Energy competition

Big Men: The Story Of Oil In Africa

A new documentary highlighting African oil corruption in the Niger Delta is set to open across the U.S. this week in theaters.  It was filmed by Rachel Boyton in late 2006 as she was trekking through the oil-rich Niger Delta region of southern Nigeria and tells her chronicle of the petroleum-fueled pursuit of wealth and status in Africa. Below is the trailer to the film.

The central narrative of the film is that it takes place in Ghana, some 200 miles to the west. Boynton somehow convinced Dallas oilman James Musselman and his British-born colleague Brian Maxted–the chief executive officer and chief operating officer, respectively, of a privately held exploration company called Kosmos Energy–to let her shadow them with cameras and microphones as they drilled their way through layers of Ghanaian politics and bureaucracy, and the white-hot core of Wall Street, in order to reap the financial rewards of an amazing discovery. Kosmos had raised $825 million in private equity investment from Warburg Pincus and the Blackstone Group and located the country’s first known oil reserves: a multi-billion barrel, deep-sea deposit, 40 miles off the Ghanaian coast in the Atlantic Ocean and dubbed the Jubilee Field.

As to why oil executives would have a documentary film maker follow them around, Musselman explains that “Rachel is very persuasive, She was passionate about the story. I thought it was a good story that just got better, frankly, as time went on. We don’t enjoy great reputations a lot of the time. I thought this was a good story to show how in Ghana, we could transform the lives of a whole lot of people for the better. And I thought her contrast back to Nigeria was really good. I’d seen some of her previous work and I thought she’s gonna do a good job. It wouldn’t be any kind of expose’ or anything bad. I trusted her.”

I look forward to seeing this film myself.

Statoil, Exxon Make Large Gas Discovery Off Tanzanian Coast

Tanzania

A large gas discovery off the coast of Tanzania has been made.

Statoil and ExxonMobil have confirmed they made a large gas discovery in the Zafarani prospect offshore Tanzania in Block 2. Earlier this month, the company reported that Zafarani-1 had encountered gas shows in a good-quality reservoir. Statoil spudded the well in early January 2012 with the Ocean Rig Poseidon (UDW drillship). Logging results reveal that it is a high-impact discovery, far proving that the well holds up to 5 Tcf of gas-in-place. Zafarani-1 has encountered 393 feet (120 meters) of excellent quality reservoir with high porosity and high permeability, reported the operator. The gas-water contact has not been established and drilling operations will continue until total depth is reached. “This discovery is the first Statoil-operated discovery in East Africa and an important event for the future development of the Tanzanian gas industry. It is also a demonstration of how Statoil’s exploration strategy of early access and high impact opportunities strongly supports the company’s ambition for international growth,” said Executive Vice President for Exploration Tim Dodson in a statement Friday. “This discovery could potentially be a catalyst for large scale natural gas developments in Tanzania,” added Tanzania Petroleum Development Corporation Managing Director Yona Killaghane. The International Monetary Fund recently stated in a country report, “Tanzania’s prospects of becoming a major producer of natural gas by the end of the decade appear good. There could be large foreign direct investment inflows over the next five years, and a substantial increase in exports and government revenue beginning around 2020.” So far, roughly 26 licenses have been awarded in the country, making it the highest number in the East Africa region. Zafarani is the first exploration well that has been drilled in the license, which covers approximately 2,120 square miles (5,500 square kilometers). The water depth at the well location is 8,470 feet (2,582 meters). The well will be drilled to reach an expected total depth of around 16,730 feet (5,100 meters). Statoil operates the license on Block 2 on behalf of TPDC and has a 65% working interest while ExxonMobil Exploration and Production Tanzania holds the remaining 35%. In the case of a development phase, TPDC has the right to a 10 percent working interest.

This is huge for Tanzania.  If all works out, the economic benefits are astronomical.  In just a short amount of time, it has become a major player in the African energy market if all the assumptions remain true from the initial discovery. Being strategically located facing Asia, the fastest growing energy consuming region in the world, getting and shipping the gas won’t be that challenging, which only means more money stays in the country for development.

Bookmark and Share

India plans to invest more in African gas and oil sector

Indian firms plan on expanding their presence in Africa.

India’s state-run companies are looking to acquire stakes in oil and gas blocks in Africa, form joint ventures in the continent and source natural gas to meet rising fuel demand at home, Indian Oil Minister S. Jaipal Reddy said Friday.

“Today as much as 21.5% of India’s crude oil imports are from Africa. In the years ahead, we seek more crude oil and liquefied natural gas from Africa,” Mr. Reddy said at a conference.

Africa is considered to have good hydrocarbon potential, with significant oil production coming from West Africa, and new promising gas discoveries in East Africa. Countries like China have already invested heavily in the region to develop its resources.

India, which faces a huge energy deficit and imports about 80% of its crude oil requirements, is scouting for hydrocarbon assets that can boost its energy security in the long term.

“Our companies are also interested in farm-in opportunities in producing blocks, especially in Libya, Algeria, Egypt and Nigeria,” Mr. Reddy said. He added that companies like GAIL (India) Ltd., Petronet LNG Ltd. and Indian Oil Corp. are interested in sourcing natural gas on a long-term basis from Africa.

He said the companies would “explore possibilities of equity participation” in natural gas export projects, gas processing businesses and gas-based petrochemical projects in Africa.

“There is no ceiling on imports from Africa. We are trying to maximise our [oil supply] sources in Africa,” Mr. Reddy said.

He didn’t specify which projects Indian oil companies were eyeing, how much they would invest and where the money would come from. He said that “with Africa’s economic development picking up momentum and its energy demands rising, India is keen to become a dependable supplier of petroleum products to Africa.”

Mr. Reddy also said that India’s crude oil imports from Iran remain on schedule and aren’t facing any bottlenecks.

Trade settlement between the two countries was hit after India’s central bank barred Iran-related payments from being processed through the Asian Clearing Union, a regional clearinghouse which the U.S. says is opaque and could be used by Tehran to finance its alleged nuclear-weapons program.

“The government of Iran is eager to help us in supplying oil in spite of many disturbing developments at the global level. Payment issues are being settled,” Mr. Reddy said.

Energy security is of top concern for India. Facing the critical challenge of meeting a rapidly increasing demand for energy, India is looking for more sources.  Africa naturally comes to mine.  Although India has significant reserves of coal, it is relatively poor in oil and gas resources. Its oil reserves amount to 5.9 billion barrels, (0.5% of global reserves) with total proven, probable, and possible reserves of close to 11 billion barrels. The majority of India’s oil reserves are located in fields offshore Bombay and onshore in Assam.

Due to stagnating domestic crude production, India imports approximately 70% of its oil, much of it from the Middle East. Its dependence is growing rapidly. The World Energy Outlook, published by the International Energy Agency (IEA), projects that India’s dependence on oil imports will grow to 91.6% by the year 2020.

Concerned about its growing reliance on oil from the Persian Gulf – 65% of its energy is imported from the region – India is following in the footsteps of other major oil importing economies, and seeking oil outside the Gulf. Indian firms’ investment in overseas oilfields is projected to reach $5 billion within a few years. Of particular interest is Africa

Bookmark and Share

Eni plans to invest $50 billion in offshore Mozambique gas

Eni Spa Italian multinational oil and gas company will begin developing natural gas off Mozambique’s coast.
Eni SpA expects to invest $50 billion developing natural gas off the coast of Mozambique and plans to begin producing fuel there by 2018, Chief Executive Officer Paolo Scaroni said.Italyâ€(TM)s biggest oil company estimates the Mambo deposit to contain 20 trillion cubic feet of gas, he said today in Doha, Qatar. Eni may transport the gas to market through a pipeline or by converting it into liquefied natural gas and shipping it to Asia. The producer may also sell the fuel locally in the form of compressed natural gas, Scaroni said. Eni announced the fieldâ€(TM)s discovery in October.“Our feeling is it would be a super-giant gas field and is well-placed to supply Asia by LNG,” he said at the World Petroleum Congress in Doha. Europe isnâ€(TM)t a likely destination for any gas from Mambo, Scaroni said.Eni, Anadarko Petroleum Corp. and BG Group Plc together with partners have found trillions of cubic feet of gas in waters off East Africa. The deposits are large enough to justify construction of at least eight LNG production trains, according to estimates by the companies. The producers may ship African gas to Asia and compete with fuel from Australia, where Royal Dutch Shell Plc, Chevron Corp. and other companies plan to invest about $250 billion in gas projects.
Mozambique holding large, vast amounts of gas has the  potential to bring  large scale gas development with a combination of both export to regional and international markets through LNG and supply to the domestic market.  This is great news for Mozambique, as such discoveries of energy will continue to spur meaningful investment in the region, generate significant revenue for the government and offer a multitude of opportunities for the people of Mozambique. Should the projects be developed, Mozambique will able to transship its output to two of the world’s top liquefied natural gas markets, Japan and South Korea, along with being in a prime position to service other rapidly emerging Asian gas markets, such as China and India.
The investment comes at a positive time looking at the context of economic and commercial relations between Italy and Mozambique. This is evident in trade figures between both countries.  According to ICE data, Italian sales to Mozambique have nearly tripled over the past 3 years, the first 5 months of 2011 registered a 13.1% growth in exports from  $15.5 to 17.6 million and 45.8% in imports from €135..5 to 202.6 million compared with the same period in 2010.  With trade expansion between both countries and investments, if managed right, Mozambique has a good chance of having good sustained economic growth and development.
Bookmark and Share

Japan disaster to have impact on South Africa’s nuclear plant proposals

South African government is debating proposals to increase nuclear energy

The devastating events in Japan over the past week have dominated the news headlines all over the world.

First came Japan’s most powerful earthquake since records began, then followed the tsunami triggered by the 8.9 magnitude tremor that wiped out whole towns on the north-east coast.

However the concerns about radioactivity after reactors at a nuclear power plant exploded is the latest worry – and could even prompt a U-turn on proposals to build new plants to increase nuclear supply in South Africa.

South Africa currently operate the only nuclear plant in the continent near Cape Town and wants to construct six new 1,600 megawatt plants to increase the percentage of nuclear energy in its supply to 14 percent by 2030.

The country’s Energy Minister Dipuo Peters said: “It has a bearing in the way in which we make decisions, in the way in which we make policies but also in the way we construct nuclear power plants.”

“I believe that as a country we need to be alive to what is happening in that part of the world,” he added.

The government is currently debating a new energy resource plan to outline South Africa’s energy mix in the next 20 years and Peters was speaking at the Africa Utilities Week in Cape Town.

The increased nuclear output is being cited as a possible solution to the kind of power shortages South Africa experienced in 2008, causing chaos and a loss of billions to industries when demand outweighed supply.

But the Japan crisis has led to safety fears over nuclear activity and Chief Executive of the nation’s energy supplier Eskom, Brian Dames, admitted that there are lessons to be learnt from the tragedy.

“We are looking at how to draw lessons out of what has happened in Japan in terms of design and safety systems,” said Dames, adding that nuclear power was still a crucial element in energy supply.

“Nuclear, as an energy option must play a role in terms of meeting not only South Africa’s energy needs but also global energy needs,” said Dames.

This was inevitable given the seriousness and uniqueness of the earthquake-tsunami damage in Japan.  Can’t fault South African officials for taking precaution.
Bookmark and Share

Oil and natural gas discovered in land locked Chad

Taiwanese state-run oil company, CPC, has discovered crude oil and natural gas in Chad.

CPC Corp, Taiwan (CPC, 台灣中油), the state-run oil company, said it discovered crude and natural gas in Chad.

The exploration well Benoy-1 could yield 9,800 barrels of oil and 35,000m3 of natural gas daily, the Taipei-based company said in a statement yesterday. It’s the largest discovery at a single well for CPC, according to the statement.

CPC, which also has energy investments in Southeast Asia, the US, Australia and Latin America, signed an agreement with Chad in January 2006 for rights to explore for oil and gas in the landlocked African nation.

Taiwan imports almost all of its crude needs and is Asia’s fourth-biggest buyer of natural gas in liquid form.

“Chad is only the beginning,” CPC chairman Chu Shao-hua (朱少華) said at a briefing in Taipei.

The company aims to meet 10 percent of its oil needs from fields in which it has stakes, compared with 2 percent currently, Chu said, without elaborating.

The refiner owns 70 percent of the production rights in three areas in the African country, CPC spokeswomen Jessica Tang (唐苑莉) said by telephone in Taipei. The Chad government holds the rest, she said.

Chad’s oil output reached 118,000 barrels a day in 2009, compared with the 2.06 million barrels a day produced by Nigeria, Africa’s biggest producer, according to BP PLC’s Statistical Review of World Energy.

This find can have significant economic benefits for Chad if the process is managed wisely and competently.  Oil Revenues to Be Used to Improve Quality of Life and standard of living.

Bookmark and Share

LUKoil, Russia’s largest independent oil producer thinking about investing in West Africa

We know that the Europe, U.S. and China have an interest in the oil resources that all over Africa.  Recently of late Russia is now showing much interest in the region as well.  The Moscow Times reports that LUKoil, Russia’s largest independent oil producer, has held top-level meetings with representatives from three West African states, including Liberia, as a part of a $9 billion overseas investment program.

The president of LUKoil Overseas, Andrei Kuzyayev, met Ghana’s energy minister, Joe Oteng Adjei, for discussions about the expansion of the company in Ghana, including the development of new projects, according to the latest corporate newsletter, Neftyanie Vedomosti. After leaving Ghana, Kuzyayev held talks in the capital of Sierra Leone, Freetown, and LUKoil Overseas senior vice president Dmitry Timoshenko visited Liberia’s capital of Monrovia.

Countries like Sierra Leone and Liberia, “which have just come through terrible civil wars … are today, with the interest of foreign investors, quickly resurrecting their shattered economies,” the company’s publication said.[…]

The West African continental shelf is an interesting prospect for many international companies, said Valery Nesterov, an oil analyst at Troika Dialog. “I think almost all Russian companies will be looking at the West African shelf — including Rosneft and TNK-BP,” he added.

LUKoil’s potential resources in the area currently consist of up to 35 million barrels. The company said in September that it might have more petroleum in West Africa than in West Siberia.

Russia’s new dash in Africa continues.  Russian companies are looking to expand abroad. What better place than Africa. The region needs foreign investment, Russia needs new markets.  Africa unlike Europe, Asia, and Latin America, Russian oil companies actually stand a chance to compete on equal terms unlike other regions of the globe that are dominated by American, British, French, Chinese, Norwegian, Canadian, Turkish, Brazilian energy companies.  The more foreign competition there is for Africa’s resources, the better economic opportunities available if managed competently.

Bookmark and Share

India Seeking To Buy Manganese Ore Mining Assets

With its continuation in finding new energy sources India is looking to buy manganese ore mining assets in South Africa.

Indian steel ministry is in talks with the South African government for buying manganese ore mining assets for state-runManganese Ore India Ltd MOIL.BO, a government official said on Wednesday. “We are talking to the government of South Africa. We have requested them to allot us certain mines, we are looking at it aggressively,” Dalip Singh, joint secretary in the ministry of steel, said.

More investment in South Africa should be welcomed. The opportunity and economic development does benefit both sides.

Bookmark and Share

Ghana Sells First Crude Oil Export

Ghana has sold its first crude oil export.

Ghana, the latest entrant to the club of African oil producers, has sold its first crude oil exports to Exxon Mobil Corp., oil trading sources said on Wednesday.

The U.S. oil company has bought cargoes of Jubilee crude loading on Jan. 1-7 and Jan. 8-18 from trading firms Vitol and Trafigura, the sources said. The price of the trades was not available.

Ghana’s Jubilee field produced its first sustained flow of oil at the end of last year. Initial production of around 120,000 barrels per day (bpd) will rank Ghana as sub-Saharan Africa’s seventh largest producer.

Jubilee is estimated to hold up to 1.8 billion barrels and have a lifespan of 20 years.

This comes recently after Ghana started oil production from the Jubilee oil field.

Video report about Ghana’s new found wealth.

Bookmark and Share

Ghana officially begins production from Jubilee Oil field

Ghana officially began oil production on December 15th when the president, John Atta Mills, opened the valves in a televised ceremony at a floating platform some 60 km off the Atlantic coast. The Jubilee oil field, operated by UK-registered Tullow Oil, is initially expected to produce 55,000 barrels/day, with output set to rise to 120,000 b/d over the next six months as more wells come into production. The long-anticipated start to commercial production is a significant moment in Ghana’s history.

Joy Business has learnt that President Mills will this Wednesday officially christen Ghana’s crude oil, Jubilee Oil.  Though production has been ongoing for some time now the day has been chosen as the official date for the programme of activities lined up to celebrate the pouring of first oil.

Energy Ministry officials explain that after months of deliberations over the many names that came up, the partners involved in the project for the country’s first oil in commercial quantities settled on Jubilee Oil. But what’s in the name?

Public Affairs Director at the Ministry, Edward Bawa explained that marketing the product is crucial and the name is central to marketing.

“The Jubilee Field being a world class oil field, has a name you can easily identify with and therefore to associate the oil with the field in itself, will make it easy in terms of marketability because at the end of the day we want to be sure that in the oil market, people – when they see a particular crude – can easily say this crude is from Ghana,” he said.

Ghana’s Jubilee Oil compares to Bonny Light from Nigeria, Iran Heavy, Basra Light from Iraq, Kuwait Export or Brent Crude from the North Sea.

Domestically, the government will have to manage expectations carefully. Many Ghanaians perceive the beginning of oil production as an end to the country’s poverty, but the reality is much less exciting, as data suggest that revenues from oil in 2011 will account for less than 6% of the government’s budget. Oil revenues will not, therefore, be an easy solution to the country’s financial challenges.

There are also concerns about the management of oil revenues, and Ghana’s ability to avoid the mistakes of other West African producers–concerns highlighted by the failure of the country’s parliament to agree a final version of the Petroleum Revenue Management Bill. The bill has been a major focus for both national and international observers, and while the failure to pass it prior to the start-up of production will not have a particularly substantial practical impact–provided the bill is passed fairly soon there­after–the symbolic effect is significant. Despite having years to prepare, wide-ranging consultation processes, technical assistance from donors and a public mandate to do so, the government was unable to pass this very important piece of legislation. This failure will worry international donors and civil society organizations that fear the worst for Ghana’s oil-rich future.

Concerns are unlikely to have been ameliorated by parliament’s decision to approve the collateralization of the country’s oil revenues for use in contracting external loans. The decision–which means that 70% of oil revenues can be used as collateral for borrowing while the remaining 30% will go into an Oil Heritage Fund–necessitated an amendment to the clause in the draft Petroleum Revenue Management Bill that prohibits the use of oil revenues as collateral for loans, and is unlikely to be well received by donors and the IMF. The government has argued that it is necessary to use future oil revenues to secure the loans needed to support its ambitious capital and social development programs. However, while there is little doubt that the move will grant greater access to external borrowing for the country, many are questioning Accra’s rationale for needing to collateralize oil revenues given current investor interest in Ghana’s sovereign bond and expected appetite for another in the future.

Certainly, the history of using oil revenues to secure borrowing does not bode well for Ghana, as oil producers such as Nigeria, Angola, Equatorial Guinea and Congo (Brazzaville) have all failed to utilize the borrowing to support development and use the money to invest in areas that generate sufficient returns, either socially or financially. Given the concern over Ghana’s use of the US$750m raised through its issuing of a Eurobond in 2007, there is reasonable cause for concern that the country risks saddling itself with substantial extra debt with little to show for it when the oil eventually runs out. With power in Ghana often swapping between the National Democratic Congress and the New Patriotic Party, there would also be a worrying incentive for each party to leverage borrowing as much as possible during their limited time in office for schemes–likely to be rushed or poorly planned–designed to win them the ongoing support of the electorate. The possibilities for corruption also increase as there is more money making its way through the system.

Crucially, the approval of collateralizing oil should serves as a warning. The failure to pass the Petroleum Revenue Management Bill and create a regulatory agency separate from the Ghana National Petroleum Corporation underscores the fact that, for the time being at least, all talk of Ghana being “different” from other West African oil producers is just that.

Here is video of the President of Ghana, John Evans Atta Mills launching the delivery of the country’s first oil allowing it to join the ranks of the worlds’ oil producers

Bookmark and Share