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Global Energy Advisory

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Saudi Arabia was in the spotlight this week, after a string of arrests on corruption allegations and muscle flexing in the direction of Iran. The so-called anti-corruption sweep toppled former and current ministers and several members of the Saudi royal family, sparking worry about a possible destabilisation in OPEC’s largest oil producer.
It has emerged in the meantime, however, that the operation might be primarily focused on money-gathering: to date, some $800 billion in assets of the people arrested have been frozen by the government and some observers have suggested the money will become state property, to go into propping up the government coffers.
At the same time, Saudi Arabia is baring its teeth at Iran, accusing it of a direct military attack after earlier this week the Iran-backed Houthi rebels in Yemen fired a missile at Riyadh, which the Saudi anti-missile system intercepted. The White House is backing the Saudis in their claims against Iran. Tehran has said the missile attack came in response to Saudi intervention in Yemen. This intervention, initiated two years ago, is a heavy load on Crown Prince Mohammed.
All these events have been bullish for oil prices but the latest from Saudi Arabia may have an opposite effect. Satellite imaging services provider Orbital Insights has released data suggesting Saudi Arabia has been lying about the state of its crude oil inventories. While Riyadh has been reporting a decline in these since early 2016, Orbital Insight data suggested a slight increase.
That data only comes from storage tanks on the ground, while Saudi Arabia also stores crude abroad, at foreign ports, and underground tanks. If stockpiles declined there then the Orbital data is irrelevant. If the Orbital data does indeed show cheating on the numbers, the OPEC production cut deal could well be dead in the water.
Deals, Mergers And Acquisitions
• French Total has bought the LNG exploration and production assets of Engie for $1.45 billion. The assets include a liquefaction plant in Louisiana, a number of long-term sales and purchase agreements, a fleet of LNG carriers, and access to re-gasification terminals in Europe. The deal also involves an additional consideration of $500 million if oil prices improve in the next few years.
• Australian Elk Petroleum has finalised the acquisition of the Greater Aneth oil filed in Utah, for a total $160 million. The seller is Resolute Energy Corp, which had a 63 per cent stake in the field, which is among the biggest CO2 enhanced oil recovery projects in the country. Its remaining recoverable reserves after a 30-year productive life are about 300 million barrels.
• China Energy Investment Corp. has signed preliminary agreements to invest $83.7 billion in U.S. LNG storage, power generation, and chemical production projects. The investment will be focused on West Virginian and was agreed during President Trump’s visit to China as part of his Asian tour.
• Noble Energy has agreed to sell 30,200 acres in the Denver-Julesburg Basin to SRC Energy for $608 million. The assets produce an average 4,100 bpd of oil equivalent from 600 drilling locations.
• Anadarko is selling its Moxa gas field in Wyoming for $350 million. The field’s output has been in decline since last year, with peak production at 96 million cubic feet daily. This has now, a year later, fallen to 72 million cubic feet daily. The company did not mention the name of the buyer.
Tenders, Auctions And Contracts
• Mexico’s tender for an oil and gas marketing firm was declared void this week, as it failed to attract any bids. The government organised the tender to pick a marketer that will sell the oil and gas produced under new contracts. Until 2013, when Pemex had a monopoly of the Mexican oil and gas market, the marketing of Mexican oil and gas was the charge of a Pemex unit, P.M.I. Comercio Internacional.
• The state oil companies of Iraq and Iran are discussing joint oil field development in Iraq, local media reported-two days after news of another ongoing negotiation concerning the possibility of shipping crude oil from Kirkuk fields to an Iranian refinery.
Discovery And Development
• China is preparing to launch the world’s largest offshore drilling rig in the South China Sea, to explore for gas hydrates, a potentially promising source of energy of which there may be vast reserves, according to scientific investigations. The Blue Whale 2 is a floating platform and can operate in 11,000 feet of water. What’s more, it can drill at depths of 50,000 feet, which is unprecedented.
Source: Oilprice Report for 10/11/17.

• Nigerian Oranto Petroleum has started exploration activities in South Sudan in partnership with geophysical survey services provider BGP. The Nigerian company has pledged $500 million for the exploration project, which contains an oil and gas block with reserves estimated at over 3 billion barrels of crude oil.
• Shell has started the construction of a $6-billion petrochemical complex in Pennsylvania, whose main feedstock will be natural gas form shale plays in the area. The complex will include three polyethylene plants with a combined annual capacity of 1.6 million tons, plus a steam cracker with a capacity equal to that of the polyethylene plants.
• UK-based Tower Resources plans to resume its exploration activities in Cameroon after a $2.76-million capital injection. The company is exploring for oil in the Thali license area, which has estimated oil-in-place resources of 39 million barrels. Drilling could begin as soon as next year, so the company can take advantage of the low prices for oilfield services while they last.
Regulatory Updates
• The chairwoman of the Senate’s Energy and Natural Resources Committee, Lisa Murkowski, has released a bill that would open the Alaska Arctic National Wildlife Refuge to oil and gas drilling if passed. The bill envisages at least two large-scale lease sales over the next ten years, spanning a minimum of 400,000 acres each. Surface development, however, should not exceed 2,000 acres, according to the bill. Environmentalists are unhappy about the legislation, arguing that recent leases sales in the North Slope have failed to yield any significant finds.
Politics, Geopolitics & Conflict
• The Niger Delta Avengers have announced an end to the ceasefire they had agreed with the Nigerian government and now once again oil infrastructure is fair game for the militant group despite calls from local community chiefs for its members to lay down their arms.
• Protests from local communities continue in Peru and are likely to continue to affect all natural resources industries present in the Andean country. Late last month, indigenous villagers ended a 43-day protest that had halted production in Peru’s largest oil block after signing a deal with the government. Protesters demander cleaning up oil pollution and from government to commit to including tribes in talks on long-term oil drilling plans, and the government accepted the terms. It is not announced why the protests were renewed. Oilfield in question, Block 192 is operated by Canadian Frontera Energy Corp but has not produced any oil from it since three indigenous tribes seized oil wells in mid September.
• The latest offshore tax haven leak, the Paradise Papers, could cause a headache for Glencore as they reveal the company hid its ownership stake in SwissMarine Corporation when it was negotiating its takeover of XStrata. Also, according to leaked documents, Aberdeen, Scotland-based Ithaca Energy is said to have set up a shell company in Bermuda in 2012 to purchase its share in a $50-million North Sea oil production platform.

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DPR Shuts 11 Gas Plants, Petrol Stations In Abuja

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The Department of Petroleum Resources (DPR) has sealed 11 illegal gas plants as well as seven filling stations over various sharp practices in Abuja, Nigeria’s seat of government.
The raided plants selling mainly Liquefied Petroleum Gas (LPG) also known as cooking gas and the filling stations visited were located in Karimo, Gwagwa, Games Village, Kuje and Gwagwalada in the Federal Capital Territory (FCT).
The petroleum industry regulator stated that the LPG plant owners were operating illegally while the affected petrol stations were carrying out their businesses without valid licences.
Some of the illegal gas plants affected were: Macco Synergy, Mr T&M cooking gas, Trinity cooking gas, Meter Smile Gas ltd, Sunny Sun cooking gas, among others.
In her remarks, during the operation, the DPR Abuja Zonal Operations Controller, Mrs Roselyn Wilkie, said that previous efforts to get the illegal operators to regularise their businesses failed to yield the needed results.
She said: “During today’s exercise, 11 illegal LPG plants were raided in collaboration with the Nigeria Security and Civil Defence Corps (NSCDC). Some personnel of these illegal facilities were arrested and they have been handed over to security operatives for prosecution.
She said, “All our efforts to get the attention of the illegal facility operators with the view to regularising their businesses failed to yield the desired result.”
DPR cannot sit back and watch the danger the existence of these illegal facilities portends to the lives and properties of citizens.
“This necessitated our going out as the situation arose to enforce provisions of the relevant laws and regulations for construction and operation of petroleum products facilities in the downstream sector.”
She added that the DPR as an opportunity house and business enabler had been engaging illegal petroleum product facility owners to get the best advice on how to regularise their businesses and operate legally in a safe environment.
Wilkie further called on all illegal facilities’ operators to come forward and regularise their operation by obtaining the necessary licence to operate from the organisation.
According to her, this would ensure the protection of investors’ assets and the safety of lives and properties within the sector.
During the raid, seven filling stations were visited while 18 petrol pumps were sealed for sharp practices, including for suspected cases of diversion of six trucks containing products.

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IPMAN Suspends Strike, Directs Members To Resume Operation

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The Independent Petroleum Marketers Association of Nigeria (IPMAN) has directed its members in Enugu State depot to resume supplies of petroleum products.
The National President of IPMAN, Alhaji Sanusi Fari disclosed this in a statement made available to journalists last Saturday.
According to the statement, the national leadership of IPMAN had last Thursday directed the withdrawal of their services at the Enugu loading depot of the Nigerian National Petroleum Corporation (NNPC) with effect from Friday.
The National Executive Committee (NEC) of IPMAN attributed the directive to an alleged attack on their secretariat in NNPC, Enugu depot on Thursday by men of the Nigeria Police Force.
The foregoing halted the supply of petroleum products to Enugu, Ebonyi and Anambra, a situation which caused a significant hike in the pump price of Premium Motor Spirit (PMS) in the affected states.
Meanwhile, Fari said that the NEC of IPMAN had reviewed the situation and directed their members to resume their services and operations.
“As a result of the intervention of higher authorities in the unwarranted and unprovoked invasion of our secretariat at Enugu depot, the NEC of IPMAN has called off our strike actions.
“Normal services and operations will immediately resume in the affected states of Enugu, Ebonyi and Anambra to allow for fruitful discussions,” he said

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Why PIA Should Be Reviewed Every Five Years – ICSAN

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The Institute of Chartered Secretaries and Administrators of Nigeria (ICSAN) has recommended that the Petroleum Industry Act (PIA) should be subject to review at least every five years.
Its Registrar, Taiwo Olusesi, made the recommendation in the Institute’s position paper on the PIA on Saturday in Lagos.
The Institute said that such periodic review would help to consolidate on the gains of the epoch-making legislation. “This is to accommodate the genuine yearnings of the stakeholders as well as other requisite exigencies that might come to light during usage of the law,” she said.
The Tide source reports that the PIA provides for the establishment of the Nigerian National Petroleum Company Limited (NNPCL) within six months after the enactment of the Act. She enjoined government to build a proper governance structure around the NNPCL.
Olusesi urged that the appointment of the directors to its board must be based purely on merit with emphasis on issues of relevance, board requirements, and diversity in the board composition.
She added that there must be strict adherence to the notions of disclosure and transparency while ethical observances must be ingrained in the template of the company’s operations. “There must be an adequate framework of risk management and control system which should incorporate well-articulated whistleblowing policy.
“Furthermore, proper checks and balances must be built into the system to ensure that no individual, unit, or department can undermine or dis-apply the control system at his or her whims and caprices.
“We request that NNPCL should always have board to oversee and guide the management to achieve the expected objectives.
“There should be an annual board appraisal with the corporate governance evaluation of NNPCL, which should be published,” she said.
She said that without putting in place all these governance mechanisms, the envisaged metamorphosis of the moribund NNPC into a more efficient and dynamic NNPCL would not be realised.
According to her, the exercise will simply be a mere change of name without a change of anything else, with all its concomitant business-as-usual tendencies.
The corporate governance professional added that as a public interest entity, the NNPCL must have a qualified and experienced company secretary to oversee its secretariat.
She said this would enable the secretariat also play its role as the compliance officer responsible for the entrenchment of good corporate governance in the company.
“The qualification and experience must not be less than that of a company secretary of a public interest entity and the recruitment process must be competitive.
“The status of this management staff, duties, functional and administrative roles, responsibilities, reporting lines and mode of determination must be clearly stated in writing by the Board,” she said.
Olusesi also called for the proper and adequate monitoring of activities in the downstream sector to discourage all manner of sharp practices including hoarding of products to create artificial scarcity for price increment.
“The Federal Government should be proactive in devising ways and measures to counter the unscrupulous elements who may attempt to sabotage the interplay of demand and supply in a deregulated market,” she said.
She urged government, through the Federal Ministry of Petroleum Resources, parastatals and regulators to embark on massive stakeholders’ enlightenment campaign to dispel the confusion by illuminating the provisions of the Act and revealing their implications.
“Much of the controversies trailing the PIA 2021 emanate from many of its grey areas and provisions which are capable of many interpretations.
“This lack of preciseness and clarity of many provisions in the Act is breeding mistrust and apprehensions among many stakeholders.
“For example, the provisions on the Thirty per cent Frontiers Exploration Fund require elucidation.
“The Institute, in consonance with its tradition of guiding on issues of Corporate Governance and Public Administration, hereby undertakes to convene a stakeholders’ webinar for the sake of mass enlightenment on this new PIA 2021,” she said.

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