What We Learned About The Oil & Gas Sector This Week

This are happenings within Africa oil and gas sector this week with Nigeria, sierra leone, Tanzania, South Sudan all making moves to strengthen their energy sector, while there was total chaos in Eastern Africa between Kenya and Uganda.

Nigeria To End Non-Supply Of Crude Oil To Local Refineries

The Federal Government and crude oil producers in Nigeria have reached an agreement to ensure a sustainable supply of crude oil to local refineries under a market-determined pricing system.

This move aims to balance business optimization for operators with adequate feedstock supply to their refineries weeks after Dangote Petroleum Refinery raised alarm over alleged sabotage.

The agreement was reached at a meeting convened by the Nigerian Upstream Petroleum Regulatory Commission, NUPRC, where producers, under the Oil Producers Trade Section, OPTS, agreed to a framework that benefits both parties. The goal is to prevent local refineries from being strangled by uncompetitive pricing.

NUPRC Chief Executive, Gbenga Komolafe, emphasized the need for a rule of engagement to ensure pricing models do not hinder domestic refineries. He therefore directed producers and refiners to provide monthly cargo price quotes for effective monitoring and regulation.

The regulator aims to drive the willing buyer-willing seller provision, prevent price strangulation, and attract investments to boost upstream development and domestic energy supply sustainability.

This agreement according to statement issued by the Commission’s Public Affairs Unit aligns with implementation of the Petroleum Industry Act (PIA) 2021 to ensure a level playing field for producers and refiners to operate effectively. Sierra Leone eyes 2025 oil spud, new NOC following bid round

Sierra Leone Eyes 2025 Oil Drilling Operations and New National Oil Company (NOC)

Sierra Leone is on the cusp of handing nine exploration blocks to a major African independent as it looks to drum up interest in its estimated 44 billion barrels of oil resources, its hydrocarbons chief said.

Sierra Leone is looking to ride a wave of exploration success in its pocket of West Africa, with nearby Ghana, Cote d'Ivoire and Senegal turning oil exporters in recent years.

It saw four discoveries through just eight wells in the 2000s, having seen exploration activity begin in the 1980s. Anadarko discovered light, sweet oil at its Venus-1, Mercury-1 and Jupiter-1 spuds, while Russia's Lukoil found oil at its Savannah-1X well. But none of the discoveries were deemed commercial and no new wells have been drilled since 2013.

Total oil in place is estimated by Sierra Leone's government to be 44 billion barrels, with 15 billion-20 billion barrels recoverable. The oil is light and sweet, with an API of 35-42.

In 2022, the country launched its fifth licensing round for 56 blocks covering 63,000 sq km offshore, with three companies applying. FA Oil, a subsidiary of Nigeria's independent Famfa Oil Ltd., secured six oil blocks and is seeking to farm them out.

Since the closure of the bid round late last year, Petroleum Directorate of Sierra Leone (PDSL) has launched a phase of direct negotiations, which is due to end in September. The focus has been on smaller independent companies and National Oil Companies, Director General Foday Mansaray said.

PDSL is also re-processing legacy 2D and 3D seismic data with a number of companies expressing interest in studying it. Two supermajors have purchased geological data.

Sierra Leone is also on the verge of establishing a National Oil Company, Mansaray said, with inauguration slated for the coming weeks. The new NOC will take stakes of 10% in all exploration licenses, Mansaray said, while the state's fiscal terms will make the government take around 25%-30%, subject to some negotiation. Contracts include stabilization clauses to protect investors against regime changes.

The country would also like to build a refinery to supply the local market, as part of its comprehensive oil and gas masterplan. Sierra Leone currently imports all its refined products, draining its foreign exchange reserves. Refined product imports averaged 15,000 b/d in the second quarter, primarily from European refiners

With activity picking up, Mansaray said Sierra Leone officials are "working toward a 2025 drill."

Tanzania to auction oil and gas blocks

The Petroleum Upstream Regulatory Authority (PURA) is set to announce new blocks for oil and gas exploration later this year, aiming to boost investment opportunities for local and foreign investors.

The agency tasked with regulating and monitoring upstream oil operations and liquefied natural gas (LNG) activities in mainland Tanzania, while providing advisory services to the government, reported that nearly 50 percent of the lands surveyed exhibited indicators of oil and gas deposits.

URA Managing Director, Mr. Charles Sangweni, announced on Friday, July 12, 2024 that the planned auction of the blocks will take place late this year or early next year.

Mr. Sangweni highlighted that the natural gas resources discovered in Songosongo and Mnazi Bay have gained global recognition as a viable energy source.

According to him, preliminary investigations carried out on 947,000 square meters of land revealed that at least 534,000 square meters showed signs of oil and gas deposits, indicating that almost 50 percent of the surveyed area has potential for these energy resources.

We have conducted research in some regions, including the coastal areas south of Mtwara, which extend up to 300 kilometres into the ocean,” Sangweni said.

To date, the government, in partnership with oil and gas companies, has discovered a total of 57.54 trillion cubic feet (TCF) of natural gas in different blocks. This includes 10.41 TCF from onshore wells and 47.13 TCF discovered offshore.

Ethiopia, South Sudan agree To Develop New Oil Export Route

South Sudan and neigbouring Ethiopia have agreed to enhance border security and trade by building alternate oil infrastructure because the old hydrocarbon pipeline was caught in a war zone in Sudan

The agreement was reached on July 6, 2024 by governors and administrators on the common border between South Sudan and Ethiopia during which the two sides held extensive discussions on various issues.

One key outcome of the meeting was an agreement to build a key road connecting Upper Nile state in South Sudan to the Ethiopian border, passing through Gambella-Pagak, Maiwut, Malakal-Maluth, and Paloich.

This road will serve as a crucial transport route for south sudan oil, heading to the ports of Djibouti through neighboring Ethiopia.

This is an important road. It will be used for transportation of the oil through the port of Djibouti which is used by landlocked Ethiopia. This means the security of the road will be coordinated and enhanced for trade and movement of people and goods between both nations.

This was preceded by a parliamentary decision of the South Sudan’s National Legislative Assembly on June 24, 2024, approving 778 million dollars for the construction of a highway project linking South Sudan with neighboring Ethiopia.

How diesel cargo sparked fresh Kenya-Uganda fallout

Kenya has thrown a fresh hurdle on Uganda’s direct fuel import scheme, doubling the bond fee for imported consignments destined for Kampala to $45 million.

Uganda's?Energy and Mineral Resources minister Ruth Nankabirwa said Kenya increased the requirement on the size of bond fees at the Vitol Tank Terminal International (VTTI) storage facility in Mombasa from $15 million —posing a bottleneck to Uganda’s hopes of lowering pump prices of the commodity.

VTTI is a privately owned terminal that ties into the Kenya Pipeline Company pipeline network in Mombasa and gives access to the Ugandan market and other landlocked countries further west.

A bond fee is a bank guarantee that an oil company importing fuel for the transit market (usually duty-free fuel) uses to secure duties and taxes payable to the relevant revenue authority should goods be disposed of locally.

The bond can be used to offset taxes in case the company decides to dump the fuel locally and help KRA avert losing billions of shillings in taxes and levies.

Sources privy to the matter say that the Ministry of Energy in Kenya wrote to the Kenya Revenue Authority (KRA) to increase the fee —a change that is expected to be passed on to consumers in Uganda.

An undeclared consignment of 17,000 cubic metres of diesel shipped to Mombasa by Vitol Bahrain on behalf of Uganda National Oil Company (UNOC) triggered this latest standoff between Kampala and Nairobi, official correspondences show, with Kenya reacting by imposing a bond fee on the disputed cargo

Documents show that Vitol imported 82,000 cubic meters of diesel under a direct fuel import deal with Kampala- higher than the 65,000 cubic metres that had been declared to Kenyan authorities by Unoc and approved by the Energy and Petroleum Ministry In Nairobi in Nairobi

Kenya Revenue Authority (KRA) initially rejected a request by Vitol Tank Terminal Authority(VTTI) to offload the Ugandan cargo into It's storage facility in Mombasa, citing a breach of conditions set by the Ministry of Energy and Petroleum.

Sources said State House in Kenya intervened and VTTI was allowed to move the extra load of diesel into it's warehouse as it processed additional bond fees

Uganda and Kenya have the joint costliest fuel in the East African region at $1.46 per litre of super. A litre of diesel is going for $1.37?in Kampala compared to $1.33?in Kenya.

Kenya had in September last year declined to issue Unoc with a license, prompting Uganda to move to the East African Court of Justice. Unoc got the license in March year, putting to an end a diplomatic spat between the two neighbours. Nairobi had while rejecting Unoc’s application cited a raft of reasons, including lack of local footprint of at least five retail stations and five licensed retail stations and no proof of annual 10 million dollars turnover by Unoc

Unoc’s maiden cargoes arrived at the port of Mombasa last week, as the country moves to end decades of relying on Kenyan oil companies.

The Ugandan government-owned firm signed a five-year deal with Vitol Bahrain, amid a fallout with Kenya’s decision to drop the Open Tender System for a Government to Government deal with three Gulf oil majors.

Kenya inked a deal with Saudi Aramco, Abu Dhabi National Oil Company, and Emirates National Oil Company for the supply of fuel on credit for 180 days.