…to engage constructively with PENGASSAN, NUPENG

Chibisi Ohakah

Group managing director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, has said that the current scoping activity going on at the Port Harcourt Refinery is part of the new management’s determination to tackle one of the key challenges facing the corporation with the aim of boosting local refining capacity to end fuel importation.

At a meeting yesterday at the NNPC Towers Abuja with the group executive committee members of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the Nigerian Union of Petroleum and Natural Gas Workers (NUPENG), he stated that the Corporation under his leadership was ready to confront challenges facing the oil and gas sector in Nigeria with new innovative ideas, noting that the priority of his management was to boost the corporation’s revenue base.

“There is no magic around it. There is no way you can increase your revenue until you produce efficiently in a very cost-efficient manner so that the income will cancel your losses. It is important to note that you cannot run efficiently until global standards are met, best practices are respected and the employees see this company as theirs” the GMD said.

He said as part of efforts to place the Corporation on the path of solid growth, the NNPC will constructively engage the two oil workers’ unions to facilitate industrial harmony. He expressed confidence in the competence of the Corporation’s workforce to exploit the enormous potentials available to change the fortune of the national oil company.

Mele Kyari said the engagement was important to enable management and the unions to x-ray issues with a view to finding solutions to challenges facing the oil and gas industry. In his presentation, the PENGASSAN group chairman, Comrade Matthew Duru, said he had no doubt in the GMD’s ability to deliver on his mandate of taking the corporation to greater heights.

On his part, the NUPENG chairman, Comrade David Edache, pledged the support of the union to all efforts by management to reposition the corporation. 

Tullow Oil has started drilling at its second exploration well in the Orinduik block offshore Guyana. The drilling of the new found oil well known as the Joe prospect is coming after the company’s Jethro-1 well which struck oil earlier this month.

According to Eco Atlantic, Tullow’s partner in the block, Joe-1 was spud at 14.45hrs (Local Guyana time) on August 25, 2019, using the Stena Forth drillship – the same rig that was used for the Jethro discovery.

Joe prospect, a Tertiary feature on the northern part of the Orinduik Block in approximately 700 meters of water is estimated by Gustavson Associates to hold 148.3mmboe of gross unrisked prospective oil resources (P50).

According to the Chief Operating Officer of Eco, “We are very pleased to have spudded on Sunday our second exploration well on Orinduik. After the discovery made on Jethro in the Lower Tertiary, which greatly derisked that age section throughout the block, we are now moving to an Upper Tertiary target in the Joe prospect where we are targeting over 100mmboe. If a further discovery is made, it will further enhance the value of the block with this shallower play. The estimated chance of success for Joe is the same as Jethro, although it is a completely different play, and we are confident in our 3D interpretation as we were ahead of the Jethro-1 discovery.”

“We look forward to continued success in our exploration efforts as we move forward to define the plays available to us in all the various geological ages and to develop this block.”

Tullow, the operator of the Orinduik block holds 60 per cent stake, while Total holds 25 per cent % with the remaining 15 per cent being held by Eco(Atlantic) Guyana Inc.

Tullow is hoping to replicate ExxonMobil’s success, as the Orinduik block is located next to Exxon’s Stabroek block where more than a dozen discoveries have been made.

With several oil discoveries, Guyana is set to become an oil-producing nation in March next year upon the arrival and the hook-up of the Liza Destiny FPSO to Exxon’s Liza field.

The FPSO is expected to reach Guyana in a few days and will be deployed at Exxon-operated Liza field as part of the first phase of the development offshore Guyana. First oil is expected in the first quarter of 2020.

The Liza field is expected to start producing up to 120,000 gross bopd by the first quarter of 2020. The first phase is expected to develop around 500 million barrels of oil.

The FPSO, the first of several to be deployed in Guyana, will be spread moored in a water depth of 1,525 meters and will be able to store 1.6 million barrels of crude oil.

The compliance of participating countries to the Organisation of the Petroleum Exporting Countries, OPEC’s Declaration of Cooperation (DoC) witnessed a record high of 159 per cent in the month of July 2019.

This was disclosed by the Joint Ministerial Monitoring Committee (JMMC) when it reviewed the monthly report prepared by its Joint Technical Committee (JTC) and recent developments in the global oil market, as well as near-term prospects in 2019 and 2020.

According to the JMMC, the overall conformity of 159% recorded in July 2019 was 22 pp higher than in June 2019, adding that the average conformity of 134% since January 2019 was the highest to date in 2019. “This high level of overall conformity has offset uncertainty in the market due to ongoing economic growth worries”.

The JMMC underscored the growing importance of the DoC in supporting oil market stability, noted that the ongoing healthy oil demand so far has arrested global oil inventories growth, while being optimistic that it will lead to significant draws in the second half of the year.

The JMMC also noted that, going forward, the forecast for oil market fundamentals by major forecasters remain robust in 2019 and 2020.

The JMMC urged all participating countries in OPEC’s Declaration of Cooperation to continue their strive in achieving full and timely conformity with voluntary production adjustments based on the decisions of the 176th Meeting of the OPEC Conference, 1 July 2019, and the 6th OPEC and non-OPEC Ministerial Meeting, 2 July 2019.

Alternative Investment Market (AIM)-listed, LEKOIL has announced a decision to acquire a 45% participating interest in the Production Sharing Contract (PSC) in relation to the Oil Prospecting Licence (OML) 276, covering a territory located onshore in the eastern Niger Delta basin. This is however subject to the receipt of the required consents.  

The agreed acquisition, from Newcross Petroleum, is for a total staged consideration of US$5million, payable subject to the milestones listed in the highlights below. Lekoil 276 will also enter into an interim governance agreement with Newcross and Albright Waves Petroleum Development setting out the terms of which Lekoil 276 will provide technical support to the PSC.

In statement from the company last weekend, Lekoil said the acquisition is consistent with the company’s continuing strategy to assemble a balanced portfolio of oil and gas interests, which already include production (Otakikpo), appraisal (OPL310) and high impact exploration assets in known basins (OPL325). “The Licence is covered by approx. 150 sq. km of 3D seismic, shot in 2008 by BGP Inc., a subsidiary of China National Petroleum Company (CNPC), as well as various 2D seismic surveys.  It is in close proximity to three existing producing fields, all less than 20 kms away,” the statement said

Newcross has previously identified ten prospects and seven leads in the area covered by the Licence. Four wells have been drilled in the License area, resulting in four discoveries (two oil and two gas), namely Uda; drilled in 1972 (oil & gas discovery), Okposo-East; drilled in 1980 (oil & gas discovery),    Mbo; drilled in 1990 (gas discovery), and Davy Bank; drilled in 1986 (gas discovery)

Preliminary resource estimates by Newcross, based on data from these four wells, reported gross recoverable volumes of 29 million barrels of oil and 333 Bcf of gas, upside of 33 million barrels of oil and 476 Bcf of gas (recoverable). “LEKOIL has verified these estimates internally, but also intends to commission an independent competent persons’ report in due course. LEKOIL sees a clear opportunity for re-entering one or more of these discovery wells, with the potential for rapid monetization of resources due to existing export facilities nearby,” the company said

The company expects to finance the acquisition with a combination of its existing financial resources and a financing solution with a strategic industry partner – discussions about which have already commenced, the company said

The acquisition is conditional upon, among other things, the extension of the term of the Licence and the PSC, obtaining the consent of the Nigerian National Petroleum Corporation (NNPC) and obtaining the approval of Nigeria’s minister of petroleum resources.

The application for extension has been filed with NNPC and awaits approval from both NNPC and ultimately the minister of petroleum resources. The Consideration is payable as follows:       US$750,000 to be held in escrow starting from the extension of the term of the licence and to be released upon receipt of the ministerial approval;      US$2.75 million to be paid after the ministerial approval is obtained and upon occurrence of the conversion of the OML lease; and US$1.5 million, to be paid within three months after the receipt of first crude oil sale proceeds from continuous commercial production from the PSC.

Lekoil 276 has also agreed to fund the costs of the programme attributable to Newcross and Albright and expects to recover all such carried costs, more specifically: “Exact capital requirements for the programme will be finalised once the extension for the Licence is received; the company does not anticipate any substantial capital expenditure to be required for the programme for the remainder of 2019; and cost recovery will be from crude oil sale proceeds structured as follows: 80% of Newcross and Albright Cost Oil; and 70% of Newcross and Albright Profit Oil.”

Commenting on the development, Lekoil chief executive officer, Lekan Akinyanmi, said the acquisition of an interest in the OPL276 PSC represents an excellent opportunity to further build our growing production base in line with our stated strategy to create a balanced portfolio of assets. “With the completion of this, LEKOIL will have acquired a potential near-term producing asset with significant resource potential. We are optimistic about the prospects here, which have shallow reservoirs and are cost-efficient to develop. Our focus will now shift to moving plans quickly forward for oil and gas production. We look forward to working with our partners to unlock additional value for our investors,” he said

Lekoil is a member of AIM, a sub-market of the London Stock Exchange that was launched on 19 June 1995. AIM allows smaller, less-viable companies to float shares with a more flexible regulatory system than is applicable to the main market. At launch, AIM comprised only 10 companies valued collectively at £82.2 million.

Nigeria’s oil production, including condensates, has continued to rise despite the reported increase in sabotage attacks on production facilities.

The Nigerian National Petroleum Corporation (NNPC) reported last week that it recorded 106 pipeline breaches in its network of pipeline infrastructure across Nigeria in June alone, representing a 77 per cent increase in cases of oil pipeline vandalism.

The figure, the apex oil corporation said in its Monthly Financial and Operation Report (MFOR) for the month of June released in Abuja last Sunday represents an increase from the 60 points vandalized in May 2019.

Nigeria’s production hovered around 2.2 million b/d in the first week of August, compared with around 1.92 million b/d a year ago. The country’s crude and condensate production has risen sharply in the past six months due to the start-up of the 205,000 b/d deepwater Egina field which came online December 29.

Nigeria pumped 2.1 million b/d and 2.05 million b/d of crude and condensate in June and July respectively, based on the estimates of S&P Global Platts, a global, leading independent provider of information, benchmark prices and analytics for the energy and commodities markets.

Quoting a spokesman of the national oil company, Platts said however that the steady growth in production was being threatened by a corresponding rise in cases of attacks on its network of oil pipelines. “NNPC recorded a 77% increase in cases of oil pipeline vandalism in its network of pipeline infrastructure in June 2019,” he said, adding that the company was collaborating with government security agencies to secure the pipelines and other production facilities.

Oil companies warned last week that escalating production costs due in part to security issues posed a serious challenge to Nigeria’s bid to boost its oil output and reserves. The companies, under the umbrella body of the Oil Producers’ Trade Group of the Lagos Chamber of Commerce and Industry, said high costs were a major disincentive to investing in new projects.

“Nigeria ranks amongst the top 10 countries with the highest cost of producing oil and gas equivalents per barrel. Security costs are escalating as peculiarities of the business environment require additional resources to be deployed to secure our people and assets,” chairman of the group, Paul McGrath said at an industry event in Lagos August 22.

Nigeria has, however, said it aims to sharply increase its crude oil production to 3 million b/d and reserves to 40 billion barrels by 2023, from around 2 million b/d and 37 billion barrels now.

   …Records 106 breaches up from 60 in May

Nigerian National Petroleum Corporation (NNPC) has said that 106 pipeline points were breached or vandalized in its network of pipeline infrastructure across Nigeria in June this year, representing 77 per cent increase in cases of oil pipeline vandalism.

This, the apex oil corporation said, representing an increase from the 60 points vandalized in May 2019.

In its Monthly Financial and Operation Report (MFOR) for the month of June released in Abuja last Sunday, the corporation said the Aba-Enugu axis in the system 2E pipeline corridor accounted for 25% of the total pulverized points, while the Lagos Atlas Cove-Mosimi axis of the system 2B had 23% of the compromised pipeline points.

The report further said that the Ibadan-Ilorin leg of the System 2B pipeline accounted for 18% of affected lines, followed by the PHC-Aba section of the system 2E which was responsible for 13% of the affected pipeline. “Other areas accounted for the remaining 21% of cumulative line breaks,” it said. In spite of the wanton breaches of its critical pipeline network during the period, NNPC said within the period in review, it ensured continuous fuel supply and effective distribution across the country during the month under review.

It said the corporation supplied 1.76 billion litres of Premium Motor Spirit (PMS), also known as petrol in June. The quantity of petrol supplied translated to 58.65 million litres/day effectively distributed. It noted that to sustain the supply and distribution of the products in the downstream sector, the Corporation continued to monitor the daily stock of PMS across the nation.

In the gas sub-sector, the report disclosed that 223.98 Billion Cubic Feet (BCF) of natural gas was produced during the period in review, translating to an average daily production of 7,466.09 million Standard Cubic Feet Per Day (mmscfd).

“The figure posted a slight increase of 0.11% compared with the previous month’s gas production. For the period June 2018 to June 2019, a total of 3,063.89BCF of gas was produced representing an average daily production of 7,873.58mmscfd during the period. Period-to-date Production from Joint Ventures (JVs), Production Sharing Contracts (PSCs) and NPDC contributed about 68.93%, 21.34% and 9.74% respectively, to the total national gas production,” it said.

The monthly report is part of the corporation’s strategies to open its operations, activities and finances to the public.