Orient Energy Review February edition

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Vol 7 No.02 February 2018

Nigerian Oil Industry: Deep Sea Projects, Downstream Opportunities to Drive Growth In 2018

Kabelmetal Sets the Pace for In-Country Manufacture of Umbilical Component Parts www.orientenergyreview.com Robert Kretschmer MD Kabelmetal

Nigeria: NNPC, Total to Produce Oil from Egina Field at $20 Orient Energy Review Vol 7 No.02 February 2018 per Barrel

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7 - 8 February 2018

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Ahmadu-Kida Musa, Deputy Managing Director, TOTAL Exploration and Production Geoff Onuoha, Vice Chairman, Petroleum Technology Engineers Association of Nigeria (PETAN) Dr. Mazadu Bako, Nigerian National Petroleum Company (NNPC)

Bank Anthony Okoroafor, Chairman, Petroleum Technology Engineers Association of Nigeria (PETAN)

Austin Ojunekwu Avuru, Chief Executive Officer, SEPLAT Petroleum Development Company

Bayo Ojulari, Managing Director, The Shell Nigeria Exploration and Production Company (SNEPCo)

Mordecai Ladan, Director Department of Petroleum Resources

Engr. Simbi Kesiye Wabote, Executive Secretary, Nigerian Content Development and Monitoring Board (NCDMB)

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EDITOR’S NOTE Hurray! The Egina FPSO is here at last!

The year 2018 opened up on a very high note for the Nigerian Oil and Gas industry.

Looking at the positive forecast by the World Bank for countries in Sub sahara Africa, Nigeria’s Gross Domestic Product (GDP) is anticipated to accelerate to a 2.5 per cent rate this year from one per cent growth in the year just ended. An upward revision to Nigeria’s forecast is based on the expectation that oil production will continue to recover and that reforms will lift non-oil sector growth,” On the path to increased Oil production level, the Nigerian oil industry, recorded a milestone as Total Upstream Nigeria Limited, TUPNI, and her partners took delivery of the Egina floating production storage offloading, FPSO, from South Korea.

Egina, known to be the largest FPSO ever installed in Nigeria and Africa (330-metres long), is currently berthed at the newly built 500-metre FPSO integration quayside at the SHI-MCI Yard, Ladol Island, Lagos, where the integration of six locally fabricated modules will take place over the next few months.

The integration of the six locally fabricated topside modules at the SHI-MCI Yard before its final sail-away to the Egina field is said to be a game changer as far as the execution of deep offshore oil and gas projects in the country is concerned.

The Nigerian petroleum industry, irrespective of its numerous challenges and uncertain posturing, still presents a number of opportunities which would be driven largely by the expected reforms in the industry, following the passage of the Petroleum Industry Governance Bill (PIGB) and the commencement and revival of large projects that were, hitherto, suspended like the Zabazaba and Bonga South West Deepwater projects.

PUBLISHER/EDITOR-IN-CHIEF: Nneka Ezeemo EDITOR: Margaret Nongo-Okojokwu PRODUCTION: Chiamaka Umeh CORRESPONDENTS: Oge Obi (Lagos) Dirisu Yakubu (Associate Editor) Vivian Osuji Isreal (Head,South South Bureau,Port Harcourt) Jerome Onoja (Lagos) Gilbert Boyefio (Ghana Correspondent) Godspower Ike (Port Harcourt) Obinene Mike Margaret Ahiakwo (Houston Texas, USA)

In this edition, we bring you detailed reports of the 2018 outlook in Nigeria’s Nigeria Oil and gas sector.

Kabelmetal and her sister company Nexans Norway who are also bidders in the Zabazaba project, hosted the Orient Energy Review team on a facility tour of their state –of- the- art fabrication yard in Lagos, they spoke to us about their strides and capability in executing the next big project in Nigeria, with a strong bias for local content, having succeeded with the Egina. Find details inside.

There are other exciting stories inside that you don’t want to miss. Please read on and don’t forget to tell us what you think about our work, we’d love to hear from you.

Have a great read!

Margaret Nongo Okojokwu Editor, Mobile +234 8170334471 m.okojokwu@orientenergyreview.com

CONTENTS 4

GM Business Development Jerome Onoja

INDUSTRY NEWS

......................................................

NNPC, Total to Produce Oil from Egina Field at $20 per Barrel

Business Development Executive: Arit Asuquo Dan Ruth Muo (South Africa) Stanley Etim CREATIVE: DEE GRAPHICS (dennilsone@gmail.com) CRE CIRCULATION MANAGER : Ajayi Kayode LONDON OFFICE: Charity Place, Unit 1 Thurrock Pack Way Thurrock Parck Ind. Estate Tilbury,Essex Rm !87Hz. +447974199137

POWER

Nigeria to Increase Transmission Capacity to 28,000MW By 2035

27

COVER STORY

Nigerian Oil Industry: Deep Sea Projects, EXPLORATION / DRILLING LEKOIL Announces Independent Downstream Opportunities to Drive Growth In 2018 Technical Study of OPL325 and

www.orientenergyreview.com

21

Intention to Farm-Down

LOCAL CONTENT New Deepwater Projects Must Surpass Egina FPSO Integration – NCDMB

GHANA OFFICE: +0243915206 orientenergyreviewgh@gmail.com 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

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Gen. Gowon to Chair OGTAN’s Maiden Education Summit

34 GHANA REPORTS Ghanaians Want Review of ENI Contract

WOMEN IN ENERGY

36

ADIPEC 2017: Women in Energy Conference Highlights Growing Role of Women in Oil and Gas Workforce

Orient Energy Review Vol 7 No.02 February 2018 3

INDUSTRY NEWS

NNPC, Total to Produce Oil from Egina Field at $20 per Barrel

T

he cost of producing a barrel of crude oil from the Egina oil field by the Nigerian National Petroleum Corporation (NNPC) and Total Upstream Nigeria Limited (TUPNI) has been put at $20 per barrel. The Group Operating Officer (COO) Upstream of the NNPC, Mr. Rabiu Bello, disclosed this recently in his presentation at the public hearing organised by the Senate Ad-hoc committee investigating the local content elements of the 200,000 barrels capacity Egina Floating Production Storage and Offloading (FPSO) platform, in Abuja. Bello, stated that estimates made by the parties indicated that at most, it will cost operators of the field $20 to produce a barrel of oil from it, noting that this was economical and profitable. He explained that so far, only about $10 billion had been expended on the project, with no variations requested by TUPNI. Similarly, the Managing Director of TUPNI, Mr. Nicolas Terraz, stated in his presentation that upon its commencement of production later in 2018, the Egina project will contribute about 10 per cent of Nigeria’s total oil production. According to Terraz, the project had obeyed all of the federal government’s Local Content dictates and employed about 3,000 local workforces in the last five years of its implementation, in addition to fabricating 60,000 tons of its equipment in-country. “The Egina project, located in OML 130, is the largest oil and gas development currently ongoing in Nigeria. The field is being developed by TUPNI in partnership with NNPC, CNOOC, SAPETRO and PETROBRAS. Operated by TUPNI, the project was launched in 2013 and is expected to start producing in the fourth quarter of 2018.

4 Orient Energy Review Vol 7 No.02 February 2018

“It will add 200,000 ba r r el s p er d ay t o Ni g e r i a’s oi l production, or approximately 10 per cent of the country’s total oil production,” said Terraz. He further stated: “Being the first major deepwater development project lau nched after the enactment of the Nigeria Oil and Gas Industry Content Development (NOGICD) Act, the Egina project has the highest level of local content of any such project so far.

“As operator of the Egina project, TUPNI fully identifies with the government’s aspirations for Nigerian Content and has been working closely with the Nigerian Content Development Monitoring Board (NCDMB) and NNPC to maximise Nigerian Content on the project.” He stated that TUPNI in response to the committee’s letter provided a detailed submission to it with regards to its request.

Listing the local content milestones recorded by the project, Terraz, said: “Employment: the project represents a workload of 24 million man-hours worked in Nigeria, or 77 per cent of total project workload, equivalent to a workforce of 3,000 persons on average during five years. Fabrication: 60,000 tons of equipment is being fabricated i n Niger ia for the project.

Infrastructure: several large-scale industrial facilities were developed in Nigeria for the project, including Africa’s first FPSO integration q uay, a nd severa l ex i sti n g fabrication yards were upgraded for the project. Capacity development: over 560,000 man-hours of human capacity development training is being performed across Egina contracts.”

Fuel Crisis May Worsen As Price Hit N165 per Liter at Depots

By Oge Obi

T

he different strategies and efforts so far adopted by the Nigerian National Petroleum Corporation (NNPC) to tackle fuel supply situation and the attendant scarcity that marred the last year’s Christmas and New Year celebrations in Nigeria have shown not being potent enough in arresting the ugly situation. Orient Energy Review’s checks have revealed that the petrol scarcity may worsen as the petrol price hits N165 per litre at the depots, against the official price of N133.28.

It was gathered that the petrol in these depots belong to the NNPC under throughput arrangement with these depot owners. And that as part of the measures by the Corporation to tackle the problem of diversion of trucks it allocated to marketers, it resorted to direct sales to trucks under throughput arrangement so as to monitor distribution. OER, however, gathered that even with the throughput arrangement, marketers that bought NNPC tickets direct from the Corporation to lift the products were selling the tickets to third party within the price range of N165 and N157 per litre. A market survey conducted by THISDAY had shown that only seven out of over 30 depots had stock of petrol at the weekend. The depots include Folawiyo, Fatgbems, Aiteo, Bovas, Heyden, Rainoil/First Royal and NIPCO. However, the major marketers had stock of NNPC’s petrol, which the corporation was dispensing to only the major marketers’ dealers and their branded filling stations at official price. According to a marketer who spoke on the condition of anonymity, blamed the high depot price on inadequate supply of the product. “We said it that NNPC can’t do it alone.

NNPC can’t sustain supply, no matter, the number of ships they bring in. Under normal situation, NNPC accounts for 40 per cent of importation and the private marketers account for 60 per cent. For NNPC to assume 100 per cent role since October last year will not be sustainable. It has overstretched the NNPC and the result was what we saw during Christmas and what we are still seeing today. NNPC can’t simply sustain supply,” the marketer said.

It would be be recalled that for NNPC to have affective control of supply and distribution so as to ensure that the petrol it imported and allocated to marketers got to retail outlets and motorists at official price, stopped product allocation to marketers and resorted to throughput arrangement with selected marketing firms. This was also following the refusal of the private marketers to import on account of unsustainability of the official pricing regime. Part of the NNPC’s efforts had resulted in the apprehension of eight trucks with a combined capacity of 469,000 litres of petrol in Mokwa, Niger State by the Nigerian Security and Civil Defence Corps. The trucks were set on cross-border diversion to the Republic of Benin.

www.orientenergyreview.com

INDUSTRY NEWS Host

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Orient Energy Review Vol 7 No.02 February 2018 5

LOCAL CONTENT

New Deepwater Projects Must Surpass Egina FPSO Integration – NCDMB

By Margaret Nongo-Okojokwu

N

ew deep water projects in Nigeria must set new records beyond in-country integ ration of the Floating, Production, Storage and Offloading (FPSO) vessels, the Executive Secretar y, Nigerian Content Development and Monitoring Board (NCDMB) Engr. Simbi Wabote has said. He spoke at the reception of the Total Upstream Nigeria’s Egina FPSO at the SHI-MCI yard in Lagos, adding that the Board was working with operating companies and project promoters to ensure that new projects like the Bonga South West and Zabazaba deep water projects surpass the significant Nigerian Content levels attained on the Egina project.

Wabote who was represented by the General Manager, Projects and Operations Division, NCDMB, Engr. Paul Zuhumben stressed the need for close collaboration among stakeholders of the industry, particularly the Nigerian National Petroleum Corporation (NNPC), National Petroleum Investment Management Services (NAPIMS) and the Department of Petroleum Resources (DPR) to ensure that new

6 Orient Energy Review Vol 7 No.02 February 2018

deep water projects are developed speedily. “This is the beginning.

We know the Zabazaba is coming with an FPSO. We have made it mandatory on forthcoming major projects that the Egina project will be used as a minimum. It means we are going to dream big and fabricate and integrate more modules incountry.” Commending Total on the arrival of Egina project, the Executive Secretary maintained that the feat was attained because of the support of the Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu and the Board’s strategic implementation of the Nigerian Content Act and insistence on the maximization of existing capacities and development of new capabilities. He said, “At the conceptualization of the project we insisted that certain activities must be carried out in Nigeria. This is why you see the Egina FPSO coming from South Korea to Nigeria for integration.”

Aside the six modules that were fabricated in Nigeria, the Executive Secretary also stated that several other components were executed in-country, including 60,000 tons of fabrication, involvement of 250

Nigerian engineers on the project and use of locally made paint on the FPSO. Speaking further, he confirmed the Board’s determination to ensure that new projects were developed within the six months cycle mandated by the Federal Government. This is necessary to keep yards like the facilities like FPSO integration yard engaged, he said. “Setting up a facility like this would have cost between $250m to $300m. If we don’t put new projects in place, thousands of Nigerians employed at the yard will be laid off.” In his comments, the Group General Manager, NAPIMS, Mr. Roland Ewubare stated that about 30 to 40 percent of the Egina FPSO project had involved Nigerian Content driven by the NCDMB. He assured that NNPC and NCDMB are aligned on the strategy and vision for local content, which he described as the only way to sustain the nation’s economy.

“The rational government policy has to be additional local content.

NNPC and NAPIMS will support the NCDMB fully in fulfilling that mission,” he added.

www.orientenergyreview.com

LOCAL CONTENT

SNEPCo/Cameron Graduate Nine OJT Trainees

Belemaoil to Build Floating Refinery, Create 12,000 Jobs

I

n fulfillment of their commitments to the development of Nigerian Content in the Oil and Gas Industry, Shell Nigeria Exploration and Production Company (SNEPCo) and Cameron Flow Control Technology Nigeria Limited recently concluded on the job training (OJT) for nine young persons. The beneficiaries were selected through the Nigerian Oil and Gas Industry Joint Qualification System (NOGIC JQS) and the trainings were conducted at the Dormanlong facility in Lagos and Cameron yard, Port Harcourt, Rivers State for one year.

The programme was on the back of Shell Bonga FPSO Induced Gas Floatation Unit and Hydrocyclone Project, a contract executed

by Cameron. The trainees received classes in entrepreneurship, business proposal presentation skills and procurement management. They also underwent training on team building, project management (PMP), offshore survival (T/BOSIET), NDT II, QA/QC, HSE, among others. At the conclusion of the exercise, the best participant, Miss Abisola Adebola Amondi was retained and employed by Schlumberger Nigeria Limited, the parent company of Cameron. Speaking at the graduation ceremony, the Executive Secretary of the Nigerian Content Development and Monitoring Board (NCDMB), Engr. Simbi Wabote commended SNEPCo and Cameron for their contributions to Human Capacity Development Initiatives (HCDI).

The Executive Secretary who was represented by the Manager, Human Capacity Development, NCDMB, Engr. Maurice Iwhiwhu Kelly congratulated the trainees on their successful completion of the programme, particularly for the zeal they showed during the period. He charged them to apply the skills they acquired in their future endeavors. He also tasked SNEPCo and Cameron to ensure that the trainees are employed in the industry. The Nigerian Content Coordinator, Cameron Flow Control Technology Nigeria Limited, Mr. Donald Ibegbu underscored the company’s pride to have participated in the project. He also counseled the trainees to extend their focus beyond the oil and gas industry and consider other industries, including the agricultural sector which has immense potentials in the economy. www.orientenergyreview.com

A

n i nd i genou s oi l f i rm, Belemaoi l Producing Limited, has announced plans to provide additional 12,000 direct jobs in the oil and gas sector before the end of 2018. President and founder of Belemaoil, Mr. Jackrich Tein, explained that the company was expecting to construct more pipelines, and set up a floating refinery and a gas processing unit soon.

Speaking on the sidelines of the NNPC/Belemaoil Joint Venture Scholarship award in Port Harcourt, Tein explained that all as been set but the company was awaiting approval from the Minister of Petroleum Resou rces, President Muhammadu Buhari.

He further disclosed that the Belemaoil model was about creating wealth for people especially in its host communities. According to him, “Right now we have our offshore floating terminal sailed into Nigeria.

We are expecting to build pipelines, create additional

opportunities based on the proposal that we sent to Mr. President. “We believed strongly that the President is a man that loves the Niger Delta and wants to see employment everywhere.

He wants to see that host communities are in harmony with the operators.

“So we believed the President is a strategic ally and that when a meaningful program is put forward, he will support it. So we have put forward a project that will create additional 12,000 direct employments which will turn around the region and people to have jobs.” The Belemaoil boss also disclosed that the oil firm was also negotiating with what he described as “ultra-large crude carrier vessel” which he said a floating refinery was going to be built on it. *Sweetcrude Reports

Orient Energy Review Vol 7 No.02 February 2018 7

LOCAL CONTENT

Gen. Gowon to Chair OGTAN’s Maiden Education Summit

By Oge Obi

prepared for such tasks. Therefore, the planned summit is bringing together major stakeholders in the education sector and the oil and gas to discuss and share their experiences in order to chart the way forward at resolving this obvious gap, the statement read.

T

he Oil and Gas Trainers A s s o c i at ion of Ni g e r i a (OGTAN) in its commitment to bridge the gap between Nigerian tertiary institutions and the oil industry, particularly in the area of Research and Development, has concluded plans to hold its first education summit. The one day event which will be a convergence of industry players as well as key stakeholders in the Nigerian education sector will be chaired by the former Head of State of the Federal Republic of Nigeria, Gen. Dr. Yakubu Gowon.

The maiden summit is scheduled to hold in Lagos on 16th of April, 2018 at the Eko Hotel and Suites. The Key speakers at the summit includes, Minister of Education, Alhaji Adamu Adamu, The Minister of Energy Ghana, Members of the National Assembly, Executive Secretary, Nigerian Content Development and Monitoring Board (NCDMB),Engr.

Simbi Wabote, Vice Chancellors of

universities; Nigerian University Commission, NUC; National Board for Technical Education, NBTE; and some state commissioners for education. Speaking at a Press Conference with journalists recently in Lagos, OGTAN’s President, Dr. Mayowa Afe, hinted that the focus of the conference is to explore ways by which the obvious gap between the tertiary institutions and the oil industry can be closed particularly in the area of Research and Development, thereby ensuring that Nigerian university graduates are employable after graduation.

Mayowa blamed the channeling of research funds set aside annually by oil majors to foreign institutions on the grounds of Nigerian tertiary institutions’ ill-preparedness for such tasks. “Today, research funds running into millions of dollars set aside annually by oil majors are splashed on foreign institutions as our own tertiary institutions are ill-

The association through its various activities such as training, research, certification and development of existing and potential work force of Nigeria’s oil and gas industry, hopes to reduce Joint Venture spending of scarce cash call in foreign currencies by domiciling some trainings in-country; drive growth

and development in the industry by equipping more Nigerians to carry out specialized task and increase earnings by local players; have a mechanism in place that would oversee periodic changes to the curriculum used by the tertiary institutions, reduction of unemployment rate by churning out graduates who are employable and can fit into the industry, among others.

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Orient Energy Review Vol 7 No.02 February 2018 9

INTERVIEW

Kabelmetal Sets the Pace for In-Country Manufacture of Umbilical Component Parts Industrial Standards (NIS) Diamond Award winner. Our products conform to IEC standards, Nigerian Industrial Standards and other EU standards.

The company recently acquired the certifications from Lloyd’s Register and Bureau Veritas to produce shipboard cables Today, Kabelmetal Nigeria Plc is the most advanced cable manufacturer in the West Africa Sub Saharan region. As an innovator in cable products in Nigeria, Kabelmetal serve a wide range of industry groups, including oil and gas, manufacturing, process, business and residential construction and of course power utilities. Their product range covers low voltage power, instrumentation and control cables. Cables for power distribution and several special cables supplement our product portfolio.

K

abelmetal Nigeria Plc has been admired for its cable making expertise for 40 Years now. It has established itself as the leader and pioneer in the Nigerian cable market because of her drive for excellence in quality of products and passion for innovation.Founded by Kabelmetal, Hannover, Germany, the Company is now a subsidiary of Nexans S.A Paris, whic h is the worldwide expert in the cable industry. It is the largest manufacturer of power- and instrumentation cables in the West African sub region. Benefiting from the parent company’s cable making expertise and from over 100 years local manufacturing experience, Kabelmetal provides the nerves and sinews of the Nigerian economy. At the beginning of the 1980’s the development of cross linked polyethylene (XLPE) for low voltage insulated cables opened the door to new market segments including the oil and gas market. The introduction of airfield lighting cables and cables with enhanced fire performance features over the following years further strengthened our product range and expanded our customer base.

Kabelmetal Nigeria Plc was the first cable manufacturer in Nigeria, certified to ISO 9000 in the year 2000. The Company also boasts itself as a Nigerian

10 Orient Energy Review Vol 7 No.02 February 2018

When ORIENT ENERGY REVIEW’S team made a facility tour of their fabrication yard in Ikeja, Lagos, it was indeed beyond what they had written about themselves on their website. We met with the Kabelmetal Nigeria and Nexans Norway Teams, who are among the bidders for the Zabazaba deepwater project. Kabelmetal is a sister company with Nexans Norway AS, with a 29% ownership by Nexans participation’s S.A in Paris; while Nexans Norway AS is owned 100%.

In this roundtable interview with ROBERT K R ETSCHMER , Managing Director, Kabelmetal Nigeria Plc, FRANCK GUIET, Plant Manager, Kabelmetal Nigeria Plc, STEN EVJEBERG HANSEN, Country purchasing Manager, Nexans Norway, WINIFRED PATRICIA JOHANSEN, Business Development Manager, Africa and sales Manager umblicals; Hybrid Underwater Cable and Guilaume Lardin, Tendering Director, Nexans Norway; we get a comprehensive view of the Nexans family and their knack for quality and excellence in project delivery; with a deliberate drive for local content which makes all the difference. Excerpts!

Obviously you are not an indigenous Nigerian firm yet you seem to be doing very well in Nigeria; how does nationality affect your operations?

We are a Nigerian company, as we are incorporated in Nigeria as a Nigerian Plc. And have been here for over 50 years! Besides myself, there is only one other expatriate in this company – two expatriates which make 1 percent of our staff strength. That means 99 percent of our staff are Nigerians and this is another reason to see us as a Nigerian company. In our line of business, it is of course beneficial to be affiliated to a foreign company, which gives us access to the necessary know-how needed to produce the right quality in Nigeria. The oil and gas industry is very challenging in regards to quality. The expectations on our product are exactly the same compared to what you would expect to buy in any other country. We are proud of our achievements, and we do not compromise on quality in any aspect. What we produce can be fully recognized as world class standard.

In terms of local content, what would you like to see as an improvement in Nigeria, having spent 50 years in the country?

The Oil and Gas industry is the power house in Nigeria. Therefore, it is not surprising that the local content policy is in place for this industry. We would like to see similar legislation in other industries. This has been discussed, for a long time now but is not yet regulated by law. I believe the local content regulation in the oil industry is a good thing because it forces our customers to look for inward sources. It increased the possibilities to engineer, fabricate, manufacture and buy in-country. There are too many pre-set minds that believe you cannot source high quality goods from Nigeria. Following this, they end up going outside without even trying to source in country. We see it often when new customers of ours are surprised that they are getting high quality products in Nigeria. This is not just with regards to our cables, but also other competitive products produced in Nigeria. If it would be further assisted by the law in other industries, it would boost companies to develop. www.orientenergyreview.com

INTERVIEW How do you source your raw materials?

We source our raw materials both in-country and abroad, depending on availability and price. Unfortunately, I must say that the biggest part for our cable-making raw material is imported because the main components we use in our cables are either not available in-country or not in the desired quality, thus the need to import the larger part from abroad. We have however seen some developments towards making more and more raw materials available in-country, though it is a gradual process.

What are the ranges of products you manufacture?

We produce low voltage cables for the broad market which are so-called infrastructure cables, power cables which you normally spread from the low voltage side of the transformer. It is what you use to power industries and also ordinary residential houses.

We also produce overhead lines for power transmission used in Nigeria, which are from aluminium. As for cables to the oil and gas industry, we produce so-called conventional cables, with enhanced properties that go beyond the standard. These cables may have special features like fire resistance and other properties like oil and hydrocarbon resistance. This makes these products tailor-made to each customer’s specification.

What role would you be playing in the Zabazaba project?

Our intention is to be a major supplier of low voltage umbilical component cables to Nexans Norway, our affiliate company, who together with their local partner, FODE, are bidding for the supply of subsea umbilicals. This is a new business segment we hope to see developing. There is another product group not completely related to the umbilicals but for offshore use as well - so called shipboard cables.

These cables are very specific in design and we can produce some range of this scope – e.g. for the Zabazaba FPSO.

able to develop our local content capabilities further. It was the first time that we could participate an industry development project under the NCDMB’s supervision.

The Umbilicals were recognized by NCDMB to have a low-voltage cable scope which should be manufactured in-country. However, due to the time schedule and technology gap, it was not possible to manufacture these cables at that time. Nevertheless, we used the opportunity to identify the technology and equipment gaps needed to be closed in order to bridge the gap for the future. We finally ran trial productions and tests. We are looking forward to the execution of the first major project for this sophisticated product and to establish a continuous manufacturing process. Another project was cables for NLNG´s FPSOs. The local content model proposed that some special cables had to be manufactured in-country and shipped to Korea for assembly on the vessels. This was a historic export of specialized (shipboard) cables from Nigeria to Korea - and an important milestone for us.

Should you be engaged for production of the umbilical cables and shipboard cables, what are some multiplier effects you think would accrue to the country across the entire value chains?

When we execute the first project and it turns out to be successful, there are high expectations to win further contracts in order to maintain continuous use of the equipment acquired. We need this for the return of capital employed and permanent employment generation. We see also other benefits from the umbilical projects, such as electrical jumpers.

Can you mention the kind of projects you have executed in Nigeria so far?

When we look at oil and gas, we have executed several projects to oil and gas majors, such as Total and Shell. The latest one which we just delivered was an onshore associated gas solution project for Shell. Before that, it was the OML 58 with Saipem as EPC contractor. We have been highly successful in the country Put in monetary terms; it is about six million dollars over the last two years alone. So, the cable part alone is already quite substantial in these projects.

Do you expor t some of your products?

We are ready to export and deliver whenever there is a business opportunity. As an example, we had the already mentioned shipboard cables for the NLNG project which were exported to Korea. Exports to African neighbouring countries have so far been challenging in terms of logistics and export processes.

Usually, it is unfortunately easier for African countries to buy products in Europe, US or elsewhere instead of buying it from a neighbouring country. It is a pity that even within ECOWAS there is not much traffic between the neighbouring countries.

What kind of training programmes do you have for your Nigerian engineers?

There is training on the job, and we take it very, very serious. We have been established for many years now, and have a very low rate of staff turnover because we only replace our staff that goes on retirement.

Tell us about Egina and a few other projects you have participated in.

During the construction project of 6 new vessels in Korea by SHI & HHI for Bonny Gas Transport Limited (NLNG) project, we were

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Orient Energy Review Vol 7 No.02 February 2018 11

INTERVIEW Our workers and engineers must be competent to operate our equipment and everybody´s qualification is assessed as he or she is entering the company.

Everyone has a job description and job qualification matrix on which basis we select training on the job to close out the gaps...

Do you have provision for engineering students and fresh graduates to gain internship?

We have provision for engineering students to do their internship with us. When we have needs to employ engineers, we start with those from internship because they may have proven their ability to learn and their motivation on the job already.

If we need further professional experience, we use our network to source people who are already on a similar job. We have a huge database to pre-select people and do not need publishing on newspapers or so.

I am interested in your strategy to replace ageing workforce with young professionals. Is there a plan in place where you are able to transfer such knowledge and put young professionals in managerial roles?

It is our company’s policy to always look inwards first to see if we have somebody who can fill up a vacant position. We are also a unionised company because of our old industrial presence where we partner with our worker´s representatives for the progress of the company.

For some of your past projects, like Egina project, were there specific knowledge transfers you engaged your engineers for?

For this kind of project, because it is beyond the normal scope of cables we usually do, we leverage on the experience of our partners to provide necessary knowledge and training on site. Future training on umbilical cables will be two-fold, firstly, part of the trainings abroad in our partner company’s facilities, secondly, we do training on the

12 Orient Energy Review Vol 7 No.02 February 2018

job here with the supervision from overseas trainers on site to train our staff until we are sure that the process is 100 percent under control before we move on to regular production.

Give or take, how many engineers do you think will be needed to carry out the Zabazaba project?

We estimated that it will require about 40 additional people for the project to be executed. It is a mix of both experienced staff from the factory, which we believe are competent to do the job, and some new staff to fill up the gaps as we acquire some additional equipment.

This gives us a 50/50 approach of experienced staff and new ones to work together. On every machine and every equipment, we must have adequate staff to man it 24/7 because we shall be running about three shifts daily on these processes.

How law-abiding is Kabelmetal?

What is your relationship with the government; how much of government’s patronage do you enjoy as a company?

Of course, we are a law-abiding firm. We are a Plc company and by nature, abide by the highest level of compliance in the country. Nigeria has stringent laws and we abide by them. Unfortunately it is sometimes a disadvantage to be 100 percent compliant to the rules if you see others who cut corners. But in the long term, it always pays off to do the things right. We also observe Nexans internal rules for business ethics and code of conduct if they are more stringent than national regulations. As for government support, there has not been as much support as we wish.

On a critical note, Nigeria is known for multiple taxation and regulations. A lot of government’s organizations and parastatals put their efforts on a limited number of companies. If your company is more famous than others, you get more attention which is not making our lives

any easier. However, we are compliant anyway and it´s not a real challenge in the end.

In certification and standards is there any difference between yourself and your competitors?

For many years, we have been certified per ISO 9001. Last year, we made a transition to the latest edition which is the 2015 edition.

What makes us different is that we are certified by Bureau Veritas while most other companies in the country are certified

by Standard Organization of Nigeria (SON). We did this due to specific requests from IOC´s or their nominated EPC´s. I believe this is another prove that we maintain a very high standard.

Just a hint on your LTI figure?

We had two Loss Time Injuries in 2017. LTI is a key performance index for us and we take HSE very seriously.

What is the relationship between Kabelmetal and Nexans Norway?

Fou nded more tha n 10 0 years ago, Nexans Norway AS is a leading supplier of power, telecommunications, installations and heating cables in Norway, and is among the world’s leading manufacturers of offshore control cables and highvoltage submarine cables. The name ‘Kabelmetal’ in Nigeria is used because it is having a connection to Kabelmetal Germany which became part of Nexans itself. We do not use the name Nexans in Nigeria because Nexans holds a minority stake only. As such we are not allowed to use the name ‘Nexans’ in our name. But of course, from an industrial point of view, we are a complete subsidiary of Nexans in terms of know-how and technology.. Therefore, we call ourselves a Nexansaffiliate company while still bearing our name ‘Kabelmetal’.

In this context, we have an uninterrupted relationship with each other.

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INTERVIEW Answers from the representatives of Nexans Norway:

with the umbilical low voltage cables before we start to focus on the next step. I think it is important we get the quads in the coming project, to deliver them in Nigeria. There is a lot of uncertainty, as we all know, the time frame is difficult to predict and we need to be a bit patient, I think.

How does local content play out in Nexans Norway?

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hat is your assessment of the team and what possible collaborations are we expecting to see in the nearest future?

Sten: So far it looks very promising. I think they have already explained what they need to deliver to be able to become the supplier to the next project we are competing for in Zabazaba and Bonga..

The quality focus they have presented follows the regulations. I am confident that we will have a valuable co-operation with Kabelmetal and Nexans Norway.

From your inspection of the yards, do you think there are any way standards or quality might be compromised?

Sten: From what I have seen so far, I am quite confident that we will find good support for our projects in Nigeria.

There is of course, a reason why Nigeria is running a local content programme and that is because you want to make sure that the companies and organisations enter more international level and to gain the experience that international players must bring into the oil and gas market. So, what we see is that there are different materials in different companies but nothing that particularly is of concern to us. We will definitely be able to find solutions for the deliverables that we want to do in Nigeria.

After this, what is the next thing you are likely looking forward to in terms of technology transfer and in-country manufacturing?

Sten: If you are referring to Kabelmetal; that is no one answer. It is not so obvious if Nexans Norway knows where it will be. They have the right equipment and facilities; they are an affiliate of Nexans.

So, it is great to see more shipboard cable.

On the oil and gas activities, I think the first thing is to qualify and get running

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Winifred: I think we need to emphasize something about local content. Local content is not CSR. It must be good business for it to succeed. It is a discussion we often have when we are with the authorities with NCDMB. Solutions proposed should be with business cases and it should not be such that if a project is not in Nigeria, Nigerian industry cannot compete. The dream scenario for successful local content should be for the custodians to ensure that the industry is competitive internationally. At least, if not internationally, they should start within the ECOWAS region on the African continent and then take it further internationally. But if local content is a whip that is entirely pushed through, the cost levels not competitive, it will not be successful in the end.

Sten: International trade agreement is not very uncommon. Within governments, this has been on for centuries; if you must buy something from abroad, then you’ll have to sell something similar to them. So, these kinds of conditions relate to purchase and sales between countries and have existed for a very long time. It is very well known within government and industries like the military activities and all other kind of industries like that. Now, when it comes to local content in Nigeria, it is an expensive solution as of today.

So, it is difficult for us as a supplier to companies in Nigeria to find cost-efficient and logistically simple solutions. This is something we must accept as part of doing business abroad, which means you come back to the same topic. The local content has a goal: to train, to raise competence, expand the economics and knowledge of the country you are working in, making it a form of technology transfer help to the country.

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inifred: I think the challenge is not only with the government, but it is also with the local suppliers or the local vendors of services and deliverables. They should be more geared to look beyond Nigeria as a market; to look at how they can compete on the global scene because that is where the sustainability of the industry is. There will not always be a project such as Egina in Nigeria but something could be in Ghana, in Senegal or in Mauritania and those are actually younger industries; I think my idea is to challenge,

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don’t look at government protection; look at where you are.”

Again, it is not charity, it not CSR, it is a business.

Given what local vendors do in the name of local content here in Nigeria, do you think we are ready for local content as a continent and how does it make business sense to a company like Nexans?

Winifred: If you want short term, it may not always make sense but if you want long term, you have to start from somewhere. There is a custodianship. You ought to start climbing the tree from the bottom and growth is always painful. For growth, we start from the birth. But once you are up and running and you can strive to make your industry competitive, you are in a far better position economically because again you have the international market to play in. If your country is in recession, not everybody is in recession; if there are no projects here, there are projects elsewhere and that is what you need to look into. Now, if you are looking at local content on an African scale, there are so many countries coming up with their own regulations and most of them are looking at Nigeria to be the flag bearer on where to go and what to do. But I think each country needs to look at where they are starting, what the merits are, what the institutions, what the infrastructure, what capabilities they have and start from there, instead of taking a blind copy of what Nigeria has done, and wanting to do the same’.

What is your advice to the Nigerian government in terms of making local content more economically viable?

Orient Energy Review Vol 7 No.02 February 2018 13

LOGISTICS/ MARITIME

Ministers of Transport, Finance Target 1% CISS Fund for New ICT Deal

By Oge Obi

that will involve a foreign firm, Mckinsery & Company This recent moves seek to oust Webb Fontaine Nigeria Limited that has been providing ICT backbone services to the Nigerian Customs Service. The ministers are seeking FEC’s approval for them to share the accrued revenue to yet to be registered NTP (74 percent for both the Single Window and Scanning Service) and (26 percent for CISS administration). It also stated that once the export related segment of the single window is incorporated, the existing Nigeria Export Supervision Scheme (NESS) will be distributed between NTP (74 percent) and NESS Secretariat (26 percent). According to the memo, the proposal had earlier been presented to Vice President Yemi Osinbajo at the Presidential enabling business Environmental Council (PEBEC) meeting.

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he Transportation Minister, Hon. Rotimi Amaechi and his Finance counterpart, Mrs. Kemi Adeosun have commenced moves to access over $1 billion funds accrued under the Comprehensive Import Supervisor Scheme (CISS) and Nigeria Export Supervision Scheme for a new ICT deal.

The ministers are seeking the Federal Executive Counci l’s (FEC) approval to access the one percent CISS that was levied on all importation, which also served as payment to pre-shipment inspection and later destination inspection agents; services the Nigeria Customs Service (NCS) now renders Severally, maritime industry stakeholders have called for the abolition of the levy without their calls being heeded to.

In a memo dated December 7, 2017, titled “Approval for the Establishment of the National Trade Platform, Joint Memorandum by

14 Orient Energy Review Vol 7 No.02 February 2018

Honou ra ble Mi n i ster of Transportation and the Honourable Minister of Finance”, the duo sought to be allowed to take the one percent Free On Board (FOB) CISS paid

by Nigerian importers and the 0. 5 p e r c e nt NESS paid by exporters a s fe e s for export trade facilitation ser vices as a way of generating more funds. It was said that over $1 billion have accrued to the accounts of NESS and CISS that are domiciled with the Central Bank of Nigeria and that the funds are targeted for a project

At the meeting, the Vice President repor ted ly c on st it uted a nd inaugurated a steering committee that was co-chai red by the Comptroller-General of Customs, Hameed Ali and the Managing Director of Nigeria Ports Authority, Hadiza Bala-Usman to work on the proposal.

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LOGISTICS/ MARITIME

Shipowners Laud Moves to Rejig Nigeria’s Oil Trading Terms large crude carriers, that will inevitably lead to the development of appropriate ship repair yards for the dry docking and repair needs of these fleet. A dry dock of that nature will create jobs, stem capital flight and increase skills development in the maritime sector,” he said. Ogbeifun however warned against the rush to acquire tanker f leet without building adequate manpower run and operate such fleet. He said, “We should not just jump into acquiring tankers. We should take it one step at a time and build adequate manpower capacity to be able to technically run and operate such fleets.

“Maybe the way to go about that is to start by acquiring a couple of tankers and then engage technical partners in a joint venture format who are experienced in doing this internationally and then gradually build the skill, the capacity and the confidence that Nigerians will gradually grow into and then gradually increase the fleet size.”

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l a n s by t he Fe dera l Government to change Nigeria’s crude oil trading terms from Free On board (FOB) to Cost, Insurance and Freight (CIF) has received the commendation of the country’s indigenous ship owners. Sale of Nigeria’s crude oil has been on FOB terms for more than 50 years. Under these terms, the buyer pays for the products and would nominate the ship to carry the cargo to the destination of choice. This arrangement has left indigenous shipping companies in the cold as the buyers of the products simply reach out to highly capitalize multinational shipping agencies that transport their goods.

Under the CIF terms, the government or NNPC as the exporter of the product will determine who delivers them to the buyer. With this, Nigerian firms can be engaged for such contracts, and where they do not have the capacity, they can form partnerships with foreign firms. NNPC recently said it had commenced engagement with the www.orientenergyreview.com

Nigerian Maritime Administration and Safety Agency (NIMASA) to explore the most viable and cost effective options in the export of Nigeria’s crude oil. President, Shipowners Association of Nigeria (SOAN), Engr. Greg Ogbeifun said the CIF policy, if well implemented, will encourage the establishment of Nigeria-owned tanker fleet to participate in crude export. He said the emergence of a Nigerian fleet would also spur the country to develop an appropriate dry dock.

“The emergence of a Nigerian fleet has the benefit of increasing the revenue base from the aff reightment. Besides the financial benefit, Nigeria will be flying her flag internationally.

There will be an increase in our flag tonnage. It will lead to our flag register being re-jigged to meet international standards. It will create huge job opportunities for the teeming seafarers both for training and employment.

The SOAN President urged NNPC to further engage stakeholders and understudy what other countries that produce and export their crude have done to overcome the risk inherent in the CIF terms even as he noted that there are many benefits under the CIF terms than the risk the NNPC may be apprehensive of. NNPC Group Managing Director, Dr. Maikanta Baru argued last week that under CIF, the wet cargo remains the property of the Federal Government, a situation which could be dangerous for the country’s earning as creditors could use court orders to arrest crude oil cargoes on transit in order to secure payment being owned by Nigeria. But Ogbeifun said, “NNPC should work with the relevant agencies including NIMASA as well as the stakeholders to brainstorm on how to mitigate their concerns and also look at what other countries have done to address that.” * Ships &Ports Daily

“If we now have a fleet of very Orient Energy Review Vol 7 No.02 February 2018 15

COMMUNITY DEVELOPMENT Pay Oil Proceeds From 1958 to Landowners – Ogbakor-Ikwerre

Gbaramatu Monarch Urges Gov’t to Kick Start Maritime University

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he Pere of Gbararmatu Kingdom, His Majesty, Oboro - Gba rau n 11, Aketekpe, Agadagba, Warri South West Local Government Area of Delta State and His Royal Majesty, Suo Vi, the Olaja-Orori of Ugborodo Clan at the weekend urged the Federal Government to kick-start the Nigerian Maritime University, Okerenkoko without further delay.

They both spoke at the palace of the Pere of Gbararmatu Kingdom at Oporoza when the Olaja-Orori of Ugborodo Clan and his entourage visited the Gbararmatu Royal Father.

According to them, the establishment of the Nigerian Maritime University, Okerenkoko will bring rapid development to the area and the entire Niger Delta Region.

They advised investors to take advantage of the prevailing peace in the area to carry out their legitimate businesses, and also implored the State and Federal Governments to ensure the immediate take-off of the Ogidigben Gas revolution industrial park (Grip) and the Gbaramatu Deep seaport which together make up the celebrated Export processing zone (EPZ) project, whose groundbreaking

ceremony was done by the former President Jonathan administration early 2015 They implored investors to take advantage of the prevailing peace in the area to carry out their legitimate businesses.

They warned those they described as enemies of progress to steer clear from the affairs of Gbararmatu Kingdom and that of Ugborodo and resolved to continue to work for peaceful coexistence in the area.

According to them; “Now that we have lasting peace in the area, we do not want any third party to come in between us and cause unnecessary trouble. We are peaceloving people and we are not going to allow ourselves to be used by enemies of progress to engage in a needless war. We do not want a fight, but development in our area”.

They added that; “This historic visit is a tremendous achievements by both parties in the process of bringing lasting peace, unity and togetherness in the area. This visit is meant to cement our cordial relationship and we will continue to promote peaceful coexistence because, w ithout peace, no development can take place”.

16 Orient Energy Review Vol 7 No.02 February 2018

he Federal Government has been charged to urgently make reparation of the proceeds from the sale of oil blocs since the country began oil production in 1958 to landowners or host communities. The apex socio-cultural group in Ikwerreland, Rivers State, the OgbakorIkwerre Cultural Organization Worldwide gave the charge, saying oil proceeds were being paid to landowners in other parts of the world apart from Nigeria. The President-General of the Ogbakor-Ikwerre group, Prof. Simeon Achinewhu made this known in an exclusive interview with our correspondent in Port Harcourt. Achinewhu who is also a retired University Professor of the Department of Science and Technology, at the Rivers State University, emphasised the need for the country to be restructured urgently. He lamented that all the day-light robbery perpetrated against oil producing communities by the government would not have taken place if the country was restructured. According to him,

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We are saying that from the time oil started being produced from our area, they should pay us reparation, they should calculate all and pay us.

“I call on the Federal to pay all proceeds from the sale of oil blocs to landowners or the producing communities because that is what is obtainable in other parts of the world. “In the United States of America, all proceeds from the sale of oil bloc are paid to landowners, while here in Nigeria the Federal Government takes it all, which is not fair. “If there was a restructuring they (Federal Government) will not do that, and for that reason, we are operating on a kind of Federalism that is defacto Unitary,” Prof.

Achinewhu said. *Sweetcrude Reports

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Orient Energy Review Vol 7 No.02 February 2018 17

CORPORATE SOCIAL RESPONSIBILTY

Belemaoil Awards Scholarship to 374 Students in Host Communities

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n indigenous oil company operating in Rivers State, BelemaOil Producing Limited, has awarded scholarships worth more than N100 million to 374 indigent students of its host communities. The scholarship, which was in three categories- postgraduate, undergraduate and post-primary- is part of the company’s corporate social responsibility policy, under the NNPC/ BelemaOil Joint Venture (JV). Out of the 374 beneficiaries, 78 are postgraduate, 175 undergraduates and 121 post-primary school students. Speaking during the official handing over of the scholarship cheques to beneficiaries in Port Harcourt recently, the President of BelemaOil, Mr. Jack-Rich Tein Jr. said the scholarship is not a display of wealth, but recognition of the important role education plays in the lives of the young ones and the future of the host communities. “We are here not just to celebrate the success that has come to them, but to also honour the privilege given to us as a company to serve. And we recognise very importantly that if you joke with education then you are joking with the future and if you fail to grab these young ones who have the enthusiasm and that flair to pursue their academic dream you are limiting the unraveling of future opportunities that they would have used to grow themselves as well as society.

“And I believe very strongly that what we have come here to celebrate is not just a display of so much wealth but a display of interest; that believing in the young ones of today is unlocking the future of tomorrow and that is making the society a better place.” He called on the beneficiaries to see the scholarship as an opportunity to develop themselves and unlock their talents and not misuse it.

18 Orient Energy Review Vol 7 No.02 February 2018

Fielding questions from journalists shortly after the programme, Tein explained that the scholarship is worth over N100 million annually, pointing out that it is for students in Nigerian schools and overseas. “The total scholarship per annum is over N100 million. What we have given today is over N70 million cheques and we have other students in Cyprus, UK, America, Canada, Ghana, Malaysia, Philippines and in Nigerian schools. What we have done is not just to show wealth but so that they can in turn do the same for society when they come out.” He added that the company is also hoping to create about 12,000 jobs if its proposal with the presidency is approved, adding that the company’s model is aimed at making sure it supports the local communities where it operates.

“The Belemaoil Model is all about making sure that the local communities where we operate and competent Niger Deltans are given technical opportunities to showcase their competences such as alliance with technical companies that provide specialised types of jobs where they can partner with them and begin to provide those services. “We also make sure that we create strategic capacity development through training for the local communities. We have also awarded scholarships like you have seen today.

“Basically as we speak now, we have our offshore floating and offloading terminal sailing to Nigeria. We are expecting to build some pipelines, we are also expecting to create some opportunities based on proposal we put forward to Mr. President and we believe very strongly that the president is a man that loves the Niger Delta region and he wants to see employment everywhere; he wants to see peace return very quickly; he wants to

make sure that the operating communities are in harmony with the operators and with the federal government so that wealth creation can begin to improve.

“So we have put forward a programme that we believe will create additional 12,000 employments which can turn around about 36,000 jobs. And we believe that as soon as he gives a nod to it the employment will begin to roll out,” Tein stated. In his remarks, the Chairman of the occasion, Alabo Tonye Graham Douglas, lauded the initiative and charged the beneficiaries not to misuse the opportunity given to them. On his part, the Managing Director of National Petroleum Investment Management Services (NAPIMS), represented by Mrs. Tolu Adefuwa, restated the NNPC’s support for the scheme. “If you are able to educate the children at the young age you are rest assured that our future is sustained because it means we are raising the next leaders, we are raising the next generation. So we are encouraging them not just to be educated but take it to the next level.”

Also speaking, the Executive VicePresident, Finance, Administration and Human Resources of BelemaOil, Mrs. Rosemary Asiegbu called on the beneficiaries to make good use of the opportunity and emulate the president in his vision. “Aside the joint venture with NNPC, he has joint venture with the communities. So the young ones, this is not just another event of giving you scholarship, we want you to emulate and see him as your mentor so that all his efforts will not be in vain.” The beneficiaries thanked the company for the opportunity, saying that it would ease their financial challenges.

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CORPORATE SOCIAL RESPONSIBILTY

Dreg Waters Empowers Children at Tarkwa Bay Community

By Margaret Nongo-Okojokwu

Dreg Waters Petroleum and Logistics successfully completed its 2017 corporate social responsibility project with a high impact Christmas event for hundreds of children at Tarkwa Bay community in Lagos state, Nigeria. The event tagged “Christmas-in-a-Box” was done in association with the renowned Non-Governmental Organization,Slum2School Africa.

Hundreds of Christmas gift packs and educational materials were provided for children of different age categories at the Tarkwa Bay community. The event which held on Sunday, December 17, 2017 featured a lot of merriment and fun for the children and care-givers of the community who came out in masses to enjoy the fun-filled atmosphere.

The Chief Executive Officer of Dreg Waters, Miss Damilola Owolabi, who led a team of staff and volunteers to join the Slum2School team for the event, expressed her gratitude for the opportunity to make positive impact on the beautiful young children at the rural community. While speaking with journalists at the event, Damilola stated that, “These children would really love to have all the good things for Christmas but their care-givers cannot afford them. Therefore, we are glad to partner with Slum2School Africa to provide them with gift items, educational materials and food items.”

She reiterated that, “We do not want the children to feel inferior, because they do not have some good things of life, so we’ve come to celebrate the festive season with them, and make

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them happy with some amazing gifts.”

Damilola passionately implored the government to provide electricity power supply for the community, so as to enhance business activities and further improve the socio-economic status of the residents. On his part, the Founder/Managing Director of Slum2School Africa, Otto Orondaam, explained that, “We want to ensure that we can have more support and more resources to get the school here more functional and provide more educational facilities for the children in this community. Our target is to achieve these in the next two to three years. We believe the goals will be accomplished through our collaborations with Dreg Waters and other organizations that share similar vision.” As a foremost downstream servicing company in

Nigeria, Dreg Waters has proven again that the management team is governed by professional policies, practices and initiatives. The management team has shown excellent commitment in leaving a positive influence on our society in various ways.

Goi ng i nto the year 2018, the management of Dreg Waters has strategically earmarked series of other corporate social projects for women and children in different communities, which are to be implemented with utmost sense of responsibility to humanity.

Orient Energy Review Vol 7 No.02 February 2018 19

DRILLING / EXPLORATION

LEKOIL Announces Independent Technical Study of OPL325 and Intention to Farm-Down

By Margaret Nongo-Okojokwu

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EKOIL , an oi l and gas exploration, development and production company with a focus on Africa, has announced the completion of a Technical Evaluation Report for OPL325, located offshore in the Dahomey Basin, straddling the western Niger Delta, 50km south of OPL310.

focused primarily on the Paleocene section of the block, generating new structural and stratigraphic maps using 3D pre-stack time migration seismic data. The maps were used in the volumetric approach to come to an estimation of potential resources in OPL325.

The Company holds 62% equity interest in OPL325, through Ashbert Oil and Gas. An Oil and gas industry specialists, Lumina Geophysical carried out a geophysical evaluation of approx. 800 sq km of 3D seismic data provided by LEKOIL. As a result of this seismic review, Lumina have identified and reported on a total of eleven prospects and leads on the block, estimated to contain potential gross aggregate Oil-in-Place volumes of over 5,700 mmbbls (un-risked, Best Estimate case). Lumina’s efforts

The Company intends to farm-down a portion of its working interest in OPL325 following a detailed prospect/ lead risking study. According to the the LEKOIL’s CEO, Lekan Akinyanmi, “This independent report underlines our belief in the prospectivity of this asset that was part of our original Dahomey Basin study. The deep water turbidite fan play is particularly exciting for OPL325. As one of LEKOIL’s key assets, we are delighted to have third party endorsement of our prospective resources, and our significant equity

Cameroun: Bowleven, NewAge to use Topaz Driller for Etinde appraisal wells

20 Orient Energy Review Vol 7 No.02 February 2018

Source: LEKOIL

Seplat Lists 25million Additional Shares in Line with Pre Approved Plans

By Margaret Nongo-Okojokwu

of the company’s long term incentive plan and that all the shares has voting rights.

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owleven, the Africa focused oil and gas exploration group traded on AIM, has announced a key milestone in the appraisal drilling campaign of its Etinde asset, in which the Company holds a 25% offshore interest.

The Company’s partner, New Age Cameroon Offshore Petroleum, a wholly owned subsidiary of New Age (African Global Energy), the Operator of the Etinde PSC, has entered into a contract with Vantage Drilling International, an offshore drilling contractor for the jack-up rig the ‘Topaz Driller’. The Topaz Driller, has been contracted for 150 days to perform drilling services in Cameroon on the Joint Venture’s proposed appraisal wells, on the Etinde licence. Planning for the delivery of the appraisal wells is ongoing and the Company currently expects the well IM-6 spud during Q2 2018. The Topaz Driller is currently in South East Asian waters and will transit to Singapore before mobilising to Cameroon.Source: energy-pedia.com

holding in the block gives us plenty of optionality for the next phases of exploration”, Akinyanmi said.

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eplat Petroleum Development Company Pls has announced the listing of an additional 25,000,000 ordinary shares on the Nigerian Stock Exchange at N0.50k.

This offer now puts Seplat’s share capital at 588,444,561 ordinary shares of 0.50k each, all with voting rights. The company in a memo to the Nigerian Stock Exchange Commission, dated February 2, 2018 said that the announcement was made in accordance with Rule 14 of the Nigerian Stock Exchange Amended Listing Rules and Article 17 - 19 of the UK Market Abuse Regulations 2016.

Titled, “Announcement of Voting Rights and Issued Share Capital”, the memo noted that the company’s action was taken in furtherance

It also stated that it was “in exercise of the powers granted to the Board of Directors of the Company, the Shareholders at the Annual General Meeting held on 30thJune 2014 to implement the IPO award and other remuneration of the top Management and Directors as disclosed in the IPO Prospectus.”

The 25,000,000 ordinary shares has been allotted to Stanbic IBTC Trustees Limited as Custodian and have also been formally listed on the Nigerian Stock Exchange. “Therefore, the figure of 588,444,561 may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in Seplat under the NSE Rules and the UK Market Abuse Regulations 2016”, the memo read. Tominiyi Ramon, equity research analysts at Vetiva Capital said due to the increased number of Seplat shares arising from the additional listing, “our per share forecasts have been revised. Following the update, our full year (FY) 2018 earnings per share (EPS) now stands at $0.24 (Previous: $0.25, FY’2017 Expected: $0.06)”.

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DRILLING / EXPLORATION

OPL 325 Technical Evaluation Complete

Qatar Petroleum Joins Total as Partner in the Exploration Block 11B/12B Offshore South Africa

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he technical evaluation report for Nigeria’s OPL 325 is now complete, according to Lekoil who holds a 62% equity interest in OPL325, through Ashbert Oil and Gas Ltd. The block is located offshore in the Dahomey Basin, straddling the western Niger Delta, 50 km south of OPL 310.

Lumina Geophysical carried out a geophysical evaluation of approximately 800 sq km of 3D seismic data provided

by LEKOIL. As a result of this seismic review, Lumina identified and reported on a total of 11 prospects and leads on the block, estimated to contain potential gross aggregate oilin-place volumes of over 5,700 million barrels (un-risked, Best Estimate case). Lumina’s efforts focused primarily on the Paleocene section of the block, generating new structural and stratigraphic maps using 3D pre-stack time migration seismic data. These maps were used in the volumetric approach to come to an estimation of potential resources in OPL325. Lekoil intends to farm-down a portion of its working interest in OPL325 following a detailed prospect/lead risking study. Lekan Akinyanmi, the company’s CEO, said, “This independent report underlines our belief in the prospectivity of this asset that was part of our original Dahomey Basin study. The deep water turbidite fan play is particularly exciting for OPL325. As one of Lekoil’s key assets, we are delighted to have third party endorsement of our prospective resources, and our significant equity holding in the block gives us plenty of optionality for the next phases of exploration.”

*Petroleum Africa

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otal has signed an agreement to sell a 25% interest in the Exploration Block 11B/12B, offshore South Africa, to Qatar Petroleum. The transaction remains subject to regulatory approval. ‘This transaction enhances the partnership on Block 11B/12B in preparation for the high potential exploration well scheduled to be drilled on the block at the end of 2018. Total is delighted to broaden its longstanding relationship with Qatar Petroleum and combine efforts to explore this promising region offshore South Africa,’ says Arnaud Breuillac, President, Exploration & Production at Total. Commenting on the agreement, Mr. Saad Sherida Al-Kaabi, the President & CEO of Qatar Petroleum said ‘We are pleased to join our longtime partner Total in exploration activities in this frontier block offshore South Africa. This is an important milestone in our strategy to expand our international

upstream footprint. We hope that the exploration efforts are successful, and we look forward to collaborating with Total, CNR, Main Street, and the South African authorities on this project.’ The Block 11B/12B is located in the Outeniqua Basin, around 175 kms off the southern coast of South Africa, and covers an area of 19,000 sq kms with water depths ranging from 200 to 1,800 meters. Upon receiving all regulatory approvals the new partnership structure will be as follows: Total (operator, 45%), Qatar Petroleum (25%), CNR international (20%) and Main Street (10%).

Total acquired its original interest in Block 11B/12B from CNR International in 2013:

Orient Energy Review Vol 7 No.02 February 2018 21

DRILLING / EXPLORATION

Nigeria, Niger Republic Sign Agreement to Build Refinery in Border Town

GAS

China Becomes World’s No.2 LNG Importer in 2017, behind Japan

By Oge Obi

C

T

he Federal Government has reached an agreement with Niger Republic to build a new refinery in the border town between Niger and Kastina State, the Mi n i st r y of Petroleum Resources has said.

The technical agreement which is to be signed soon by the two countries would include building of crude oil pipeline from Niger to the new refinery. The Ministry of Petroleum Resources had in a statement disclosed this as the outcome of the delegation led by the Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu to the President of Niger Re pu b l i c , M a h a m a d o u Issoufou and the country’s E n e r g y M i n i s t e r, M r.

Foumakoye Gado. According to the statement, from this development, a definitive bi latera l and tech n ica l agreements on the refinery would be signed in coming days. Adding that this will mark another chapter in the Nigeria-Niger bilateral trade, partnership and agreements, this time anchored in energy

and petroleum ref ining.

The mutually benef icial agreement was reached by the two countries for the purpose of constructing a refinery in the border town between the Republic of Niger and Katsina State (Nigeria) and the laying of a crude oil pipeline from the Republic of Niger to the new refinery. The ministry had on its Twitter handle stated that, “the visit to Niger Republic will lead to a definite agreement for the design and construction of a new refinery to be located at a border town between Nigeria and Niger.” Earlier this year the Petroleum Min istr y released a statement of plans for 10 new modular refineries for the Niger-Delta region, with Akwa Ibom, Cross River, Delta, Imo and Edo States as the major beneficiaries.

Meanwhile the single largest petrochemical refinery in Nigeria, built by Dangote Group in Lekki-Epe, Lagos is in progress with the set target of 2019 for completion.

hina will become the world’s second-biggest importer of liquefied natural gas (LNG) this year as it overtakes South Korea, shipping data in Thomson Reuters Eikon showed. This is a huge boost to Asia’s emerging spot market as Chinese buyers rely much more on short-term purchases to meet their needs than their counterparts in Japan and South Korea. Shipping data in Thomson Reuters Eikon shows that China’s imports of LNG will have risen by more than 50 percent in 2017 compared with the previous year to around 38 million tonnes. Comparatively, import-dependent Japan and South Korea will have taken around 83.5 million tonnes and just over 37 million tonnes by the end of the year, respectively. Analysts, though, say China’s LNG imports will rise further.

“We are expecting to see even higher surges in winter demand over the next three to four years as the Chinese government pushes more broadly its gas-for-coal drive,” said Wang Wen, Beijing-based gas analyst with consultancy Wood Mackenzie. China’s soaring LNG import demand is a result of a huge government gasification program that saw millions of households switch from using coal for household heating this year to natural gas. Beyond virtually doubling Asian spot LNG prices since June to $11.2 per million British thermal units (mmBtu) – their highest since November 2014 – China’s rapid growth in purchases also changed the structure of the market. Despite efforts to change the market, LNG trading has remained dominated by long-term contracts under which fixed monthly volumes are supplied at prices linked to the oil market, although within certain prices ranges. Such deals have been preferred by Japan and South Korea, which meet all their gas demand through LNG imports, as it gives them security of supply and prevents price volatility.

China is different. It has significant domestic natural gas reserves and also brings in supplies via pipeline from Central Asia. This means its utilities may order LNG cargoes only when they require gas at short notice – for instance during the current winter cold snap and supply crunch – possibly bringing a sudden spurt of purchases to a spot LNG market that in the past has seen limited activity. “China will surely become a key driver for Asian spot LNG prices,” Wang Wen said. Japan, China and South Korea together make up 60 percent of global LNG demand. The world’s biggest LNG producers are Qatar, Australia and Malaysia, which together meet around 60 percent of global demand. U.S. exports are also surging thanks to the shale oil and gas production boom in North America.

Courtesy: Reuters

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ADIPEC 2017

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PHOTO GALLERY

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Nigerian Oil Industry: Deep SeaOilProjects, Nigerian Industry:Downstream Opportunities to Drive Growth In Deep Sea Projects, Downstream 2018 Opportunities to Drive Growth In 2018

By Godspower Ike

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igeria started the year 2018 with a fuel crisis which began December 2017, fuelling concerns that the crisis would persist throughout the year. However, despite the fuel supply challenges, numerous opportunities exist in the industry. This article explores developments that would drive activities in the petroleum industry in 2018, identifying projects, investment activities and the numerous benefits that would accrue to prospective investors, as well as businesses, mainly indigenous 26 Orient Energy Review Vol 7 No.02 February 2018

firms, individuals and the country in general.

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he Nigerian petroleum industry, irrespective of its numerous challenges and uncertain posturing, still presents a number of opportunities which would be driven largely by the expected reforms in the industry, following the passage of the Petroleum Industry Governance Bill (PIGB) and the commencement and revival of

large projects that were, hitherto, suspended. In its outlook for the year, OPEC had forecasted that the global Gross Domestic Product (GDP) would grow at 3.7% for 2018, same as in 2017, stating also that the global oil demand is expected to grow by 1.51 million barrels per day. OPEC noted that Organisation for Economic Cooperation and Development (OECD) would contribute positively to oil demand growth, adding some 0.28 million barrels per day, www.orientenergyreview.com

COVER STORY lending support to industrial and construction fuels in both OECD and non-OECD. It also stated that expansion in the transportation sector is expected to provide the bulk of oil demand growth, noting that growth in petrochemical demand is projected to be one of the fastest-growing contributors in US, China, South Korea and the Middle East. Coming home, the International Monetary Fund (IMF) predicted that economic growth in Nigeria and sub-Saharan Africa is projected to reach 3.4 percent in 2018, broadly in line with the April forecast, with sizable differences across countries.

Beyond the near term, according to the IMF, growth is expected to rise gradually, but barely above population growth, as large consolidation needs weigh on public spending. For Nigeria, specifically, the PIGB, recently passed by the House of Representatives, would be a major determinant of the direction of the petroleum industry in 2018, and the implementation of legislations contained therein would either make or mar the industry in the year under review.

The Senate had in May 2017, passed the PIGB, while the House of Representatives followed suit by passing the Bill in January 17, 2018.

The Bill would become law when the president assents to it. The PIGB is seeking to establish a new regulatory agency, known as the Nigeria Petroleum Regulatory Commission, NPRC, which would take over the functions of Petroleum Inspectorate, PI, the Department of Petroleum Resources, DPR, and the Petroleum Products Pricing Regulatory Agency, PPPRA. The new commission, among other things, would also administer and enforce policies, laws and regulations relating to all aspects of petroleum operations which are assigned to it under the provisions of the Act.

whereas the bulk of the growth would come from the non-OECD with 1.23 million barrels per day of potential growth. “The 2018 forecast for non-OPEC supply is associated with considerable uncertainties, particularly regarding US tight oil developments. US oil supply is now expected to grow by 1.05 million barrels per day next year, representing an upward revision of 0.18 million barrels per day and following growth of 0.61 million barrels per day in 2017. www.orientenergyreview.com

“OPEC Natural Gas Liquids (NGL) and non-conventional liquids are expected to increase by 0.18 million barrels per day in 2018, compared to 0.17 million barrels per day this year. In November, OPEC crude production decreased by 133 trillion barrels per day, according to secondary sources, to average 32.45 million barrels per day,” OPEC explained. OPEC noted that activities in the petroleum industry would be driven by firm economic growth,

“

OPEC Natural Gas Liquids (NGL) and non-conventional liquids are expected to increase by 0.18 million barrels per day in 2018, compared to 0.17 million barrels per day this year. In November, OPEC crude production decreased by 133 trillion barrels per day, according to secondary sources, to average 32.45 million barrels per day,”

Orient Energy Review Vol 7 No.02 February 2018 27

COVER STORY Also, the Bill would see to the creation of two new companies, Nigeria Petroleum Assets Management Company and National Petroleum Company, with certain assets and liabilities of the Nigerian National Petroleum Corporation, NNPC, while the National Petroleum Company, for instance, would operate as a full independent commercial entity.

With the PIGB becoming law, the Ministry of Petroleum Resources would be renamed Ministry of Petroleum Incorporated, which upon its recommendations, the Minister of Petroleum Resources can grant, amend, renew, extend or revoke any licence or lease required for petroleum or production, pursuant to the provisions of the Act or any other enactment. When the commission is created, it shall be vested with all assets, funds, resources and other movable and immovable property, which immediately before the commencement of operation of the new commission, were held by the PI, DPR and PPPRA. Executive Secretary of the Nigeria Extractive Industry Transparency Initiative (NEITI), Mr. Waziri Adio, stated that the PIGB when assented to by the President, would provide a dynamic governance framework required to reposition the petroleum industry to fully embrace competition, openness, accountability, professionalism and better profit and returns on investments to both companies and government.

Adio disclosed that the current stag nation of i nvestment opportunities in the petroleum industry was as a result of the absence of a new law for the sector. He said this had led to huge revenue losses to the tune of over $200 billion, adding that the revenue losses were as a result of investments withheld or diverted by investors to other, more predictable, jurisdictions.

According to him, the hedging by investors stems from the expectation that the old rules would no longer apply, but not knowing when the new ones would materialise. Adio further stated that over $10.4 billion and N378.7 billion were lost through under-remittances, inefficiencies, theft or absence of a clear governance framework for the oil and gas industry, adding that the total cost to the nation in 2013 alone was N1.74 trillion largely as a result of the absence of a new law. However, he said NEITI is optimistic that with the new governance law for the

28 Orient Energy Review Vol 7 No.02 February 2018

industry, these huge revenue losses to the nation as a result of process lapses and outright stealing will be strictly checked if not eliminated.

its associated costs and therefore attracts foreign direct investments in the nation’s oil and gas sector.

On his own part, Minister of State for Petroleum Resources, Mr. Ibe Kachikwu, said the recently passed PIGB was designed to establish clear and enduring good governance principles; provide for fiscal regimes that are flexible and that would guarantee optimal take for the government. He also stated that the PIGB would support domestic gas utilization through the National Gas Master Plan; enhance local content; properly align the roles and functions of institutions; strengthen and reposition the Nigerian National Petroleum Corporation (NNPC) for enhanced productivity; and ensure that NNPC runs like all world class commercial entities. Kachikwu noted that the PIGB aims to create the governing institutions with clear and separate roles and establish frameworks for creation of commercially viable petroleum entities, that would eliminate bureaucratic bottlenecks, which discourage investors, hinder growth, and prevent the attainment of the summit of performances.

According to him, in Nigeria today, the situation is such that foreign direct investment flows into the country are at high cost.

Kachikwu, however, noted that the challenges of any beautiful plan lie in its implementation, assuring that the administration would ensure the implementation in order to ensure that the Oil and Gas industry yields profit for the Nigerian people. Another factor that would drive activities in the Nigerian energy sector is the rising crude oil price, spearheaded by the ongoing crude oil production output cut spearheaded by the Organisation of Petroleum Exporting Countries (OPEC). Since the output cut deal started, the price of crude oil had risen from $30 per barrel to about $70 per barrel, bringing about renewed vigour in investment activities in the petroleum industry, with fresh projects set to come on stream, while hitherto, suspended project, such as the Bonga South-West set to return.

He disclosed that a single regulator provides a one-stop shop for investors; it removes duplicate procedures and

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COVER STORY The Nigerian petroleum industry would see a rebound in activity this year, with major big ticket projects coming on stream, such as the Zabazaba, Etan and Bong South-West among others. The Zabazaba and Etan Integrated Development Project is a green field hydrocarbon development, an offshore license block located in the deepwater eastern portion of the Niger Delta with water depths ranging from 1,200 metres to 2,400 metres. The Production Sharing Agreement (PSA) for the block is between the Nigerian Agip Exploration (NAE) Limited (50%) and Shell Nigeria Exploration and Production Company (SNEPCo) (50%), where NAE is the operator.

Etan and Zabazaba were discovered in 2005 and 2006 respectively. NAE is developing the Zabazaba field as a standalone development and thereafter Etan field development as a tie-back to Zabazaba. The project is estimated to create about 20,000 new jobs within the oil and gas industry, save over 30 per cent of the project costs using local manpower and retain up to $1 billion incountry spend. Other benefits of the project include technology transfer in licensing and module know-hows, 9,000 tonnes fabrication locally, increased tax revenue generation for government and fostering greater collaboration between Nigerian companies.

The Zabazaba development has since progressed from plan approvals, regulatory checks and contract bid processes. The Executive Secretary of NCDMB, Mr. Simbi Wabote confirmed the Board carried out detailed scoping of the project to ensure that the targets exceed the accomplishments achieved on previous deepwater developments in the country. He expressed optimism that the development of Zabazaba would grow Nigerian content and impact the economy, much more than previous deepwater projects. The field development would offer huge opportunities for local fabrication yards with the right set of skills and technology for fabrication of different topside modules that would be integrated into the main FPSO hull when it arrives Nigeria.

Over 50 percent of the topside packages would be awarded to local companies for in-country fabrication ahead of full facility integration.

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The packages of the project included the Floating, Production, Storage and Off loading (FPSO) units, subsea, installation and rigs.

The $13.5 bi l l ion Zabazaba project will set a new record in local content development as the major contractors bidding for the project were said to have submitted competitive costs and concrete plans to fabricate and integrate over 50 per cent of the topsides of the FPSO in the country. The terms of the Zabazaba deepwater project stipulated that the contractors must fabricate and integrate over 50 per cent of the topsides of the FPSOs in Nigeria. In the case of the Bonga South-West Aparo (BSWA), there are plans to build a vessel that would be 337 metres long, 65 metres wide and 37 metres deep and displaces approximately 560,000 tonnes. The topsides weigh 40,000 tonnes and the product storage capacity would be 2.5 million barrels. The vessel will be designed to operate permanently moored at the BSWA location for a minimum of 25 years without dry-docking and with a fatigue design life of 40 years. Promoter of the project, Shell Nigeria Exploration and Production Company (SNEPCO) would witness the in-country fabrication of half of the topsides of the FPSO and their integration.

These would create jobs for most of the major fabrication yards in the country, bringing about increased activities in the petroleum industry and huge jobs opportunities in the industry. Already, the Egina FPSO had berthed in the country and the integration of the topsides and other components would commence immediately, after which the vessel would move to site to commence crude oil exploration and production,

with first oil expected in December 2018. The Floating, Production, Storage and Offloading vessel for the $16bn Egina deepwater oilfield project by Total Upstream Nigeria

Limited which arrived Nigeria from South Korea on Wednesday January 24th 2018, berthed at the newly built 500-metre FPSO integration quayside at the SHIMCI Yard, Ladol island, Lagos, where the integration of six locally fabricated modules will take place over the next few months.

According to the oil major, Egina is the deepest offshore development carried out so far in Nigeria, with water depths over 1,500 meters and will add 200,000 barrels per day to Nigeria’s oil production. It said the Egina FPSO had been designed for 25 years of operations and would produce 200,000 barrels of oil per day (at plateau).

The company said the Egina op e r at ion s wou ld g e ne r at e significant activities for local contractors in various sectors, and continue to provide avenues for the training and development of Nigerians in various domains.

The Managing Director, Total Upstream Companies in Nigeria, Nicolas Terraz, who described Egina as the largest investment project currently ongoing in the Nigerian oil and gas sector, said it would be completed in the fourth quarter of 2018 with the initial budget of $16bn. He said, “This is for me a collective success. Together with our partners, we are kind of making history. It is the first time we will have such a big vessel and such an activity of integration taking place in Nigeria. So, I am grateful to the partners and the authorities.

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COVER STORY

“I think Total has taken the unique position to invest significantly in Nigeria when times are difficult. Two years ago, the oil price was below $50 per barrel, and still we have continued to invest in deepwater in Nigeria.” He said the oil major would continue to work with the Nigerian National Petroleum Corporation and its partners to grow its activities for the benefit of the country and the company. The Egina field was discovered by TUPNI in 2003 within the Oil Mining Licence 130, some 200 kilometres south of Port Harcourt, Nigeria. The field is being developed

by TUPNI in partnership with the NNPC, CNOOC, SAPETRO and Petrobras. The Managing Director, Nigerian Ports Authority, Hadiza Usman, said the magnitude of the project presented the NPA with the opportunity to once again showcase unrelenting effort at building capacity to meet the needs of customers across board. She said the project furthered the Federal Government’s local content policy with multiplier effects evident in employment opportunities, capacity building, technological transfer, cost saving, reduction in capital flight as well as the attraction of oil and gas hub to Nigeria for the sub-region.

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“As we shall be playing host to the Egina for the next few months, the NPA is determined to deploy all its resources to supporting the project unto completion. We wish her a safe stay in the Lagos harbor and in the onward journey to the Egina oil field offshore.

According to a statement, the integration of the six locally fabricated topside modules at the SHI-MCI Yard before its final sailaway to the Egina field is a game changer as far as the execution of deep offshore oil and gas projects in the country is concerned. Another major project that would likely buoy activities in the petroleum industry in 2018 is the planned Trains 7&8 of the Nigerian Liquefied Natural Gas, NLNG. Managing Director and Chief Executive Officer of Nigeria LNG, Mr. Tony Attah, said the company with the support of its Board, is making steady progress towards achieving Final Investment Decision (FID) on its Train 7 Plus (7+) project in 2018. On completion of Train 7+, Attah stated that NLNG’s annual production capacity is expected to scale up from the current capacity of 22 metric tonnes per annum

(mtpa) to 30 mtpa. In addition to the NLNG project, another project that would provide much prospect for the Nigeria petroleum industry was the agreement signed towards the end of 2017, between the NNPC/ Total Exploration and Production Nigeria, TEPNG, Joint Venture with Greenville Energy for the construction of a $500 million miniLiquefied Natural Gas facility in the country to increase domestic gas supply and boost supply to power plants. The initial capacity of the mini-LNG project is 2,200 metric tonnes and has the capacity to grow to about 5,000 metric tonnes. Phase one of the project, which would be situated in Rumuoji, Rivers State, would commence with three trains, with a capacity of 2,200, while the long term plans is to increase the trains to eight trains. The NNPC had projected that the agreement would allow it increase its gas output to 1.4 billion standard cubic feet (SCF) with plans to increase it to 1.6 billion SCF in the months ahead. Total outlay of the investment is around $500 million in the first phase, and plans to increase it to about $850 million, completely on equity without any bank financing.

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COVER STORY Also, the Federal Government was able to secure over $3.7 billion investments into the Nigerian petroleum industry in 2017, as a result of the cash call underfunding challenge which rose to about $1.2 billion in 2016 alone.

This underfunding made the NNPC and its Joint Venture (JV) partners to explore alternative funding mechanisms that would allow the JV business finance itself in order to sustain and grow the business. This initiative would trigger activities in the industry and bring about new investment opportunities and fresh projects, as the NNPC JV operators would undertake projects hitherto constraint by finances. The average JV cash call requirement for the Federal Government through the NNPC stood at about $600 million a month, while coupled with flat low budget levels over the past years, the budgeted volumes were hardly delivered. Breakdown of the investments secured included the $1.2 blllion multi-year drilling financing package for 23 onshore and 13 offshore wells under NNPC/ Chevron Nigeria Limited Joint Venture termed Project Cheetah and the $2.5 billion alternative funding arrangements for NNPC/ Shell Petroleum Development Company, SPDC, JV, termed Project Santol i na; NNPC / Chevron Nigeria Limited, CNL, JV termed Project Falcon as well as the NNPC/First E&P JV and Schlumberger Agreement, $700 million. Project Cheetah was projected to increase crude oil production by 41,000 barrels of oil per day (bopd) and 127 million standard cubic feet per day (mmscfd) of gas, with a Government-take of $6 billion over the life of the Project.

In the same vein, Projects Santolina, Falcon and the NNPC/ First E&P JV and Schlumberger Funding Arrangement were projected to increase combined production of crude oil and condensate by 150,000bopd and 618MMscfd of gas with a combined government-take of about $32 billion over the life of the projects.

Furthermore, Kachikwu had also declared that the Federal Government would continue to address the Niger Delta issues and

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build a peaceful and prosperous Niger Delta, with emphasis on job creation for the teaming unemployed youths, investment in infrastructure, energy and pr omot ion of s u s t a i n a ble livelihood. From 2018, the planned engagement of 10,000 Niger Delta youths in pipeline surveillance is expected to kick off in earnest and this would help address the challenges in the Niger Delta, bring peace and address agitations in the region.

Other key areas of focus that would drive activity in the industry include the hydrocarbon tracking and cost reduction initiatives, and restructuring of parastatals under the Ministry of Petroleum Resources. Again, following the fuel crisis which had lingered since December 2017, t he Federal Government had increased its emphasis on boosting Nigeria’s refining capacity, mainly through the modular refineries initiative and the revamp of the Warri, Kaduna and Port Harcourt refineries with the aid of private investors. Specifically, the NNPC had stated that it is inching closer to arriving at the choice of financiers for the refurbishment of the country’s three refineries, the Port Harcourt Refining Company Limited (PHRC), Warri Refining and Petrochemical Company Limited (WRPC) and the Kaduna Refining and Petrochemical Company Limited.

According to the NNPC, the development holds the promise to boosting petroleum products supply and distribution in the Country, while it added that agreements on the potential financiers for the refineries were being fine-tuned, following which the endorsement of the NNPC Board would be secured this month.

When the agreements are finally consummated, local contractors would engaged to provide a number of services in line with the local content initiatives of the country. The NNPC also added that it is encouraging new refining capacities to come on board, stating that two consortia had indicated interest to co-locate refineries in Warri

and Port Harcourt. It said the Kaduna State Government was also championing a proposal to co-locate another refinery close to the KRPC with the intent of sourcing Nigerien crude for its operations, while other Greenfield refineries were to be brought on board soon in Kano and Kaduna, which would source their crude from Niger Republic.

The NNPC added that the designs for the proposed refineries in Kano and Kaduna were ready, saying their construction would commence this year. Also, the Ministry of Petroleum Resources said so far, the Department of Petroleum Resources (DPR) had received interests for about 35 modular refineries from investors and had issued licenses to about 13 of the investors. The ground breaking ceremony of the first of the modular refineries would be done in Bayelsa next month.

The Federal Government towards the tail end of 2017, had given approval for the $2.8 billion, 614 kilometer, 40 inch Abuja-KadunaKano pipeline project, which when completed, would create the needed backbone for the Abuja’s 1,350 megawatts power plant, Kaduna’s 900 megawatts power plant and Kano’s 1,350 megawatts power plant. All these projects, other things being equal, are expected to expected to come on stream in 2018, while other actions and the soon-to-be introduced reforms, present enormous opportunities for investments that would bring about renewed activities in the petroleum industry in 2018.

“

I think Total has taken the unique position to invest significantly in Nigeria when times are difficult. Two years ago, the oil price was below $50 per barrel, and still we have continued to invest in deepwater in Nigeria.”

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POWER

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GHANA REPORTS

Finally, Ghana’s New Oil Refinery Will Have Capacity of 150,000 B / D

TOR Workers Kick against Plans to Build New Refinery at Tema

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orkers of Tema Oil Refinery, TOR, are kicking against plans to build a new refinery next to the current facility. The workers say they are shocked at the news since TOR has a development plan towards expanding the current refinery. Chairman of the General Transport, Petroleum and Chemical Workers Union at TOR, John Elton Botwey said, “… it hit us as news, I mean, nobody has an idea of what the minister really wants to do but I take it that maybe he has misplaced either his notes or technically whoever advised him has not done a yeoman’s job.”

G

hana’s Minister of Energy Boakye Agyarko said that capacity for the country’s second largest oil refinery is 150,000 barrels a day.

As a reminder, in May 2016, former President John Dramani Mahama who had, for the first time, the idea of a new refinery announced that it would have a capacity of 100,000 barrels per day. In March 2017, Isaac Osei, head of the Tema Oil Refinery (TOR), the country’s first refinery, said that demand will increase to 200,000 barrels a day.

According to the Energ y Minister, the new plant, “the other TOR”, will significantly reduce the amount of oil imported by the country and will meet the government’s vision to make Ghana a hub for the distribution of refined petroleum products

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in the West African subregion.

TOR produces 60,000 barrels of petroleum products every day, which equates to 50% of Ghana’s daily consumption. The construction of a new refinery is all the more important as new wells have come into production and others have left the initial production phase. “Although we are a crude oil producing country, we have become net importers of petroleum products. In Ghana, we are forever running out of petroleum products and this reflects the instability of the equation between supply and demand. ”The official said according to reports by Ghana Web .

According to sources familiar with the matter, the new plant should come out of the ground, within the next four years.

“TOR itself has a development plan that is going to see to its expansion and it’s going to be the 160,000 barrels per day … and apparently, if he says he’s building a new TOR, I don’t know what’s going to happen to the old TOR which means that all the plans that are there are going to be scrapped,” he said. Mr Botwey believes the Energy Minister got it wrong, “And that I don’t know how he’s going to do it. Honestly, I didn’t listen to him speak but from the excerpts I have and whatever I’ve been seeing on the media landscape, I feel that he’s got it wrong.”

Energy Minister Boakye Agyarko recently disclosed to JoyBusiness that government is encouraging some private sector firms to build a new refinery next to the Tema Oil Refinery. He said the move is part of plans to help Ghana attain energy hub status that the government is aiming at in the short to medium term. The workers are therefore meeting on Monday to see the way forward, “So the union is trying to meet the management. We are pulling through a meeting by Monday to see what exactly the way forward.” *www.reportingoilandgas.org

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GHANA REPORTS

Ghanaians Want Review of ENI Contract …Gas Very Expensive To Be Sold In Ghana

S

ome energy experts have described the contract signed between the government of Ghana and ENI in 2015 as a bad one and called on the president to review it to save Ghanaians from more economic hardship. Mr Agyei Samuel Amoako, an oil and gas Analyst, in an interview with the New Crusading Guide indicated that the ENI gas would be expensive when it begins selling in Ghana.

Statistics indicate that ENI is selling gas to government at $9.8 per mmBtu when the market price is around USD$ 3.028 per mmBtu. “The prices were not properly fixed.

The prices are very high compared to the cost of the same commodity on the open market. I can tell you that Ghana cannot operate with such a high price . Government must do something about it. There is a need to review the price to save all of us, a source at Ghana Gas; name withheld told this Journalist in an interview.

According to the Mr Amoako, Gas from the Jubilee and Ten Fields

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are free because it is an associated gas which is not being flared but transported to Atuabo for processing.

A gas is termed associated when it emerges with crude oil which is the main focus of production According to Analyses by The Africa Centre for Energy Policy, ACEP, the terms and conditions of the Agreements and Term Sheets show that the deal is fraught with badly negotiated terms, and at most serving the interest of the Contractors rather than Ghana’s. The findings from the analyses show that the government offered over-generous terms to the Contractors just to satisfy Ghana’s thirst for gas supplies. In trying to satisfy the country’s demand for gas, the incentives provided to the Contractors exceeded what pertains in international transactions of similar nature.

ACEP noted that Government’s fiscal support package, which included an exempt debt-to-equity ratio of 2:1 at 7% interest on the commercial loans of the Contractors, would lead to significant revenue

losses to the state over the project life of 20 years, since interest expenses are tax deductible. The state must guarantee that at any time, the free fiscal support to the Contractors remain $125 million to make the initial gas price of $9.8 per mmBtu. This could run into several millions of dollars when gas prices fall. In the event that the contractors source the loans from their affiliates, the gains to the Contractors could increase at Ghana’s expense. A policy Analyst and Executive Director of the Integrated Social Development Centre, Dr Steve Manteaw corroborated the call for the review of the contract with the view that it will have negative consequences on power generation in Ghana. He said the contract was signed in a manner that only Ghana National Petroleum Corporation has the right to buy the process Gas from ENI and it dared not fail to buy else government would be cited for Judgment Debt. He regarded this clause in the contract as awkward and called for the review of the contract. Negotiating capacity

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GHANA REPORTS

Dr Manteaw also reiterated the need for the country to build its capacity in contract negotiations to be able to get the best of the deal from the oil and gas sector. He said the country had weak negotiation capacity and should therefore tie the rules of negotiation into the laws of the country governing the sector. He further explained that if the procedures on negotiations were present in the laws of the country, it would make the rules mandatory which would prevent public officers from giving too much away and manipulating the terms of negotiation.“We are not known to be great negotiators so if you have a law that actually stipulates how an investor should acquire a concession in the oil sector, let that law work for you,” he said. Concerns have been raised about the price negotiated for the commencement of oil and gas production at the Sankofa GyeNyame field (SGN) operated by ENI and several other related contracts. Dr Manteaw said the prices negotiated for the gas operated by the ENI fields were not very competitive and would be dangerous for the country’s economy. Sharing his views on the US$7 billion signed contract for the SGN oil and gas project, he said the price negotiated for the gas was higher than that of Ghana’s gas and added that there was a worrying clause in the contract that committed the country to buy the ENI gas at the negotiated price even when cheaper options became available.

“

So once we have already signed these and therefore cannot alter them, we should relook at the terms of negotiation and not repeat the same mistakes by tying the terms of the contract mostly to our laws and allow the laws to operate,” he said.

The Government is required under the Security Package and Fiscal Support Agreement to issue five (5) different Sovereign Guarantees estimated at about $1.5 billion in addition to World Bank and IDA guarantees. This situation over-exposes the state to too much risks and demonstrates the lack of investor confidence in the

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Ghanaian Government. It said the plan by GNPC to make an upfront payment in cash to the Contractors or allow the Contractors to overlift GNPC’s share of oil at the beginning of production of oil, for the purpose of making Gas price of $9.8 per mm Btu viable is not fair. he said although the amount is expected to be recovered at the end of production, the recovery amount does not attract interest charges. This is not consistent with sound financial management.

According to ACEP, Government’s decision to allocate the maximum 55% Net Carried and Participating Interest to GNPC beyond the 15 year period for the capitalization of GNPC as provided in the Petroleum Revenue Management Act 2011 (Act 815) or PRMA violates Section 7.3 of the PRMA and will therefore amount to an illegality.

The Agreement covers terms and conditions for the financing of the project by the Contractors and for the sale of the Contractors’ share of gas produced to GNPC. The Sankofa-Gye-Nyame Fields is estimated to hold petroleum reserves of 131 million barrels of crude oil and 1.15 trillion cubic feet of natural gas. The project is in two phases – Phase 1 (Oil) and Phase 2 (Gas). First oil is expected on stream in March 2017 whilst first gas is expected in February 2018. Daily production of oil will be at 80,000 barrels whilst daily production of gas will average 171 million standard cubic feet over 20 years.

Several Agreements and Term Sheets cover the project as follows: i. OCTP Petroleum Agreement signed in 2006 (Approved by Parliament). ENI farmed into the Petroleum Agreement in September, 2009.

iii. Fiscal Support Agreement and Security Package Term Sheet for signsed in December 2014 (Approved by Parliament) 2.0. Sharing of Petroleum Sharing of petroleum in monetary terms is based on the fiscal regime in the OCTP Petroleum Agreement. The fiscal terms include royalty of 7.5% for oil since the water depth is in excess of 400 mters; gas royalty of 5%, corporate tax of 35%. GNPC has a carried interest of 15%; and additional paid interest of 5%. The working interest of the partners therefore amount to ENI Ghana (44%), Vitol Ghana (35%) and GNPC (20%). Based on after tax working interest, the contractor group will be entitled to $14.3 billion (56%) of total cash flow over the project life whilst the state is entitled to $11.1 billion (44%). The state take is lower than what pertains to previous contracts. Given that the project is a $7 billion project, the contractors will be making profit of $7billion. This makes the project a profitable one at an oil price of US$90 per barrel and gas price of US$9.8 per mmBtu. 3.0. Over-generous Concessions by the State In spite of these gains the company is likely to make from the deal, the Government has further overexposed the country to too many risks due the decision to buy all the gas produced by the contractor.

The exposure takes the form of guarantees and security to keep gas price at $9.8 per mmBtu and to support the Gas Sales Agreement.

This is where the real challenge is. The over-generous concessions the Government and GNPC are providing to the Contractors. www.reportingoilandgas.org

ii. Supplementary Agreement for Submission of OCTP Plan of Development singed in 2014 (Approved by Parliament);

Orient Energy Review Vol 7 No.02 February 2018 35

WOMEN IN ENERGY

ADIPEC 2017: Women in Energy Conference Highlights Growing Role of Women in Oil and Gas Workforce *Event Held as Part of ADIPEC 2017, Empowering a New Generation of Female Professionals to Break the Glass Ceiling *Career Opportunities Needed for Science, Technology and Engineering Graduates, says Keynote Speaker and Former US Ambassador to UAE.

By Margaret Nongo-Okojokwu

T

he closing day of ADIPEC has put the spotlight on the growing importance of women in the oil and gas workforce, with industry role models leading the Women in Energy conference.

Held as part of the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC), more than 200 delegates attended Women in Energy, offering a full day of discussions aimed at promoting diversity and inclusion within the global oil and gas industry. In the conference’s keynote address, former US ambassador to the UAE, and now president of the Arab Gulf States Institute in Washington, Marcelle M. Wahba, said many industries continued to have a builtin bias that men were better suited

36 Orient Energy Review Vol 7 No.02 February 2018

to certain roles.

“

This is the glass ceiling that women contend with in male dominated professions or industries,” Wahba said.

“When it comes to glass ceilings, I understand that there’s none tougher to crack than the one that women face in the oil and gas industry.”

Women in Energy includes an emphasis on supporting a new generation of female professionals seeking careers in scientific or technical roles. Research by the Boston Consulting Group, for the World Petroleum Council, has found that less than a fifth of oil and gas workers are female. The disparity is particularly acute in

offshore and marine, refining, and petrochemicals, in which women hold just 15 per cent of entry-level technical and field positions. By comparison, female graduates hold half of entry-level office and business-support positions. “While the number of women enrolling in the science and technology programmes at university level is very high, the number of women entering the STEM workforce is not accelerating at the same pace,” commented Wahba. “Some social stigmas and stereotyped gender roles persist, and those jobs are often viewed as more demanding or more dangerous. That’s true not only in the UAE, it’s also true in other countries, in Europe and in the United States.” www.orientenergyreview.com

WOMEN IN ENERGY

progress is very visible, and also quite unique, not only for this part of the world, but globally. I believe the role of women in the UAE demonstrates the progressive vision of this society and its leaders.” Women in Energy provides a vital platform enabling women and men from many countries to meet, network and share experience. Held as part of ADIPEC, one of the world’s leading annual events for oil and gas professionals and decision makers, it is assured of high visibility across the industry.

“

The progress is very visible, and also quite unique, not only for this part of the world, but globally. I believe the role of women in the UAE demonstrates the progressive vision of this society and its leaders.”

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While noting that the glass ceiling is faced by women worldwide, Wahba added that it is cracking, and praised the UAE for its commitment to expanding the role of women in both business and government.

“The UAE leadership has for decades championed women’s issues from education to employment, and everything in between,” she said. “The

A full day of sessions focused on the contribution women are making in the industry, both in terms of how women can be further empowered towards achieving their career ambitions, and by offering space for women to share their own professional expertise with their peers. Speakers included women working at several international and local companies, including Petronas, Lukoil, Nova Chemicals and Tatweer Petroleum, sharing their knowledge and experience, and exploring strategies for promoting diversity across the board.

Held under the patronage of His Highness Sheikh Khalifa Bin Zayed Al Nahyan, President of the UAE, hosted by the Abu Dhabi National Oil Company (ADNOC), and organised by the Global Energy division of dmg events, ADIPEC is one of the world’s leading oil and gas events, and the largest in Africa and the Middle East.

Orient Energy Review Vol 7 No.02 February 2018 37

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ADIPEC FEATURE

Instrutech Woos Foreign Technical Partners

By Jerome Onoja

I

nstr utech Limited is a Nigerian oil and gas company with over 11 years of operation at the as an oil and gas service company. With specialty in electrical, mechan ical, and electronics instrumentation, as well as construction, installation, calibration, repairs, maintenance, pre-commissioning and commissioning, the Port-Harcourt based company is a Nigerian household name when it comes to pipeline integrity. Armed with a team of highly-trained engineers and technicians that have made their mark in the various fields of engineering, Instrutech has in the last couple of years, delivered top-notch services in the oil and gas industry, making it one of the success stories in the drive to entrench local content by the present administration. Only recently, your authoritative voice for local content development, Orient Energy Review (OER) caught up with Kenneth Ilounu in Abu Dhabi as he took us

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down memory lane narrating the activities of the company in the past and its present disposition, while also providing insight into its relationship with some International Oil Companies (IOCs).

“

We are trying to negotiate with foreign technical companies who intend to do business in Nigeria as our partners. We hope to bring one or two down to Nigeria” he told Orient Energy Review, adding that the company “has been in business since 2005 and hope to have direct opportunities with some oil majors like Shell, Mobil, Total, Agip, Chevron and others.” On actual patronage, Mr.Ilounu noted that Instrutech had worked for the likes of Eroton, Shell and Mobil as sub-contractor.

“We are hopeful that we will be a major contractor soon with the support of the local content law

and government programmes,” he added. The indigenous company he said is striving to match other major multinational service companies, stressing that “In the next 10 years, we are expecting to be as big as Siapem and other major servicing companies. While lauding the local content policy of the federal government in the oil and gas industry, Mr.Ilounu called for a comprehensive implementation of the Act, noting that the foreign companies, till date, still dominate in some areas of the industry to the detriment of local firms with proven capacities.

“The local content Law is okay but the implementation by the government needs improvement.

We are improving but not as expected as the policy stated.

The foreign companies are still overshadowing us in some areas.

Orient Energy Review Vol 7 No.02 February 2018 39

ADIPEC FEATURE

Red Star Oil and Gas Positions for Core Upstream Business

A

member of the Middle East Petroleum Club, Abdulkadir Adenle, a director at Red Star Oil and Gas Limited said his presence in ADIPEC 2017 is strategic as he is looking forward to having some critical discussions that should culminate in technical partnership ahead of the bidding round for oil assets as recently announced by the Federal Government of Nigeria.

“

We are prepared financially and are on the verge of concluding talks for technical partnership in order to stand a very good chance of acquiring oil blocks next year”, he said.

Adenle noted, “We have broadened our range of activities and area of operations to include neighbouring countries like Guinea and the Gambia. Also, we shall be adding

40 Orient Energy Review Vol 7 No.02 February 2018

an LNG vessel to our fleet and that would see us carry Liquefied Natural Gas as far as Asia and parts of Europe.” Asked about his level of optimism, Adenle explained, “Though the Nigerian downstream sector has been faced with several challenges, the potential is huge and investors shouldn’t be deterred. All it needs is for the government to completely deregulate the sector.” “Frankly, there’s no need for subsidy,” he quipped. “Let competition and the market forces of demand and supply rebalance the prices of all products. The right enabling environment would see investors’ confidence rise and more money pumped into the sector.” Again he added, “Enabling environment includes access to funding at single digit interest rate. That should be the focus, not subsidy. Part of the duties the Central Bank is

saddled with is developmental in nature and this is a sure way to develop the sector. It is not rocket science. With more investors in the sector, there will be more products and the prices would reflect this competition.” Red Star Oil and Gas Limited was incorporated in 2007 as a downstream company with retail distribution outlets spread across the shores of Nigeria. It presently operates its own fleet of tugs, barges, and supply vessels and has played actively in the marine space for over 4 years, having worked for a variety of independents and multinationals.

ADIPEC which holds annually in Abu Dhabi, United Arab Emirates is arguably the largest oil and gas conference in the world with over 100,000 visitors, 27 countries represented, 2,000 Exhibitors and 10, 000 delegates.

www.orientenergyreview.com

ADIPEC FEATURE

HEOSL: Setting Standards for Successful 3rd Party Operator Model in Nigeria Heritage Energy Operational Services Ltd (HEOSL) is the operator of OML 30, a mature producing field which was acquired from NPDC. Production from the field had declined considerably prior to its takeover. By deploying various technologically-sound processes, the HEOSL management have since turned the fortunes of the oil asset around as they ramped up production and currently produce about 70,000bpd, while aiming for more than 100,000bpd in 2018. Being the first and only company in Nigeria operating this unique, non-equityholding 3rd party operator model, HEOSL and its technical operator company, Salvic Petroleum Resources Ltd, aims to become the go-to company in the efficient and profitable oil and gas facility operations in Nigeria, with the ‘midas touch’ for fields that have proven difficult to operate.

In this interview with JEROME ONOJA of Orient Energy Review at Abu Dhabi, Mr Uchechi Nwankwo, the GM, HSSEQ, speaks on these and more.

Briefy introduce, yourself please?

My name is Uchechi Nwankwo; you can call me Uche. I work for Heritage Energy Operational Services Ltd and Salvic Petroleum Resources Ltd. My role in both companies is GM HSSEQ. Please give us a brief history about Heritage Energy Operational Services?

Heritage Energy Operational Services Ltd is the operator of OML30 which is one of the divested assets from SPDC. The JV partners and equity holders are NPDC and Shoreline Natural Resources, while Heritage Energy Operational Services Ltd are the operators, in a 3rd party operating agreement with the JV partners.

How long have you been operating and what is your present volume?

We took over full operation of OML30 and the Trans-ForcadosPipline

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(TFP) in March 2017 and currently we are doing an average of 68,000 – 70,000 barrels per day.

What sort of technology do you deploy and how has the business been generally?

The business from a production perspective has been good. Aside from all the “normal” challenges of operating in Nigeria, which makes it a bit tough. We have an old asset with all its asset integrity challenges that we have to address.

We have the challenges around illegal tapping/bunkering into the Trans-Forcados Pipeline which we operate and obviously the resultant environmental spill. There are also security challenges ranging from vandalization of wellheads, kidnap of personnel and attack on infrastructures. These and many more make the environment quite challenging to operate. Technology wise, we are deploying various technologically sound processes to enhance recovery and to manage emissions and safety issues.

OML30 is actually a mature asset, it’s been operated by SPDC for many years before it was handed over to NPDC and then to ourselves. So the reserves are well known and it is public info. In terms of improving our production, yes we intend to carryout major drilling campaigns starting next year and the coming years to essentially improve our target production to well over 100,000bpd.

With the whole buzz about local content development, how does it resound with Heritage Energy Operational Services Ltd? Presently, Her itage Energ y Operational Services Ltd in Nigeria is 100% Nigerian; we don’t have any expatriates. We are made up of experienced Nigerians, who have worked in various IOC and internationally. We are all Nigerians; it is all 100% local content on staff count. We have also adopted the policy to use only Nigerian companies to execute our engineering and construction activities.

What is your present reserve and are you looking at new discoveries and increased production?

Orient Energy Review Vol 7 No.02 February 2018 41

ADIPEC FEATURE What next big thing should we be looking forward to from Heritage Energy Operational Services Ltd? If I talk about my parent company which is Salvic Petroleum Resources Ltd, we are poised to become the best operating company in Nigeria and this is the first time you have a non-JV partner operating an asset in Nigeria; so essentially we are pioneering in everything we do including operatorship and maintenance. So the next big thing is: we are looking at taking over. The value proposition essentially for us is taking over fields that are difficult to operate and the next big thing for us is to become the go-to company in oil and gas facility operation in Nigeria.

How many other non-JV operating companies do we have in Nigeria that are also thriving?

Currently there is no other non-equity holding 3rd party operating company in Nigeria today that I know about, except us in OML30.

42 Orient Energy Review Vol 7 No.02 February 2018

Do you think other businesses should consider this model as against the JV practice that are having issues of cash call and all that?

Well issues of cash call are even worse. When you are a non-equity holder, essentially you are solely dependent on the equity holders and JV partners to make the decision on budget and funding. It requires more rigorous engagements and closer relationships with the JV partners, and demonstrating top-quartile transparency in contracting and procurement processes. So, from that perspective, it is not a model that a lot of people are interested in doing.

But for us, it has worked. We have developed good relations with our JV partners and demonstrated that we can operate the asset to profitably.

We are setting the standards for a successful 3rd party operator model and making sure that we set the pace and be an example for every other person to follow.

In the wake of this shale gas and oil and the fact that its production cost has been driven down (I hear it is about $40

per barrel); what is your outlook for the future of oil and gas at Heritage Energy Operational Services Ltd?

I think the future is bright. The oil price is over $60 per barrel at the moment which is the highest it has been in about 2 years. There are a lot of movements across the world in terms of new exploration activities and for Nigeria, the future is bright because we still have a lot of reserves to tap into.

So do you think shale will pose any threat to Nigeria’s oil and gas in the future?

You have to think about the value, and Nigeria’s oil is valued very strongly.

But I guess everybody around the world is worried about America going into shale oil production. At the moment it doesn’t pose a lot of threat. That is my personal view anyway.

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POWER

Nigeria to Increase Transmission Capacity to 28,000MW By 2035 As TCN says its increases transmission by 2,000MW

T

he Federal Government has drafted a long-term master plan aimed at increasing the transmission capacity to as high as 28,000 Megawatts (MW) by the year 2035. Prior to now, there have been several calls for the increase of the country’s transmission capacity. The disparity in figures between power generation and transmission has led to the creation of underutilized power. The 20-year transmission master plan, targeting a wheeling capacity of 10,000 megawatts of

electricity by 2020 was presented by the Transmission Company of Nigeria (TCN) in Abuja. Interim Managing Director of TCN, Mr. Usman Gur Mohammed, who presented the plan to Minister of Power, Works and Housing, Mr. Babatunde Fashola, said the company engaged Fitchner of Germany in November 2015 under Nigeria Electricity and Gas Improvement Programme (NEGIP), financed by World Bank and was ready on December 22, 2017. The officials of Fitchner GmbH & Co, K.G. of Germany in their presentations, explained that 387MW will be exported from the 10,000MW target of 2020.

including the World Bank and African Development Bank (AfDB).

The Minister of Power, Works and Housing Mr. Fashola noted that the presidential directive of the present administration changed things and that it was followed with policies and budgetary support, which helped TCN to clear 502 containers to complete several transmission projects to improve electricity supply. According to him, the plan was to ensure that in future, there was no excuse of stranded power generation not being evacuated as the government was planning for the future. Fashola said, “In future, we should no longer have a story of stranded power. That is the power that is produced but not utilised because of no transmission and evacuation means.” Meanwhile, the Minister of Power, Works and Housing, Babatunde Fashola, disclosed at the meeting that the Transmission Company of Nigeria (TCN) had improved its capacity to transmit electricity by 2000MW from 5,000MW to 7,000MW.

“The transmission capacity would reach 15,000MW with 1,540MW marked for export in 2025. By 2030, the electricity grid will have a 23,000MW wheeling capacity and 28,000MW by 2035 from which 2,000MW will be available for export,” he said.

Power Analyst for the consultancy firm, Dr. Liliana Oprea, said the master plan integrates training from TCN staff and rehabilitation of many transmission substations financed by several international agencies,

*Sweetcrude Reports

100 Million Nigerians Lack Access to Grid Electricity – NESG

O

ne hundred million Nigerians have no access to g r id electricity. This was the submission of a June 2017 report, True Cost of Electricity: Comparison of Costs of Electricity Generation in Nigeria published by the Nigerian Economic Summit Group and Heinrich Böll Stiftung Nigeria. As at 2016, Nigeria’s population was estimated at 186 million. According to the report lead-authored by Maria Yetano Roche and supported by Nnanna Ude and Ikenna Donald

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Ofoegbu, the figure represents 60% of the country’s population. Today’s on-grid power generation capacity in Nigeria is dominated by natural gas power stations (86% of capacity) and three large hydropower plants (14% of capacity). On the other hand, off-grid generation occurs almost exclusively through expensive and polluting diesel and petrol generators, of which there are an estimated 60 million in the country, according to National Data Corporation, 2016.

One hundred million means that less than half of the Nigerian population has access to electricity. It is estimated that per capita elect r icity consumption in Nigeria currently at 151kWh per year, should be four to five times higher than the current level when considering latent and suppressed demand. For comparison, the per capita electricity consumption of Ghana and South Africa are 3 and 30 times higher than Nigeria’s, respectively. As at December last year, World Bank’s estimation puts over 80 million Nigerians as having no access to electricity. The World Bank’s 80 million December 2017 figure, was five million over its 75 million estimates as at February last year.

Orient Energy Review Vol 7 No.02 February 2018 43

OP –ED

Feasibility of the Power Sector Recovery Plan – II

By Okafor Akachukwu industry. This assertion is reflected in the PSRP which shows that there has being a steady decline of both naira and dollar denominated investment in the electricity sector since 2013 to 2017, with uncertainties for year 2019. The level of confidence in the Nigeria Electricity Supply Industry (NESI) has left the industry with only two dependable investors – the Central Bank of Nigeria (CBN) for Naira investment and the World Bank Group for dollar investments.

A

few weeks before this year’s annual Nigerian Economic Summit, I was in conversation with an energy reporter from one of Nigeria’s leading dailies. In that dialogue, I mentioned that I did not see a situation in which further reforms in the power sector especially the Power Sector Recovery Plan (PSRP), would yield any results without the government reviewing the privatization of the electricity sector especially the distribution companies (DISCOs). I argued that part of the reason the DISCOs are not making required investments into network and systems upgrade is because they are not sure of how long they will be permitted by the regulators to be indisciplined before they are called to order. I told him that what most of the DISCOs are doing is cashing out, pending when there is certainty about which direction the sector is going. He argued that the government will not attempt any review of the privatization exercise as this will further place Nigeria’s electricity market on the negative for investment.

We concluded the conversation after acknowledging that it may put Nigeria on the negative, but that government doesn’t have an alternative. Although I emphasized that while I foresee a review soon, what I do not know is how it will be handled by government, the nature that it will take,and what the outcome will be.

Soon afterwards, during the Nigerian Economic Summit, Nigeria’s Minister of State for Budget and National Planning, Zainab Ahmed, told the summit that government was considering a review of the power sector privatization, starting with the DISCOs. This, according to her, was necessary to attract the required investment into the sector, particularly the World Bank Group’s $2.5billion which can only be offered upon Nigeria’s fulfilment of 18 agreed conditions stated in the PSRP. In early April, I provided a preliminary analysis on the PSRP based 44 Orient Energy Review Vol 7 No.02 February 2018

on the Minister of Power’s briefing to newsmen during the launch of the plan, and promised more analysis when the entire PSRP document is available to me, which you will read in this article Of the 18 conditions stipulated in the PSRP, there are conditions that will be difficult to meet due to the difficult and challenging environment where these problems are situated – the numerous stakeholder groups to engage with, the lack of a clear strategy for solving these problems, the political will to pursue any strategies and most importantly the lack of effective and strong institutions to implement plans/strategies that will meet these conditions. They include: review and implementing a cost-reflective tariff (per MYTO review schedule), development of a plan for the prevention of gas pipeline vandalism and its implementation, and also, identification of sources of funding for the PSRP. The last attempt by the industry regulator to review the tariff upwards to reflect cost of electricity production to distribution to consumers was resisted by consumer groups through legal action.

Unfortunately, there seems to be no way that further investment that will make significant difference in the electricity sector can be made without a tariff increase. I remember one of the former heads of the regulatory commission telling me during a private chat that for Nigeria’s electricity sector to recover, electricity tariff needs to be set at a minimum of N62KW/h and that it will take at least 10 years should all stakeholders in the sector start doing the right thing once tariff was set at N62KW/h. He further pointed out that it is only at this tariff that the industry can achieve a levelized cost that will increase electricity generation especially from renewable energy sources and attract needed investment in the

For gas pipeline vandalism, government is light years behind developing and implementing a sound plan that will effectively solve the problem due to the long historical background of violent agitation that has been part of exploiting resources in the region, it’s underdevelopment, continued pollution and political economy of resources there.

Unfortunately, 85% of Nigeria’s current total generation output is powered by gas.

This is part of the reason government is vigorously pursuing the development of more hydropower. So, it is difficult to imagine where the funds for implementing the PSRP will come from.

Other strategies laid out in the plan leave more questions than answers. They include: where and how the funds that will be used to fund future (2017 – 2021) sector deficit will come from, who is guarantying and insuring the funds?

Will there be political will to match the need to ensure that DISCOs’ performance and implementation of credible business continuity plans are realized? This is a serious concern because of the political interferences on the work of the regulator which has long been a hindrance in compelling DISCOs to adhere to industry best governance practices. There must be a sustainable way to run Nigeria’s electricity market. Currently, it is run on very unsustainable shortfalls, the market shortfall for 2015 and 2016 is estimated at N473 billion, while the tariff shortfall is N458 billion. At this level of shortfalls, the subsidy that needs to be injected into the market to keep it running and simultaneously making investments for service improvements is simply not there, especially in a market that tariff increases will not be immediately supported by consumer groups. For subsidies in Nigeria most times, it is difficult to measure their effectiveness, and justify the subsidy mechanism. While subsidies can be a mechanism to correct market failures, however over the years we have come to experience it as an additional effective mechanism of providing more cash to a market that is usually not accountable and transparent for the sole benefit of market players that have access to the seat of power.

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OP –ED This presents a trilemma for implementation of the PSRP. Government has long realized this reality as it has quickly invoked the provisions of (Section 27) of the Electric Power Sector Reform Act 2005 to increase the ease at which four categories of electricity consumers can have access to electricity. With this development, these consumers (that consume more than 2MWhr/h) can buy electricity directly from electricity generating companies (GENCOs), hereby bypassing the usually inefficient and ineffective DISCOs from the line of business. This makes it possible for previously stranded generated capacities that cannot be wheeled out to reach consumers and for the market to be more demand driven in allocation of electricity to DISCOs. For instance, we achieve a situation where about 36MW which a certain DISCO failed to pick up for distribution to consumers from a power substation would not be sent to it in

the first place. Other commendable measures have been the launch of the Mini-grids Regulation, the inaugurating of the board of several electricity entities including the board and management of the Rural Electrification Fund (REA) which will soon be launching its platform for accessing electrification fund for accelerated rural electrification.

While all these measures are commendable, however, holistic policy, institutional and operational mechanism interventions need to take place more alongside implementation of these measures if Nigeria can dream to reduce the annual loss of over USD$29.3 billion to the national economy and approximately USD$470 billion loss in GDP in 17 years according to a World Bank’s Africa Infrastructure Country Diagnostic (ACID) and a 2015 McKinsey report.

In all, the PSRP is not adequate for the recovery of Nigeria’s power sector; this brings me to the

governance culture in Nigeria’s public, quasi-public institutions and compliance to standing rules and adherence to industry best practices devoid of political interference. Without reforms in the public and civil service to improve efficiency of service delivery and effectiveness, reduce corruption and mismanagement, it is expected that the PSRP will lead to no recovery of the power sector.

Okafor Akachukwu Akachukwu is a 2017 Mandela Wa s hin g t on Fe l l o w (Pu b li c Management, University of Maine) and a Science Policy Research Unit (SPRU), University of Sussex trained Energy Policy, Innovation and Sustainability Expert. Email: akachukwu_okafor@yahoo.com

Nigeria’s Lost Treasure Nigeria’s long-standing fight against gas flaring is showing progress, but leaders must be strong to defend the future of the country and its citizens

By N.J Ayuk & João Gaspar Marque

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hen, in November 2017, Emmanuel Ibe Kachikwu, the Nigerian Minister of State, Petroleum Resources, stated, in an interview with the Financial Times that Nigeria was “really a gas

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nation with some findings of oil”, it might have sounded strange to those used to hearing of the country as Africa’s biggest oil producer. However, M r. K a c h i k w u absolutely hit the mark on that one.

Nigeria is in fact a natural gas nation — it just hasn’t acted on it yet. With an estimated 186 trillion standard cubic feet (SCF) of natural gas reserves, Nigeria is by far the biggest reserve holder in the continent, and could, if it made use of its resources, be the gas powerhouse of Africa. Yet, it’s natural gas sector

remains underdeveloped. Despite all the existing potential for using natural gas for transportation, power generation and other uses, the country suffers from constant, chronic and crippling power outages.

Businesses and citizens suffer from a lack of electricity, which hinders economic development. The most flagrant of these lost opportunities though, lies not in the gas reserves that remain undeveloped, but in the associated gas being produced and flared. Not only is this a missed opportunity, but considerable damage is also being done to the environment and to Nigeria’s coffers.

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OP –ED According to the Nigerian National Petroleum Corporation (NNPC), the country has lost around $710 million in 2016 due to flaring of an astonishing 244.8 billion SCF of natural gas. Nigeria is the seventh largest natural gas-flaring country in the world. It is estimated that these resources could sustain power generation of 3.5GW, which, if materialized, would almost double Nigeria’s generation capacity.The Nigerian economy cannot afford such losses, and recent campaigns to block the practice have had significant results. NNPC claims that between 2006 and 2016, it managed to cut down gas flaring from 36 percent to 10 percent. This makes for encouraging news, but subsequent reports indicate that continued progress is not assured and is even reversible. For instance, August 2017 saw a 2 percent increase in Nigerian gas production being flared, from 10 percent in July. This setback raises questions about the NNPC’s capacity to implement the government’s plans for restrictions on gas flaring. That is no small matter.

Nigeria’s financial woes are no secret.

Over the past 40 years, with billions of dollars flowing into the national coffers from oil export earnings, successive Nigerian leaders have failed to promote infrastructural development, address poverty issues or impose economic diversification. As a result, Nigeria is still today a net importer of refined oil, despite being the continent’s biggest producer of crude oil, and suffers from chronic energy shortages. It remains extremely exposed to commodity price variations. This paradox has become even more evident since 2014, when the price of crude oil collapsed. Nigeria is an oil country per excellence, with crude composing 90 percent of export earnings and 70 percent of the national budget, but would benefit much from becoming a gas country. Just by harnessing the gas that is produced and flared, it could significantly address the fact 75 million Nigerians remain without access to electricity. The Ministry of Petroleum estimates investment opportunities in the natural gas value chain amount to over $50 billion, and yet the sector remains underdeveloped.

Leading by example

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ith so many opportunities missed throughout the years, it has become ever more imperative that political leaders take into their hands the development of other economic sectors, in a time when crude oil fails to fill the coffers. Nigerian officials are finally recognizing that its natural gas reserves constitute one of the biggest lost opportunities for economic development in the country, and gas flaring represents the biggest flagrant waste. In 2015, Nigeria joined the World 46 Orient Energy Review Vol 7 No.02 February 2018

Bank-led Global Gas Flaring Reduction Partnership (GGFR) in the

“

Zero Routine Flaring by 2030”

initiative, which aims at putting a stop to the routine flaring of 5 trillion SCF of natural gas globally every year. On a global scale, this activity causes the emission of 300 million tons of CO2 per year, and could be used to produce750 billion kilowatts hour of electricity, enough to power the whole of Africa. Nigeria is one of 24 nations endorsing the program, but it stepped up its game by setting its own zero-gas flaring goal deadline a full decade before the GGFR by 2020. It has also committed to forbid any new oil wells from flaring natural gas.

Nigeria can also learn strategies and policy ideas from neighbors that have prioritized gas monetization, like Equatorial Guinea.

Equatorial Guinea is on the cutting edge of gas monetization, boasting a global reputation for cutting out gas flaring and implementing gas-focused projects. The country’s land-based Punta Europa LNG is one of the fastest-built LNG trains in history and the costs for the complex have already been recovered. The country is close to finalizing the Fortuna FLNG, the first deepwater FLNG project in Africa. Certainly, Equatorial Guinea has established itself as a strong exporter of gas on the global stage, and Nigeria can learn from its example.

Carrot and stick

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n 2017, the Buhari administration has announced the introduction of the “National Gas Flaring Commercialization Programme”, an initiative that will find solutions to use the resources to power the nation rather than pollute it. The plan will reward companies that are compliant with zero flaring policies while harnessing that power to use for cooking, power generation and industrial use. The government estimates that the program will create 36,000 direct and 200,000 jobs. All of this is brilliant news for a problem that has lasted for far longer than it should. However, the program remains without an official launch date, and policy approval has proven to rarely be enough to fix problems in Nigeria. After all, in Nigeria, natural gas flaring is completely forbidden. Oil and gas companies are regularly fined for flaring gas. The problem is that those fines are extremely low — N10 (equivalent to $0.50) per thousand cubic feet of gas flared. The motivation for operators to invest in reducing their carbon footprint is very dim. The realization of the failure of the penalty system is no novelty either.

In 2008, the Department of Petroleum Resources had already tried to raise the value of the fines to try to push operators to act. Instead, oil and gas companies in the country opposed the move and the policy change fell through. Now

the topic is up for debate again. The government’s new national gas policy, currently under discussion, is proposing to raise the penalty up to N420 ($3.5) per thousand cubic feet. We can only hope the raise stands. But beyond the fines themselves, the Ministry of Petroleum, through the NNPC, has to have the means to impose these regulations.

According to NNPC’s reports, oil and gas companies have accumulated over $14 billion in gas flaring fines between 2008 and 2016 that are yet to be paid.

On top of that, Nigeria looses millions in carbon credits because of the practice.

The compound economic impact of gas flaring is enormous, but so is its social and environmental relevance. Many communities have decried the health problems that exposure to flared natural gas has caused, leading to several reported deaths, particularly in the Niger Delta.

The environmental impact of the practice affects any business in the vicinity that is dependent on the environment, like fishing or agriculture. The neglect of these populations over the years has further strengthened the social divide that so often gives rise to violence in the region. The government alone cannot change it all. Development must be led by investors in the private sector, so businesses can be created to make use of this wasted resource. However, it is up to the State to remove the many bottlenecks and restrictions that have hampered the development of the natural gas sector for years, and it is up to official institutions to not only develop, but, above all, implement anti-gas flaring policies. It is imperative to act quickly and decisively.

While present efforts are laudable, it is hardly the first time political leaders have tried and failed at addressing this issue. We must keep in mind that the first Nigerian policy against gas flaring goes back as far as the 1970s. We are running out of time not only to save the environment, but also to take part in the growing global natural gas sector, as discoveries elsewhere progressively dwarf the relevance of Nigeria in the market. The Nigerian economy cannot afford any further waste.

NJ Ayuk is a leading energy lawyer and a strong advocate for African entrepreneurs, A Global Shaper with the World Economic Forum, one of Forbes’ Top 10 Most Influential Men in Africa in 2015, and a well-known dealmaker in the petroleum and power sectors. He is the founder and CEO of Centurion Law Group.

João Gaspar Marques is an energy analyst and a seasoned Africa specialist with inthe-field reporting experience from Africa’s petroleum hotspots.

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