Oil & Energy
Stakeholders And Oil, Gas Exploration
Some stakeholders in the oil and gas industry have advised the Federal Government to make provision in subsequent national budgets for offshore and onshore exploration activities to encourage new discoveries.
They gave the advice in separate interviews with newsmen in Lagos last Friday while reviewing the oil and gas sector for 2018.
The former President, Nigerian Association of Petroleum Explorationists (NAPE), Mr Biodun Adesanya, said in 2018, there was noticeable improvement in the revenue generation occasioned by better oil price and less disruption in export volumes.
“In 2019, we should work harder to sustain and improve on the modest gains of 2018 especially the production and export infrastructures.
“They also need to conduct licensing round.”
Adesanya, who is also the Managing Director, Degeconek Nig. Ltd., urged government to develop the country’s modular refineries to reduce importation of refine petroleum products.
“The modular refinery concept is a good idea but its implementation will be difficult under the existing structure.
“How would it resolve the challenges of the Niger Delta region, how will it be funded?
“How can the crude supply be guaranteed, what currency will the crude be sold to the refineries given that products will be sold in Naira,” he said.
The former Chairman, Society of Petroleum Engineers (SPE), Nigeria Council, Mr Chikezie Nwosu, said establishing fairly comfortable oil price should be of particular interest to the oil and gas industry in 2019 and beyond.
He said the current uncertainty in global politics had effects on the global economy and that prediction of market trends was becoming increasingly difficult.
According to him, global political tensions add significant uncertainty to an already challenged oil and gas industry; demand versus supply economics.
“The tensions between the USA and Iran, the Saudi Arabian issues with the killing of the journalist Jamal Khashoggi and the withdrawal of Qatar from OPEC.
“The trade tariff skirmishes between China and the USA, BREXIT and the sudden announcement of the total withdrawal of the USA from Syria, all added to the global tensions,” he said.
Predicating the budget, Nwosu said it depended to a large extent on oil revenues, adding that an oil price of 60 dollars per barrel seemed a bit optimistic.
“A more realistic range will probably be between 40 dollars and 45 dollars per barrel, allowing for windfall receipts if higher, but also providing a hedge against lower oil prices.
“Oil production from the current data as at September stood between 2.03 million barrels per day and 2.3 million barrels per day is possible.
“This, however, provided the 2019 elections are peaceful and the results do not aggravate the Niger-Delta and host and impacted communities.
“It will be good if all four key component bills of the Petroleum Industry Bill are passed by the National Assembly, and assented to by the Presidency, early enough in the year before mid-year 2019.”
Nwosu said that would bring the needed peace to the host and impacted communities, as they become partners in the exploitation of oil and gas resources.
According to him, it will also restructure the industry and NNPC to be more effective, with a world class governance structure.
He said the bill would also attract the necessary direct investments, both local and foreign.
“Markets, including the oil and gas industry, do not like uncertainty and the PIB will go a long way to address the framework for doing business in the Nigerian oil and gas industry,” he said.
Nwosu said of particular importance was the full implementation of the seven big must wins initiated by Dr Ibe Kachikwu and supported by Dr Maikanti Baru which addresses many policy challenges in the industry.
He said unlocking the huge potential of the gas resources would also help in diversifying and growing the Nigerian economy through its impact on power, agriculture and other industry.
He said integrated Oil and Gas Field Development Plans (FDPs) must be emphasised by NNPC and some urban planning concepts must be encouraged.
This, he said was to ensure that there was leverage on synergies of development by the various operators, especially in offshore developments, and significantly lowering unit technical costs.
He said to encourage investments in exploration, it was important for NNPC to insist that exploration and appraisal plans are an integral part of all FDPs.
The Chairman, Integrated Oil and Gas Ltd., Mr Emmanuel Iheanacho, said that in the last 10 years, the demand for refined products had always been on the increase.
Iheanacho said that building a modular refinery of about 1,000 barrel cost over 1.2 billion dollars.
“Building a modular refinery is not easy, apart from citing your refinery beside the sea, one can as well site it near a marginal oil field.
“Finance is the major reasons why most investors in the modular refineries abandoned it.
“No bank is ready to give loan to any investor in modular refineries that is why it is just only two out of 40 investors given licences that were able to build it.
“Government should engage the banks to provide the finance needed for building modular refineries,” he said.
In his views, the Director-General, Lagos Chamber of Commerce and Industry, Mr Muda Yusuf, urged the Federal Government to review its policy on refined products to encourage investors into the sector.
Yusuf said: “It is a pity that after many years of oil discovery, the country is still importing its refined products for consumption.
“As long as we have oil and gas sector link with the government, private investors will continue to evade the sector.”
The chamber’s director-general also urged the government to overhaul the sector to encourage private investors.
The former Chairman, Nigerian Council of Society of Petroleum Engineers, Dr Saka Matemilola, urged NNPC to repair the existing refineries to improve its production.
Matemilola also urged Department of Petroleum Resources not to revoke the licences of investors who were unable to build modular refineries.
According to him, withdrawing the licences will not solve the problems facing the sector.
He said that there was need to work with the licence owners to address the issue of sourcing for finance from the banks to build the refineries.
Reports say that the Vice President, Prof. Yemi Osinbajo, in June, confirmed that 10 modular refineries were at advanced stages of development in the Niger Delta.
The 10 modular refineries are located in five out of the nine states in the Niger Delta region.
The states include Akwa Ibom, Cross River, Delta, Edo and Imo states.
Osinbajo said that two of the refineries, Amakpe Refinery (Akwa Ibom) and OPAC Refinery (Delta State), have had their mini-refinery modules already fabricated, assembled and containerised overseas and ready for shipment to Nigeria for installation.
The total proposed refining capacities of the 10 licensed refineries stands at 300,000 barrels.
Similarly, in November, the Minister of State for Petroleum Resources, Dr Ibe Kachikwu, said there were strong indications that three out of the 40 planned modular refineries would come on stream by end of 2019.
“Out of the 40 licenses issued, only 10 have shown progress by submitting their programmes and putting something on the ground.
“By end of 2019, we are assured that three private modular refineries would come on stream,’’ he said.
Yusuf writes for News Agency of Nigeria.
Yunus Yusuf
Oil & Energy
Savannah To Take Over Stubb Creek Field in Nigeria
Savannah Energy PLC has signed agreements to take over Sinopec International Petroleum Exploration and Production Company Nigeria Ltd. (SIPEC), the British company’s co-venturer in the Stubb Creek oil and gas field in Nigeria, for $61.5 million.
SIPEC owns a 49 percent interest in the proven onshore asset in the Akwa Ibom State, which sits on the southern coast of the Western African country.
Savannah affiliate Universal Energy Resources Ltd. operates Stubb Creek with a 51 percent interest.
London-based Savannah, in a Press Release, said it has now inked separate share purchase agreements (SPAs) with the Chinese and Nigerian owners of SIPEC—Sinopec International Petroleum Exploration and Production Corp. (SIPC) and Jagal Ventures Ltd., the completion of which will result in Savannah taking full ownership of Stubb Creek, SIPEC’s principal asset.
“The SIPC SPA will see Savannah Energy SC Limited (a wholly owned subsidiary of Savannah) acquire a 75 percent equity interest in SIPEC for cash consideration of US$52 million, payable on completion and subject to customary adjustments for a transaction of this nature from 1 September 2023.
“The Jagal SPA will see Savannah Energy SC Limited acquire a 25 percent equity interest in SIPEC for cash consideration of US$7.5 million (without adjustment), payable on completion, plus US$2 million in deferred cash consideration payable in eight equal quarterly installments post-completion”, it stated.
Savannah simultaneously released an independent analysis showing gross proven and probable (2P) oil and condensate reserves of 11.9 million stock tank barrels (MMstb), as well as a gross best contingent gas estimate (2C) of 515.3 billion cubic feet (Bcf), in Stubb Creek as of January
It also holds an 80 percent interest in Accugas Midstream Business, which owns and operates the Uquo central gas processing facility and 260-kilometer (161.6 miles) pipeline network. The processing facility has a declared capacity of 200 million cubic feet a day.
SIPEC meanwhile had an estimated 8.1 MMstb of 2P oil reserves and 227 Bcf of 2C gas as of yearend, while its oil production is estimated to average 1,400 barrels per day (Kbpd) this year.
“Savannah’s Reserve and Resource base will increase by approximately 46 MMboe [million barrels of oil equivalent] following completion of the SIPEC Acquisition.
“It is anticipated that, within 12 months following completion of the SIPEC Acquisition, Stubb Creek gross production should increase by approximately 2.7 Kbopd to approximately 4.7 Kbopd through implementation of a de-bottlenecking program”, it said.
Oil & Energy
NNPCL Lists Transparency, Accountability, Others, As Transformation Drivers
The Executive Vice President, Gas, Power and New Energy, Nigerian National Petroleum Company Ltd, Olalekan Ogunleye, has identified transparency, accountability, research, technology and innovation as key drivers of the ongoing transformation in the company.
Ogunleye disclosed this while speaking during a Panel Session hosted by the NNPC Ltd at the ongoing 2024 CERAWeek Conference in Houston, the United States.
Ogunleye, whose session addressed the theme, “Africa’s Energy Future: Access, Investment & Sustainability”, said under the current leadership of Mr. Mele Kyari, the Company has institutionalized the use of modern technology to drive its operations, a development that has created tremendous value for the company in its quest to compete with its global peers.
He said with the coming of the Petroleum Industry Act (PIA) in 2021, NNPC Ltd has today transformed into an integrated commercial entity that is focused on transparency and accountability, two core values that are vital towards the Company’s quest to float an Initial Public Offer (IPO) at the stock exchange.
“Over the last five years, the NNPC Ltd has been pushing the agenda of transparency, accountability and performance excellence. I am glad to say that we are setting very high standards, and this is a journey that we are all committed to going forward”, Ogunleye stated.
He further observed that transparency and accountability have a commercial component to them, because they can make any organisation attractive to its partners and potential investors.
He said currently, the NNPC Ltd is working assiduously to become IPO-ready, stressing that once that is done, the IPO would be phenomenal and successful.
Ogunleye, who described the future as exciting for the NNPC Ltd, said as the biggest energy company in Africa with the biggest resources and largest market, the Company remained committed to delivering value to its shareholders by relentlessly improving its processes in line with global best standards.
He said gas would continue to be an important resource for Africa because it is the surest tool for economic development and for delivering better living standards for the teeming population on the continent.
Ogunleye called on all gas players to sustain the advocacy for gas as a major energy source that will be utilised to develop the economic and industrial fortunes of the continent.
According to him, gas is a top priority for NNPC Ltd because the Company is at the forefront of Nigeria’s gas commercialization efforts and flare elimination.
“Gas has come to stay. It is going to be part of the energy mix for us in the long term. We shall continue to be at the forefront of accelerating gas development and commercialisation in Nigeria”, he added.
Oil & Energy
Africa’s Energy Leap From Fossil Fuels To Renewable Powerhouse
The African continent is at a critical turning point. The region’s energy demand is set to skyrocket, just as climate change is starting to impact local livelihoods in earnest.
African countries are among those most vulnerable to climate change despite having contributed the least to the climate crisis.
Faced by a sharp population growth, and a need to develop local and national economies, Africa also must simultaneously contend with the urgent imperative to keep emissions in check. It’s a tall order.
Indeed, Africa is a perfect example of what is known as the energy trilemma: the tricky problem of creating enough energy while also keeping that energy sustainable and affordable.
What makes Africa’s situation so unique and so dire is the intense scale of each of these trends. The continent has some of the most underdeveloped energy grids on the globe, and is also facing the biggest population boom anywhere on Earth.
Africa has the fastest growing population in the world, expected to double between now and 2050. This means that, by midcentury, a quarter of the global population will be in sub-Saharan Africa. This presents a massive energy and infrastructure gap in the coming decades.
Currently, about 600 million people across Africa completely lack access to electricity. Furthermore, for a great many of those who do have access, it is not reliable or stable, as power failures and rolling blackouts are a common occurrence.
Such intermittent electricity is common in urban areas, while in rural areas establishing any form of grid connectivity can present a major challenge.
African energy demand is expected to increase by a third over the next decade as sub-Saharan Africa grows, develops, and industrializses.
To meet this demand, power generation capacity will have to increase by a factor of 10 by 2065. But to advance toward such goals without breaking climate pledges and more generally counteracting global progress toward decarbonization, Africa has to “leapfrog” over what is normally the next phase of development in a poor nation’s economic journey.
Unlike other nations in history which have enriched themselves and developed their economy by burning massive amounts of cheap and abundant fossil fuels with abandon, countries developing now do not have the same option.
Luckily, Africa is a goldmine of potential renewable energy resources.
“The continent is extremely rich in natural gas (considered to be a stepping stone away from dirtier fossil fuels like coal and oil), as well as abundant sunshine, wind, and highly sought-after rare Earth minerals such as lithium and cobalt which are essential components of renewable technologies including photovoltaic solar panels and lithium-ion batteries for electric vehicles and renewable energy storage”, Oilprice reported in July of 2023.
It’s just a matter of securing sufficient investment, fostering a supportive political environment, and establishing trans-national intra-African energy sharing agreements to be able to tap all of that green energy potential. If managed properly, clean energy could benefit the African economy enormously while helping to solve the riddle of the energy trilemma.
According to a new database of planned and installed renewable energy capacity across Africa, the continent is well on its way to achieving its ambitious energy “leapfrogging” goals.
In fact, figures show that if all planned additions are carried out without issue, some African nations could totally decarbonize by midcentury.
The Renewable Power Plant Database Africa, built by a renewable energy scientific modelling team from Rwanda and Germany, is the first comprehensive overview of renewable energy plants in Africa to include key details such as their geographic coordinates, construction status and capacity (in megawatts), allowing for more accurate and sophisticated modelling.
Such modelling shows that some of the countries with the most advanced renewable energy sectors and plans (such as Nigeria and Zimbabwe) already have enough clean energy projects lined up to conceivably transition away from fossil fuels as soon as 2050.
Furthermore, 76% of Africa’s electricity demand could be supplied by renewable sources by just 2040 in a scenario in which all clean energy plants in the pipeline are built as planned, and existing hydro-, solar and wind power plants are used to their full capacity.
This 76% would be composed of 82% hydropower, 11% solar power and 7% wind power.
However, the heavy dependence on hydropower in the short term is not a good long-term solution as periods of drought pose serious energy security risks.
“We conclude that combining the advantages of hydropower with wind and solar would be a more sustainable alternative to hydropower alone”, the Database team states, adding, “And that hybrid solutions would be the best option’.
Despite Africa’s many challenges, it stands to be one of the most important players in the global energy industry going forward. Its climatic and ecological characteristics and relatively low population density compared to other key regions gives it a major advantage as a hydro, wind, and solar powerhouse.
If built out according to plan, its clean energy output will be formidable. And as the continent develops, its massive workforce could make it a clean energy manufacturing source to reckon with.
Zaremba writes for oilprice.com concessional and semi-concessional.
By: Haley Zaremba
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