, Semliki and their affiliates against SacOil and its affiliates. SacOil and DIG will retain their respective participating interests of 12.5% and 5.87% in Block III post the reorganisation. SacOil’s entire interest in Block III will be held via SacOil DRC. Rationale The reasons for the reorganisation of the ownership structure are to enable SacOil to represent its interest in Block III directly

and to have direct line of sight to the activities of Block III. Timeline On 29 February 2016, SacOil and DIG concluded the transaction agreements implementing the reorganisation. Closing is subject to all necessary approvals being procured and necessary amendments to the relevant Block III agreements being effected. • Energy-pedia.com

Petroceltic Spuds First Development Well in Algeria

etroceltic International and its partners on the Isarene Permit in Algeria, Enel and Sonatrach, have started development drilling on the Ain Tsila gas and condensate field. The Sinopec Rig 50117 arrived on the Isarene Permit in November and was successfully assembled and tested. The first well in the development program, the AT-10, was spud on February 21. The well is located approximately 3.4 km from the field discovery well AT-1, and 2.0 km from the appraisal well AT-8. Each of these wells delivered gas flow rates in excess of 30 Mmscf/d on test. The AT-10 is the first of up to 24 new development wells on Ain Tsila expected to be required to establish and maintain the currently approved annual average wet gas plateau rate of 355 Mmscf/d. In addition to the commencement of development drilling, the tender of the major field EPC contract covering main field facilities and pipelines is progressing.

Orient Energy Review Feb. - March, 2016

DRILLING/ EXPLORATION

Drilling Operations Commence In High Impact Exploration Well On Bakassi West, Cameroon

Dana and SDX spud Manatee-1 exploration well on Bakassi West, Cameroon

DX Energy has announced that drilling operations have commenced on its high impact exploration well (Manatee-1) on Bakassi West, Cameroon. The well, which is located in shallow water in the prolific Niger Delta Basin, offshore Cameroon, will be drilled using Paragon M825 jack-up rig to a depth of 1,550 meters and the operation is expected to take up to 45 days. The well is operated by Dana Petroleum and SDX holds 35% working interest (38.89% paying interest) in the concession. The concession, which contains a number of discoveries, is covered by 350km of newly acquired 2D seismic from which 13 prospects and leads have been identified. The location of Manatee-1 is in the South Western corner of the block, and has been chosen based on the seismic data which has identified strong geological similarities to the adjacent Abana Field, which lies 7km’s to the Southwest. The Abana field has reported recoverable reserves of 85 MMBBL of high quality light crude oil which produced at a plateau rate of 30kbopd when it came on stream in 1999. Commenting on the spudding of the well, CEO Paul Welch said: ‘This is an exciting well with the potential to be truly transformational for

SDX. The data we have acquired on this block provides strong evidence that this prospect is very similar to the Abana field, which has been a strong oil producer since it came on stream. In the success case of an oil discovery, we believe that an accelerated development plan could

IM-listed San Leon Energy has announced that it has secured the funds to complete the Mart Resources Arrangement Agreement announced on22 January 2016, and the extensions announced on 18 February and 25 February 2016. Completion of the Arrangement Agreement is subject to necessary approvals. This forms part of the broader proposed transaction outlined on 22 January 2016, and totals approx. CAD$89.26 million plus approx. US$4.5 million in transaction costs. Progress on the other elements of the proposed transaction will be announced in due course. San Leon has provided Mart with confirmation from its investors that they will fund the agreed escrow account by 5pm Calgary time on 8 March 2016, and a further extension to the agreed funding timing has been agreed between parties to facilitate this.

Orient Energy Review Feb. - March, 2016

be put together given the shallow water location and the example set by Abana which achieved first production less than 24 months after the TD of the discovery well. The Bakassi block has numerous prospects and leads and success at Manatee-1 will significantly de-risk these other opportunities. This is the first of two high impact exploration wells we plan to drill this year and represents the first major catalyst for SDX Energy’s shareholders since the successful merger in October of last year. We are fortunate to be in a position whereby we are generating positive cash flow from our Egyptian assets whilst testing high impact exploration opportunities that have the potential to transform the company. I look forward to updating our shareholders on this well in due course.’

San Leon Energy Secures Funding For Mart Arrangement Agreement Oisin Fanning, San Leon’s Executive Chairman, commented: ‘We are delighted to have secured the funds to enable this company-changing transaction to complete, subject to necessary approvals.’

TALKING POINT

ositioned strategically at the entry-point to Lagos harbour, The Lagos Deep Offshore Logistics - LADOL provides a one-stop-shop for multinational industrial and oil and gas companies operating in West Africa. It has become the region’s largest base for rig and vessel repair, LADOL also provides 24/7 operations with a wide range of services and facilities – from cargo handling and inventory management to onsite hotel and recreational facilities. In this brief chat with Orient Energy Review at the just concluded Offshore West Africa Conference and Exhibition in Lagos, Mr. Jide Jadesimi, an Executive Director of the company narrates the successes achieved so far.

‘LADOL’S Partnership with Samsung Will Create 5,000 Jobs’ – Jadesimi location of our office facilities allowing for 8 hours turnaround time. Basically, we want to continue to have the government’s support, without the support of the various government agencies like the NPA, NNPC, NCDMB, we won’t have achieved what we have which is to build upon the initial vision of the founders, who saw that you have to invest ahead of the market. So we need more support from all the parastatals. And we strongly believe in the administration of President Muhammadu Buhari, and this is the platform that we set out to industrialise Nigeria, and we will continue to work towards that.

We are aware that LADOL has entered into partnership with Samsung Heavy Industries for ship building in Nigeria, can you tell us about that and how many foreigners are working with you right now? Well LADOL and Samsung Heavy Industries have kicked off full fabrication and construction of ships in Nigeria. Though LADOL went into local fabrication of Floating Production Storage and Offloading (FPSO) integration and conversion in 2015, we have gone into ship building after the joint agreement we had with Samsung Heavy Industries. And concerning the number of foreigners we have in our facility, it is a ratio and is never more than 1:10, we have kept this to the absolute minimum, this is something that is carefully negotiated at the tendering face, and the key part is the monitoring during the progression of the project and that is something that I’ll say is very seriously done and adhered to and to make sure that the promises that we made to Nigerians at the inception of the project are actually adhered to and continued throughout the life circle of that project.

Looking at the declining price of crude oil, it is affecting the oil majors and these are your clients, is it in anyway going to affect your operation? If your answer is yes, what long term measures have you put in place to cushion such effect? The crude oil price is declining, that is the reality. For LADOL our business is based on flexibility. So if the oil price is low or high, it doesn’t affect our business module. Our business module is based on flexible oil prices, in fact, in low oil prices just as we have right now, we have an attractive solution, cost saving solutions to the bigger IOCs; when oil was $100 per barrel they were not so concerned with such efficiency. But with what we have, the big IOCs want to do something differently, they want cost saving, they want efficiency and that is what we are providing with the environment that we have in our base and the strategic

As a Jetty, is LADOL obeying the Federal government laws? We obey all laws in the Federal territory of Nigeria. You mentioned the issue of government support that you need it to succeed are you getting that support from the Nigerian Customs Service, because there is an allegation that you people are operating without approval from the Nigerian Customs Service, how true is that? Well, we abide with all laws; we are a fully compliant company. In terms of any supposed issue with the Nigerian Customs, I am not aware of that. But of course we have a good working relationship not only with the Nigerian Customs but also with the NPA

You said you already have 5,000 jobs to be created from the project, so from its inception to this very moment, what is the workforce now? For direct employees, we have 1000 on ground, indirectly you must multiply that by 10 to get the multiplying factor for indirect jobs you get from our suppliers and what have you? We have projects to run for a couple of years and we’ve got a project plan which shows the escalation of the workforce throughout the project as activities begin to pick up.

Jadesimi, delivering a speech at the Offshore West Africa Conference in Lagos.

Orient Energy Review Feb. - March, 2016

ALTERNATIVE ENERGY

BoI Provides 24KW Solar Power Grid To Gombe Rural Community T he Bank of Industry, BoI, has provided rural dwellers in Kolwa, Kaltungo Local Government of Gombe State, Nigeria with the commissioning of 24KW micro-grid solar solution. This is even as the governor of the state, Dr. Ibrahim Dankwambo, hinted that the state government had concluded plans with the development finance institution to replicate the project in other nine local government areas Prior to the installation of the solar power system, the over 250 households in the rustic and largely agrarian village, like other remote communities across the country, subsisted on self-power generation, largely seen as unhealthy. The Kolwa Electrification Project is a 24KW capacity installation that covers a 6 kilometre distribution network, and is also capable providing commercial ventures with electricity. While the BoI/UNDP solar power pilot project is to be installed in six rural communities in the six geo-political zones of the country, the Kolwa project makes it three, having previously been installed in Bisanti, in Katcha Local Government Area of Niger State, and in Onibambu, IfeNorth LGA in Osun State. The three others include Ogbekpen, Ikpoba in Okha LGA, Edo State, Onono, Anambra West LGA, in Anambra State and Carwa/Cakum, Markarfi LGA, in Kano State are awaiting commissioning.

Speaking during the commissioning of the project in Kolwa, BoI’s Acting Managing Director, Mr. Waheed Olagunju explained that the N44m rural electrification project which was financed by the bank, in conjunction with the United Nations Development Programme, would provide electricity for over 200 homes not connected to the national grid. He said that the rural electrification project was conceived by the bank not only to improve living standards of the rural dwellers, but also to boost economic activities in such areas. According to him, the installation of the 24KW solar power project in Kolwa would give electricity to the over 200 households in the area at the cheapest cost, adding that the bank gave concessionary loan to the project developer, GVE Nigeria Limited, to achieve the feat. Olagunju urged other partnering state governments to emulate Gombe state’s gesture by replicating the solar system in other parts of the states. In his remarks, Dankwanbo noted that the initiative would provide linkages for enterprise development in rural communities across the country. He explained that he had ordered top officials of the state to liaise with the bank officials for the purpose of perfecting strategies on how the project could be replicated in the other nine local governments of the state. While congratulating the Kolwa community for being the pioneer beneficiaries of the pilot green energy solution programme in the state, Dankwambo urged them to guard the project jealously and ensure its sustainability

Orient Energy Review Feb. - March, 2016

* Solar panel harnessing energy from the sun to generate electricity.

Solar Powered Airport to Launch in SA

outh Africa’s Minister of Transport, Dipuo Peters, will launch the country’s first solar powered airport on February 26. The solar powered airport, located in George, is also the first on the continent. A statement said the department would officially launch its Solar Power Plant at George Airport in the Western Cape, spearheaded by the Agency of the Department of Transport, Airports Company South Africa (ACSA) “A 200 square-meter clean energy source has been designed to supply the airport with 750kw of its total electricity needs.” The George Herald reported that the purpose of the solar development is to supply George Airport with its own electricity source for daily operation, and not to sell off surplus energy through Eskom. “In making use of solar energy, the ACSA George Airport will not only operate on a clean and renewable energy source, but will also be self-reliant as far as energy provision is concerned, lessening the burden on the local energy grid,” the airport said.

LOGISTICS/ MARITIME

1,500 Trucks Certified By NPA for Port Operation Stories by Pita Ochai

n its determination to enforce implementation of minimum standard of trucks operating at the ports, the Nigerian Ports Authority (NPA) has reached out to the Association of Nigerian Licensed Customs Agents (ANLCA) and the National Association of Government Approved Freight Forwarders (NAGAFF) to help sensitize its members and solicit their cooperation in achieving desired outcome. General Manager, Western Ports of NPA, High Chief Michael Ajayi made the appeal when he visited the headquarters of both associations in Lagos. Ajayi also disclosed that NPA had so far registered and certified 1,500 trucks for operations at the ports in Lagos. The truck certification exercise, which commenced on February 1, will end on February 29. “This exercise will afford NPA the opportunity of data collation for traffic and infrastructure planning process and to prevent sharp practices like theft and to serve as security measure to prevent any threat to security in the ports in compliance with the International Ships & Ports Facility Security Code (ISPS Code). “We are here to ask for your cooperation and to inform your members not to patronise any truck without NPA sticker as such truck has not passed through our road worthiness certification exercise. “With effect from March 1st 2016, all trucks without NPA sticker will not be allowed into the port,” he said. He also informed the agents that plans were ongoing to construct some parts of the road leading to the ports by Dangote Group with the support of NPA. In his response, the National President of ANLCA, Prince Olayiwola Shittu lamented the proliferation of touts at the port saying that the negative image often associated with clearing agents was as a result of unwanted persons loitering around the port environment unchecked. He blamed the situation on the Council for the Regulation of Freight Forwarders (CRFFN) whom he said deceived NPA to issue port pass to individuals registered by the council to have access to the port. “Why NPA should be issuing us annual license which we pay for if at the end of the day you don’t recognise the people you have licensed. That is the reason why there are touts in the ports,” he said. He charged NPA to take the bull by the horn and do the needful if it is indeed desirous of controlling crowd at the port by issuing new port passes to only corporate bodies. Shittu also appealed to his guest to address the problem of extortion by NPA security officials at the port. The National President of NAGAFF, Chief Eugene Nweke who received Ajayi and his team at the NAGAFF headquarters in Apapa, appealed to NPA to prevail on truck operators to adopt uniform charges in their operations.

While commending NPA for embarking on truck certification to ensure that only roadworthy trucks are allowed into the ports, he also called for action to curtail alleged extortion by security operatives. He also requested that further palliative measures be put in place to fix other bad portions of the access roads. Responding to some of the requests made, Ajayi said NPA would introduce a new biometric identity card to address the problem of different port passes control access into the ports.

He also assured that NPA would investigate cases of extortion by security agencies and bring to book any operative found culpable.

UASC Lauds Nigerian Shippers Council Over Shipping Law Capacity

he Union of African Shippers Council (UASC) meeting in its 10th General Assembly has lauded the Nigerian Shippers Council (NSC) for its efforts at building capacity for judges through its annual maritime law seminars. Speaking at the annual assembly meeting held at the International Conference Centre, Accra, Ghana, the chairman of the UASC, Dr Nortey Quarshie Omaboe, said that he had observed and keenly followed the Nigerian Shippers Council’s consultative fora and stakeholder engagement seeking to address bottlenecks in the international trading system. “These are indeed laudable and commendable initiatives. As shippers’ organisations within the sub-region, it would be my expectations that you would utilise the common umbrella that the UASC offers to harmonise your approaches towards the resolution of the myriad of shippers’ problems and develop common templates for trade facilitation in the sub-region,” Omaboe noted. The need for members to support young and weaker ones as well activate closer ties among African economies was the focus of deliberations of the 10th General Assembly of the UASC. Omaboe, who called for closer ties amongst West African economies to improve its participation in global value chain, said that there was need for effective linkages in economic activities. He said, “Indeed, a recent study has shown that for developing economies to effectively participate in the global value chain, there should be effective linkages in activities such as farming, extraction of natural resources, research and development, manufacturing, design, management, marketing, distribution and post-sales services across the entire sub-regions value chain. “It will, therefore, be essential for shipper’s organisations to analyse the entire value chain

of their respective economies, isolate the common challenges and proffer solutions towards a removal of the bottlenecks that hinder a proper alignment of this linkages.” Omaboe said that over the last couple of years, he had observed at close quarters some of the efforts of the Ghana Shippers Authority towards a reduction in the cost of doing business at her ports through their publication in national dailies. “I am of the firm belief and conviction that its impact would only be truly felt when a monitoring mechanism is put in place to ensure compliance,” he added. Earlier, the executive secretary of the NSC, Hassan Bello, visited the Ghanaian chief justice, Justice Georgina Theodora Wood, where he observed that the admiralty law and the maritime industry remained very critical to the development of the national economy and advancement of international trade. Bello said, “The importance of the admiralty law and maritime practice to the development of the national economy and advancement of international trade cannot be over-emphasised. In that regard, the role of the judiciary in the development of maritime law is an important contributor to the national economy of any nation.”

Orient Energy Review Feb. - March, 2016

MINING/ SOLID MINERALS

South Africa Drops Out Of Top 10 in Africa for Mining Investment A

ccording to the latest annual global survey released Tuesday by Canadian think tank the Fraser Institute, South Africa has fallen out of the top ten mining investment destinations on the continent and dropped 11 places to 67th globally. The institute’s Annual Survey of Mining Companies 2014, rates 122 jurisdictions around the world based on their geologic appeal and the extent to which government policies encourage exploration and investment. “While it is useful to measure the attractiveness of a jurisdiction based on policy factors such as onerous regulations, taxation levels, the quality of infrastructure and so forth, investment decisions are often based on the pure mineral potential of a jurisdiction. Indeed respondents consistently indicate that roughly only 40% of their investment decision is determined by policy factors,” according to the report. The survey covers Central African Republic, Egypt, Lesotho, Mauritania, Morocco, South Sudan, Sudan, and Uganda for the first time, but it’s at the top of the rankings that trends are most visible. And it’s not encouraging for the continent’s long-time stalwart. South Africa is ranked the 11th most attractive African destination for investment in the resources sector behind the Democratic Republic of the Congo. Troubles in the mining sector are also reflected in the country’s broader economic performance. GDP growth in 2014 was the lowest for South Africa in five years. An unprecedented five-month wage strike by platinum mine workers, followed by another prolonged strike by more than 220,000 metalworkers and engineers, dragged growth down to 1.5% for the year. Rolling electricity blackouts (or load shedding at it is referred to in the country) as the power utility struggles to keep its creaking coal-fired plants running have also badly shaken business confidence. Comments on the state of mining in South Africa from the Frasier Institute survey also point to labour and power as central concerns: “Highly political unionized workforce that perpetually demands more and more in return for less and less productivity; inadequate power generation and

inadequate labour laws regarding mineral sector strikes.” Namibia is the top ranked destination in Africa and 25th overall edging out jurisdictions like Queensland in Australia, British Columbia in Canada and Colorado in the US.

The country showed improvement on its policy factors and moved up to a ranking of 20th in 2014 from 34th in 2013 based on its legal and tax environment and other factors such as infrastructure and costs. Botswana is ranked just below Namibia overall and is again the highest ranked jurisdiction in Africa on policy factors, ranking 13th in 2014 and up from 25th in 2013. Botswana’s showed an improvement on the ratings for nearly all policy factors, most notably for the availability of labour and skills (+15 points), (less) uncertainty concerning the administration, interpretation, or enforcement of existing regulations (+14 points), and security (+11 points).

Nigeria’s Govt Inaugurates 17-Man Panel on Transformation of Mining Sector

he Federal Government has inaugurated a 17-man committee to develop a blueprint to guide the transformation of the solid minerals sector in the country. It noted that given the dwindling fortunes of the nation as a result of falling oil prices, the government has hinged the diversification of the economy on the solid minerals and agricultural sectors. A statement issued in Abuja recently stated that the Minister of Solid Minerals Development, Dr. Kayode Fayemi, inaugurated the committee chaired by Prof. Ibrahim Garba and co-chaired by Prof. Siyan Malomo. The committee has three weeks to complete its assignment. Fayemi said the committee was to produce a 25-year action plan for the transformation of the solid minerals sector, broken down into 24-month short-term plan, 10-year midterm plan and 25-year long-term plan. The terms of reference of the committee include the identification of hindrances to the development of Nigeria’s mineral resources, identification of pathways to overcome the barriers, prioritisation of activities and provision of time frames for all activities. They also include the creation of models and scenarios for successful implementation

Orient Energy Review Feb. - March, 2016

Dr Kayode Fayemi, Minister of Solid Minerals.

and monitoring of activities; and development of a consensus strategy for buyin by all stakeholders in the industry, among others. The minister said the committee was at liberty to identify sub-sectional activities along the minerals value chain that would enhance the rapid development of the industry. He urged the committee members to take the assignment with passion and commitment, adding that the work was critical to the economy of the nation. Garba expressed appreciation to the Federal Government for giving the members an opportunity to serve the nation in that capacity and pledged their determination to take the responsibility very seriously.

GAS

Seven Energy Secures $100m Fresh Capital S

even Energy International Limited, an integrated gas company in the country with oil and gas interests in the South East region, recently said it had secured $100m of new equity capital to boost gas delivery to the domestic market. This, the company said, comprised $50m from existing shareholders of the group, including Temasek, Petrofac, Capital International Private Equity, Standard Chartered, International Finance Corporation and IFC African, Latin American and Caribbean Fund, by way of an open offer and $50m invested by the IDB Infrastructure Fund II, sponsored by the Islamic Development Bank and other institutional investors. According to a statement by Seven Energy, the IDB Infrastructure Fund

II, with a target fund size of $2bn, invests in infrastructure opportunities across Asia, the Middle East and Africa. The fund is being managed by ASMA Capital Partners B.S.C. (c). The Chief Executive Officer, ASMA, Stephen Vineburg, will join the Board of Directors of Seven Energy, it said. The company said these additional funds would enhance its liquidity as it completes the gas pipeline that integrates its existing pipelines in the South East over the next few months. It said when completed, Seven Energy would own and operate a flexible gas transportation network from Ukanafun and Ikot Abasi in the west, to Calabar in the east. It said this would enable the group to deliver more gas to Nigeria’s growing domestic market for power generation and industrial consumption. Seven Energy’s total investment in gas

production, processing and distribution infrastructure is over $1bn. The Chief Executive Officer, Seven Energy, Mr. Phillip Ihenacho, was quoted as saying, “I am pleased by the continued support shown by our leading shareholders and the vote of confidence in our business plan demonstrated by the investment from the IDB Infrastructure Fund II. “Seven Energy is now established as a significant participant in the rapidly developing Nigerian gas market. Our gas deliveries have more than trebled during the course of 2015, and are currently running in excess of 110 MMcfpd. This new funding enables us to complete our current development phase, enhancing our pipeline network, which will be capable of transporting 600 MMcfpd of gas to the growing regional market.”

Siemens’ Gas Turbines in Transit to Beni Suef T

he first gas turbines from Siemens’ in Germany to Egypt are now in transit. Two turbines for the Beni Suef power plant project will be loaded onto a barge at the Berlin Westhafen port, from where they will be shipped to the Rotterdam seaport. Via the Port of Adabiya on the Red Sea the 890-ton cargo will then be transported to Beni Suef. The gas turbines are scheduled to be installed in the power plant in mid-May. A total of eight SGT5-8000H gas turbines will be installed in the plant in several phases. The facility will be initially operated as a simple cycle gas-fired power plant. After its expansion into a combined cycle power plant with a total installed capacity of approximately 4.8 GW. The plant will be the largest combined cycle

plant in the world after it is completed. “We expect the plant in Beni Suef to feed electricity into the Egyptian power grid as early as the winter of 2016/2017,” says Willi Meixner, CEO of the Siemens Power and Gas Division. “Siemens is helping its Egyptian partner to build a powerful, reliable power supply system with proven power plant technology.” The H-class gas turbines from Berlin will play a key role in the planned expansion of Egypt’s power generation system. In total, 24 highly efficient turbines, 24 heat recovery steam generators, 12 steam turbines and 36 generators will be installed in the country’s three power plant projects. Siemens is not only supplying

the key components for all three plants but is also supporting Egypt with logistics and the execution of this mega project. Siemens will build a total of three natural gas-fired combined cycle power plants with H-class technology and a total capacity of 14.4 GW in Egypt.

Orient Energy Review Feb. - March, 2016

GAS

Tanzania Makes Big Onshore Natural Gas Discovery T

anzania says it has added to its natural gas bounty with a new discovery. According to the Energy and Minerals Minister, Sospeter Muhongo,an additional 2.17 trillion cubic feet (tcf) of possible natural gas deposits has been discovered, this time onshore; raising the east African nation’s total estimated recoverable natural gas reserves to more than 57 tcf, local media reported recently. The onshore reserves were found at a field licensed to the United Arab Emirates’ Dodsal Grouplocated at Ruvu basin in Coast region, near the country’s commercial capital, Dar es Salaam, the state-run Daily News reported. ‘We have learnt that there are huge

potentials of hydrocarbons in Tanzania. We expect to have more gas discoveries in the near future,’ The Citizen newspaper quoted Pilavulathill Surendran, CEO of Dodsal Hydrocarbons and Power (Tanzania), as saying. Local media reported that Muhongo said that the onshore discovery had been made in July, although the official announcement was delayed due to the political transition, as well as the oil and gas revenues management Act 2015 not being operational. The Minister said the discovery was made at the Ruvu Basin onshore block by the Dodsal Group. “We have learnt that there are huge potentials of hydrocarbons in Tanzania. We expect to have more gas discoveries in the near future,” Dodsal Hydrocarbons and Power (Tanzania) Ltd. said. The discovery made by Dodsal onshore Tanzania adds to the reserves discovered

offshore the country by BG/Ophir Energy and Statoil/ExxonMobil. Most of the gas discoveries in Tanzania were made in deep-sea offshore blocks south of the country near the site of a planned liquefied natural gas (LNG) plant. BG Group acquired by Royal Dutch Shell, along with Statoil, Exxon Mobil and Ophir Energy plan to build the onshore LNG export terminal in the southern Tanzanian town of Lindi in partnership with state-run Tanzania Petroleum Development Corp (TPDC). East Africa is a new hotspot in hydrocarbon exploration after substantial deposits of oil were found in Uganda and major gas reserves discovered in Tanzania and Mozambique.

Clarke Energy Sees First GE Jenbacher Gas Engine Order in Cameroon

E’s Distributed Power business announced that UK-based Clarke Energy, GE’s new authorized distributor of Jenbacher gas engines in Cameroon, is supplying a 1.4-MW J420 Jenbacher gas engine to Flour Mill SCTB s.a. (Societe Camerounaise de Transformation du Blé S.A.) to provide more reliable, cost-effective, on-site power for the company’s mills in the city of Douala. The project marks the first Jenbacher gas engine order in Cameroon for Clarke Energy. The Jenbacher unit will permanently replace existing rented gas generators at the site, giving SCTB a more cost-effective, permanent, onsite power solution that will enable the company to save more than $200,000 annually in fuel costs. The system is scheduled to enter commercial service in the Q2. “Changing from a rental power plant to a permanent installation provided by Clarke Energy and using GE’s Jenbacher gas engine technology will enable us to save in excess of $200,000 per year in fuel costs,” said Fofou Gregoire, project manager of SCTB. “Installing a permanent on-site power solution also will help

us improve our mill’s availability so we can meet our production targets.” Clarke Energy worked with SCTB to develop a technical solution to deliver a permanent supply of reliable electricity from pipeline-sourced natural gas. The projected savings in fuel costs was a significant driver for the gas engine’s installation. The project marks the first Jenbacher engine that Clarke Energy has supplied to SCTB. “GE’s gas engine technology has been proven to be an attractive technical and commercial solution for Cameroon. This installation will be our first in Cameroon and will immediately start to deliver cost savings and reliable energy to our customer SCTB,” said Ali Hjaiej, business development director— Africa, Clarke Energy. By increasing its gas-to-power efficiency rate and reducing diesel fuel consumption, SCTB also will be able to reduce carbon emissions at its mills. “We are pleased to provide our first Jenbacher gas engine in Cameroon as part of our new distributor agreement with Clarke Energy. The J420 gas engine will enable SCTB to save on fuel while accessing reliable power for its operations,” said Oluwatoyin Abegunde, sub-Saharan region leader for

Orient Energy Review Feb. - March, 2016

GE’s Distributed Power business. “The project illustrates how GE’s technology is able to support Cameroon’s needs for a more sustainable supply of electricity.” With Cameroon’s unstable grid causing local power outages, industrial operators have experienced unplanned downtime for their factories, resulting in losses from reduced production levels. As a result, a number of factory owners first turned to diesel generators to produce on-site power. SCTB decided to switch from diesel engines to gas-fired reciprocating engines to prove the feasibility of natural gas-fueled generation in Cameroon. Based on the rental units’ success, SCTB chose to install a new permanent Jenbacher gas engine solution to provide a reliable supply of electricity supply to the flour mills.