Shell concerned at local insecurity challenges in Nigeria

Shell, the international oil firm, lamented the insecurity affecting its operations in the country.

Chief Executive Officer Ben van Beurden, raised concern as he presented the company’s unaudited financial results for the fourth quarter of 2013.

“Compared with the fourth quarter 2012, upstream earnings excluding identified items were impacted by higher exploration expenses and lower volumes.

“A high level of maintenance activity during the fourth quarter 2013 affected high value oil and gas production volumes, including gas-to-liquids, as well as LNG sales volumes.

“Earnings were also impacted by the weakening of the Australian dollar.

Upstream Americas continued to incur a loss. The security situation in Nigeria remained challenging,” he said.

The company has previously bemoaned vandalism to its equipment in the country.

Meanwhile, Shell’s fourth quarter 2013 earnings on a current cost of supplies (“CCS”) basis excluding identified items are expected to be approximately $2.9 billion and were impacted by weak industry conditions in downstream oil products, higher exploration expenses and lower upstream volumes.

“Our 2013 performance was not what I expect from Shell. Our focus will be on improving Shell’s financial results, achieving better capital efficiency and on continuing to strengthen our operational performance and project delivery,” said van Beurden.

The company announced audited results on January 30.

Fourth quarter 2013 CCS earnings are expected to be approximately $2.2 billion, and full year 2013 CCS earnings are expected to be approximately $16.8 billion.

US Eagle Ford Shale Field

By Asjylyn Loder in New York

Zaza Energy Corp. (ZAZA), which got its start as a joint venture with Hess Corp. (HES), bought up oil rights in the Eagle Ford shale field and the nearby Eaglebine in South Texas, near the heart of the U.S. oil boom. Its first quarter revenue fell short of interest expense. The firm’s accountants in March voiced “substantial doubt” about the Houston-based company’s ability to stay afloat.

Hess, which dissolved the partnership almost two years ago, lost money on the deal. And its foray into what has turned out to be the biggest shale play in the U.S. prompted Elliott Management Corp., billionaire Paul Singer’s investment firm, to oust John Hess last year from the chairmanship of a company his father founded more than 80 years ago. Zaza has since entered into a joint venture with EOG Resources Inc. in Houston, one of the few shale companies to bring in more cash than it spends. Zaza’s shares have declined 28 percent this year.

“We are now significantly increasing our production volumes and revenue,” said Todd A. Brooks, president and chief executive officer.

Credit: Bloomberg.net

US Shale Costly Gains

By Asjylyn Loder in New York

The gains haven’t come cheaply. Goodrich said earlier this month that it’s trying to whittle its well costs in the Tuscaloosa Marine Shale down to $11.5 million apiece. The $1.1 billion company, based in Houston, spent almost $52 million more than it earned in the first quarter.

The company has enough money to cover its 2014 capital needs and is working with its board to fund 2015 as it ramps up drilling, spokesman Daniel Jenkins said in an e-mail.

A successful well announced last month has propelled Goodrich shares to $25.34, more than double the 2014 low of $12.28.

While borrowing to spend is typical of start-up companies, it’s not always sustainable. Forest Oil, where interest expense totaled 27 percent of revenue in the first quarter, in February reporteddisappointing well results, and warned that it might run afoul of its debt agreements. Forest on May 6 announced a plan to sell itself to Sabine Oil & Gas LLC in an all-stock transaction. Denver-based Forest declined to put a value on the deal. The company declined comment. Shares have declined 39 percent so far this year.

Credit: Bloomberg.net

Malabu Oil Asks Court to Nullify House Resolution on OPL 245

Tobi Soniyi 
Malabu Oil and Gas Limited has asked a Federal High Court in Abuja to set aside the resolution of the House of Representatives which directed the federal government to cancel the Oil Prospecting Licence (OPL) 245 transaction in which the company is involved.

The company, which was represented in court yesterday by Chief Femi Fasawe,  is also asking the court to set aside the resolution on the grounds that the House of Representatives lacked the power to determine the ownership structure of the OPL 245 deal, as it did in the said resolution.

Following a petition, the House investigated the circumstances surrounding the dispute over the disposition of  OPL 245 which involved the company, the federal government, Shell Nigeria Exploration, Production Company Limited and Nigeria Agip Exploration Limited.

Malabu, through its counsel, Mr. M. A Mogaji (SAN), in its suit filed on April 17, 2014, argued that the House of Representatives’ resolution on its (Malabu’s) ownership structure was illegal and unconstitutional.

It argued that it was only a court of law that was empowered by the constitution to determine the ownership structure of a company.

It therefore asked the court to declare that “the decision and determination” of the House of Representatives was unconstitutional because it amounted to “a piece of legislative judgment and a usurpation of the powers of the judiciary under section 6 of the 1999 Constitution.”

Malabu also asked the court  to declare that not withstanding sections 88 and 89 of the constitution, the House of Representatives did not have the powers to pass any resolution interpreting, canceling and/or deciding legality or otherwise of the contractual agreements between the parties in the transaction.

It sought  “an order setting aside the decision, determination and/or purported resolution HR. 111 of the House of Representatives of Tuesday, February 18, 2014” and another order of perpetual injunction from further interfering in the transaction illegally.

The plaintiff is also asking the court to award N2bn as damages against the House of Representatives and other defendants in the suit “for the stress and the psychological trauma” it allegedly underwent because of the defendants’
“unlawful interference” in the deal.

Listed as defendants are: the House of Representatives; the Speaker, Hon. Aminu Tambuawal, and the Clerk of the House of Representatives.

Other defendants are the chairman of the House of Representatives ad hoc committee which investigated the OPL 245 deal, Mr. Leo Ogor, and the Attorney-General of the Federation, Mr. Mohammed Adoke.

The case could not go on yesterday because two lawyers announced appearances for Malabu Oil.
Justice Ahmed Mohammed adjourned the matter to July 8th to enable the plaintiff resolve the dispute over representation.

Papers filed in court showed that based on the report of the Mr. Leo Ogor-led ad hoc committee, the House of Representatives on February 18, 2014, among other resolutions, gave 50 per cent shareholding of Malabu to Mohammed Abacha, a son of the late former Head of State, Genral Sani Abacha.

The House of Representatives was also said to have, in the said resolution, declared 30 per cent shares of the company for Kekwu Amafegba (Dan Etete) and the remaining 20 per cent for Pecos Energy Ltd.

The House was also said to have directed the federal government to cancel the OPL 245 transaction.

US Shale Negative Outlook

US Shale Negative Outlook

By Asjylyn Loder in New York

Swift Energy Co. (SFY) has slowed drilling while trying to sell acreage or find a partner to shoulder some of the costs. The company on May 6 announced a $175 million joint venture with a unit of a government-controlled energy company in Indonesia. The proceeds will be used to help pay down debt. The deal announcement still didn’t stop Standard & Poor’s from cutting Swift’s credit rating on May 15 and tagging the company with a negative outlook. Shares have declined 19 percent so far this year.

“Traditionally we’ve been a financially conservative company,” said Bruce Vincent, president of Houston-based Swift. “We’ve become more leveraged than we historically have been and we’ve become uncomfortable with that.”

Credit: Bloomberg.net

OPEC Crude Output Advances from 3-Year Low

OPEC Headoffice

Obinna Chima with agency report

The Organisation of Petroleum Exporting Countries (OPEC) crude production climbed in May for the first time in three months, led by gains in Angola and Saudi Arabia, a Bloomberg survey showed.

Output from the 12-member OPEC countries rose by 75,000 barrels a day to an average 29.988 million, according to the survey of oil companies, producers and analysts.

Last month’s total was revised 50,000 barrels a day higher to 29.913 million because of changes to the Saudi Arabian and United Arab Emirates estimates.

Members increased production as the International Energy Agency projected further increases will be needed to meet demand during the second half of the year.

The IEA had said in a May 15 report that OPEC would need to provide an average of 30.7 million barrels a day in the last six months of 2014.

“There’s still room for OPEC production to increase further,” Managing Principal of ESAI Energy Incorporated, in Wakefield, Massachusetts, Sarah Emerson said.

“Both the IEA and OPEC said this month that there’s a need for additional barrels.”

Brent crude for July settlement advanced 16 cents to close at $109.97 a barrel last Friday on the London-based ICE Futures Europe exchange. Brent is the benchmark grade for more than half the world’s oil. West Texas Intermediate crude for July delivery increased 86 cents, or 0.8 per cent, to settle at $103.58 a barrel on the New York Mercantile Exchange.

Saudi Arabia, the group’s biggest producer, bolstered output by 70,000 barrels a day to 9.67 million, the first gain this year.

Nigeria’s production fell 70,000 barrels a day to 1.95 million in May, the second-biggest decrease in the survey. Royal Dutch Shell Plc lifted a force majeure on Forcados crude exports on May 15 after removal of theft points, according to e-mailed statement. Force majeure is a legal step that protects a company from liability when it can’t fulfil a contract for reasons beyond its control.

Libyan output fell by 35,000 barrels a day to 180,000, the lowest level since September 2011. Production this month was down 87 per cent from a year earlier.
OPEC ministers kept their output target unchanged at 30 million barrels a day on December 4. The group will next meet on June 11 in Vienna.

Oilserv MD Calls for Speedy Passage of Nigeria PIB

Managing Director of Oilserv,  Mr. Emeka Okwuosa

By Chika Amanze-Nwachuku

Managing Director of Oilserv,  Mr. Emeka Okwuosa has urged the  National Assembly  to expedite action towards  the passage of the Petroleum Industry Bill (PIB) into law in order to attract more investments into Nigeria's oil and gas sector.

Okwuosa, who made the call in a recent interview with journalists, said the delay in the passage of the PIB was a major setback to the desired transformation in the petroleum industry.

He argued that the oil and gas industry regulatory system and laws are very much out dated, and do not accurately represent the true position of things in the sector.

According to Okwuosa,  the signing of the Nigerian Content Act into law in April, 2010 has resulted in the engagement of indigenous contractors in jobs hitherto handled by foreign firms.

He said aside from empowering indigenous companies, Nigerian companies have built capacity that is sustainable and are now able to offer credible and competitive services in the sector.

According to him, indigenous companies are now taking control of lucrative pipeline construction projects since the passage of the Nigerian content law. He pointed out that the East-west Gas Pipeline project, which was awarded to Oilserv after the opening and examination of bids the company and  and other foreign companies was possible due to  steady investment in capacity building and the Petroleum Minister's insistence that indigenous companies must be accorded due recognition in line with the Nigerian Content Act.

He disclosed that the   Oilserv is currently handling  11 projects valued at about $550 million.  Okwuosa said  some of the  projects had been completed while others  are at various stages of completion included the engineering, procurement and construction (EPC) of Obiafu/Obrikom to Obennode gas transmission pipeline system lot B.

The projects, he said, involved the construction, testing and commissioning of Oron Gas transmission pipeline system, associated pigging facilities and construction of greater Lagos phase 1V gas distribution network system.

Others are the EPC of pressure reduction metering system, EPC of the National Integrated Power Project (NIPP) Lot 1 of gas transmission pipeline system and construction, installation, testing and commissioning crude oil pipeline system as well as other associated facilities.  The project included total upgrade of Ikeja gas metering station, EPC of gas transmission pipeline system, as well as earth and associated civil works.

He explained that the delay by the Nigerian National Petroleum Corporation, NNPC in securing  the right of way  for the 120km x 48 inch Ob/Ob Oben East-West Gas Pipeline was a major setback to early completion of the project, which was aimed at increasing gas supply to the  domestic market.

Okwuosa, however, gave a firm assurance that the project would be completed within 20 months.

Oilserv, an Oil and Gas EPC (Pipeline & Facilities) company incorporated in 1992 commenced operation in 1995. The company, which also offers services beyond the Nigerian shores especially in the West African sub-region, has integrated its strength in the construction of oil and gas pipeline/ flow line , metering station and facilities technology including maintenance of oil and gas pipeline and facilities, fabrication, procurement and project management to offer single point responsibility under stringent delivery schedules.