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JDZ Oil Blocks: Companies May Know Fate Today
From Onyebuchi Ezigbo in Abuja, 04.27.2005
Ministers from Nigeria and Democratic Republic of Sao Tome and Principe (DRSTP) appear set to release the result of the 2004 Licensing Rounds for five oil blocks (Blocks 2,3,4,5, and 6) whose bids were opened November, 2004.
The Ministers yesterday went into a close-door session in Abuja aimed at settling once and for, all issues holding up the announcement of results for the bid.
The ministers from Sao Tome who arrived Abuja, late Monday night said they were full of optimism that the meeting would thrash out the remaining issues to enable actual development of the oil blocks to commence.
Addressing the opening session of the Joint Ministerial Meeting, Nigeria's Minister of State for Foreign Affairs, Alhaji Abubakar Tanko, said the authorities of the Joint Development Zone is moving towards the conclusion of the much-awaited 2004 JDZ Licensing Rounds with the response from ExxonMobil on the exercise of their rights.
Apart from concluding action on the oil blocks, the meeting will also consider some key administrative issues such as the Joint Development Authority (JDA) 2005 Budget and other activities that are geared towards furthering the objectives of JDZ.
Tanko explained the several delays that have accompanied the implementation of the 2004 Licensing Rounds, saying the need for the parties to work within the dictates of contractual agreements necessitated the shift from the scheduled date of announcement of bids result last December, 2004.
"We have now reached the moment of decision towards the conclusion of the much-awaited 2004 JDZ Licensing Rounds following the response from ExxonMobil on the exercise of their rights", he said.
He recalled that a lot has happened in the JDA, an organ charged with the responsibility for managing and developing the petroleum and other natural resources in the JDZ for the benefit of the governments and peoples of the two countries.
Some of the achievements so far recorded by the JDA included the signing of the Production Sharing Contract (PSC) for Block one in February 2005 in Sao Tome, the commencement of the 2004 bidding rounds and payment of signature bonus by the contractors for block one.
By: strategyone
25 Apr 2005, 12:23 PM EDT
Msg. 28762 of 28767
Jump to msg. #
Serious new discussion.
I would like to hear some other peoples thoughts on the impact of today's news.
Talk about shock and ahhhhh. ERHE just added two new outside directors to the board of such high caliber it almost doesn't make sense. The only person I could imagine being more impressive at this point in time would be the sitting CEO of XOM, LOL. This has actually changed my perspective of this investment.
First of all, the timing. I was looking for ERHE to start naming outside directors about 6 months to 1 year from now. Yes, I would have liked it sooner but didn't expect appointees until drilling commenced or maybe even oil struck.
Second, being the caliber of appointees. Worth posting again.
"Ambassador Jeter is the immediate past US Ambassador to Nigeria. He also served as Deputy Assistant Secretary of State for African Affairs, State Department Director for West Africa, President Clinton's Special Envoy for Liberia, and Ambassador to Botswana."
And a seasoned, senior level oil expert in E&P.
"Dr. Uzoigwe started his career with Dow Chemical Company where he held various senior positions in its Walnut Creek Research Center and in its Specialty Chemicals Production Facility in Pittsburgh, California. He joined the Nigerian National Petroleum Corporation (NNPC) in 1981. During his tenure at NNPC, Dr. Uzoigwe held several senior technical and management positions, including Chief Engineer and Project Coordinator (Petrochemicals), Group General Manager (R&D Division), and Managing Director of NNPC's Refining and Petrochemicals subsidiaries. In 1999 he was appointed the Group Executive Director (Exploration and Production), a position he held until he retired from NNPC in 2002."
The best way to describe this is simply "unbelievable but true".
What does this mean to you?
For me, it changes my strategy in the immediate future and possibly the long term. I began purchasing ERHC at around .10 or so about 2 years ago. I have continued to research and study both ERHE and the oil industry while continuing to average up with many more purchases giving me a larger than I expected position in an OTC stock. I was fully planning on exiting 10% - 25% of my position on the awards and post awards 2 week run to take all risk off the table. This was primarily due to my opinion that this OTC stock was still primarily controlled by a Nigerian (albeit a billionaire business man).
In my opinion, some of the excitement of owning an OTC stock is catching the ride during major changes with the stock. This can come from company news (ie patent approval, contract award etc), industry news (in this case when oil is first struck by anyone in the JDZ or EEZ) and stock related news (OTC positioning itself for a move to another exchange).
Not only did these two BOD appointees bring legitimacy to ERHE, it also changed the potential timing of moving off the OTC to another exchange. One of the primary requirements to get to the Nasdaq (smallcap) exchange that ERHE was missing is having 2 independent directors under the "Corporate Governance Requirements". Some of the other milestones will be a $4 minimum bid price (that may get established soon), a $50 million market cap. (done), a minimum of 3 market makers (done), at least 300 shareholders of at least 100 shares (pretty sure that is done), 1 million publicly held shares (done) and at least $5 million in market value of publicly held shares (done). Anyone else starting to see what might happen sooner than expected?
Food for thought - think of the pps reaction to a PR stating the ERHE has submitted their application to move to the Nasdaq smallcap (or better). This could happen with a few Fortnights (LOL) of the award announcements.
Follow that up with the announcements of the drilling plans in awarded blocks, followed by announcement of the STP EEZ 100% blocks ERHE accepts, followed by JV partners in the STP EEZ, etc......
I'm starting to think like thinkbig, lol....
Anyone else want to discuss the impact of today's news in regards to their exit/trading strategy?
Strategyone
Upstream: New board members at ERHC
(15:20)
New board members at ERHC
US minnow ERHC Energy, which holds preferential rights to blocks in the Gulf of Guinea off West Africa, has appointed two new non-executive directors.
Howard Jeter's and Andrew Uzoigwe's appointments were effective on from 21 April, the company said in a statement today.
JDZ: ExxonMobil paves way for deepwater minnows
By Bassey Udo,
Energy Editor
The decision by American multi-national oil and gas giant and Nigeria’s second highest hydrocarbon producer, ExxonMobil to reserve its right in two of the five oil blocs on offer in the 2004 Nigeria-Sao Tome and Principe Joint Development Zone (JDZ) Licensing Round may have paved the way for little known international and indigenous exploration and production (E&P) companies to jostle for stakes in the deepwater region.
ExxonMobil, which was expected to have taken up 25 percent stakes in each of Blocs-2 and 4 in the zone by virtue of its existence in the region in years predating the establishment of the 2001 treaty between Nigeria and Sao Tome and Principe creating the JDZ, declined after weeks of anxious wait, citing business reasons.
Though the Chairman, Board of the Joint Development Authority (JDA), Carlos Gomes said in Abuja on Tuesday that ExxonMobil’s decision might not significantly affect the progress so far made in the development of the richly endowed region, analysts believe the development may have put a freeze on the initial frenzy and enthusiasm that heralded the scramble for acreages in the zone by prospective investors.
Though ExxonMobil is yet to say what really informed its decision to reserve its rights, a top official in one of the multi-national oil companies, who pleaded anonymity said in Lagos yesterday that the reason may not have been unconnected with its alleged discomfort over the seeming lack of technical capacity of its prospective indigenous partners to lead the challenge of operating in such a high risk terrain if it did otherwise.
It was gathered that because of its clout as one of the world’s leading oil industry operators, ExxonMobil felt uncomfortable exercising those rights, an action it considered would have placed it in a junior partner’s position behind any of the bidders for the two oil blocs.
“ExxonMobil would have wanted to emerge as the operator of the two oil blocs. But, since it did not bid for them, it felt uncomfortable working under any other capacity with the indigenous companies favoured to emerge as operators”, the official explained.
During the bidding exercise, seven companies staked a total of $588million for Bloc-2, while10 others jostling for Bloc-4 staked a total of $870.285.
The companies include a horde of largely unknown names in deepwater operations, led by Vintage Oil and Gas, which posted the highest bid of $135million for Bloc-2 and ECL International, which offered the highest bid of $175million for Bloc-4.
After months of deliberations by the JDA, preliminary results likely to be ratified by the Joint Ministerial Council (JMC) of the zone, made up of the Ministers of Petroleum of the two partnering companies, next week, according to Gomes, indicates a signature bonus of $71million for Bloc-2, $40million for Bloc-3, $90million for Bloc-4, $37million for Bloc-5 and $45million for Bloc-6.
The highest signature bonuses offered during the bidding round for the respective oil blocs were Bloc-2 ($135million) by Vintage Oil & Gas; Bloc-3 ($41million) by Energy Equity Resources (EER); Bloc-4 ($175million) by ECL International; Bloc-5 ($37million) by ICC-OEOC Consortium, as well as Bloc-6 ($45million) by Filtim Huzod Oil & gas Limited.
--------------------------------------------------------------------------------
JDZ: ExxonMobil paves way for deepwater minnows
By Bassey Udo,
Energy Editor
The decision by American multi-national oil and gas giant and Nigeria’s second highest hydrocarbon producer, ExxonMobil to reserve its right in two of the five oil blocs on offer in the 2004 Nigeria-Sao Tome and Principe Joint Development Zone (JDZ) Licensing Round may have paved the way for little known international and indigenous exploration and production (E&P) companies to jostle for stakes in the deepwater region.
ExxonMobil, which was expected to have taken up 25 percent stakes in each of Blocs-2 and 4 in the zone by virtue of its existence in the region in years predating the establishment of the 2001 treaty between Nigeria and Sao Tome and Principe creating the JDZ, declined after weeks of anxious wait, citing business reasons.
Though the Chairman, Board of the Joint Development Authority (JDA), Carlos Gomes said in Abuja on Tuesday that ExxonMobil’s decision might not significantly affect the progress so far made in the development of the richly endowed region, analysts believe the development may have put a freeze on the initial frenzy and enthusiasm that heralded the scramble for acreages in the zone by prospective investors.
Though ExxonMobil is yet to say what really informed its decision to reserve its rights, a top official in one of the multi-national oil companies, who pleaded anonymity said in Lagos yesterday that the reason may not have been unconnected with its alleged discomfort over the seeming lack of technical capacity of its prospective indigenous partners to lead the challenge of operating in such a high risk terrain if it did otherwise.
It was gathered that because of its clout as one of the world’s leading oil industry operators, ExxonMobil felt uncomfortable exercising those rights, an action it considered would have placed it in a junior partner’s position behind any of the bidders for the two oil blocs.
“ExxonMobil would have wanted to emerge as the operator of the two oil blocs. But, since it did not bid for them, it felt uncomfortable working under any other capacity with the indigenous companies favoured to emerge as operators”, the official explained.
During the bidding exercise, seven companies staked a total of $588million for Bloc-2, while10 others jostling for Bloc-4 staked a total of $870.285.
The companies include a horde of largely unknown names in deepwater operations, led by Vintage Oil and Gas, which posted the highest bid of $135million for Bloc-2 and ECL International, which offered the highest bid of $175million for Bloc-4.
After months of deliberations by the JDA, preliminary results likely to be ratified by the Joint Ministerial Council (JMC) of the zone, made up of the Ministers of Petroleum of the two partnering companies, next week, according to Gomes, indicates a signature bonus of $71million for Bloc-2, $40million for Bloc-3, $90million for Bloc-4, $37million for Bloc-5 and $45million for Bloc-6.
The highest signature bonuses offered during the bidding round for the respective oil blocs were Bloc-2 ($135million) by Vintage Oil & Gas; Bloc-3 ($41million) by Energy Equity Resources (EER); Bloc-4 ($175million) by ECL International; Bloc-5 ($37million) by ICC-OEOC Consortium, as well as Bloc-6 ($45million) by Filtim Huzod Oil & gas Limited.
Upstream: Pioneer sells proved reserves
(23:17)
Pioneer sells proved reserves
The company will retain control over reserves
Dallas-based Pioneer Natural Resources on Monday closed its third volumetric production payment (VPP) transaction, under which it sold 7.3 million barrels oil equivalent of proved reserves in a $300 million transaction.
Under the terms of the deal, the company received about $34 for each boe and sold a limited term overriding royalty interest in a portion of its Spraberry oil and gas field.
"The VPP allows us to unlock the value of our long-lived assets at today's high oil and gas prices. The VPP proceeds, coupled with the strong free cash flow we expect to generate this year, will enhance our financial flexibility to develop future exploration successes, secure accretive, bolt-on acquisitions, support share repurchases and potentially increase future dividends," said Pioneer chairman and chief Scott Sheffield
The oil sold through the VPP is cited for a 5-year term beginning 1 January, 2006, while the gas sold is for a 32-month term beginning 1 May, 2005.
However, Pioneer will maintain control over the oil and gas reserves and production stream beyond the limited term of the VPP and will retain the upside of future development drilling.
Barclays Capital provided the capital to the unnamed purchaser of the VPP.
In January of this year, Pioneer closed its first two VPPs with proceeds totaling $593 million. The deals included oil reserves from the Spraberry field and gas reserves from the Hugoton field.
Airlines scramble for oil sector traffic
Ayo Olesin, Port Harcourt
German flag carrier Lufthansa, has commenced operations on the Port Harcourt – Frankfurt route, following the recent approval granted by the Federal Government.
Lufthansa joins Air France and Virgin Atlantic Airways in the scramble for seat offerings in a market made up of mostly oil industry executives, rotators and traders, with three weekly frequencies to the Frankfurt hub.
Port Harcourt has recently acquired increasing importance as an international destination as giant oil fields recently discovered by oil and gas majors in the Nigerian sector of the Gulf of Guinea are set to come on stream. A flurry of activities will also be prompted by the latest oil block bid round which results are expected in August.
The new route, according to Lufthansa, was part of its consolidation strategy for West Africa, considered one of the fastest growing regions in the world.
It is also one of Lufthansa’s ways of strengthening its competitive position in key economic areas particularly petroleum and gas markets.
The inaugural flight operated with the equipment of choice –the Airbus A330-300 - touched down at the Port Harcourt on last Thursday amidst fanfare with Executive Vice President, Lufthansa German Airlines, Dr Holger Hatty, who led a delegation of the airline’s management, international oil media representatives and Rivers State Governor, Dr. Peter Odili on board.
Hatty who visited offshore oil installations and Rivers State Government House over the weekend said that the increased competition on the route is a driving force for the airline for the improvement of the its product offering which already sports the hallmarks of German enterprise and tradition including safety, superior technology, reliability and innovation.
Pointing out that the airline was not focusing on a particular market segment, he however said that arrival and departure times on the new route is tailor made to meet the requirements of the oil industry and also the needs of the Lufthansa Special Traders Club members.
He stressed that Lufthansa lives on its connectivity with the quality of the connection to Port Harcourt particularly high especially for rotators and that the airline, through the service, would promote oil and gas activities by linking the Nigerian industry to oil and gas sectors in other parts of the world.
Noting that the decision to invest on the new route marked another milestone in the airline’s commitment to the development of the Nigerian economy through the airline industry, where it first commenced operations to Africa in March 1962, the airline boss inaugurated a special loyalty programme – the Oil and Energy Club- with a wide range of benefits for frequent fliers.
Hatty however pointed out that for Port Harcourt to become a true hub of oil and gas activities in the West Africa region, appropriate infrastructure had to be put in place at the southern gateway.
Expressing dissatisfaction with the state of the Port Harcourt International Airport, in line with views previously expressed by Air France and Virgin Atlantic, he said there was need for expansion of the airport to give room for check in facilities, waiting lounges, logistics and security operations.
“Airports and airlines are beneficial to the economy and the airports must have appropriate infrastructure, which is affordable. The authorities must see the airline industry as a jump machine and support it,” he stressed.
Lufthansa has already increased its Accra Ghana service from four weekly frequencies to a daily flight operating via Lagos.
Odili assured the airline’s management team during their visit to Government House that the machinery had already been set in motion to build anew airport terminal and construct a second runway to cope with increasing local and international traffic, while construction work on the Airport Road dualisation project would be completed in a matter of months.
He however urged the airline to employ more Rivers State indigenes in order to give them a sense of partnership and belonging
Nigeria, China sign pacts
Nigeria and China on Thursday signed four bilateral agreements as President Olusegun Obasanjo began a three-day official visit to the Asian nation.
The agreements signed by top Nigerian and Chinese officials in Peking, the Chinese capital included Memorandum of Understanding on Nigerian telephony project; telecommunication and economic and technical co-operation.
The Obasanjo-led Nigerian delegation is seeking technical assistance from China in several areas, including electricity, railway, telecommunications and agriculture.
At a state banquet held in his honour, Obasanjo expressed hope that China would help to resolve conflicts in Africa.
Business
Wednesday April 13, 2005
Nigeria oil adviser against raising Opec output
SINGAPORE: Oil producers' cartel Opec should not raise production now that prices have eased below US$55, Nigeria's top oil official said yesterday, the second member to oppose moves by Middle East Gulf nations to increase output.
The comments are in sharp contrast to those of Opec's president, Sheikh Ahmad al-Fahd al-Sabah, who told Reuters on Monday the cartel was pressing on with a second output increase in May to build up stockpiles ahead of strong demand expected in the second half.
“I don't go along with that,” Nigerian presidential adviser on petroleum and energy, Edmund Daukoru, told reporters. “I think that at the current (price) level there is no need to activate the second tranche.”
Opec boosted output by 500,000 barrels per day (bpd) at its March 16 meeting and left room for a second increase if prices failed to drop below US$55 a barrel.
Benchmark US light crude futures spiked to an all-time high of $58.28 a barrel last week, but had fallen to $53.81 yesterday.
Daukoru said Opec should only consider another production increase if oil prices were to climb back above US$55 for a period of 10 to 14 days.
Edmund Daukoru
Raising output now would risk prices sliding lower during the second quarter, the weakest for demand, he said.
“If we are not careful, our concern will be (for oil prices to move) in the opposite direction,” he told reporters on the sidelines of a presentation for Nigeria's new round of offshore exploration licensing.
Sheikh Ahmad, who is also Kuwait oil minister, said real output by the cartel was set to hit 28.5 million bpd in May, up from just over 28 million bpd this month, the bulk of which likely coming from Saudi Arabia.
The kingdom, which holds most of Opec's spare output capacity, is moving on with plans to lift supplies despite dissent within the cartel, telling refiners in Asia it would sell them about 10% more crude in May than in April, market sources said yesterday.
Asked about Riyadh's decision this week to boost supplies, Daukoru said it was their sovereign right but he supported any rhetorical efforts aimed at moderating prices.
He said that falling prices showed Opec was right in its assertion that speculation and not fundamentals had been responsible for pushing US crude to record heights.
In comments to reporters, Daukoru said he thought US$40 a barrel for US light crude would be a “reasonable” floor for Opec's yet-to-be-established new price band.
He declined to give a specific level for a possible upper limit to the range, but some officials have said it could be around US$50 a barrel. – Reuters
Upstream: ExxonMobil turns down offer
(14:08)
ExxonMobil turns down offer
Supermajor sticks with current holdings in JDA
ExxonMobil will not exercise its preferential rights to a 25% stake in offshore oil blocks on offer by Nigeria and Sao Tome in their joint development area, the US supermajor said today.
In February, the Nigeria-Sao Tome Joint Development Authority (JDA) had given the supermajor a pre-emptive right to any two of the five blocks in the second bidding round which began in December.
The blocks are located in the Gulf of Guinea, which has seen a swathe of huge deep-water oil finds over the last decade.
"ExxonMobil has elected not to exercise its rights to participate in additional blocks that may be awarded pursuant to the current tender round," a company spokesman said, without giving reasons.
Nigeria's ThisDay newspaper, quoting an unnamed company official, said the super major had turned down the oil block offer for "business reasons", after weighing the costs of exploration and drilling and the potential gains.
The JDA had said that a decision on the rights by ExxonMobil would pave the way for final licence awards to be made.
ExxonMobil and US minnow ERHC Energy enjoyed the rights because they invested in the exploration under a deal with Sao Tome & Principe before the disputed area became a Joint Development Zone, managed bilaterally.
The JDA received bids from 23 company for five blocks in the deep waters shared by Nigeria and Sao Tome.
ExxonMobil said it retained the 40% interest the JDA awarded to it last year in Block One, the most sought-after of the nine blocks offered in the first licensing round.
JDZ: ExxonMobil Turns Down Oil Block Offer
Crude prices drop
By Mike Oduniyi, 04.12.2005
ExxonMobil has turned down the offer to take up 25 percent equity in oil blocks in the Joint Development Zone (JDZ) of the Gulf of Guinea, under the 2004 Licensing Round organised by Nigeria and the Republic of Sao Tome and Principe.
By virtue of an agreement reached by all parties with interest in the JDZ, the US oil major has preferential rights to three of the nine blocks. The company exercised its rights by claiming 40 percent interest in Block 01, awarded last year by the JDA.
Final decision on the award of five oil blocks put on offer by the Joint Development Authority (JDA), the body managing hydrocarbon resources within the zone on behalf of the two countries, had been delayed as the agency awaited ExxonMobil's response to the rights offer.
The JDA, which last November called bids for the oil blocks named 02, 03, 04, 05 and 06, was initially expected to announce the winners in January this year. This was shifted to allow ExxonMobil exercise its preferential rights.
"We confirm that ExxonMobil has elected not to exercise its rights to participate in additional blocks that may be awarded pursuant to the current tender round in the Joint Development Zone of Nigeria and Sao Tome and Principe," the company said yesterday.
A senior company official cited economic reasons for turning down the offer. "It is for business reasons. We looked at the costs (of exploration and drilling) and the gains," said the official.
The company added that it was retaining its 40 percent interest in Block 1 that was awarded in April 2004. Other partners in the block regarded as the most prolific in the zone are Dangote-Energy Equity Resources (nine percent) and ChevronTexaco, 51 percent.
A JDA source said yesterday that ExxonMobil was actually given up to the end of last week to exercise the rights. The source said the latest development meant that the Joint Ministerial Council (JMC) would be meeting very soon to take a decision on the awards.
Analysts said yesterday that ExxonMobil pulling out of the contest, should pave the way for a straight contest between Nigeria's leading indigenous oil production company, Conoil and another US oil firm, ECL International, which are targeting Block 04.
Conoil has offered to pay $150 million (N20 billion), while ECL International offered $175 million.
Meanwhile, Oil prices fell for the sixth straight session yesterday at the international markets. The drop was attributed to the pledge by the Organisation of Petroleum Exporting Countries (OPEC) to raise oil production further by 500,000 barrels per day (bpd) and partly to the suspension of the planned strike by Nigerian oil workers.
The US light crude dropped 52 cents to $52.80 a barrel, while the benchmark crude, the Brent crude was down 82 cents at $52.07 per barrel.
The Nigerian Union of Petroleum and Natural Gas Workers (NUPENG) and the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), which had vowed to shut down crude oil production during the strike scheduled for yesterday, said they decided to stay action following an agreement reached between the oil workers' unions and industry employers after a series of meetings brokered by the Federal Ministry of Labour and Productivity.
OPEC President Sheik Ahmad Fahad al-Ahmad al-Sabah said despite the drop in oil price, the group probably would go ahead with a planned 500,000 bpd rise in production to lift its output ceiling to 28 million bpd in May this year.
Al-Sabah said that while price drop had eased pressure on OPEC to increase production immediately, but expected higher world demand in the third quarter should be met with increased supply from OPEC.
At its last March 16 meeting in Iran, OPEC agreed to raise its production ceiling by 500,000 bpd to 27.5 million bpd immediately and authorized its president to order a second increase of 500,000 bpd after consultations with member states if the prices remained at high levels.
He said, however, OPEC's spare production capacity became limited with a few countries such as Saudi Arabia, Kuwait and United Arab Emirates, while producers outside OPEC have no spare capacity at all.
Upstream: Nigeria banging the round drum
(08.04.2005)
Nigeria banging the round drum
Deep-water blocks are up for grabs as Abuja launches its latest licensing effort
Nigeria's official promotion of its latest licensing round is in full swing, although suitors at this week's London roadshow appeared uneasy that several areas of upstream policy remained undetermined.
However, most were impressed by the apparent determination of oil officials to conduct a thoroughly open exercise in accordance with the Extractive Industries Transparency Initiative.
Less reassuring was official candour that the timetable was not guaranteed and that delays might occur, despite a broad will that the day of the "bidding conference" when awards would be given should take place mid-summer.
Sixty-one blocks spread over different terrain, including 12 sought-after deep-water blocks, could net $1.2 billion in signature bonuses, according to Edmund Daukoru, Nigeria's Special Advisor to the Presidency on Petroleum & Energy Affairs. Daukoru gave industry delegates what he termed "pre-flight instructions" on the round.
"We are embarking on a journey that will hopefully result in a soft landing," he said.
He stated that the UK government is playing a major role in Nigeria's reform programme and has already taken up Nigeria's invitation to observe the round. The US had not, but both Brazil and Norway were on board for quality control.
Daukoru said 25% of Nigeria's reserves base lay in deep water and he expected 2 billion to 3 billion barrels to be added each year through to 2010.
The objectives of the round were to preserve the producibility of the national reserves base, expand the gas sector, attract new players and to revive E&P interest in the onshore Niger Delta.
Daukoru dismissed the threat posed by the National Assembly's suggestion that petroleum profit tax should be hiked to 85%. "The Assembly is not aware of the intricacies of production sharing contracts and we will give advice, informally and hopefully through formal testimony, so I feel comfortable about that," he said.
Viable local content vehicles would be nurtured by the new guidelines under which officials plan to release documentation clearly distinguishing local companies providing services from local investors participating in the bidding round. "Issues of disclosure and and access are being reviewed," according to Daukoru.
Successful companies and consortia must consider local content in their bids to the tune of a minimum of 30%, and companies would be discouraged from hawking Nigerian acreage abroad, as seen in previous years, he added.
Unlike previous rounds, local companies and their international partners bidding for blocks will be considered as one "in fact, they will be treated as ring-fenced entities".
Daukoru denied pre-qualified local companies deemed capable of delivering goods and services would be foisted on international players.
He said a shortlist of local service providers and credible block equity participants would be drawn up by the government, from which suitors would make their selection when submitting local content commitments in their respective bids.
As for local companies bidding for blocks, Daukoru did not expect that they be carried for free by their international partners "they may feasibly come in at a certain level, it's negotiable".
Daukoru admitted that some of the majors that were required to give up 20 onshore development licences in the Niger Delta for non-performance may yet win them back.
Setting rules: Nigerian Presidential Adviser on Petroleum Edmund Daukoru is promoting local content in the latest round Photo: REUTERS
Barry Morgan
ExxonMobil reserves rights on JDZ oil bloc
By Bassey Udo, Energy Editor
After weeks of suspense, American oil giant, ExxonMobil, expected to exercise its rights in two of the five oil blocs on offer in the 2004 Licensing Round of the Nigeria-Sao Tome and Principe Joint Development Zone (JDZ) on Monday opted to reserve any such rights.
The Joint Development Authority (JDA) December last year put on offer five oil blocs – 2, 3, 4, 5 and 6 of the JDZ for which 23 prospective companies staked over $60 billion in 26 bids.
Following the conclusion of consultations between the Nigerian and Sao Tome’s authorities on issues concerning the 2004 licensing round, the JDA last month notified ExxonMobil to move within 30 days to exercise its pre-emptive rights to pave the way for the final appraisal of the bids and announcement of the result by the Joint Ministerial Council (JMC).
Following the expiration of the deadline last Friday, the company expected to exercise its rights in blocs 2, 3 and 4 in the zone, however, opted to hold back on such rights, thus ending the planned announcement of the final bid result, which could been held later this week.
A terse statement on Monday in Lagos said inter alia: “We confirm that ExxonMobil has elected not to exercise its rights to participate in additional blocs that may be awarded pursuant to the current tender round in the Joint Development Zone of Nigeria and Sao Tome and Principe”.
ExxonMobil, however, confirmed it is retaining its right to participate in the development of the premier Bloc-1 scheduled to commence production later this year.
The company, through its subsidiary, Esso Exploration and Production Nigeria-Sao Tome "One" Limited, holds 40 per cent stake in the bloc operated by ChevronTexaco, through its subsidiary, ChevronTexaco JDZ Limited (51 per cent) as a Joint Venture which also involves Dangote and Energy Equity Resources (DEER) Limited (9 per cent).
BUSINESS NEWS
Get used to high oil prices!
DEMAND AND SUPPLY By Boo Chanco
The Philippine Star 04/11/2005
The price of a barrel of oil went up to $58 a barrel last week and experts say it is likely to get worse before it gets better. The Economist describes the situation as "a titanic struggle between supply and demand." Even OPEC is helpless because oil producers are reaching the peak of their capacity and demand is still continuing to grow, despite the rising price.
The Economist cited a report released last week by Goldman Sachs that should really make us worried. The report predicts oil prices may stay above $50 per barrel for several years simply because "the laws of supply and demand are catching up with an oil-hungry world."
The bad news is, the same analysts at Goldman Sachs think "the only thing that can restore equilibrium in the market is a sustained period of high prices that forces a cutback in consumption. This would give producers time to build more capacity, which could sate demand and cushion supply shocks, such as the Iraq war."
Prices are so high today because the market is providing for the high probability that a natural disaster or political unrest can leave the world without enough oil to go around. Yet, as The Economist points out, premium prices do not seem to be translating into lower consumer demand. This is unlike what happened in the 1970s and early 1980s. When oil prices rose spectacularly at that time, consumers responded by using a lot less of it.
Goldman analysts think it might take prices of more than $100 per barrel to make consumers today retrench. Perhaps, The Economist wondered, the demand remains high despite high prices because many economies have become a lot more fuel-efficient over the past 20 years; as a result, spending on petroleum products is a smaller percentage of total expenses.
Maybe too, consumers are now used to high prices at the pump because governments have been taxing fuel more heavily to the point that the price of crude makes up a much smaller fraction of the price consumers pay at the pump. That is true of Europe and many parts of Asia but not as true in the Philippines. Believe it or not, our fuel taxes are not that high in comparison.
The International Energy Agency (IEA) has issued a draft report on how countries can build emergency programs to deal with high oil prices but there seem to be no really new ideas. Our four-day work week, is an example of that. If government is really serious, they should dust up our mid 70s to 80s era energy conservation program. Conservation, at least, will help people realize the gravity of the crisis. It would also help poorer countries like ours live through this era of rising oil prices.
At the consumer level however, nothing works as well as letting the market’s price signals get through to consumers. In other words, any temptation to subsidize will be counterproductive in making demand align with supply before an even worse crisis develops. Then again, we are in no danger of taking this option, given that we don’t have anything to subsidize with.
Eventually, high prices should encourage companies to look for new oilfields to exploit. But even then, new capacity takes years to come on stream. Until then, we have to suffer as we are suffering now.
There is also this thing called "global oil-production peak" that we earlier wrote about in this column. As an article in Rolling Stone magazine last week explained, it means "a turning point will come when the world produces the most oil it will ever produce in a given year and, after that, yearly production will inexorably decline."
Peak oil, Rolling Stone explains, is usually represented graphically in a bell curve. "The peak is the top of the curve, the halfway point of the world’s all-time total endowment, meaning half the world’s oil will be left. That seems like a lot of oil, and it is, but there’s a big catch: It’s the half that is much more difficult to extract, far more costly to get, of much poorer quality and located mostly in places where the people hate us (Americans). A substantial amount of it will never be extracted."
The best estimates of when the world will actually get to this point of crisis, the Rolling Stone article declares, is somewhere between now and 2010. "In 2004, however, after demand from burgeoning China and India shot up, and revelations that Shell Oil wildly misstated its reserves, and Saudi Arabia proved incapable of goosing up its production despite promises to do so, the most knowledgeable experts revised their predictions and now concur that 2005 is apt to be the year of all-time global peak production."
So, that’s the score. But how do we explain that to the jeepney drivers in a way that would make them more understanding of the problem and less prone to resort to civil disturbance, as if strikes and rioting in the streets would help bring down oil prices. In a sense, we have entered a prolonged period of energy emergency and the world in general, has no idea on how to deal with it.
In the meantime, get used to high priced oil. It will get worse before it gets better… if at all.
11/04/2005
Sao Tome: ExxonMobil turns down more offshore acreage
ExxonMobil will not be exercising its preferential rights in the Sao Tomean-Nigerian Joint Development Zone, a person close to the negotiating process has confirmed. ExxonMobil held rights on any two blocks from those on offer in the current JDZ current licensing round, but has chosen not to exercise these, the person said. ExxonMobil had a deadline of April 9 to decide whether to take up its rights or not.
The decision by ExxonMobil should allow the Joint Development Authority to move forward in concluding the drawn-out licensing process for the JDZ, which has been ongoing since April 2003. The licensing round closed on Dec. 15, 2004, with 26 bids from 23 companies for the five JDZ oil and gas blocks on offer being received.
ExxonMobil has already taken a 40% interest in Block 1, which is considered to have the best prospects in the JDZ and was awarded by the JDA in 2004.
Why 60 oil blocs are up for sale, by Daukoru
From Oghogho Obayuwana, Abuja
NIGERIA is putting up for bids, 60 oil blocs spread accross the gulf of Guinea, the Niger Delta and the inland basins of Chad, Anambra and Benue because among others, the prospects of substantial recoveries from the region is high.
This, according to the Presidential Adviser on Petroleum and Energy (PAPE) Dr. Edmund Daukoru, is the kind of competitive environment long envisaged in Nigeria of which investors from foreign lands should make the utmost use of.
A statement by the office of the PAPE at the weekend quoted Daukoru as saying at the Texas Road show on the 2005 Bid Round that: "Although the Niger Delta is a mature oil and gas province, the prospect of substantial recoveries from the region was high, especially for deeper accumulations of oil and gas".
He added that this was being made possible by what he called "New advances in seismic as well as drilling technology"
Nigeria currently exercises jurisdiction over about one-fifth of the frontier play and in more than half of the oil and gas resources located in the region. Recent studies also show that prospecting inland of the basins for instance, could be higher than was generally estimated and could hold more aces in view of the growing importance of gas in the country's energy mix.
The statement also listed the thrusts of the 2005 bid round by Nigeria to include:
attracting the most viable and commercially attainable value to government for its hydrocarbon assets in Niger Delta, inland basins and deep offshore.
attracting international oil and gas operators by whose entry government intends to stimulate an influx of new competitive commercial arrangements and technology.
reversing the current flight of oil and gas exploration to deepwater by re-invigorating onshore investments.
The Federal Government, according to Daukoru, intends to carry out some modifications of the fiscal terms governing deep offshore activities to make them comparable to existing practices in countries like Ageria, Brazil and Norway.
A break-down of the 61 blocs on offer in the Niger Delta, the deep offshore and the inland basins shows that: Nigeria deep offshore has 12 blocs Niger Delta shallow water (six, could be more); Niger Delta onshore (six, could be more); Anambra basin (nine); Benue Trough (16); and Chad Basin (12).
The presidential adviser was emphatic, while noting in his summation, that "With gasoline prices scaling the $2.25 per gallon mark, we hope that the United States and indeed all countries of the Americas will take the opportunity offered by Nigeria to invest in one of the world's most prolific hydrocarbon provinces and in the search for creative solutions to the current runaway energy costs"
He added that the Nigerian window calls for a reassessment of the value of existing business relationships to both the international investor and the host government and communities as well as the fashioning of new partnerships that assure win-win co-operation while extracting the maximum value for all parties.
The last segment of the Oil and gas road show begins in Singapore tomorrow.
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Nigeria, Key to US Energy Security - Daukoru
From Cletus Akwaya in Abuja, 04.11.2005
Nigeria, the sixth highest oil producer in Organisation of Petroleum Exporting Countries (OPEC) holds the key to energy security in the United States of America (USA), Presidential Adviser to the President on Oil and Energy, Dr. Edmund Daokuro, has said.
Daukoru, who is on international marketing campaign for Nigeria's 61 oil blocks being put on sale in the up coming bid round, will take his campaign tomorrow to Singapore for the Asian countries.
Speaking in Houston on the second leg of the Road Show, the presidential adviser said the 2005 bid round presented a unique opportunity for partnership between Nigeria and oil and gas companies in the America to ensure the region's short and long term energy security interest.
He specifically pointed at what he called the supply capacity constraint being currently experienced worldwide, adding that he was afraid the situation would worsen in the future if the kind of opportunity the 2005 bid round offered by Nigeria was not adequately exploited.
Nigeria is offering 61 blocks in the Niger Delta, the Deep Offshore and the Inland Basins. A breakdown of the blocks shows that 12 are from Deep Offshore; about six or more from each of Niger Delta Shallow Water and Niger Delta Onshore; nine from Anambra Basin; 16 from the Benue Trough and 12 from Chad Basin.
"With gasoline prices scaling the $2.5 per gallon mark, we hope that the United States and indeed all countries of the Americas, will take opportunity offered by Nigeria to invest in one of the world's most prolific hydrocarbon provinces and in the search for creative solutions to the current business relationships to both the international investor and the host government and communities and the fashioning of new partnerships that assure win-win cooperation while extracting the maximum value for all parties," he said.
Nigeria, he noted, was aspiring for partnerships that would support the transformation of her national economy, saying the choice of Houston as venue for the promotion of the 2005 bid round was in view of the country's recognition of the existing partnerships between Nigeria and US in oil and gas and the fact US had the most deregulated gas market in the world.
He aaded Houston has since the 1950s emerged a "great centre" where technology, knowledge, capital and enterprise had combined to shape the history of the business and its fundamentals.
MARCH 2005 VOL 6 NO 3
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ExxonMobil keeps JDZ bidders on tenterhooks
The saga of the Nigeria–São Tomé Joint Development Zone (JDZ) 2004 licensing round, originally scheduled to conclude last December, now appears set to continue well into April. According to regional sources, a meeting of the Joint Ministerial Council to approve awards has been arranged for the third week of April.
The Joint Development Authority says it is ready to announce the award of up to six blocks. Officials insist they are waiting only on a decision by ExxonMobil as to whether or not the company intends to exercise its options of up to 25% in two blocks. ExxonMobil secured the options in return for relinquishing rights agreed with São Tomé before the establishment of the JDZ in 2002. In the past, ExxonMobil has expressed reservations about exercising the options, at least partly because of its concerns at having to work with Emeka Offor, the controversial but well-connected Nigerian chairman of US-listed ERHC, which also has options in the JDZ.
The JDA notified ExxonMobil in writing on 18 February of the bona fide highest bidders for each block. The JDA believed the delivery of the letter marked the beginning of the contractually agreed 30-day period for ExxonMobil to exercise.
However, it was only at a meeting with the JDA in Abuja on 9 March that Exxon officials received full disclosure and clarification of data. At a subsequent meeting in Abuja on 21 March, Exxon argued successfully that the 30-day period should begin from 9 March. The two sides have agreed that the company has until 9 April to decide its position.
ExxonMobil is understood to have indicated verbally that it is interested in exercising one option of 25% in block 2, where it believes seismic data is more promising. Devon/Pioneer/ERHC are understood to be the most likely operators of the block. ExxonMobil is also interested in exercising its 25% option in block 4 – but only as a farm-out. Speculation in the industry has linked any farm-out to Anadarko, the designated highest bidder for the block, and Occidental, which has yet to establish a presence in the region.
Anadarko has pitched strongly for operatorship of block 4. However, rival US independent Noble is also well placed and has a much better relationship with the JDA. The company has an agreement with ERHC, which has already exercised its own preferential rights, also secured for relinquishing earlier terms agreed with São Tomé. These give ERHC 30% of block 4 and 25% of the equally prospective block 2.
Centurion is understood also to have worked hard to impress its credentials as operator on the JDA, and may benefit in the Nigeria licensing round as a result. By way of contrast, Equator Energy, run by controversial Canadian businessman Wade Cherwayko, appears unlikely to receive any significant interest, despite its partnership with major Indian player ONGC. Officials are understood to have concerns over Cherwayko’s previous record with companies operating in the region, notably Abacan, which collapsed spectacularly in 1997.
Nigeria Focus understands that the substance of the 9 March meeting between ExxonMobil and the JDA centred on whether or not ExxonMobil and a partner, to which it would farm out, could be guaranteed operating rights for block 4 if the company exercised its 25% option. It is understood that the JDA could provide no such guarantee.
The picture is further complicated by uncertainty over which Nigerian company is likely to receive the 10% stake informally reserved for indigenous operators. ConOil chairman Mike Adenuga has lobbied hard, and was a guest at President Olusegun Obasanjo’s private birthday party in mid-March. Equinox is also understood to harbour hopes of winning
Pioneer dives into Nigeria
Dallas-based independent Pioneer Natural Resources has teamed up with Oranto Petroleum and Orandi Petroleum in an existing production sharing contract (PSC) covering deep-water Block 320, off Nigeria.
Pioneer said the 1790 square kilometre block lies about 150 kilometres south-east of Lagos in water depths ranging between 2100 metres to 2700 metres.
Pioneer is the technical operator of the block with a 51% working interest. Oranto Petroleum and Orandi Petroleum hold 32% and 17%, respectively.
Under terms of the PSC, Pioneer and the other participants will carry out a work program that includes acquiring a minimum of 1790 square kilometers of 3D seismic data and drilling at least one exploration well by February 2007.
Pioneer Natural Resources Company (ticker: PXD, exchange: New York Stock Exchange (.N)) News Release - 5-Apr-2005
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Pioneer Awarded Interest in Deepwater Nigeria
DALLAS--(BUSINESS WIRE)--April 5, 2005--Pioneer Natural Resources Company (NYSE:PXD) announced today that a subsidiary of the Company has joined Oranto Petroleum and Orandi Petroleum in an existing production sharing contract on Block 320 in deepwater Nigeria gaining exploration rights from the Nigerian National Petroleum Corporation.
The 442,000 acre (1,790 square km) block is located about 90 miles (150 km) southeast of Lagos in water depths ranging between 6,900 to 8,900 feet (2,100 to 2,700 m). Pioneer's subsidiary is the technical operator of the block with a 51% working interest. Oranto Petroleum and Orandi Petroleum Limited, Nigerian corporations, hold 32% and 17%, respectively.
Under terms of an existing Production Sharing Contract, Pioneer and the other participants will carry out a work program that includes acquiring a minimum of 1,790 square kilometers of 3-D seismic data and drilling at least one exploration well by February of 2007.
Scott Sheffield, Pioneer's Chairman and CEO stated, "We've targeted West Africa as an area of focus for our exploration program. These exploration rights on Block 320 offer us a unique opportunity to participate in the upside potential of deepwater Nigeria." Chris Cheatwood, Executive Vice President of Worldwide Exploration, added, "Existing 2-D seismic on the block indicates the presence of large channel systems similar to those of the large nearby fields, Erha and Bosi. By acquiring new 3-D seismic data, we should be able to more confidently quantify the reserve potential and risk prior to drilling the first well."
Pioneer is a large independent oil and gas exploration and production company with operations in the United States, Argentina, Canada, South Africa, Tunisia, Equatorial Guinea, and Nigeria. Pioneer's headquarters are in Dallas. For more information, visit Pioneer's website at www.pioneernrc.com.
Upstream: Devon sell-off nets $925m
(16:46)
Devon sell-off nets $925m
Indie divests US assets, prepares for Canada sale
US independent Devon Energy has reached agreements to sell almost all the US oil and gas properties it had put up for sale.
The company said it expects total proceeds from the deals to be about $1.2 billion, or about $915 million after taxes. It did not disclose the terms of the individual sales or the buyers.
Devon said it was also selling non-core oil and gas properties in Canada, and will disclose the details of those sales at a later date.
FG, Chevron Agree On New $5bn Gas Project
This Day (Lagos)
NEWS
April 2, 2005
Posted to the web April 4, 2005
By Mike Oduniyi
Kwale, Delta State
Obasanjo reads riot act to oil firms on IPP
The Federal Government and US oil major ChevronTexaco, have agreed to execute a $5 billion (N665 billion) Gas-to-Liquids (GTL) project that will be sited in Escravos, in the heartland of Delta State.
President Olusegun Obasanjo also yesterday issued a stern warning to oil producing companies in the country that henceforth, he would not give approval to projects presented by any company that does not show concrete efforts to build an Independent Power Plant (IPP).
The GTL project initiated in 2001 by the NNPC/Chevron Joint Venture, was initially to cost some $1.7 billion. However, THIDAY checks reveal that following the approval of Obasanjo for the expansion of the project that included a comprehensive gas gathering project and the construction of floating mega stations for the Niger Delta area, the EGTL cost now rose to $5 billion.
Execution of the projects it was gathered, will generate close to 5,000 new jobs for indigenes in the Niger Delta region.
Representatives of the Nigerian National Petroleum Corporation (NNPC) and Chevron, yesterday, put pen to paper for the awards of the contracts for the project shortly after the president commissioned the $450 million IPP constructed by the Nigerian Agip Oil Company (NAOC) in Okpai, Delta State.
The Federal Government, through the NNPC, holds 25 percent equity in the project while ChevronTexaco holds the remaining 75 percent.
Speaking at the occasion, President Obasanjo said that the power project served as a pointer to the success of his administrationís partnership with multinational oil joint venture partners ìwho should gave interest in ensuring that we overcome our immediate problems of infrastructure development.î
Obasanjo said that in line with the governmentís economic blue-print, it aimed to generate 10,000 mega watts of electricity by 207, adding that mush of this output is expected from the private sector.
According to the president, as producer of natural gas from which most of the increases in power generation are expected, his government invited oil companies to play active roles in the power sector.
Obasanjo who stated that participation in the power sector is only one of the many areas in which the government expected the oil industry to champion the current economic reforms, warned that the days of pleading with the oil companies were over.
ìWe appeal in the past, we pleaded in the past, we begged in the past, now we will use all possible means to achieve our objectivesÖ. No any oil company we get any permission, for anything unless they show us satisfactory programme of IPP they engage on,î said the president.
ìIt is not question of say we have the programme. Mobil had its programme when I came, Mobil has not even cut a piece of grass to implement that programe. This time it is not programme, we will see the programme, we will follow the programme, we will feel how the programme is progressing.
ìWe want to be partners who would show reasonable social responsibility and respond to the needs of Nigeria, if all our entreaties in the past have not worked, then we are not absolutely powerless to do what we believe we should do,î he added.
Obasanjo commended Agip for delivering on schedule, its promise to the government in 2000, to construct the IPP.
The power plant is generating 300 mega watts (mw) into the national grid. It will rise to 480 mw by September this year, to boost electricity generation by the National Electric Power Authority (NEPA) by 15 percent.
Also speaking at the occasion, the Group Managing Director of the NNPC, Engineer Funsho Kupolokun, said the venturing of oil companies into the power generation business, was part of the strategies to end gas flaring by 2008.
Nigeria said Kupolokun, was by 1999 flaring about 68 percent of associated gas produced, which carried an economic loss of more than $2.5 billion annually and capable of generating electricity enough to meet the power requirements of the whole of sub-Saharan Africa.
He said that the Agip Kwale IPP would for instance consume 70 million standard cubic feet of gas per day, ìwhich would otherwise have been flared."
ìWe are pleased with the timely response of Agip to government directive on the subject of IPPs,î he said, while also commending the Italian firm for the level of local engineering companies engaged in the execution of some aspects of the project.
The NNPC boss further said that the expectation of the government from the oil industry was limited to the establishment of IPPs. According to him, the basuic tenets of the NEEDS document, positioned the oil industry as the vehicle for diversifying and transforming the nationís economy.
Tuesday April 5th, 2005 HOME / Previous Page
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JDZ: ChevronTexaco, partners set to commence exploration
By Bassey Udo,
Energy Editor
ChevronTexaco and its joint venture partners –ExxonMobil and Dangote Energy Equity Resources (ERR) – are set to commence oil exploration and development activities in the Nigeria-Sao Tome and Principe Joint Development Zone (JDZ).
John Pryor, chairman and managing director of Chevron-Texaco, operator of the premier oil bloc, said all parties had resolved to exercise their utmost commitments to fast track the early development of the acreage.
Pryor, who is also in charge of ChevronTexaco’s Nigeria/Mid-Africa upstream business unit, said at the recent agreement on the effective date for Production Sharing Contract (PSC) between the Joint Development Authority (JDA) and the partners, partners were given a 30-day period from March 22 within to pay up the $123 million signature bonus in accordance with the ratio of their equity holding.
ChevronTexaco JDZ Limited will pay 51 per cent of the total $123 million, while Esso Exploration and Production Nigeria-São Tomé "One" Limited, a subsidiary of ExxonMobil, will pay 40 per cent and Dangote Energy Equity Resources Limited, a Joint Venture between the Dangote Group of Nigeria and Energy Equity Resources AS of Norway, nine per cent. According to Pryor, the commencement of operations in the area will open doors of immense opportunities and cooperation for Nigeria and the Democratic Republic of Sao Tome and Principe, assuring that first oil from the bloc would be drilled in the last quarter of this year.
JDA chairman, who was represented by executive director, finance and administration, Malam Hassan Tukur, expressed happiness that the first PSC in the JDZ was signed with the best of intentions for the two countries, adding that the commitment so far by partners was a demonstration of their willingness to bring the field to production in the near future to enable them reap the benefits associated with the development of the oil bloc.
He said the early mobilisation of resources by partners towards the settlement of their signature bonuses within the stipulated period will reassure governments of Nigeria and Sao Tome and Principe of their commitments.
Meanwhile, Dangote EER says it has completed its financing arrangement with AFREN Plc in respect of its equity stake in the oil bloc, saying the arrangement involves AFREN financing the Dangote-ERR’s share of the Bloc-1 exploration cost, while AFREN in return will receive a share of future profits from the bloc.
``We are very pleased to be working with AFREN and are happy that our shareholders received the deal with the right amount of enthusiasm,'' EER's President, Olav Eimstad said, adding that the transaction will help the company to mitigate its exploration risks and give ERR the necessary liquidity to aggressively pursue its strategic business development objectives.
Block-1 located in 5,700 feet (1,800 meters) of water depth, approximately 190 miles (300 kilometers) north of Sao Tome, was awarded in April 2004.
The JDZ considered Nigeria’s newest deep offshore concession is reputed to be one of the world’s most prolific oil and gas basins, with hydrocarbon reserves in excess of 300Billion barrels.
Upstream: Futures hit all-time high
(12:26)
Futures hit all-time high
Nymex, Brent surge ahead
Oil prices have raced to all-time peaks, climbing towards $58 a barrel, as Opec says it has begun discussing a second output rise to try to quell the market's rally.
US light crude hit a record $57.79 a barrel in early trade today, surpassing Friday's high of $57.70, which was triggered by a forecast prices could spike above $100 because of robust global demand and tight spare capacity.
At 0936 GMT, US crude was up 21 cents at $57.48. London's Brent crude was trading 26 cents higher at $56.79, just off a new record of $57.05.
"I would have thought prices would struggle to go much higher. The market fundamentals suggest lower prices," Mark Pervan, an analyst with Daiwa Securities in Melbourne, told Reuters.
"I think they will struggle to get over $60 in the next couple of weeks - that is a big psychological barrier."
On Saturday, Opec president Sheikh Ahmad al-Fahd al-Sabah said he would likely start consulting member producers on Sunday over a 500,000 barrel per day increase to group supplies to cool the market.
Opec raised output limits by 500,000 bpd to 27.5 million bpd in mid-March and left room for a second rise before a June ministerial meeting if prices failed to ease below $55.
"We had suspended (consultations) for a period of time because of the decline in prices," Sheikh Ahmad said.
"But now, the reality of prices requires that we once again undertake communications for the purpose of consultations with the fellow Opec oil ministers... pertaining to the 500,000-bpd hike."
Nigerian Presidential Adviser on Petroleum Edmund Daukoru said on Sunday the increase could happen within two weeks if prices stayed above $55 for at least the next 10 to 14 days.
Prices have gained more than $3 since Thursday when top energy derivatives trader Goldman Sachs released a report saying oil markets might have entered a "super-spike" period that could eventually drive them toward $105.
Concerns about the adequacy of US gasoline stocks ahead of the peak summer demand season were also partly behind last week's price jump after a handful of refiners had production problems.
• Wilbur Smith making study in island nation
Wilbur Smith Associates, the Columbia-based global engineering firm, is preparing a port development study in Sao Tome and Principe.
The small island nation off the West Coast of Central Africa has a population of 180,000. Large oil reserves recently have been discovered in the country’s territorial waters.
www.thestate.com
Goldman Sachs SuperSpike Report Warns of $13 Gas, $105 Crude
Intelligence Press 3/31/2005
URL: http://www.rigzone.com/news/article.asp?a_id=21470
A new research report from Goldman Sachs sent energy prices through the roof on Thursday by warning investors that the oil markets are entering into a "super-spike" period that could see crude prices as high as $105/bbl. In addition, the firm said Henry Hub natural gas prices could soar to $13/MMBtu by 2007.
After the report hit the street, the energy futures complex popped higher. At one point during the session, May crude was $2.11 higher than Wednesday's $53.99 settle. Likewise, May natural gas peaked at $7.74, up 28 cents. April heating oil hit a high during the day of $1.67, up 6.34 cents.
"We believe oil markets may have entered the early stages of what we have referred to as a "super spike" period -- a multi-year trading band of oil prices high enough to meaningfully reduce energy consumption and recreate a spare capacity cushion only after which will lower energy prices return," said Arjun N. Murti, an analyst with Goldman Sachs and one of the authors of the report. "Resilient demand has caused us to revise up our super-spike range to $50-$105 per bbl up from $50-$80 per bbl previously."
Murti pointed out that the new super-spike range conservatively corresponds to gasoline spending in the United States that reaches 3.6% of the forecasted Gross Domestic Product, 5.3% of consumer expenditures, and 5% of personal disposable income. "If we were to assume that gasoline spending needs to reach the heights of the 1970s, our upside super-spike estimate would be $135 per bbl for WTI," he said.
Some market experts said the report definitely contributed to the "background noise" that helped futures contracts such as natural gas higher (see related story). "Part of the background noise is this asinine projection by somebody at Goldman Sachs that crude oil could hit $105/bbl," said Ed Kennedy of Commercial Brokerage Corp. in Miami. "They better watch themselves. If there is even a hint of them trying to manipulate market prices they are in deep trouble. I've been a technician for 35 years... You cannot predict a super-spike! I have no idea what they are talking about."
Goldman Sachs also raised its base case forecast for Henry Hub spot natural gas for 2005 and 2006 to $6.73/MMBtu and $7.00/MMBtu, up from $6/MMBtu in both years, respectively. However, under the super-spike potential, Goldman Sachs said prices could be as high as: $6.75 in 2005; $9 in 2006; $13 in 2007; $9 in 2008; $6.50 in 2009; and $4.50 in 2010.
"Note, our Henry Hub forecast does not rise as much as our WTI estimate due to relative weakness in residual fuel oil pricing -- a key alternative fuel to natural gas," Murti said in the report.
The analyst added that the significant increase in WTI oil prices in recent years has been primarily driven by fundamental factors and geopolitical turmoil, including:
Rising E&P cost structures due to increased geologic maturity in many of the traditional areas of oil supply as well as service and materials cost inflation have driven an increase in long-dated WTI oil prices and in turn spot WTI oil prices.
Growing premium for light-sweet crude oils like WTI relative to heavy-sour grades is due to high (and rising) OPEC production volumes, limited complex refining capacity, and increasingly strict sulfur specifications in the United States and Europe.
Significant increases in energy efficiency since the 1970s have allowed world economies to more easily withstand what otherwise appear to be high nominal oil prices.
Geopolitical turmoil in key oil exporting countries coupled with populist rhetoric in many of these same places that keep foreign oil companies from developing host country resources in a timely manner has limited supply growth from areas that could otherwise meet oil demand growth at lower prices.
The analyst added that it is possible that the revised price forecast could still be conservative. "The strength in oil demand and economic growth, especially in the United States and China, following a year of $40-50 per bbl WTI oil has surprised us," Murti said. "Looking back at the late 1970s and early 1980s, we see that U.S. gasoline spending was a much higher percentage of the U.S. economy and consumer spending than it is today, likely explaining the lack of impact we have seen thus far from what otherwise appear to be high crude oil and gasoline prices. Our new 'super-spike' range assumes a level of gasoline spending relative to the economy and consumer spending that is still below the heights reached in 1980-1981, suggesting our new range could prove conservative, especially if there is a supply disruption in a major oil exporting country."
As for the subject of oil supply, Murti said he doesn't believe the spigot is running dry. "We are not subscribers to the theory that global oil supply has hit some magical inflection point that will result in permanent supply declines at some point in the near future," he said. "Though we recognize that the nature of oil is such that it will be difficult for anyone to definitively prove or disprove such theories, it appears to us that there exists a large 'known' quantity of both conventional and unconventional oil resources to develop."
He pointed out that the real issue is that a large portion of the resources are effectively off limits to western investment due to either outright prohibitions or restrictions on investments placed by host governments in the Middle East, Russia, and Venezuela. "Until the political landscape changes to allow for significant increases in investment either by the host countries themselves (through state-owned oil companies) or by foreign oil entities, we believe the current tight supply/demand environment will persist until demand destruction materializes," Murti said.
(Copyright 2004 Intelligence Press Inc. All rights reserved. The preceding
CNBC showcases Nigeria to the world
By Aaron Ukodie
IT Telecom Editor
In a major move to sway investments in favour of Nigeria, Europe-based Corporate National Broadcasting Channel (CNBC) is currently in the country to package the Federal Government’s efforts and programmes and showcase them to the international community.
The aim of the project, which is endorsed by the Presidency, is to turn the attention of foreign investors to Nigeria, presently described as the new investors’ bride of Africa, and to present her as a safe haven for investment.
To accomplish its mission, the CNBC television crew has interviewed President Olusegun Obasanjo, the Central Bank of Nigeria (CBN) Governor Charles Soludo, ministers, and a handful of the country’s leaders in government and business. The interviews with the leaders are, however, still ongoing. CNBC Europe runs a special programme, “Africa Report”, thrice a week on DSTV Channel 54 and according to the leader of the CNBC crew, Espen Roed, the gains of the economic reforms of the Obasanjo’s government, and the improved investment climate in Nigeria, will soon be featured elaborately on the channel.
Roed said CNBC Europe was focusing on Nigeria to project the Nigerian economy to the world, adding: “We are here to tell the world the true situation in Nigeria with regards to investment opportunities and risks. Unlike the bad impression being given to the world about Nigeria, the situation in Nigeria is good enough for any genuine foreign investor.
“Reports about Nigeria should not be about fraudulent people all the time. From our observation, there are world class genuine businessmen and women in Nigeria and the economic reforms being carried out by the government are really positioning the country in a better light for both local and foreign investments”.
“As a respected and objective medium in the world, it is the job of CBNC Europe Africa Report to support the growth of the African economy, and in Nigeria, we are here to examine the true situation on the ground and disseminate information for interested investors worldwide. We are getting the government’s side of the story as well as the private sector’s in order to present an un-biased report to the world on the Nigerian situation,” he said.
CNBC Europe Africa Report focuses on investment opportunities, corporate citizenship, evolving market, political and economic reforms, sustainable development and expanding tourism throughout the African continent, among others.
Oil: Nigeria, others to attract $19bn investments
Michael Faloseyi, Abuja
Nigeria and other oil producing countries in West Africa are to attract about $19.2 billion in investments in the oil and gas industry.
This represents about 40 per cent of the total $48 billion exploration expenditure projected in the international oil and gas market between 2005 and 2009.
Managing Director of Shell Nigeria Exploration and Production Company, Mr. Chima Ibeneche, said this at the ninth edition of the Offshore West Africa, that started in Abuja on Monday.
Ibeneche said, “Analysts indicated that the region will attract over 40 per cent of the $48 billion exploration expenditure projected to take place between 2005 and 2009. It is estimated that the West African deep-water basin that extends to Angola and Equatorial Guinea, has potential reserves of some 46 billion barrels.”
“Exploiting these hydrocarbon resources will lead to the investment of about 43 per cent of all exploration and production expenditure in 2005.
“It is expected that the development in this region will make it the largest projected growth area for the floating production storage and off-take vessels and sub-sea systems worldwide over the next half decade.”
He said that exploration and development of hydrocarbon resources in deep water offshore was expensive and demanded heavy investments with long gestation periods.
With this, he said that oil discovery in the deep water must be substantial to justify the high cost of development and exploration activities and to encourage investments and drive down the cost and cycle times.
He advised the government not to do anything that would tamper with the flow of returns on investments in the deep water to ensure sustained growth in the Nigerian deep water.
On the pending amendment bills to the Petroleum Act and the Deep Offshore and Inland Basin Production Sharing Contract Act, Ibeneche said that the reviews of those laws would unilaterally increase the petroleum profit tax applicable to the deepwater production-sharing contract from 50 per cent to 85 per cent
He stated, however, that the existing PSC did not permit the Nigerian state to adversely affect the economic value to the contractor after signature.
According to him, the proposal to increase the petroleum profit tax would send signals that would severely jeopardise prospects for future investment in general and stunt further growth.
He said that the review of the relevant laws on oil production in Nigeria had not taken cognizance of the disparity in the cost and risk elements between the deep water and onshore operations.
According to him, “the passage of such laws would imply that government is reneging on agreements and eroding trust, but it would also render new projects unsustainable and liable to termination.”
He said that oil companies in Nigeria are operating in an restive environment as a result of the communal clashes in the host communities and that any review of law or policy that would affect sanctity of Nigerian contracts would do further harm to investment in Nigeria oil and gas.
The Punch, Tuesday, March 22, 2005
Nigeria: ExxonMobil agrees new LNG project construction
Mobil Producing Nigeria, ExxonMobil's Nigerian subsidiary, has signed a Memorandum of Understanding with the Nigerian National Petroleum Corporation to construct a new Liquefied Natural Gas project at Bonny Island in Nigeria.
The new project, which would form the seventh LNG train at Bonny Island, would have a potential output of 4.8 million metric tons of LNG a year and could be operational by 2010, ExxonMobil spokesman Bob Davis has told reporters. The MOU for the project had been signed earlier in 2005 and the MPN is looking at pre-FEED (front-end engineering design) work for the plant.
Davis said that the potential cost of the project wasn't known yet, while a deadline for a decision on the MOU also hadn't been set although such FEED work usually takes about a year to complete.
The new plant would produce LNG for export to markets such as the US, Europe or Asia and it should also help to reduce gas flaring in Nigeria and could also involve the construction of an associated power generation plant, he said.
Nigeria to show case it potential’s at Owa
2005-03-21 08:54:49
By: Olusola Bello
The offshore West African Conference is the sub regional equivalent of the offshore Technology Conference (OTC) hosted every year in Houston, United States.
OWA, the 9th in the series starts today in Abuja and ends on Wednesday and it is the West African sub region most famous oil and gas industry event for the development of offshore resources in the fields of drilling, exploration, production and environmental protection.
Recognized as the largest annual offshore technical conference and exhibition, the event will draw more than 10,000 representatives from over 30, countries.
The attendees will include ministers, industry leaders including chief executives of major old companies, scientists, managers and dignitaries.
This will be the fourth time Nigeria will host the conference and it is planning to make, the hosting a permanent feature.
The hosting of OWA will help expose Nigeria’s oil and gas potential.
Nigeria’s permanent hosting and active participation in the events will also.
• Expose Nigerian professionals to the latest state of the art technologies in deep offshore E & P
Encourage the application of new skills for the development of the Nigerian petroleum industry
• It will draw attention to Nigeria’s deep offshore potentials and attract new investment into the petroleum industry.
• Facilitate formation of partnership between Nigerian entrepreneurs and prospective investors attending the event.
Encourage increase in local content in the petroleum industry and generate enormous multiplier effects on other sectors of the economy such as the hospitality business.
Nigeria’s participation will showcase the potentials of the Gulf of Guinea. One of it aims is to expand the frontiers of oil and gas exploration and production in West Africa with particular reference to the Gulf of Guinea, which is showing great promise in the Joint Development Zone (JDZ) owned by Sao Tome and Principe. The deliberate focus on the Gulf of Guinea has the added advantage of attracting the latest deep offshore technologies being applied in the Gulf of Mexico to the region.
Production from West Africa has been relatively flat until recently, but the region will capitalize on large offshore discoveries and reserves yet to be found that will increase production 75% by 2009 and probably maintain that level for at least 6 more years.
Last year marked a turning point in production for the area after years of successful exploration with few new projects brought upstream, said Louise Geddes, manager of the upstream research team with Wood Mackenzie, describing a report called “Oil Production Outlook for Sub-Sharan Africa”.
The largest project brought online to date was ExxonMobil’s Kizomba A off Angola, and it still has Kizomba B, C and D in the planning stages. Total brought Girassol on production on block 17 off Angola, and it still has Dalia and a host of smaller fields to put into production on the same block, probably in 2007.
Chevron Texaco will bring Lobitto online and BP will start producing from its Greater Plutonio fields on Black 18 offshore Angola.
Nigeria also is primed for a big move with Shell’s Bonga and Bonga Southwest ramping up. ExxonMobils Erha is due onstream next year. By 2007, Chevron Texaco’s Agbami and Total’s Akpo should start flowing oil.
With African countries now demanding simultaneous development of gas from these fields, gas production will surge as well.
Putting the production picture in perspective, Senior Analyst Stewart Williams said Nigeria is the giant in this part of the oilpath with 22 billion bbl of onstream or being developed by 2009 and another 5 billion bbl likely to be developed after that time.
Angola has the most growth potential, with approximately 4 billion bbl produced, 10 billion bbl under development and another 4 billion bbl likely to be developed.
Catriona Boggon, Wood Mackenzie analyst, looked at the similar countries, starting with Gabon, which holds the next largest position. It has produced 3 billion bbl, is developing another 750 million bbl has another 500 million bbl in the likely category. It has no deepwater discoveries yet but had four potentially commercial shallower discoveries last year. Next in line size are the Congo, Equatorial Guinea, Cameroon, Chad and Mauritania. Chad boasts a lot of potential from unexplored areas.
Australia’s Woodside Petroleum has been active offshore Mauritania with Chinguetti (130 million bbl) and Tiof (300 million bbl) fields and the more recent Tivet-1 discovery that could be tied back to Chinguetti.
Looking to the future, Williams said West Africa produced 4.1 million bbl of liquids in 2003 and should reach 7.1 million bbl by 2009.
Among the countries, probably only Nigeria will show growth from onshore properties. Peak production for Nigeria should reach 3.6 million b/d by 2011. That’s lower number than the government projection of 4 million b/d by 2010, but Nigeria faces project delays from problems with joint venture funding, gas production requirements, civil unrest and other project delays. OPEC quotas may also stifle development.
All that production will require substantial amounts of cash, Williams said. Onshore spending probably will remain in the area of US $2.5 billion a year thorough 2010, but shallowwater spending probably peaked at about $3 billion last year and will decline slowly to approximately $1.5 billion by the end of the decade.
The big money will go into deep water as spending rises from $4.6 billion this year to billion in 2005 and declines to about $1.5 billion in 2010 on fields under development and likely to be developed, Williams said.
He estimated total spending for West Africa onshore and offshore- from less than $6 billion in 2000 to a peak of more than $13 billion in 2006.
Tuesday March 15th, 2005
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ExxonMobil set to exercise JDZ rights
By Bassey Udo
Energy Editor, Lagos
ExxonMobil appears set to exercise its preferential rights in the five oil blocs put up for bids in the 2004 licensing round of the Nigeria-Sao Tome and Principe Joint Development Zone (JDZ).
Last week, top officials of the American oil major and those of the Joint Development Authority (JDA) held talks in Abuja, on the terms that will see ExxonMobil moving to exercise its rights within the stipulated 30-day deadline approved by the Joint Ministerial Council (JMC) last month.
A source close to the company at the weekend raised hope on the prospect of ExxonMobil exercising its rights in some of the plum acreages.
“I can tell you that discussions are still going on in Abuja. A decision is yet to be taken on the issue. There are a lot of issues to be resolved.
“But, right away, I can tell you that there is a high probability that the company will exercise its rights in some of the acreages before the expiration of the deadline. It might be today or tomorrow, but just give it some time,” the source said.
ExxonMobil is expected to “farm in” 25 per cent of its pre-emptive rights in any two blocs of its choice, preferably blocs 2 and 4, considered the most prolific of all the five on offer last December.
It was gathered that ExxonMobil may forfeit its rights in the acreage if it does not exercise them before the expiration of the March 18 deadline as there was no provision allowing a farm out to an interested party.
Nigeria’s Environmental Remediation Holding Corporation (ERHC), which has already exercised its rights, holds 15 to 30 per cent stake in all five blocs as well as exclusive rights to two oil blocs in the Exclusive Economic Zone (EEZ).
ERHC also has in the EEZ and another 15 per cent stake in two of the five blocs that will attract signature bonuses provided they match the highest price offered by the bona fide bidders. The JMC might convene next week to announce the final result and awards if ExxonMobil acts before Friday.
Sao Tome: Danes looking to set up euros 12 Mn tourism complex
Sao Tome, March 14 (Lusa) - Negotiations with Sao Tome and Principe's government for the construction of an upscale tourism complex has reached its final phase, says Denmark's Anchor Shipping and Trading company.
Company representative Jannick Pitzner told Lusa at the weekend that the proposed complex, including a hotel, two tourist villages and other infrastructures, had a first-stage price tag of USD 18 million, or about euros 12 million.
The negotiations, begun six months ago, were "in their final phase, only lacking the formalizing of an accord", Pitzner said.
The government unveiled a "strategic plan" for the archipelago's fledgling tourism sector in 2002, with the help of United Nations' agencies and aid partners, including Portugal.
RCN/SAS.
Lusa
Bid for 80 oil blocs to begin Friday
By Yakubu Lawal, Asst. Energy Editor
AT least 80 oil blocs located in various geological basins of the country have been put on offer by the Federal Government for prospective bidders in the 2005 licensing round.
The exercise which kicked off yesterday through an advertisement by the Ministry of Petroleum Resources covered oil blocs located in the deep offshore, Niger Delta and inland basins of the country.
The Deputy Director in the ministry, Mr. Emmanuel Agbegir, said the licensing round would involve some 60 blocs made up of 12 each in the deep offshore and Niger Delta shallow water and onshore as well as other 36 in the inland basins of Anambra, Benue and Chad.
He stated that another 20 blocs in the Niger Delta might be added in due course, apparently bringing the total number of the blocs identified by the government in the exercise to eighty.
The Presidential Adviser on Petroleum and Energy Matters, Dr. Edmund Daukoru is expected to give details of the exercise on Friday in Abuja.
In a statement yesterday by the Office, Daukoru formally kick off the process for the award of oil blocs to prospective industry investors.
"The licensing round will involve some 60 blocs made up of 12 deep offshore, 12 Niger Delta shallow water and onshore, and 36 in the inland basins of Anambra, Benue, and Chad. Up to 20 additional blocs in the Niger Delta may be added in due course" Agbegir stated.
According to him, the blocs have been chosen in such a way that they will satisfy the interest of a broad spectrum of investors in both the downstream and upstream sectors of the petroleum industry.
The ministry said that in this year's exercise, a new type of open bidding process would be adopted to meet the country's requirement and demonstrate government's commitment to the principles of the Extractive Industry Transparency Initiative (EITI).
Stressing that the process would give special consideration to local investors and operators in line with government's aspiration to build local capacity in the oil and gas industry.
The statement disclosed that Daukoru would give details of the exercise at a press briefing slated for Friday this week in Abuja.
The Guardian had reported exclusively yesterday that all bidders for this exercise would pass through a pre-qualification stage.
This process, The Guardian source said, would lead to transparency and competitiveness in the bidding process.
According to Presidency officials, the introduction of pre-qualification method was a global practice based on technical bids of the bidders and then the commercial bids of those who scale through the pre-qualification stage.
Daukoru had told The Guardian early this year that the government had noticed abuses in the past and was set to address them in this new exercise.`
US and Nigeria host high-level seminar on African oil security
Mon Mar 7, 9:21 AM ET
ABUJA (AFP) - Military officers and officials from Africa and the United States gathered in the Nigerian capital Abuja for a five-day seminar on improving the security of the continent's oil and gas supplies.
AFP/File Photo
The conference on "Energy and Security in Africa" was organised by the US Defense Department's Africa Center for Security Studies and by the defence ministry of Nigeria, Africa's largest oil producer.
Generals, diplomats and ministers from 15 African oil and gas producers joined military officers and defence experts from the United States, Britain, France, Canada and Denmark and executives from international oil giants.
Africa -- and in particular the Gulf of Guinea region off the continent's western coast -- is a rapidly expanding source of oil, but also prey to violent political instability which could threaten US and European supplies.
Nigeria's President Olusegun Obasanjo, in an address to the conference read out by a junior defence minister, said that it was time that the oil-hungry western powers paid more attention to the security situation in his region.
"Recent events, including in particular the instability in the Middle East, have created a situation where the Gulf of Guinea and other oil producing areas of Africa have suddenly emerged as areas where the international community must pay particular attention," said Obasanjo's message to the delegates.
Delegates were told that the Gulf of Guinea supplies 15 percent of US oil imports and seven percent of Europe's, and that this proportion will grow as more deep-sea fields are developed and more countries begin to drill.
But the region remains unstable. The governments of both Sao Tome and Equatorial Guinea, small countries with massive reserves of off-shore oil in the Gulf of Guinea, have in recent years been threatened by coup attempts.
In Nigeria, which exports more than 2.5 million barrels of crude per day, the profits from stealing oil and from shaking down oil giants for protection money fund armed militia groups and a conflict that kills hundreds every year.
In August last year world oil prices -- already high because of the ongoing violence in the Middle East -- were pushed to record peaks after one Nigerian militia leader threatened to lead attacks against foreign-owned oil platforms.
Over the course of the week, delegates will meet to discuss ways of sharing their knowledge and expertise to better protect oil production and exports.
The hottest hydrocarbon property in the globe
2005-03-07 09:26:05
Until 1995, the offshore trend off the west coast of Africa hummed noiselessly along on the periphery of the Global oil industry. The province was a sure producer of oil, but no one could point to it as a place of strategic importance.
Now America is touting the West African coastal trend as an alternative to its supplies from the Arabian Gulf.
The West African trend runs from the coast of Dakar to Walvis Bay. Loosely referred to as the Gulf of Guinea, the place was, until very recently, just another segment of the oil patch.
Africa as a whole put out 7% of total world oil production, but the Maghreb countries had most of the continent's spotlight. Libya held more oil reserves than Nigeria. Algeria was establishing itself as Europe's leading supplier of gas. Egypt was as much a magical place for West tourism freak as it was a reliable site of oilfield investment.
Angola's Five billion barrels were less than a quarter of Libya's proven reserves. Nigeria's gas struggled for markets and Equatorial Guinea searched fruitlessly for oil.
Then, suddenly, everything changed.
Mobil encountered the first commercial sized pool of oil in Equatorial Guinea in March of 1995. As 700 delegates converged on Libreville, the seaside capital of Gabon for the first Offshore West Africa (OWA) Conference in November 1996, the hot news item was that the 300 MMBO field, as it then was, located in 150m Water Depth, was going to come on stream by Christmas, a record 18 months from discovery. Zafiro instantly transformed this small, volcanic island on the Atlantic from a putative gas producer to an oil producing state. Located in the prolific south east of the continental shelf off the Niger Delta basin, the field produced 40,000 Barrels of oil per day on start-up. But the most important story of the decade was being made, in that same year 6,000km southwards, in Angola.
The lunch hour talk at the second and most important day of the Offshore West Africa (OWA) conference was on the Bengo field a pancake reservoir with a high gas cap, which Shell was enthusiastic on developing in deepwater off Angola. As it turned out, Bengo field proved disappointing. Indeed, what "made" Angola and by extension, West Africa, into the hottest hydrocarbon property on the globe was the discovery of Girassol, in Block 17 deepwater Angola, by pre-merger Elf. The French company had suspended Girassol in April 1996 after running a successful drill stem test. But the flow rates of 2,800BOPD from two sands didn't seem terribly exciting. Elf went ahead and drilled an appraisal well on the structure, which on testing flowed 18,000BOPD in two sands. A second appraisal flowed 14,00BOPD.
The Offshore Scoop
It was then that the Energy Press-and the oil patch at large-came to grips with the fact that west Africa was a place to look up to. In its cover article titled BOOM, in February 1997, the Offshore magazine scooped every other medium of mass communication in identifying the emerging game changers in oil exploration. "Like the US Gulf, the magazine wrote, "West Africa's dynamic offshore province is riding a wave of enthusiasm, as discovery after discovery prompt further concession licensing and exploration, and fast track development, particularly with FPSOs, put activity at its highest".
For all the self-evident truth in it, the story might not have been published at that time. Dev. George was the brain behind the Offshore West Africa Conference (OWA), which he says was a response to the positive news coming out of the territory.
Dev. George said he had to fight for OWA, because they thought no one would go to West Africa for a conference. “I had to choose which country to hold it in and because of the political situation at the time; the choices were either Libreville or Abidjan. I like Abidjan and had been there before, but decided on Libreville because Gabon was more of an oil producer.
In the article, George identified five key elements that have contributed to the extraordinary growth of the oil industry in the mid 90s. They were:
•Changes in Fiscal Regimes
• New Methods of project management
• Constant growth in World Demand
• Strong, market based and demand driven oil and gas prices.
The emergence of the Gulf of Guinea as the place to be is also, in part, a result of the worldwide foray into deepwater. About $60 billion is expected to be spent on more than 100 deepwater field developments worldwide between 2002 and 2007, according to industry analysts Douglas-Westwood. 38% of the money will be spent in deepwater 32% and 23% respectively. The company notes that $21 billion is likely to be spent on deepwater floating production systems, $18 billion on drilling and completing 2002. Equatorial Guinea, which had no proven oil pool seven years ago, is today a 1 billion barrel oil country. Whereas discoveries have dwindled world wide in 2001, with Europe, Latin America and the Middle East each finding, on average 1 billion barrels of oil, Africa encountered 2.6 billion barrels of new oil. Mauritania, in North West Africa, is one of just two countries, which had their first discoveries in 2001.
And The Potential Keeps Looking Up.
As the hunt for elephant-sized reserves continue in deeper Nigeria, Angola, Equatorial Guinea and Cote D'lvoire, it is clear that in Nigeria at least, the continental shelf as well as onshore remain viable pots of gold. In 2001, Shell reported discoveries of five field extensions on land and shelf. On average, these discoveries each add between 40-200 Million barrels of oil, an especially good figure, considering that they are located near producing facilities. Three of these new fields were hooked up in 2002 at 2,500BOPD, 8,000BOPD and 10,000BOPD respectively. Between 1999 and 2002, the finds have added 800Million to Shell's portfolio on land and continental shelf. Last November, Shell reported having 10 billion barrels of proven reserves on the land shelf in Nigeria. Added to figures from the company's deepwater assets (e.g. Bonga and Bonga South West), the total P+P+P is at least 12 billion barrels. Shell is the biggest operator in Nigeria, but there are four other key operators who have comparably huge reserves. They include ExxonMobil, Chevron Texaco, TotalFina Elf and Agip. So the official figures given as 32 billion barrels by the Nigerian government might even be very conservative Angola's star dimmed a bit in 2001 and anxiety reigned for most of 2002 as drilling in the Kwanza Basin reported duster after disappointing duster, and the earliest results from ultra deepwater Congo Fan were frustrating. But TotalFinaElf's success in reaching a production level of 200,000BOPD.
From the Girassol field in less than eight months is a world record and a testimony to the quality of reservoirs in that province. The British super major BP lifted the gloom late in 2002 when it flowed 5,357BOPD from a 200 feet interval in the Plutao well in ultra deepwater Block 31. As at our press time, TFE had not reported the results of Gindungo 1 in Block 32. Operators will be hurt if the ultra deepwater Congo Fan turns out to be lacking in commercial sized hydrocarbon; each of the three leases commanded a signature bonus of $300MM on offer in 1999.
Notwithstanding, coastward, the deepwater Congo Fan has proved redoubtable. A capacity test has shown that Girassol could potentially produce more than 200,000BOPD but TFE is satisfied with the present level of production.
Equatorial Guinea is the flavour of the month along the West African coast, even though it's much smaller than either Angola or Nigeria. American companies have swooped on this country of 400,000 inhabitants. Chevron Texaco had spudded its first well as we went to press.
Amerada Hess's purchase of Triton, the small independent, is in large part because of the latter's assets in the country. Vanco holds 7,200sq km acreage in two blocks. ExxconMobil has proven 750MM barrels of oil in the Zafiro/Ekanga Complex in Block B in the Niger Delta. Amerada Hess' Ceiba field, in the Rio Muni basin holds 13 Million barrels recoverable, with potential up to 500 Million. Amerada Hess produces 65000BOPD in Ceiba and has unproduced discoveries - Oveng, Okume elsewhere in the basin. ExxonMobil does 165, 000BOPD in Zafiro. When the field's southern expansion project is completed, with first production in September, Zafiro will be doing 270,000BOPD.
Culled from NAPE News
Nigeria to Earn More From Oil
Daily Champion (Lagos)
NEWS
March 7, 2005
Posted to the web March 7, 2005
By Sopuruchi Onwuka
Lagos
As OPEC restructures basket
The price of Nigeria's reference crude oil grade, the Bonny light will add $2.5 a barrel if the Organisation of Petroleum Exporting Countries (OPEC) upholds the recomposition of its crude basket in its next meeting in Iran.
The Bonny Light is more sweet (contains less sulphur) than most crude oil grades produced by some members of OPEC which presents a common basket of seven benchmark crudes in the export market for a common prize band that is less than the prices of the London Brent and the United State's light crude.
If the basket is recomposed, every OPEC member will have own benchmark crude reference while the group will have a total of 11 crude varieties in a new basket in the export market.
OPEC experts who have been working on the new basket for two years now proposed that each country's bench mark crude will be its predominant crude variety at the international market.
Thus, Nigeria's reference Bonny Light will become the nation's benchmark crude, and will have more market value for its lower sulphur content than the present OPEC basket that is heavier and more sour and consequently costs less in the export market.
Last Thursday OPEC basket sold $47.01 per barrel ($47.01/bbl) against Londons Brent $51.59/bbl and US Light $53.57/bbl.
According to agency sources in Iran, venue of the next OPEC meeting, share of any crude oil variety in the new OPEC basket will be determined in line with ratio of its production by the producing country to afford the nation a proportionate share to its output and quota.
Expert studies on the new basket, which are carried out by all members, are going through final stages for discussion at ministers conference later this month in Isfahan, Iran.
The reason for such a salvation, according to sources, is to have a more logical index compared to the existing crude basket of the group which pumps a little less than half of world's oil output.
Considering a heavier and soarer crude oil basket for OPEC will reduce its prices by about 1.5 dollars. At the same time, pricing goals of the organisation are measured according to the said basket and OPEC members will be selling their crude at the actual price and not according to the existing light, sweet crude basket.
According to new system defined for OPEC's crude basket, which is a result of two years of studies, price of Iran's benchmark crude will be less than the new basket of OPEC, but price of crude produced by such countries as Nigeria, Algeria and Indonesia will be 2.5 dollars, 3 dollars and 3 dollars higher than the basket, respectively.
The current crude basket of OPEC comprises seven varieties from Algeria, Indonesia, Nigeria, Saudi Arabia, the United Arab Emirates, Venezuela and Mexico (non-OPEC producer) and is more sweet and lighter than crude oil produced by most members.
Market conditions during the concluding months of 2004 and the first two months of 2005 and sudden rise of crude price has increased OPEC's basket price to over 40 dollars per barrel while every barrel of crude oil produced by individual members is sold for less due to being sourer and heavier than the basket.
Many market analysts believe that the existing OPEC basket is not representative of real crude varieties produced by members and its composition should be reviewed.
Meanwhile, the price of Brent North Sea crude oil rocketed to a new record high of $53 per barrel weekend and crude futures approached record levels in New York above $55 on strong speculative fund buying, traders and analysts said.
In London, the price of Brent North Sea crude oil for delivery in April surged $1.78 to $53 per barrel in late afternoon deals on strong buying following reports of a decline in US natural gas inventories and bullish Opec comments, Bache Financial trade Christopher Bellew said.
The London price smashed the previous record high of $51.94 per barrel reached last October 27, also due to freezing weather in parts of the norther hemisphere and concerns about a production cut by the Organisation of Petroleum Exporting Countries (OPEC), analysts said.
New York's main contract, light sweet crude for delivery in April, meanwhile soared as much as $2.15 to $55.20 a barrel in early deals yesterday, the first time it had risen above $55 since late October.
The price later stood at $54.55 up 1.50 on Wednesday's closing price.
New York crude hit an historic record $55.67 on October 25.
"Largely it's fund buying, to a lesser extent the natural gas statistics that came out and possibly the remarks by one of the PEC staff that he thought prices could spike as high as $80." Bellow said.
The US Department of Energy reported natural gas stockpiles had billion cubic feet last week.
World oil prices have nearly trebled from about $20 a barrel in New York at the start of 2002.
Adjusted for inflation, however, they remain far below the levels reached in the wake of the 1979 Iranian revolution when prices surged to upwards of $80 a barrel in today's money.
Oil prices could surge to as high as $80 a barrel within the next tow years but such a level would not last long, OPEC's acting secretary general was quoted as saying.
"I can affirm that the price of a barrel of crude oil rising to 80 dollars in the near future is a weak possibility," Adnan Shehab-Eldin told Kuwait's Al Qabas newspaper.
"But I cannot rule out the possibility) of oil prices rising to $80 a barrel within the next two years," he was quoted as saying.
"If the oil price rises to this level for one reason or another-for example, interruption of supplies from a producing nation by one to two million barrels a day-it is not expected to continue for long," Shehab-Eldin added.
Analysts have said the global economy was likely to need more oil to keep up with the current pace of economic growth and that OPEC may be keeping supplies tight.
Meanwhile, the Bush administration is urging OPEC not to oil production when it meets later this month, US Engergy Secretary Sam Bodman said. 'The capability of any representative of this government to influence the members of OPEC is limited," Bodman told a Senate panel hearing.
06/03/2005
Terror premium on oil prices still remains - article
The so-called ‘Terror Premium’ on oil prices still remains, but investors and drivers are learning to accept it. The Middle East is much more stable than it was last year, but the so-called terror premium on oil prices remains. Some analysts blame hedge speculators, while others say the soaring costs are justified by short supplies and rising demand from Asia.
One thing that is clear, while they may not like it, stock investors are learning to accept sky-high prices, drivers are getting used to paying more at the pump and so far, the economy has been able to withstand the pressure. Light, sweet crude rose 21 cents to settle at $53.78 on the New York Mercantile Exchange last Friday, and the Dow Jones industrial average soared 107 points.
Despite worries that lofty oil will eventually lead to higher consumer prices, businesses have been very good at squeezing energy costs out of each unit of production, and inflation remains in check. Consumer spending patterns are on track, as well, with data showing brisk sales for retail goods, homes and even cars, though General Motors and Ford Motor saw declines due in part to the waning appeal of big trucks and SUVs.
For stock investors, the price of oil has become an excuse to sell on down days, said Bill Groenveld, head trader for vFinance Investments, and something they're willing to overlook when market fundamentals are strong, because in the back of your mind you know it really hasn't hurt anything at this level.
"I view it right now, for the average investor, as a psychological distraction," Groenveld said. "Is it really that scary at these levels? Obviously it's not. But every time the dollar gets a big move, it makes the hair on the back of your neck stand up, and you look to oil and wonder about inflation. It's a knee-jerk reaction."
Even as the stock market tries to get comfortable with the new economics of energy, oil remains a significant pressure, however. Given strong fundamentals, one could argue that stocks would be materially higher if energy prices had continued to abate the way they did during the last quarter of 2004, said Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co. Instead, oil has been steadily rising since the first of the year.
"Now that crude prices have been up and stayed up, the market is moving sideways. If you drew a line through it all, you could say the stock market was held back by oil prices," Battipaglia said. "There's been not much progress in stocks at this point even though the fundamentals are decent, and I think you can lay that at the feet of costly energy."
While some market watchers argue that oil is overpriced, and likely to correct, Battipaglia is part of a growing camp that believes expanding global consumption, partly due to rising demand in India and China will keep energy costs higher over the long term. Few things go up in a straight line, but over the next 10 years, that could put the average per-barrel cost of oil in the $35 to $45 range, as opposed to $20 for the previous decade, he said. That could mean a boomtime for energy stocks.
"That's a dramatic revaluation of the oil in the ground and the earnings of the companies in that industry, and the cash flows they generate," Battipaglia said. "The easy money has been missed if you're buying in now, but I'm not so sure that it's over yet either. The forward profile for energy stocks over the next five years shows their average price received will be higher, their margins will be higher and their cash flows will be up."
Such a trend would likely bring a wave of consolidation to the energy sector, as larger oil companies look to replace the reserves they're consuming, a point underscored by reports that ChevronTexaco Corp., the second largest US oil company, is considering a bid for smaller rival Unocal Corp.
An examination of price patterns going back to the 1970s by Merrill Lynch suggests the energy sector enjoyed an eight-year bull cycle from April 1972 until November 1980, during which its peak weighting in the Standard & Poor's 500 reached 40%. That was followed by a 20-year contraction that brought the sector's market cap to an all-time low in February 1999, and energy started a fresh bull trend in 2000. Now, the energy's sector weight in the S&P 500 stands at 8.5%.
In the short term, oil prices and oil stocks appear overextended, and may be heading for a correction, said Mary Ann Bartels, global equity trading strategist at Merrill Lynch. But over the long term, the relative out performance of the sector is likely to continue. If there is a pause, Bartels said, it's likely to be only temporary; her research shows oil could rise as high as $70 per barrel if the current trends continue.
"When I look at the charts and interpret the price action, a move to $70 is supported by the charts," Bartels said. "I'm not looking at oil to trade at $70 this year, but it looks like oil prices are sustainable at these high levels and can possibly move higher."
As for hedge fund speculators? These large traders have gotten very good at moving quickly to take advantage of price trends, and their actions often exaggerate moves already in progress. But while they can be influential, Bartels said they aren't responsible for the price of oil.
"The speculators aren't large enough to be the market, but they are large enough to move it at the margin, to be the next leg that comes in," Bartels said. "But they are not creating these higher oil prices, they are following the trend, and as they are, they're allowing it to go higher. They accelerate the movements on the upside or the downside." For investors, that means more volatility lies ahead.
Source: Associated Press
March 5, 2005, 10:38PM
Nigeria seeks bidders on deep-water blocks
Reuters News Service
LAGOS, NIGERIA - OPEC member Nigeria will launch an oil licensing roadshow on Friday, with a stop in Houston, for 60 exploration blocks, including 15 in deep water, with tougher contractual terms than previous rounds, the country's top oil official said Friday.
Nigeria's offshore territory juts into the Gulf of Guinea, where multinationals have made several giant discoveries in water depths of more than 6,000 feet over the past decade.
"We believe the deep offshore is no longer frontier. Prospectivity is proven up, so we don't feel the incentives need to be carried over," Daukoru said in an interview.
Royalties on deep-water blocks will be raised from zero to 8 percent, the size of the blocks will be halved, and there will be an 85 percent cap on the share of production recouped by investors, known as "cost oil," Daukoru said.
Nigeria is facing a possible fall in oil revenue because declining production in some onshore areas will be replaced by new deep-water developments, where investors take 100 percent of the revenue until their costs are covered and royalties are zero.
Investors have greeted the changes reluctantly, insisting that the changes should not be applied retroactively to production-sharing contracts.
Sao Tome: Gov't snubs China, reaffirming its 'excellent' ties to Taiwan
Sao Tome, March 4 (Lusa) - Sao Tome and Principe, reacting to official indications China wants to re-establish severed bilateral diplomatic relations, underlined its commitment Friday to strengthening the archipelago's ties to Taiwan.
In a communiqué, Sao Tome's Foreign Ministry said the government "reaffirms its excellent relations" with Taiwan, "as evidenced by the presentation of (diplomatic) credentials" by Taipe's new ambassador, Yang Chung Yuen, on Wednesday.
The government's reiteration of its seven-year-old diplomatic relations with Taiwan came days after a Chinese Communist Party official said in Sao Tome that Beijing was ready to normalize its ties with the African island-nation, which lies on the verge of becoming an oil center.
China, the official told a congress of Sao Tome's ruling MLSTP party last weekend, stood ready to "normalize bilateral relations as quickly as possible".
Beijing, which considers Taiwan as a renegade Chinese province, severed its two-decade-old relations with Sao Tome in 1997 in response to the archipelago's establishing diplomatic ties with Taipe.
Since then, Taiwan has emerged as a major source of humanitarian and development aid for Sao Tome and Principe.
RCN/SAS.
Nigeria to Offer 80 Blocks in 2005 Bid Round
Xinhua News Agency 2/28/2005
URL: http://www.rigzone.com/news/article.asp?a_id=20693
A Nigerian government official said Monday the government is preparing the 2005 bidding round for 80 oil blocks.
Nigerian Presidential Adviser on petroleum and energy Edmund Daukoru said the bidding would be conducted once technical details were put in place.
"I have just submitted the bidding round documents to the president last Friday and he needs time to study them before opening the bid," he said.
According to the presidential aide, the 80 oil blocks on offer include the ones in the inland basin, onshore and deep water offshore blocks.
Daukoru also expressed optimism that the exercise would attract multinationals as well as indigenous oil companies.
Meanwhile, he denied reports that lack of presidential approval delayed the bid round from opening in February as scheduled.
"I will like to make it abundantly clear that presidential approval is not delaying the process leading to the 2005 oil blocks bidding round," he said.
He explained there was need for the government to be flexible on the timing due to the complex and technical nature of the exercise.
He gave the assurance that the exercise would soon be conducted with minimum delay.
Nigeria is the largest oil producer in Africa and the sixth largest oil exporter in the world with a daily crude output of over 2.5 million barrels.