Mozambican parliament approves new Hydrocarbon Law

Mozambique’s long awaited petroleum law has been approved by the parliament with substantial amendments by MPs who argued that the changes will strengthen the role of the Mozambican state in oil and gas exploration and production.

The bill, which will come into effect by the end of the year, was approved with votes from Frelimo and MDM. Renamo voted against the bill on the grounds the High Authority of the Extractive Industry – the body that oversees oil and gas operations - must be composed by elected members from all political parties.

The most important point in the new law is perhaps the fact that the state, through the National Hydrocarbon Company (ENH), controls the production, transport, marketing and transformation of all LNG and their derivatives.

It also states that the government must create the conditions for the involvement of Mozambican business people in the oil and gas industry. This is in response to local businesses who have been demanding a better share in the oil and gas business.

The sector is currently dominated by giant multinationals such as Anadarko and ENI and their own international service suppliers. It is very unlikely that any local company will venture into bidding for concessions of oil and gas exploration areas because they neither have the necessary expertise, nor the funds. They have, however, asked the government to introduce a special regiment that forces multinationals to contract local companies for service and products supply.

For a comprehensive analysis of Mozambique’s petroleum law, the Renamo amnesty deal - otherwise unavailable in the international press - and the political, business and security issues affecting Mozambique, please see our latest issue of Mozambique Politics and Security.

© 2014 Menas Associates

IOCs evacuate staff from Libya

Italian energy giant, ENI, has responded to the escalating violence in the capital by moving fifteen members of its staff out of Tripoli. The employees were moved to the offshore Bouri oilfield before being whisked away to Malta and onto Italy.

French company Total has also moved its staff out of the capital, getting them out of the country by road to Tunisia. The United Nations has also pulled its remaining staff out of the country. 

Following the abduction and beheading of a Filipino construction worker on 15 July, the Philippines government ordered its estimated 13,000 nationals in Libya to leave the country, instructing them to contact the embassy in Tripoli for instructions on "mass evacuation."

Yet how such evacuations are going to take place while the airport is out of action and with little prospect of its restarting operations any time soon is unclear. 

Although the airport at Zawara is preparing to take both domestic and international flights, it is still going to take several days before it is in a position to do so. It also still requires the agreement and support of the Ministry of Transport and the Civil Aviation Authority. More importantly there are still question marks over safety and insurance issues.  

Meanwhile there are growing fears about evacuation by road given that the confrontation has now spilled beyond the airport area and out to Janzour. 

For more news and expert analysis about Libya, please see Libya Focus and Libya Politics & Security.

© 2014 Menas Associates

Algeria: Sonatrach may take stake in Mozambique gas assets

 

Sonatrach's CEO Abdelhamid Zerguine was quoted by APS on 30 April as saying that Sonatrach is in talks to farm into Mozambique's offshore gas projects operated by Eni and Anadarko.

Anadarko, which has been in Algeria since the 1980s, is the largest foreign operator there, operating three oil and gas production sites, with production approaching some 350,000 b/d. It has recently been responsible for discovering one of the world's largest gas finds in Mozambique's Offshore Area 1 of the Rovuma basin. The discovery is likely to transform the economic prospects of Mozambique and Southern Africa.

Zerguine was speaking after signing a Memorandum of Understanding with the head of Mozambique's Empresa Nacional de Hidrocarbonets (ENH), Nelson Ocuane. He said Sonatrach was interested in buying part of a minority stake held by ENH in the offshore gas fields. “We want to have a place, but on the Mozambican side,” he said.

Zerguine did not give details of the size of stake Sonatrach was seeking to acquire, but said a 5% holding would cost it around US$1 billion. The memorandum also opened the way for Sonatrach to acquire exploration blocks in Mozambique.

For more news and expert analysis about Algeria, please see Algeria Focus and Algeria Politics & Security.

© 2013 Menas Associates

Government calls for more Caspian development

The government has called for further development of the Caspian shelf's energy wealth, adding to speculation that some new Production Sharing Agreements could be on the cards.

Economy and Development Minister Basimmyrat Hojamammedov said in late August that PSAs are “rapidly developing” in Turkmenistan, and that the government's priority was signing new PSAs on offshore fields. Specifically (and a little unusually given that talks are still underway), he said that negotiations were being held with companies including “Chevron, ExxonMobil, Total, Gas de France, Eni, ConocoPhilips, Midland Oil & Gas, British Petroleum and several companies from the Far East and the Persian Gulf”.

It is hardly a secret that most of these companies are interested in Turkmenistan's reserves: in particular the dogged efforts of Chevron and ExxonMobil to secure an offshore block are a long-running saga in Ashgabat. The decision to flag up the negotiations now could suggest that the government is moving towards signing new deals. However it's significant the news came from the Economy and Development Ministry – something of an outlier on energy policy - rather than the State Agency for Hydrocarbons, the Oil and Gas Ministry, or Baymurad Hojamuhammedov.

President Gurbanguly Berdymuhammedov also called for increased oil and gas development and “cooperation with foreign partners, including the world's leading companies with advanced technologies and know-how.”

Analysts will be keeping a close eye out as to whether this actually leads to any new deals being signed, particularly as conference season approaches. There is no sign that the government is prepared to budge on its refusal to grant PSAs onshore.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2012 Menas Associates

Algeria: El Merk 'mega project'

Following the announcement of the settlement of its tax dispute Anadarko issued a statement, ahead of its investor conference last week, saying that the El Merk mega project, in which Anadarko is the leading foreign shareholder, is approximately 90 per cent complete and expected production of significant volumes by the end of this year. The El Merk in the Berkine Basin is approximately 300 kms south-east of Hassi Messaoud. It was established to design and construct the surface facilities required for the exploitation of hydrocarbon liquid reserves of six reservoirs in Blocks 208, 405a and 212. It will also accommodate the processing of additional fluids from the Sonatrach/Anadarko and Sonatrach/Eni existing HBNS/HBN facilities (Block 403a/404a), approximately 80 Km north of the proposed El Merk development.

The US$4 billion El Merk Oil Field Development project is under the management of the Groupement Berkine whose shareholders are Sonatrach (37.70%), Anadarko (18.10 %), ConocoPhillips (16.90%), Maersk (9.10%), Eni (9.10%) and Talisman (9.10%) A considerable number of other foreign companies are involved in various aspects of the massive project. These include Petrofac for the central processing facilities; the ABB/SARPI/Petrojet consortium for the support networks; Kahrif for the transmission lines; and Siemens (for the armoured post package. The original design contract was awarded to KBR in 2006.

For more news and expert analysis about Algeria, please see Algeria Focus and Algeria Politics & Security.

© 2012 Menas Associates

Libya: Italy wants to resume its favoured trading relationship

The Italian government is pressing hard for the endorsement of the contracts which were signed between Italy and Libya following the 2008 bilateral Treaty of Friendship. In pursuit of this goal, Italy's Prime Minister Mario Monti and his entourage of diplomats, including Foreign Minister Giulio Terzi and Admiral Giampaolo Di Paola, and businessmen visited Libya on 21st January for talks. The Italian authorities are hopeful that new offers of aid to Libya – including the strengthening of the national police force and improving security - will enable the original agreements to be restored.

Libya will receive US$5 billion from Italy over the next 20 years, including several major contracts of which the largest single project is for the construction of the coastal highway.

Meanwhile, Italy's ENI has reported that bilateral oil sector relations are very cordial. Its CEO, Paolo Scaroni, reported that ENI's output has now returned to pre-war levels of 260,000 b/d. The company has also signed a memorandum of understanding to undertake €380 million worth of social projects in Libya.

For more news and expert analysis about Libya, please see Libya Focus and Libya Politics & Security.

© 2012 Menas Associates

Eni and Total resume operations in Libya

Italian oil giant Eni has resumed operations in Libya, as the National Transitional Council (NTC) tightens its grip on the economy. Eni, one of the biggest western oil investors within the country before Colonel Mu'ammar Qadhafi, said it planned to reopen a number of other oil fields within a matter of days. French oil company Total has also resumed work at the Al-Jurf offshore facility, which is capable of producing 40,000 b/d.

Meanwhile, anti Qadhafi protesters are reportedly closing in on the Leader's home town of Sirte, which is one of the last remaining Qadhafi strongholds. Troops loyal to NTC launched a surprise assault on the city during the weekend.

Eni released a statement saying it has restarted production at 15 wells in the Abu Attifel oil field, about 300km south of Benghazi. The company said it was pumping 31,900 b/d, compared with a rate of 70,000 b/d before the unrest.

The company shut down its operations in March following months of violence and an increasing security threat to its personnel.

Earlier this month, Libya's state controlled Arabian Gulf Oil (Agoco) announced that it had started pumping 160,000 b/d from fields in the east. It is estimated that Libya was producing in the region of 1.6 million b/d before the popular uprising, which makes up a large portion of the country's revenues.

Sources: BBC News, Reuters, WSJ

For more news and expert analysis about Libya, please see Libya Focus and Libya Politics & Security.

Kashagan to come onstream by end of 2012

According to project operator Eni, Kazakhstan's enormous Kashagan oilfield is due to begin producing by the end of 2012 - several months earlier than expected.

The Italian energy major announced the news on 4th September, with Chairman Giuseppe Recchi revealing that “phase one of the Kashagan project has been completed by over 90 per cent”. The first phase is expected to produce 300,000 barrels per day (b/d), with production reaching 1 million b/d in the second phase and 1.5 million b/d in the third phase.

The announcement is something of a last-minute victory for Eni and its partners in the North Caspian Operating Company (NCOC), a consortium which also includes Royal Dutch Shell Plc, ExxonMobil Corp, Total, KazMunaiGas, ConocoPhillips and Inpex Holdings Inc. As recently as July, the consortium was allegedly considering requesting the Kazakh government for an extension to the 2013 deadline for pumping the first oil. Last year senior Kazakh officials suggested that the second phase might not start until 2020. In March, a source told the energy analysts Platts that Kashagan “is in complete disarray.”

The government's Oil Ministry has threatened to slap the consortium with financial penalties if it fails to meet the deadline, having rejected an improvised plan to begin pumping 50,000 b/d by bypassing unfinished processing facilities.

The project has been delayed for both political and technical reasons. On the political side an uncertain tax environment and an increasing tendency towards resource nationalism by the Kazakh government have sown uncertainty among the consortium's international members. On the technical side, geological peculiarities and the area's environment – freezing cold in winter, beset by huge chunks of ice and high winds – have led to a steady increase in the cost and time of recovering oil.

There are reasons to be sceptical about Eni's latest statement, however. In May the company was adamant that Kashagan would begin producing by the end of 2012 or early 2013, before it began discussing the possible need for an extension. So although hopes have been raised by Eni's announcement, it remains to be seen whether the consortium can deliver on its latest promise.

Sources: Central Asia Newswire, Platts

For more news and expert analysis about the Caspian region, please see Caspian Focus.

Libyan oil sector in a state of disrepair

In the key oil sector the Libyan regime has pursued a policy of destruction rather than preservation of the oil installations along the Gulf of Sirte. ENI announced on 14th April that it planned to transfer much of its oil stored in Libya to a safe Italian base as soon as possible. Their intention is to rescue some of their assets, not an easy matter, because the continuation of oil exports cannot be relied upon. Indeed, the revolutionary authorities have stated that further oil exports will be held back until repairs are effected at two oilfields – Mesala and Sarir.

Doubtless, legal wrangling will be acute between the two sides in determining which of the governments in Libya should be in receipt of revenues and taxes arising from oil exports. A strong lobby including the French, whose government has already recognised the Interim Transitional National Council (ITNC) as the legitimate administration, UK and Qatar favours retaining all payments frozen until such time as there is arbitration on the ownership of the oil shipped.

Throughout the country security is poor and few establishments are functioning at other than low capacity. For the moment, foreign concerns are sheltered while Libyan nationals are heavily engrossed in the political turmoil but almost inevitably life will become difficult depending on their support for or against Colonel Mu'ammar Qadhafi's regime.

The local staff in Tripolitania could turn antagonistic to foreign employers should NATO help to usher in new victories for the eastern Libyans.

For more news and expert analysis about Libya, please see Libya Focus and Libya Politics & Security.

© 2011 Menas Associates

Kazakhstan tightens control of resources with nationalisation law

Claiming the need for predictability and clarity, on 24th March the government of Kazakhstan announced that its ability to nationalise private property was now enshrined in law. Seeking to calm the concerns of foreign investors, already concerned about growing resource nationalism in the energy sector, Economy Minister Zhanar Aitzhanova insisted that nationalisation would occur only as a last resort, and that market-based compensation would be paid out. In a choice of phrase that underlined the importance of gas and oil to Kazakhstan's economy, Aitzhanova said that nationalisation would only occur in the case of a “ threat to national security".

The nationalisation provision is already law, having been slipped into a new state property bill which was passed by Kazakhstan's rubberstamp parliament last month. Industry experts have quickly drawn a link between the ruling and the ongoing dispute between the Kazakh government and a Western-led consortium (comprising Eni, BG Group, Chevron and Lukoil) investing in the vast Karachaganak gas condensate field in northwest Kazakhstan.

The Karachaganak contracts were drawn up in the chaotic 1990s, when enterprising oilmen used post-Soviet Kazakhstan's economic upheaval and lack of negotiating knowledge to seal extremely profitable deals. As Astana has gained confidence and expertise, it has pushed back on Western investors and sought a bigger slice of the technical action and the profits. Karachaganak is now the only significant hydrocarbon project in the country without the participation of KazMunaiGas, the state energy firm.

An increasingly acrimonious dispute, featuring several lawsuits has emerged between the Karachaganak consortium and the Kazakh government. In August 2010 it was confirmed that the two sides were close to an agreement which would give KazMunaiGas a stake, and in February and March this year senior officials - including Prime Minister Karim Masimov – said that a deal would be reached this year.

Whether the nationalisation law had this project specifically in mind is unlikely: it seems that the two sides have already gone most of the way towards a solution, and suddenly nationalising the project would be a risky step. However, the lengthy tussle over the Karachaganak field has clearly been a lesson for Astana. The new law provides another tool to ensure that any future investments reap suitable rewards for Kazakhstan.

Sources: Reuters, Silk Road Intelligencer

For more news and expert analysis about the Caspian region, please see Caspian Focus.

Wintershall joins troubled South Stream project

Wintershall has announced that it is joining Russia's South Stream pipeline project. According to a press release on 21st March, the oil arm of German chemicals firm BASF will take a15 per cent share in the offshore section of the pipeline, slated to run across the bed of the Black Sea from Russia to Europe. Wintershall's stake will be worth approximately €2 billion, out of a total cost of around €20 billion.

The move is arguably a tactical success for South Stream, a vast and complex project which has been viewed with scepticism by many energy analysts as commercially unviable. Recently, Russia's Prime Minister Vladimir Putin seemed to signal that he, and Russia's energy giant Gazprom, were backtracking on the project. At a meeting with Energy Minister Sergei Shmatko, the two men discussed the possibility of abandoning the undersea section of the project and shipping liquefied natural gas (LNG) from Russia's distant northern Yamal Peninsula across the Black Sea instead. The plan, which was suggested in response to Turkey's reluctance to agree to South Stream traversing its territorial zone in the Black Sea, has been widely dismissed as commercially impossible.

The agreement with Wintershall implies that the original pipeline plan remains unchanged. The message was reinforced on 22nd March when Putin travelled to Slovenia and secured an agreement between Gazprom and Slovenian gas company Geoplin Plinovodi to develop the Slovenian section of the South Stream. In addition, French electricity firm Electricite de France is anticipated to join the project later in the year. Italy's Eni is already involved as one of South Stream's founding partners, alongside Gazprom.

The involvement of European companies is critical to reassuring European governments and the EU that South Stream is indeed commercially viable. The participation of Wintershall is particularly valuable for Gazprom, since the BASF subsidiary already works on the Nord Stream pipeline, which is being built along the Baltic seabed from Russia to Germany, demonstrating its track record of working on projects which actually do get built.

Wintershall's involvement, however, and the agreement with Slovenia, cannot dispel the issues which still remain for South Stream. The fact that Russia has even raised the possibility of using LNG instead of an undersea pipeline shows that very real political and technical challenges ahead, no matter how European companies participate.

Sources: Wall Street Journal, Wintershall, Bloomberg, AFP

For more news and expert analysis about the Caspian region, please see Caspian Focus.

NNPC negotiating Brass Liquefied Natural Gas project with international partners

There are reports that Nigerian National Petroleum Corporation (NNPC) is currently in negotiation with LNG Japan and Itochu Corporation and the US-based Sempra Energy, to jointly acquire 9 per cent of NNPC's stake in the Brass Liquefied Natural Gas (LNG) project. Negotiations are said to have reached an advanced stage and will soon be concluded. NNPC currently has a 49 per cent stake in the potentially hugely lucrative project, whilst ConocoPhillips, Eni and Total each hold 17 per cent stakes in the project which is located in Bayelsa State.

As part of the Federal Government's Niger Delta post amnesty policy the NNPC will cede 10 per cent of its stake in the Brass LNG project to Rivers and Bayelsa States, under the scheme to allow host States to own stakes in such projects. This means that if the current negotiations are indeed successful the NNPC will only hold a 30 percent stake in Brass LNG after ceding 9 per cent to the consortium and 10 percent to the Bayelsa and Rivers State Governments.

Long fuel queues have suddenly returned to most of Nigeria's major cities. On Friday 18th March residents in Abuja and Lagos State awoke to the reality of fuel scarcity and the resultant queues.

The NNPC has not yet made any statement on the reasons for this recent fuel scarcity. Some observers believe that, unless the fuel scarcities are quickly resolved, it could definitely have an adverse effect on President Goodluck Jonathan's popularity in the presidential polls which is now less than a month away.

For more news and expert analysis about Nigeria, please see Nigeria Focus and Nigeria Politics & Security.

© 2011 Menas Associates

Algeria: Development contracts progress slowly

On 3rd February, the Algerian Council of Ministers reviewed a host of measures related both to the recent unrest in the country and also to economic development. Among dozens of other decisions, the approval of four presidential decrees on oil and gas exploration inched forwards developments in the strategic south west and in the Berkine Basin. Amendments were approved for contracts governing BG Group's Hassi Bahamou permit, Repsol's Reggane and for a development at Rhourde Messaoud Nord involving Eni. Six of Sonatrach's own exploration deals also got the go-ahead.

An amendment to Sonatrach's July 2002 agreement with Repsol and its partners to develop the Reggane field has confirmed the balance of shareholdings in the joint venture. Sonatrach holds 40 per cent, Repsol YPF 29.25 per cent, RWE Dea 19.5 per cent and Edison International 11.25 per cent. The partners have been awaiting approval of this development for more than a year.

BG Group's contract with Sonatrach for exploration and development of the Hassi BaHamou perimeter has also been amended to extend its exploration period until 2012. BG North Sea Holdings is also awaiting approval of its February 2010 deal to buy its partner Gulf Keystone Petroleum's 38.35 per cent interest in permit for $9.9 million, giving BG a 75.1 per cent stake.

A third decision approved a minority stake for Eni Algeria Exploration in the Rhourde Messaoud Nord perimeter through an amendment to a July 2009 agreement between Sonatrach and Alnaft). According to Eni, it signed a framework agreement with Sonatrach in 2008 “setting out the common contractual ground” and extending the duration of the Rhourde Messaoud development licence and one other for a further 10 years. No details were released about Sonatrach's six exploration contracts agreed with Alnaft in June 2010, which have also now been approved.

For more news and expert analysis about Algeria, please see Algeria Focus and Algeria Politics & Security.

© 2011 Menas Associates

Zubair field hits peak output target

Eni has said that production in Iraq's Zubair field has reached its peak output target of 1.2 million b/d. The field, which is already profitable, is divvied up between Missan Oil Company (25%), Eni (32.81%) Occidental Petroleum (23.44%) and Kogas (18.75%).

According to Eni output at Zubair has reached 201,000 b/d, showing a 9.8 per cent rise from when the service contract commenced on 18th February 2010. Zubair, one of the biggest oil fields in Iraq, is located near Basra in the south of the country.

"The consortium's contract cost recovery commences, with the group earning a remuneration fee of $2 per barrel on incremental production," said Eni in a statement.

For more news and expert analysis about Iraq, please see Iraq Focus.

© 2010 Menas Associates

Nigeria: Two pipelines belonging to NAOC blown up by suspected militants

Two pipelines belonging to Eni's Nigeria Agip Oil Company (NAOC) subsidiary, were blown up in an attack by suspected militants at Osiama in Bayelsa State's Southern Ijaw Local Government Area (LGA) on Friday 29th October. The resultant substantial oil spillage damage in the area forced Agip to shut down production of over 60,000 b/d.

According to reports, security operatives suspect that the attack was masterminded and perpetrated by the militant commander, Africanus Ukparisia (a.k.a. General Africa).

Meanwhile, the presidential adviser on Niger Delta Affairs, Timi Alaibe, vehemently refuted claims that the attack on Agip's pipelines was carried out by militants because of their dissatisfaction with the implementation of the Federal Government's amnesty programme.

According to Alaibe, “attributing such wicked act of economic sabotage to ex-militants in an attempt to gain relevance is totally unacceptable.” He insisted that the attack was an isolated delinquent case which had nothing to do with the implementation of the amnesty programme.

For more news and expert analysis about Nigeria, please see Nigeria Focus and Nigeria Politics & Security.

© 2010 Menas Associates

Thirteen IOC's qualify to bid in Iraq's gas auction

Iraq has said that 13 international oil companies have qualified to bid in next week's gas filed auction for the Akkas field, in the western desert, the Mansuriyah field near the Iranian border in the Diyala province and Siba field near Basra. The three oil fields together have estimated reserves of around 11.23 trillion cf of gas.

"Thirteen companies will take part in the gas auction and no more firms will be allowed," said Head Iraq's Oil Ministry's Licensing and Contracting Office Abdul-Mahdy al-Ameedi.

The 13 companies that have qualified to bid include Edison, Eni, Total, Korean Gas Corporation (Kogas), Mitsubishi, TPAO, Itochu, KazMunaiGaz, TNK-BP, Statoil, India's Oil & Natural Gas Corporation (ONGC), Jogmec and Kuwait Energy.

Source: Upstream

For more news and expert analysis about Iraq, please see Iraq Focus.

President Jonathan meets with Eni's CEO to discuss oil and gas developments

President Goodluck Jonathan has recently met with Eni's CEO Paolo Scaroni to discuss the strategies in the Nigerian hydrocarbon sector within the current international energy environment.

At the meeting, the two parties discussed the development of power generation through use of associated natural gas, in order to avoiding the gas flaring practice. In a join venture with several Nigerian national companies Eni contributes over 15 per cent of the power capacity in Nigeria.

Jonathan and Scaroni also discussed Eni's role in the Liquefied Natural Gas (LNG) production sector which contributes to the growth and development of the Delta regions, and Eni's future commitment to development of Nigerai's oil and gas industry.

To find out more about Eni please visit Eni's web site, which you can find here.

For more news and expert analysis about Nigeria, please see Nigeria Focus and Nigeria Politics & Security.

© 2010 Menas Associates

Eni begins operations in Tuna field off the coast of Egypt

Eni has begun gas production in the Tuna field, within the Temsah concession, located in the Mediterranean sea off the coast of Egypt. It is expected that by September, the project will yield around 4.5 million scm/day, and will contribute approximately 8,500 be/day to Eni's equity share production.

Eni owns a 50 per cent of the Temsah concession with the remaining 50 per cent owned by BP. Petrobel, a joint operating company owned by International Egyptian Oil Company (IEOC) and Egyptian General Petroleum Corporation (EGPC), is the operator of the Tuna project. The project consists of a new 4 leg platform in approximately 80 meters of water, three producing wells and 14km of 24" pipeline connecting to an existing infrastructure.

Eni's activities in the Temsah concession, one of the most lucrative in Egyptian waters, with production in excess of 170,000 b/d, continue with ongoing campaign of infill drilling in Temsah, and development of the Denise B field, which is expected to begin production in 2011.

To find out more about Eni please visit Eni's web site, which you can find here.

For more news and expert analysis about Egypt, please see Egypt Politics & Security.

© 2010 Menas Associates