IOCs To Dispose Of More Assets After PIB Passage, Licence Expiration
International oil companies (IOCs) operating in the country will continue to hold back on the divestment of onshore assets until after the passage of the Petroleum Industry Bill (PIB) that governs fiscal terms, and the expiration of a number of the joint venture onshore assets in 2019, investigations by THISDAY have revealed.
A former Minister of State for Petroleum Resources, Mr. Odein Ajumogobia has also hinted that the asset disposals will continue in the foreseeable future, with up to $12 billion of the portfolio of oil multinationals potentially up for grabs.
The investigation has revealed that the companies wouldn’t put more assets on offer until their licences expire in 2019.
THISDAY had reported that the eight Oil Mining Leases (OMLs) – 18, 24, 25, 26, 29, 30, 34, 40 and 42 – sold by Shell and its partners between 2011 and 2015 would expire in 2019.
It was learnt that the renewal terms that can be negotiated for the remaining onshore leases by the federal government would determine whether the IOCs will dispose of the remaining acreages or renew their licences.
Shell Petroleum Development Company of Nigeria Limited (SPDC), which had pioneered the asset disposals with the sale of OMLs 4, 38 and 41 to Seplat Petroleum Development Company Plc, had in its yearly report and Form 20-F 2016 stated that 17 onshore OMLs would expire in 2019.
In accordance with the report released in the primary quarter of 2017, about 164 million barrels of oil equivalent (boe) will probably be produced before the expiration of the licenses, while the acreages will produce 377 million boe after 2019.
A source near the IOCs, who spoke to THISDAY off the record, said the divestments would likely continue after the expiration of the licenses and passage of the PIB.
“The litmus test crude oil trading ppt will come when the expiring concessions shall be renewed. It is either the assets will be surrendered or renewed, depending on the terms of the renewals. If the terms are usually not favourable to the IOCs, they’ll surrender the assets to the federal government. In that case, it won’t be a case of direct divestment but non-renewal,” he explained.
“The companies are also concerned in regards to the fiscal regime and are waiting for the passage of the aspect of the PIB that governs the fiscal terms.
“It is an open secret that one in all the companies divested and went to East Africa where the fiscal terms are more favourable. So if the fiscal terms within the PIB don’t favour the IOCs, they will divest more assets.
“If the terms are favourable, they can even likely review their portfolio and sell more assets to place money where the expected rate of returns is higher,” he added.
THISDAY also gathered that Chevron is holding back on the planned divestment of its 40 per cent stake in OMLs 86 and 88, both located in shallow waters off Bayelsa State, pending the conclusion of discussions with partners, which shall be determined by the fiscal terms within the PIB.
Speaking on the challenges of the asset disposals at a recent dinner organised by the Petroleum Club in Lagos, Ajumogobia stated that Shell would likely divest more blocks in step with its technique to reposition its deepwater portfolio.
Ajumogobia revealed that each one blocks except OMLs 23, 28 and 35, which are crucial for gas supply to the Nigeria LNG Limited, may very well be open for discussion, adding that as much as $12 billion of the portfolio of IOCs will potentially be up for grabs.
He also added that pipeline infrastructure could be included, especially the Shell-operated Trans-Niger Pipeline (TNP), which together with the Aiteo-operated Nembe Creek Trunkline (NCTL) are the 2 main pipelines utilized by Shell and other producing companies within the eastern Niger Delta to evacuate crude to the export terminal.
Shell sold NCTL to the Aiteo Group within the last divestment programme concluded in 2015.
Other than the 17 onshore blocks currently operated by Shell, which can expire by 2019, ExxonMobil’s shallow water OML 104, containing the Yoho and Awawa fields may also expire by 2018.
The previous minister, who also stated that the asset disposals were expected to continue in the foreseeable future, added that there are “opportunities for indigenous companies and possible foreign independents to continue to participate in the Nigerian crude oil trading ppt oil and gas industry and be involved in creating history for the industry and country in terms of value and job creation”.
He added that the non-passage of the PIB’s fiscal terms was a constraint on investment and financing.
Also speaking on the asset disposals by the IOCs, the Chief Executive Officer of International Energy Services Limited, Dr. Diran Fawibe told THISDAY at the weekend that a mix of many factors had fuelled the sale of assets by the IOCs.
He said with the attacks on onshore and shallow water assets by the militants, the IOCs needed to realign their portfolios in direct response to the attacks.
Fawibe also noted that the worth of oil at that period rendered the contributions of a number of the onshore assets to the companies’ overall portfolios very marginal.
“The IOCs have a global business model and they’ll have a look at the overall model and see how each country fits in. There’s calm within the industry and we shall look ahead to the passage of the PIB that concerns the fiscal regime,” Fawibe added.
Meanwhile, the Nigerian National Petroleum Corporation (NNPC) yesterday disclosed that in the last one year it renegotiated and got discounts worth $2 billion on upstream oil and gas contracts it gave out and are being executed by its various service providers.
The corporation also stated that within the identical period, it was capable of drive down production costs in oil fields in the country by $5 per barrel, from $27 to $22 per barrel.
An announcement from NNPC’s Group General Manager, Public Affairs, Mr. Ndu Ughamadu in Abuja, explained that this was disclosed by its Group Managing Director, Dr. Maikanti Baru, in a podcast to mark his first year as the top of the state oil firm.
The statement said the corporation lowered production costs from $27 to $22 per barrel in its quest to drive down the high cost of oil production in the industry in Nigeria.
It quoted Baru to have said NNPC would continue to pay close attention to cost reduction strategies and efficiency in upstream oil production.
Baru, the statement added, has directed that every of NNPC’s Autonomous Business Units (ABUs) and company Services Units (CSUs) deal with identifying their focal points for efficiency.
This might be certain that they realise the important thing performance indicators enshrined in the 2017 budget of the corporation.
He also noted that NNPC would continue to push to attain a six-month contracting cycle within the industry.
Baru equally stated that within the last one year, NNPC under his watch recorded a significant increase in Nigeria’s crude oil reserves and production, adding that on average Nigeria’s daily oil and condensate production was 1.83 million barrels (mb), while its year-to this point (YTD) 2017 average production was 1.88mb.
In accordance with him, the reported improvement in security and resumption of production at the Forcados Oil Terminal (FOT) and Qua Iboe Terminal (QIT) pipelines would see Nigeria producing more than 2.2mb of oil and condensate per day.
He explained that in October 2016, the Owowo oil field located close to the producing ExxonMobil-operated Usan field was discovered, adding that its location could allow for early production through a tie-back to the Usan Floating Production Storage and Offloading (FPSO).
The sphere, he also noted, has added current estimated reserves of 1 billion barrels to Nigeria’s reserves.
The Nigerian Petroleum Development Company (NPDC), he said, also grew its production from 15,000bpd to 210,000bpd as of June 2017.
Baru further revealed that through presidential intervention, the ownership of OML 13 was settled and restored to the NPDC. He said NPDC was expecting its first oil from the well before the year ends.
He also said NNPC rekindled the boldness of its joint venture partners to pursue new projects, following the negotiated agreement on the repayment of outstanding JV cash call debts up till 2015.
In the gas sector, Baru said gas supply to power plants and industries in Nigeria also increased.
He listed among the projects NNPC had embarked on in the sector to incorporate the completion of crude oil trading ppt repairs of the vandalised 20-inch Escravos Lagos Pipeline System A (ELPS-A) in August 2016, which he said ramped up Chevron’s Escravos gas plant supply from nil to 259 million standard feet per day (mmscfd), in addition to that of the vandalised Chevron offshore gas pipeline in February 2017 which equally increased the company’s gas supply to 430mmscfd.
Other gas related projects undertaken by NNPC throughout the period included the completion of repair works on the vandalised 48-inch Forcados Oil Terminal (FOT) export gas pipeline in June 2017, which reactivated shutdown gas plants just like the Oredo gas plant, Sapele gas plant, Ovade gas plant, Oben and Nigeria Gas Company’s (NGC) gas compressors.
NPDC’s Utorogu NAG2 and Oredo EPF 2 gas plants, he stated, were also commissioned on the back of the corporation’s works in the gas sector.