Angola Committed To Meeting Energy Objectives Amid COVID-19

Africa Oil & Power, the African Energy Chamber and the U.S.-Angola Chamber of Commerce united to present, ‘Powering Forward: The Pathway to Grid Stability, Increased Capacity and a Diversified Angolan Economy,” on Thursday.

The webinar addressed how Angola can continue to prioritize its development of national transmission and distribution capacities in the long-term, with a view toward increasing electrification, job creation and economic growth.

The panelists included Maria da Cruz, President & CEO of the U.S.-Angola Chamber of Commerce; Paul Ghiotto, Deputy Political-Economic Chief/Energy Officer, Political-Economic Section, U.S. Embassy Luanda and Frederico Martins Correia, Energy, Resources & Industrials Partner, Deloitte.

‘Powering Forward: The Pathway to Grid Stability, Increased Capacity and a Diversified Angolan Economy’ explored the long-term and strategic outlook for the Angolan power sector on Thursday through a public webinar hosted by Africa Oil &Power (AOP), the African Energy Chamber and the U.S.-Angola Chamber of Commerce.

Until 2025, power demand in Angola is expected to grow at a substantial rate, with the overall system load reaching 7,200 MW – more than four times the current level – which is closely linked with the country’s plans for industrialization.

While industry currently accounts for just 9% of energy demand, energy-intensive activities such as mining and iron exploration will serve as key drivers of growth, with industry aimed to account for 25% of total consumption by 2025.

“You cannot expand the industrialization of the country without secure power throughout,” said Maria da Cruz, President & CEO of U.S.-Angola Chamber of Commerce.

“The government of Angola has invested in the economy with the Angola Energy 2025 agenda, which is robust and seeks to invest in the energy sector. There is an estimate of around $23 billion that the government would like to invest as part of the Angola Energy 2025 strategy, and it is going to need support from the private sector.”

Over the past decade, the Angolan government has channeled significant resources into improving access to affordable and reliable power for both urban and rural communities. This is reflected by the Angola Energy 2025 Vision, which aligns with the National Development Plan 2018-2022 and centers on creating increased capacity and distribution capabilities, supported by new renewables and private sector investment.

“The Angolan government, along with multilateral donors and some bilateral donors, has invested a lot in generation,” said Paul Ghiotto, Deputy Political-Economic Chief/Energy Officer Political-Economic Section, U.S. Embassy Luanda.

“The Ministry’s plan for electrification not only aims to go from 38% to around 60% by 2025, but it also aims to go from around less than three gigawatts (GW) of installed generation to approximately 9 GW by the end of the same period.

We do not know if we will get to 9 GW, but through the development of hydropower in the Kwanza river basin, Angola has a very strong base of generation sufficient to meet future demand, even projected until to 2030. There are also additional opportunities in generation, I would argue in gas-to-power, and particularly renewables in the solar sector.”

In addition to government funding, the country is eager to attract private sector investment into its most bankable power projects, specifically in distribution to end users.

“Angola already has a clear view of its transmission, generation and distribution sectors, which enables its Power Sector Reform Support Program,” said Frederico Martins Correia, Energy, Resources & Industrials Partner, Deloitte.

“The law and regulation has been improved so that the private sector can enter, in addition to the public sector. In terms of distribution, it is quite easy to create a company and be a player, and the government is very keen to create distribution companies locally.

In transmission, the vision is to provide more services or exploration and product-sharing contracts, and not to be a player. The vision for the government is to keep transmission as a state-owned part.”

Like many oil-producing African countries, Angola remains dependent on crude oil exports to make up the majority of government revenues. In spite of market conditions produced by COVID-19, the government is continuing its commitment to provide affordable power to its citizens, as well as attract capital inflows during the current period of reduced final investment decisions.

“Angola is a fairly new country, given the fact that this year it is going to celebrate 25 years of independence,” said Maria da Cruz.

“There are industries here that are still not created, and there are opportunities with different tenders and investments in the energy sector. Another key item is that there is a true commitment by the government of Angola to invest and provide key reforms to attract private investment into the country.” 

Equatorial Guinea Adopts New Petroleum Regulation

The Ministry of Mines and Hydrocarbons (MMH) of the Republic of Equatorial Guinea has announced the adoption of the new Regulation of Petroleum Operations, Regulation No. 2/2020 of June 15th, 2020.

The new Regulation modernizes Equatorial Guinea's existing regulatory framework and is intended to maintain the country's attractiveness for foreign investors. It notably covers key matters such as the extension of the productive life of mature fields though mechanisms allowing operators to generate greater value from these assets; the exploration of marginal and onshore fields along with investments in deep and ultra deep water acreages; the monetization of gas and the development of the petrochemicals industry, along with further integration of the national workforce and local companies across the value-chain.

"This new Regulation gives an opportunity to the Republic of Equatorial Guinea to continue being a world reference in the hydrocarbons sector. To maintain our position, we must be prepared, with updated norms and policies, to respond to the great challenge that the recovery of commodity prices, the creation of employment and the execution of projects after the Covid-19 pandemic will pose for the sector," declared H.E. Gabriel Mbaga Obiang Lima, Minister of Mines and Hydrocarbons.

"It is for this reason that the Ministry of Mines and Hydrocarbons, in its desire to continue betting on the growth and economic diversification of the country, has decided to update the regulations to answer all the questions of the industry, as well as create a space of trust with all the actors in the country's hydrocarbon sector," he added.

The new Regulation is seen as a pillar of Equatorial Guinea's recovery strategy post Covid-19, and clarifies several aspects of petroleum operations in the country. It also comes as Equatorial Guinea pushes for additional local participation across the value-chain, and is developing several gas monetization and downstream projects. The Regulation notably stipulates that refining, petrochemicals and commercialization activities can be realized under a specific license granted by the MMH (Article 93) on the basis of technical and financial capabilities notably.

It also strictly prohibits gas flaring, except under very specific circumstances, and stipulates that Field Development and Production Plans must always be designed in such a way as to allow the use, conservation or commercial exploitation of associated gas (Article 149).

It also clarifies new rules and frameworks on exploration and production from mature and marginal fields, defining the former as a field that has entered into decline and is no longer economically viable, and the former as a field that has produced 90% of its proven hydrocarbons reserves (Article 41). Such fields will benefit from 10-year contracts, which can be renewed every five years after study and assessment by the MMH.

What It Takes To Get A Marginal Oil And Gas Field In Nigeria

By Zion Adeoye

Following its marginal fields licensing rounds in 2001 and 2013, the Nigerian Department of Petroleum Resources (DPR) recently released guidelines on the 2020 licensing round.

Under the 2020 licencing round, a total of 57 fields located onshore, swamp, and shallow offshore terrains are on offer; while the ongoing Nigerian Marginal Fields Bidding Round is a purely domestic process, the development of these marginal acreages and discoveries will open up various avenues for partnerships with international capital and technology providers.

Nigeria's marginal fields licensing rounds have been the cornerstone of Nigeria's upstream local content development strategy since the early 2000s and previous rounds gave birth to what are now strong local and regional African E&P companies. The move has been so successful that it is now being followed by other key African oil producing countries such as Angola and Gabon.

In Nigeria, previous rounds have given the opportunity for local players to make a difference in a sector that had been until then dominated by international oil companies and international independents. Nigerian marginal players such as AMNI Petroleum, Shoreline Energy, Aiteo, Neconde Energy, Seplat Petroleum or Belema Oil are now strong operators able to develop technically challenging fields, just to name a few.

The development of a marginal players has also brought a boost to the reduction of gas flaring in Nigeria, with several Nigerian marginal fields recognised under the UN Clean Development Mechanism for their successful reduction of gas flaring and valorisation of natural gas.

Marginal Fields

In the Nigerian context, marginal fields include fields with reported reserves and production potential, which are however deemed marginal for a variety of reasons including having remained un-produced for a period of over 10 years. Notably, the marginal fields exist under current Oil Mining Leases (OMLs).

Eligibility and Bid Evaluation

As one of the key objectives of the marginal fields licencing round is to promote indigenous participation in the Nigerian oil and gas sector and to foster technological transfer, the licensing round is exclusively intended for participation by indigenous companies i.e., companies duly registered to carry out petroleum exploration and production operations in Nigeria with 100% indigenous shareholding.

International Participation: a Not-so-small Margin

However, upon the award of the marginal field, the awardee may assign up to 49% of its interest to another party subject to approval by the Minister of Petroleum Resources. As a result, and while the bidding process remains an exclusively indigenous affair, foreign technical and financial partners are not outrightly precluded from participation in the development of marginal fields once contracts are awarded and fields need to be developed.

Due to the capital-intensive nature of oil and gas operations, and current liquidity constraints due to the historic crash of oil prices and the Covid-19 pandemic, it is very likely that existing and future Nigerian operators of marginal fields will be on the look out for regional and international partners.

As such, direct and indirect participation of international players is possible within marginal plays in Nigeria, be it under services or technical assistance contracts from technology providers or under capital injections from funds or private equity investors. We continue to witness the success of these partnerships and applaud the retention of this key element by the Nigerian government under the 2020 licensing round.

Bid Process and Timelines

The licensing round implicates a carefully laid out process, including the negotiation of farm-out agreements with holders of the OMLs (Farmors) within which the marginal fields exist. The Farmors will be entitled to an over-riding royalty interest as well as a negotiated $/bbl tariff for hydrocarbons transportation/processing.

The Marginal Field Bidding Round is a 12-step process which will roll out as follows:

  1. Announcement of the Marginal Field Bidding Round and launch of its dedicated portal;
  2. Applicants fill and submit the online registration form along with the required documents after paying the registration fee;
  3. Evaluation and prequalification of registered companies;
  4. Notification of prequalified applicants;
  5. Evaluation by the DRP of the submitted bids, which it forwards to the Honourable Minister of Petroleum Resources for approval;
  6. Submission by the applicants of technical and commercial bids after paying the application and processing fees;
  7. Granting of access to pry data and lease data to the applicants, who can purchase applicable reports after paying the necessary fees;
  8. Prequalified applicants are granted access to Fields' Teasers;
  9. Notification of Preferred Bidder;
  10. Payment of signature bonus by the Preferred Bidder (or the Reserve Bidder);
  11. Award of the Marginal Field to the Preferred Bidder;
  12. Negotiation and Execution of the Farm-out agreement between applicants and leaseholders.

The DPR notably expects the registration of applicants to take about two weeks, followed by another two weeks of evaluation of submission and reports preparation. Prequalification, which eventually gives access to the data rooms, will be based on the applicant's incorporation status, technical competence and financial capability. By August 2020, all technical and commercial bids are expected to be submitted.

The whole process is done electronically on the https://marginal.drp.gov.ng portal. Under the DPR Guidelines, the entire process is not expected to take longer than six (6) months, from date of announcement and commencement to signing of Farm-out agreement with the OML holders.

Fees Payable

S/N0

Description

Amount

1

Registration fee

N500,000

2

Application Fee

N2,000,000 per field

3

Bid Processing Fee

N3,000,000 per field

4

Data Prying Fee

N15,000 per field

5

Data Leasing Fee

N25,000 per field

6

Competent Persons Report

N50,000 per field

7

Field Specific Report

N25,000 per field

 

Approving Authority

The approval of the President, subsequent to the payment of all bonuses and fees brings a marginal field award into effect.

Zion is Managing Director at Centurion Law Group and is responsible for Legal Affairs in Project Finance, Infrastructure, Real Estate, Taxation and Energy law.

MENA Region To Get $792bn APICORP Planned Five Year Investments

The Arab Petroleum Investments Corporation (APICORP), a multilateral development financial institution, estimates that planned and committed investments in the MENA region will exceed USD792bn over the next five years (2020–2024).

As per APICORP's MENA Energy Investment Outlook 2020-2024, which it launched today, the amount marks a USD173mn decline from the USD965bn in last year's five-year outlook.

The overall decline in the investment outlook - mostly in planned investments - is largely attributed to the 2020 triple crisis: the COVID-19-related health crisis, oil crisis and a looming financial crisis.

Despite these difficult circumstances however, the GCC region's committed investments increased by 2.3% compared to a 6% overall decrease in the MENA region as a whole, indicating a higher project execution rate in the GCC.

The fallout from the 2020 triple crisis

At the end of the first quarter of 2020, most countries around the world were facing the same dilemma in how to deal with the COVID-19 health crisis: choosing between maintaining business as usual and thus risking a massive loss of lives, or imposing lockdowns and restrictions to contain the virus. This dilemma called for uncoordinated trade-offs among countries. The resumption of travel and trade however will require international coordination.

With regards to the decline in oil prices, which was driven by the supply surplus and exacerbated by a historic demand contraction due to the COVID-19 pandemic, APICORP expects that it will lead to a restructuring of the oil and associated gas industry, as well as an accelerated closure of the lowest efficiency parts of the capital stock, and mergers and acquisitions (M&A). Considering the various market forces such as crude price differentials and discrepancies between actual markets versus futures markets, APICORP projects average Brent oil prices to stay in the USD30-40 range in 2020 and 2021 before reflecting a more balanced market.

The third episode of the triple crisis is a potential financial crisismanifested by a global liquidity crunch that is taking hold as more financial assets shed their value. Although central banks and multilateral financial institutions are stepping up, concerns linger that such massive stimulus plans might create enormous unproductive debt overhangs that will slow economic growth.

Dr. Ahmed Ali Attiga, Chief Executive Officer of APICORP, said: "The impact of COVID-19 is already deeper and longer lasting than past downturns. Indeed, the nature of this triple crisis and the profound restructuring in oil and gas will hit energy investments for a potentially long period of time, sowing the seeds of supply crunches and price volatility. Therefore, we expect a W-shaped recovery for the MENA region. Furthermore, despite the positive effects of digitization and automation on efficiencies across the value chains, many fundamental questions remain that will negatively affect investments. International collaboration between the private and public sector will therefore be critical to counter the expected shortfalls in investment, and APICORP will continue to play a lead support role in this regard as a trusted financial partner to the region's energy sector."

Dr. Leila R Benali, Chief Economist, Head of Strategy, Energy Economics and Sustainability of APICORP, said: "The impact of the triple crisis has led to sharp cuts in capital expenditures and restrictions to projects and supply chains. It has also brought to the forefront a possible restructuring of the oil and gas industry, accelerated the closure of the lowest efficiency parts of the capital stock, and energized mergers and acquisition activity. As we mention in the outlook, we expect a restructuring of the value chain, thus putting the strongest countries and companies from a total cost and leverage standpoint in the best position to preserve their long-term value proposition and return to their respective shareholders."

What is driving energy investments in the MENA region?

The MENA Energy Investments Outlook 2020 indicates that energy investments are primarily driven by several countries, namely investments by Saudi Arabia in the gas and power sectors (USD39bn and USD41bn, respectively); Iraq's reconstruction efforts and gas-to-power (USD33bn); the UAE's oil capacity maximization (USD45bn); and Egypt's new petrochemicals drive (USD38bn). Notably, APICORP puts private sector's share in energy project investments at 19% after climbing to 22% in last year's outlook.

Key developments in the gas, petrochemicals and power sectors

In terms of planned investments, the biggest gain was in the gas value chain, which jumped by USD28 billion, a 13% increase compared to last year's outlook. The increase signals the developing of unconventional gas in the GCC, namely in Jafura and Hail gas fields in Saudi Arabia and Ghasha in the UAE, as well as the increasing production capacity in Qatar, Egypt and Oman.

In the petrochemicals sector, APICORP expects countries to consolidate their respective strategy in order to increase monetization and maximize value from the hydrocarbons they produce. Key investments in this sector include Duqm (USD8.67bn) and Sur (USD6.73bn) in Oman; Al-Zor (USD6.5bn) in Kuwait; SATORP Amiral ((USD6.34bn) in Saudi Arabia; and the QCHEM Complex (USD4.5bn) in Ras Laffan in Qatar.

The power sector meanwhile registered a USD114bn decline in investments due to the commissioning of several projects during 2019 in Egypt, UAE and Saudi Arabia. Globally and in the region however, utilities' share prices did not fall as much as their counterparts in the oil and gas sector. This was due to a relatively milder decrease in demand for electricity and government utilities subsidies in select countries.

Although the power sector has not witnessed major credit issues so far, the impact on investments has been more acute in 2020. Spending on renewable projects and transmission and distribution (T&D) networks were cut due to delays in project development, the various restrictions imposed and expectations of lower demand. As per the outlook however, the MENA region does not seem to have been affected so far as renewables auctions remained unchanged, namely Saudi Arabia's Renewable Energy Development Office (REPDO) program.

Compared to 2020's initial figures, planned upstream spending has been cut by 20-30% across the board by oil majors, National Oil Companies and large Independents as a result of the decline in oil and gas prices and unprecedented drop in demand. However, unconventional gas and non-associated gas developments aimed at domestic consumption and strategic market share positioning for exports are expected to offset the impact on the upstream sector in the MENA relative to the rest of the world. 

Energy Leaders Give Insight On The Future of Kenya's Oil & Gas Transition

Under the theme ‘Moving Kenya Forward: Oil Production and New Exploration Under COVID-19,’ Africa Oil & Power and the African Energy Chamber provided energy industry leaders a platform to share strategies and thoughts on how Kenya’s oil and gas sector can deal with the implications caused by COVID-19.

The Kenya webinar featured Hon. Dr. Elly Karuhanga, Chairman of the Uganda Chamber of Mines & Petroleum & Chairman, Private Sector Foundation Uganda; Doris Mwirigi, Chief Operating Officer of Energy Solutions Africa; Toks Azeez, Sales and Commercial Director for Sub Saharan Africa, Baker Hughes; Mwendia Nyaga, Chief Finance Officer of Oilfield Movers and Brian Muriuki, Managing Director & Country Chair of Royal Dutch Shell Ghana.

Kenya’s oil and gas industry is in a state of transition, as its major oil and gas development — Blocks 10BB and 13T in Turkana — has been put on hold, with Tullow Oil submitting a notice of force majeure to the Kenyan Ministry of Petroleum and Mining, citing complications from COVID-19.

Meanwhile, Uganda’s Lake Albert Project is moving ahead, with Total announcing plans to acquire Tullow Oil’s stake in the project. The massive development in Uganda, which is set to include a pipeline and refinery, could easily have an impact on regional oil and gas developments and opportunities.

According to Dr. Elly Karuhanga, “Force majeures are reactive for companies, it is something that is beyond their means or the problem there are facing. So, it is unfortunate that this has happened in Kenya, but it is also unfortunate that Tullow had to exercise this in their business. When you think about the reasons they faced, they had no alternative.”

In East Africa, Kenya has the most natural resources and is the most explored country in the region. In order to have a knock-on effect and attract investors in this climate, East African countries need to keep exploring and looking at other projects. In Kenya, there are offshore blocks operated by Eni and hopefully with a great oil flow they will help the economy.

For companies like Baker Hughes, transition into deep-water explorations is expected to be less difficult, because it is already involved in offshore projects across Africa and has actively interacted with Eni in Kenya.

“For us it is more about, how do we get our local partners in Kenya who have been involved in the onshore activities, to then up their game a little bit to meet the offshore requirements and that’s going to take a lot of back and forth, integration, cooperation to get them to a point where the skillset of that personnel and the equipment that they have and intend to acquire will be able to meet the requirements of deep-water play,” said Toks Azeez, Sales and Commercial Director for Sub Saharan Africa, Baker Hughes.

Speakers encouraged synergies and regional collaboration to overcome the challenges faced by the oil and gas industry. Local companies as well as countries need to come together to find a solution to them. According to Mwendia Nyaga, Chief Finance Officer of Oilfield Movers. “Companies can scale up from the location at which they are based and start working in other places. For me it is cooperation, synergizing and not over complication.”

African governments are advised to think about the long-term effects COVID-19 has on oil and gas projects as well as how to regain investors’ appetite, “You should always look at fiscal incentives that allow fair and equitable taxation on revenues, but allow an investment environment that is lucrative, because every dollar in our industry can go anywhere in the world."

"East Africa, big companies and the small-medium sized oil and gas companies, will look at the investment climate as to where they get greater bang for their buck and that will mean that if the East African region does not have favorable fiscals then the dollars will go elsewhere, where you will get better bang for your buck, so there is a balance.

When government is looking at this to be able to enable an environment where investment will be made, knowing that the risk is carried by the investors initially,” said Brian Muriuki, Managing Director & Country Chair of Royal Dutch Shell Ghana.

Doris Mwirigi, Chief Operating Officer of Energy Solutions Africa closed by sharing her belief that the oil and gas industry is in a transition, seeing that oil prices are slowly recovering to pre-COVID-19 prices. “In Kenya we are already at the forefront in terms of green energy and if you look at it, we are still very dependent of fossil fuels. So, you find that we are ahead in terms of green energy, however, I am still an oil girl and believe that oil and gas will recover, and in any case as you can see globally, the oil prices are prices are coming up and if you look at the equity market the oil prices are good for oil companies, so I think oil and gas will still play a major role in the oil and gas mix and we will be here,” she said.

Mwirigi also touched on the involvement of women and how the EqualBy30 initiative will empower more women in the oil and gas sector, “When you talk about adding women, it should not be just about diversity, but a business decision because companies headed by women do better. So, it’s not even a cry for help or diversity but business sense.” 

Covid-19: African Energy Chamber Supports South Sudan

The African Energy Chamber has provided financial and material support to the government of South Sudan to support its efforts to respond to the global Covid-19 pandemic. The number of reported cases in South Sudan is currently nearing 1,000, with 10 deaths already confirmed.

The donation comprises a cash grant and sanitizing products, and represents the long-standing commitment of the Chamber towards the prosperity of South Sudan. It was received in Juba by H.E. Daniel Awow Chuang, Undersecretary at the Ministry of Petroleum, who will, in turn, coordinate the relief activities with the Ministry of Health.

"It is our wish at the Chamber that our contribution will support the laudable ongoing efforts of the government of South Sudan to respond to the pandemic," stated NJ Ayuk, Executive Chairman at the African Energy Chamber.

"This ongoing pandemic goes beyond the oil sector only and we are calling for a much broader support for South Sudan, its workers and its refugees. Short-term relief is critical to the country, especially when it comes to alleviating the economic pain caused by the pandemic and felt throughout the country," concluded Ayuk

Unfortunately, the ongoing pandemic and the crash in oil prices have slowed the good progress that was made by the peace agreement signed by H.E. President Salva Kiir and Riek Machar.

Economic stability and development remain critical to ensuring a successful and long-lasting peace, and the ongoing crisis gives an opportunity to address the fundamental vulnerabilities of the country's economy. Politicians, energy stakeholders, and the international investment community must come together to think about adopting the right approach to ensure a sustainable recovery post Covid-19.

In light of the consequences of the Covid-19 pandemic across African oil markets, the Chamber has multiplied initiatives and efforts to bring relief and guidance to the industry. Since the start of the pandemic, the Chamber has notably published a Common-sense Energy Agenda of top key policy measures to support the industry, and a set of Guidelines for the Movement and Safety of Oil Workers amidst sustained travel restrictions.

Namibia's Ministry Of Mines And Energy Is Optimistic About The Future

With the recently introduced reforms in Namibia's renewable energy sector and the growing presence and entry of international oil companies entering the hydrocarbons sector, the Ministry of Mines and Energy is optimistic about the country's energy future.

"There are very positive and encouraging signs when we talk about the hydrocarbons sector. We have had a couple of investors that are keen on entering the market and potentially finding something," said Hon. Tom Alweendo, Namibia's Minister of Mines and Energy during a webinar hosted by the African Energy Chamber in partnership with Africa Oil & Power on Friday.

"On the renewable energy sector, we have been able to introduce some reforms that have made it possible for independent power producers to come into the sector and produce clean energy, especially through solar and wind," he added.

Minister Alweendo was joined by the Chamber's Executive Chairman, NJ Ayuk, who encouraged a practical and realistic energy transition that addresses the continent's energy needs first.  

"Oil and gas are going to be around for a long time and will remain a major part of many countries across Africa. The same can be said for clean energy. We have to be environmentally conscious and ensure that lowering carbon emissions remains a key priority," said Nj Ayuk. "But, we have to also look at where we stand as a continent and address our needs first," he added.

Although Namibia is largely a consuming country, it hopes to grow its upstream industry, improve energy security through diversifying its energy mix. In achieving this, the country is looking forward to collaborating with the private sector to review its policies in order to attracter further investment.

Other topics explored during the discussion guided by the theme: The Future of the Namibian Energy Industry included plans on the development of the Kudu gas project to which the minister provided that the ministry is currently relooking the project's business model and hopes to move forward thereafter.

On other key projects, Minister Alweendo said the 37,500 bpd barge-mounted refinery in Walvis bay was due to finalize in March this year but, was deterred by the pandemic. Despite this, the ministry is exploring other avenues in order to reach completion on the $370 million project by the end of 2020.

The Angola-Namibia cross border Baynes hydroelectric dam is currently undergoing feasibility studies and is planned to commence with construction in June this year. The 600MW output will be split in 300MW for Angola and 300MW for Namibia.

COVID-19: African Energy Chamber Issues Advisory Guidelines For Oil Workers’ Safety

Amid the ongoing effects of lockdowns in oil and gas-producing countries such as Nigeria, Angola, Algeria, Egypt, Libya, Congo, Gabon, Ghana, Equatorial Guinea, South Sudan and Cameroon, the African Energy Chamber (www.EnergyChamber.org) hereby issues pragmatic commonsense advisory guidelines for governments, oil companies and personnel.

This is aimed at mobilizing, demobilizing and putting back our energy sector to work safely across the continent. The guidelines are open for free consultation on www.EnergyChamber.org.

In light of the prolonged Covid-19 pandemic, the oil & gas industry has been heavily strained, increasing the need to pay critical attention to workers’ safety and putting in place procedures to ensure their transitioning in and out of the workplace. Currently, travel restrictions have forced oil operators to maintain their personnel for extended periods of time on remote sites, increasing the risks of Lost Time Injury.

“We must always prioritize the health, safety and well-being of brave oil workers who continue to defy insurmountable odds to keep energy production ongoing across the continent,” stated NJ Ayuk, Executive Chairman at the African Energy Chamber. “All upstream oil & gas operators are experiencing similar challenges due to reduced workforces and extended periods of lockdown and travel restrictions. Our guidelines put the safety of workers, host communities and oil operators at the core of the industry’s operations and sector recovery.”

“These non-exhaustive guidelines will assist operators and governments in ensuring the movement and safety of offshore and onshore oil workers so oil & gas operations can continue while preventing any additional spread of Covid-19,” concluded Ayuk.

In order to ensure that oil & gas health and safety standards and practices adapt to a new normal, the African Energy Chamber has worked with its partners to issue this new set of advisory guidelines. These guidelines notably take into account local regulations in host countries, and are heedful of the need to protect local communities from exposition to any potential Covid-19 transmission.

Such advisory guidelines notably include a series of agreements and protocols governing health monitoring and travel authorizations given to oil workers before, during and after their mobilization on site. They take into account the best international healthcare practices in order to ensure both a safe continuation and resumption of onshore and offshore activities, while preserving the health of oil workers, host countries and host communities.

Agreement Between Eni, Springfield Exploration & Production Excites Ghana

Following study of technical evidence from Springfield E&P (SEP)'s West Cape Three Points 2 (WCTP2) License and Eni's Offshore Cape Three Points (OCTP) License offshore Ghana, the Government of Ghana has declared earlier this year that the Afina-1x Cenomanian reservoir and the Sankofa Cenomanian reservoir are "one and the same". This conclusion calls for a Unitization Agreement between both operators in order to develop the reservoir that straddles both of their blocks.

This Unitization Agreement of the Afina and Sankofa Fields was requested by Minister of Energy, Hon. John-Peter Amewu, in a letter sent to SEP and Eni in early April 2020. The government's direction then requested unitization talks to be completed within 120 days (four months). Shall both parties fail to comply with the government's directive to agree on a Unitization Agreement, the Minister of Energy is empowered to stipulate the terms and conditions of such an agreement per Regulation 50(6) of L.I. 2359.

While both operators have until August 2020 to complete their negotiations, the African Energy Chamber is hopeful that it will result in the very first Unitization Agreement between an International Oil Company and a Ghanaian operator in the country, ushering a new era for Ghana's upstream sector.

The conclusion of such an agreement would ensure efficient reservoir exploitation, avoid unnecessary competitive drilling and maximize economic recovery of the hydrocarbons reserves from both licenses.

This would not be the first such agreement in Ghana. In July 2009, a Unitization and Unit Operating Agreement (UUOA) was signed for the development of the Jubilee Field, appointing Tullow Oil as its operator. The field entered into production a year later and has been successfully producing since then, becoming the crown jewel of Ghana's oil & gas sector. 

"Oil and gas works best with an enabling environment. The Government of Ghana and the Ministry of Energy are demonstrating a very pro-active attitude towards the development of the country's oil & gas sector.  Their directive to push for negotiations on a Unitization Agreement on Afina and Sankofa to be completed within 120 days is proof of political will that works to benefit the energy sector and the country," stated NJ Ayuk, Executive Chairman at the African Energy Chamber.

"Fast-tracking the development of these fields is very positive given current market dynamics and ensures that a credible Ghanaian operator will start producing at a time when other players are shying away from investing in Africa's upstream," he added.

"We are very bullish that Springfield E&P can move ahead, make the deal work for Ghana's oil sector and become a remarkable example of what African E&P companies can achieve for our industry and our continent," concluded Ayuk.

SEP is a majority interest holder (84%) and operator of the WCTP2 License, with the Ghana National Petroleum Corporation and its exploration company, EXPLORCO, holding the remaining interest. SEP drilled the Afina-1 well in October 2019, making two gas and light sweet oil discoveries at a water depth of 1,030 meters, and consequently more than doubling its proven oil reserves to 1.5 billion barrels and adding 0.7Tcf of gas.

On the other side, Sankofa is a part of the Eni-operated OCTP Block, where Eni holds a 44.44% interest, Vitol 35.56 %, and GNPC 20%. The OCTP Block is reported to have reserves of about 40 billion cubic metres of unassociated gas and 500 million barrels of oil, and has been producing since 2017 from the John Agyekum Kufuor FPSO.

Oil Producer Urges African Countries On Energy & Economic Diversification

If there is one thing that the current COVID-19 and oil prices crises have demonstrated, it is that African oil-producing nations are still not economically diverse.

Despite repeated actions taken by governments over the past decade to diversify their economies, especially following the 2014-2016 African recessions, not enough has been done. Economic crises in African oil-producing countries this year will be so severe they could reach double-digit economic recessions.

As countries like Nigeria, Angola, Gabon, Congo or Equatorial Guinea deal with unprecedented lows in oil prices and struggle to keep their economies afloat, the current downturn could well be the historic turning point these economies need to seriously put diversification at the top of economic policies priorities.

To be clear, diversification does not mean the end of oil, quite the contrary. Efficient diversification goes through a better use of oil revenues to fuel other sector of the economy, build a stronger industrial base and create jobs. But it also means diversifying national hydrocarbons output and increasing production, monetization and valorization of natural gas.

In fact, for many African oil producers, successful economic diversification depends on their abilities to increase hydrocarbons production and make better us of flared and associated natural gas to generate power for industries, produce fertilizers for farmers and manufacture petrochemicals for their growing domestic markets.

With 188.8 Tcf of proved natural gas (BP, 2019), Nigeria has Africa’s largest discovered gas reserves and the 10th biggest in the world. In 2019, it was the world’s sixth largest LNG exporter with a 6% global market share, ahead of Algeria (3%), Angola (1%) and Equatorial Guinea (1%).

Yet, out of the 20.8 million tonnes of LNG Nigeria exported last year (IGU, 2020), 54% went to Europe, 37% to Asia, and the rest to the Americas and the Middle East. In short, none of Nigeria’s LNG goes to Africa.

The only Nigerian gas that reaches African markets is the limited, and often interrupted, supply that goes through the West African Gas Pipeline (WAGP) to Benin, Togo and Ghana. Even then, the lack of stable gas supplies from the pipeline has forced these countries to rely on additional domestic or international sources of gas to fuel their power plants.

“The current situation in global and African energy markets is giving tremendous opportunities for Africans to take a strong position on economic diversification. In that aspect, Nigeria is the country that could take the lead position in becoming the African gas producing platform the continent needs,” stated Kola Karim, CEO & Managing Director of Shoreline Natural Resources during an Invest Africa podcast last week. He is right, and unless the current crisis leads to serious gas-market policies and initiatives to monetize gas across Nigeria and Africa, oil dependence-related hardships will continue and only get stronger.

More needs to be done to monetize gas in Africa. Thankfully, the continent has demonstrated several successful gas monetization projects across industries and beyond just electricity generation. In Benin City, Nigeria, NICPO has been developing for years a network of CNG outlets that take customers beyond petrol and diesel and offer them a domestic, more cost efficient, and cleaner fuel to put in their cars.

On a bigger scale, domestic gas is already being valorized in the Indorama Eleme fertilizers plant in Port Harcourt, currently under expansion, and in the soon-to-be commissioned Dangote Fertilizers plant in Lekki. In neighboring Cameroon, Victoria Oil & Gas has been supporting the development of a strong industrial and manufacturing base on the outskirt of Douala by connecting several customers to natural gas.

Also in the Gulf of Guinea, Equatorial Guinea is building a regasification terminal to process its own natural gas across several industries such as power and cement on its mainland. Further North in Abidjan, the government has been pushing for the procurement and deployment of CNG buses that also run on domestic natural gas. Success stories abound all around us, yet they need to be expanded and replicated for Africa to truly embrace the benefits of economic diversification.

For this ambition to be achieved, the development of enabling environments and sound market policies is crucial to facilitate investments into gas production and gas transportation and processing infrastructure. “Nigeria has already taken the opportunity to maximize its gas with the West Africa Gas Pipeline.

As an industry, if we are able not only to ensure stable gas supplies through that pipeline but also lay additional connections to North Africa and Europe through Niger, and to East and Southern Africa through the Central African Republic, then a country like Nigeria gives itself the opportunity to industrialize the whole continent through the production and export of its domestic gas while creating several thousands jobs,” Kola Karim added.

In that regards, incentives to be given to such critical midstream infrastructure, along with market policies to support gas valorization, form key parts of the African Energy Chamber’s Common-sense Energy Agenda released this month.

Africa needs to get used to a post-COVID-19 world where $50/barrel is the new $100, and where diversification needs to be the key priority in order to create a new hedge and natural buffer against future downwards cycles. “Diversification needs to become our new reality,” added Kola Karim.

“For Nigeria, it is time to stand up and focus on gas to become the gas platform producer that the continent needs. This pandemic should afford us all the opportunity to view our countries from an internal point of view and prepare ourselves and our economies for the next big crisis,” he concluded.

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