2018 was an eventful year for Nigeria oil and gas following a significant recovery in 2017 thanks to a turbulent 2016 when crude prices found the floor at $30 per barrel and militants were blowing up pipelines. Here are the top winners and losers in 2018.
Winners
Asset Renewals
2018 was a good year for asset owners who secured renewal of licenses for their acreages as President Muhammadu Buhari who is also Nigeria’s petroleum minister gave consent for the renewal of some Oil Mining Licenses (OML).
Nigeria’s Seplat Petroleum Development Company Plc got consent for the renewal of OMLs 4, 38 and 41 while Eland Oil & Gas Plc received 20 year extension for OML 40 which hosts the Opuama field where production rates recently reached around 30,000 barrels of oil per day with further expansion through additional new wells.
Shell was the biggest winner with Federal Government renewing 14 out of its 17 oil licenses which were due to expire in 2019.
The 14 renewed assets includes OMLs 11, 17, 20, 21, 22, 23, 25, 27, 28, 32, 35, 43, 45 and 46; while the acreages revoked include OMLs 31, 33 and 36.
FPSO
Anticipated increase by 200,000 barrels of oil per day to Nigeria’s oil production (approximately 10 per cent of the country’s total oil production) received impetus following the successful deployment of the Egina Floating, Production, Storage and Offloading (FPSO) in 2018.
WalterSmith Refining and Petrochemical Company Limited
One of the major winners in 2018 is WalterSmith Petroleum Ltd; the company made a $35 million debt facility agreement for the construction of a 5,000 barrels per day modular refinery which is expected to be completed within the next 18 months.
According to Abdulrasaq Isa, chairman of the WalterSmith Petroleum Ltd the facility would be scaled up to 30,000 barrels per day after the first phase of the project must have been completed.
Automotive Gas Oil (AGO), House Hold kerosene, Naphata would be the major products that would be produced from the 5,000 barrels per day refinery.
Salvic Petroleum
There is a lot of positive things to say about Oil Mining Lease (OML) 30, Nigeria’s second largest onshore Oil & Gas asset, located in the Niger Delta, about 35km East of Warri in 2018. SALVIC was the 3rd party operator of OML30 on behalf of the official (name-plate) operator, a company called Heritage Energy Operational Services Ltd (HEOSL).
Undaunted by the foregoing challenges, Between March 2017, and April 2018, Salvic Petroleum embarked on the task of turning around the fortunes of OML30. The company assembled some of the best Nigerian hands in the Oil and Gas space, both locally and internationally, to set the company on its journey to create value from the erstwhile inactive OML30 and rehabilitate the Trans Forcados Pipeline which is a major evacuation line not just for OML30 but also many other oil and gas producers in the region.
Petrobras
After years of multiple efforts, Brazilian state-controlled oil company, Petrobras sold its 50 per cent stake in a Nigerian oil and gas exploration venture to a consortium led by top oil trader Vitol for $1.407 billion.
The consortium was led by Vitol and comprises Africa Oil Corp, Delonex Energy Limited and Vitol Investment Partnership II Limited. Africa Oil has 25 per cent in the deal, Delonex Energy Limited (25 per cent) and Vitol Investment Partnership II Ltd. (50 per cent).
First Exploration& Petroleum Development Company Limited (First E & P)
Nigerian independent First Exploration & Petroleum Development Company Limited (FIRST E&P) made improved plans with Anyala and Madu fields and also finalized the acquisition of three dimensional (3D) seismic data on Oil Mining Leases (OMLs) 83 and 85.
Under the agreement, global oil services giant, Schlumberger will contribute the required services in kind and capital for the project development until first oil. The joint project team will leverage the technical expertise of Schlumberger and the extensive local knowledge of the partners. The project is to be developed with an existing FPSO and is designed to add 50,000 Bbls of oil per day and 120 mmscf of gas per day.
Losers
PIGB bill
President Muhammadu Buhari withheld assent to the Petroleum Industrial Governance Bill (PIGB) in 2018. The decision came after 17 years of rigorous consultations and legislative hassles on the document.
The bill which has been in the saddle for close to two decades had suffered several delays and setbacks, forcing the 8th National Assembly to unbundle it into four parts for ease of administration with the first being the PIGB. The proposed law, which is conceived to liberalize the governance structure of Nigeria’s oil industry and open the sector up for more Foreign Direct Investment (FDI) has been described by stakeholders as the only leeway for the oil sector.
Marginal Field Bid Rounds
In 2018, hopes of having a marginal field bid round that would have generated huge signature bonus was dashed as politics and regulatory challenges continued to obstruct growth in the sector.
Stakeholders that spoke to BusinessDay lamented that the lack of a scheduled programme for the exercise has left prospective investors more confused in 2018 than before as they are not getting any information even from the Department of Petroleum Resources (DPR).
Addax Oil
Addax Petroleum Development Nigeria Ltd was plagued with controversies all through 2018 as the federal government, through the office of the Attorney-General of the Federation commenced legal proceedings against it for alleged under-remittance of $3 billion in taxes and royalties.
Documents before Justice Mojisola Olatoregun showed that the funds are outstanding claims against the company under the Petroleum Profit Tax Act and Petroleum (Drilling and Production) Amendment Regulation 2003 over Oil Mining Leases (OMLs) 123, 124, 126, and 137.
Also in 2018, the company had workers unrest as all the entrances to the premises were firmly locked by protesting workers.
Erin Energy
The bankruptcy of Houston based Erin Energy is not only the straw that broke the camel’s back but also the beginning of more legal woes for the company formally known as Camac Energy as it’s at the verge of losing its only cash-generating asset, a Nigerian oilfield.
New York and Johannesburg listed Erin Energy filed for bankruptcy in April 2018 and sought to restructure its debt and regain financial viability.
Independents majors on Nembe Creek Trunk Line pipeline
AITEO, Eroton and Newcross, three Nigerian independents who evacuate their crude through the Nembe Creek Trunk Line pipeline (NCTL), lost as much as 40 percent of crude routinely to oil theft in 2018.
The 97kilometre pipeline, with capacity to pump 150,000Barrels Per Day, is a favourite of oil thieves, who routinely hack into the line, creating as many as 24 illegal bunkering points that require constant plugging.
Hopefully, the alternative evacuation plans the companies are pursuing will provide relief in 2019.
Lekoil
Once considered one of the brightest promising independent oil firm years ago, Africa-focused oil and gas company Lekoil had a lacklustre 2018.
The company requested for an extension for lease OPL 310 from the Nigerian Federal Ministry of Petroleum Resources in order to recover the three years and one month lost due to regulatory delays out of Lekoil’s control.
Uncertainty on FID for NLNG Train 7
The much publicized Final Investment Decision (FID) for Train 7 of the Nigeria Liquefied Natural Gas
The reason is that the exercise will not take place until after the completion of the Front End Engineering Design (FEED) which is expected to give investors a fair idea of what would be needed financially to complete the project.
OPEC
Organization of Petroleum Exporting Countries (OPEC) found itself in a very unusual situation. Although they were able agree on a production cut, the last meeting in Vienna is a clear writing on the wall that OPEC can’t unilaterally dominate the energy markets as it has done for the last five decades.
For OPEC the world is a different place from the heady days of 1973 as Qatar’s exit, and the determination of Russia a non-member on whom it is heavily reliant to enforce production cuts to prop up prices are clear signs of its diminishing importance.
DIPO OLADEHINDE
