Upstream

How Africa Oil Corp. made half a billion dollars from Nigeria in less than two years

TotalEnergies' Egina FPSO is Nigeria's biggest producing asset.

By

Investing in Nigeria may not be for the faint-hearted, but the country continues to prove times and again that it can be a highly rewarding market. By securing an indirect interest in some of the country’s largest producing deep-water blocks in 2020, Africa Oil Corp. has shown the benefits that come with betting on Nigeria’s brownfield opportunities.

In early 2020, the Canadian junior secured a 50% equity interest in Prime Oil & Gas B.V. (POGBV) for $519.5m. POGBV has an indirect 8% interest in the Chevron-operated OML 127 that contains the producing Agbami field and a 16% indirect interest in the Total-operated OML 130 that contains the producing Akpo and Egina fields.

Because these represent some of Nigeria’s biggest producing assets, Africa Oil Corp.’s has relied on an average daily working interest production of 25,000 to 28,000 barrels of oil equivalent per day since 2020. Despite hedging constraining POGBV’s realized oil price to less than $60 in 2021, the company’s dividends to Africa Oil Corp. have been generous.

Since January 2020, Prime has distributed eleven dividend payments totaling $500m to AOC, representing over 95% of its original equity investment.  

"Performance of the Company’s investment in Prime has continued to exceed expectations with strong cash flows, dividend distributions and very modest investments on the upstream assets, offshore Nigeria."

Africa Oil Corp, 13 May 2022

A Brownfield Investment Destination

Nigeria offers some of the best proven reserves of oil & gas in the world, existing infrastructure and a large, established energy industry. But because of its above-ground risks, the country has repeatedly deterred foreign investors.

However, deals like the one made by AOC in 2020 are proof that opportunities in the market are real.

“Above-ground risks are constantly used as a pretext by foreign investors not to put their money in Nigeria. Those perceptions are often short-sighted and reveal a misunderstanding of the country’s environment. Because Nigeria is a brownfield investment destination, a successful investment strategy is one that relies on partnering with local actors who will be taking on the above-ground risks for you,” said Mickael Vogel, Hawilti’s Director & Head of Research.

Last year, the country adopted the Petroleum Industry Act in a bid to bring much-needed regulatory certainty to investors. But the transition to the new regime has come with its challenges and is yet to translate into a significant increase in investments.

“Recent and successful deals in Nigeria have been made by foreign companies that focus on injecting capital and bringing in technical expertise instead of seeking straightforward operatorship of the assets. In doing so, they let their Nigerian counterpart and operator navigate the country’s business environment while they focus on developing the reserves and cashing in on their investment,” added Vogel.

Read more

Nigerian companies team up to provide gas to West Africa’s leading industrial hub

The Lagos Free Zone (LFZ) has officially signed earlier today a Gas Infrastructure Development Agreement with Optimera Energy FZE to develop its own gas distribution network. The new project gathers some of Nigeria’s leading gas players around a new venture committed to promoting gas-based industrialisation. West Africa’s leading industrial hub needs gas Located on the Lekki Corridor, the Lagos Free Zone covers some 830ha and is quickly emerging as West Africa’s leading integrated multi-cluster industrial zone. The project is promoted by the Tolaram Group of Singapore and is co-located with the Lekki Port, Nigeria’s deepest multi-purpose seaport, expected to be completed this year. LFZ has already been successful in attracting several industrial companies and manufacturers including TG Arla, Kellogg’s, Colgate, BASF, Saba Building Systems, or Raffles Oil amongst others. As the zone grows, it seeks to cater for potential high-growth sectors such as FMCG, pharmaceuticals, chemicals, engineering, non-metallic minerals, logistics and mixed-use. This is in return increasing the need to provide world-class infrastructure, including a reliable energy supply. Optimera Energy is now in charge of building, owning, and operating the natural gas distribution network within the free zone. The project is expected to require some $20-25m, with uninterrupted deliveries of piped gas expected to start in 2024. Initial capacity will be set at 5 MMscf/d before being gradually increased to 40 MMscf/d as demand in the zone picks up. The special purpose vehicle (SPV) gathers three of Nigeria’s strongest gas players including natural gas distributor Falcon Corporation Ltd and independent oil & gas companies ND Western and First Hydrocarbon Nigeria (FHN) via their respective subsidiaries ND Western Midstream Ltd and FHN Gas Ltd. “The Optimera consortium is made up of like-minded shareholders who are passionate about a common goal: accelerating the further growth of domestic gas utilisation in Nigeria. Having reliable dedicated gas supply infrastructure installed in the LFZ adds tremendous value to existing industrial concerns and will increase the Zone’s attractiveness to future customers.” Audrey Joe-Ezigbo, Managing Director of Optimera Energy and Deputy Managing Director of Falcon Corporation. Promoters of gas-based industrialisation Falcon Corporation has been successfully operating the Ikorodu natural gas franchise in Lagos since November 2006 and will bring its experience in building and operating gas pipeline networks for industries. The company is also a bulk distributor of Liquefied Petroleum Gas (LPG) in the domestic market and is actively developing LPG bulk storage infrastructure in the Niger Delta. On the other side, both ND Western and FHN are amongst Nigeria’s biggest gas producers from OML 34 and OML 26 in the Niger Delta, with combined gas reserves of over 4 Tcf. Via Optimera Energy, they will be transporting their gas to the Lagos Free Zone via the Escravos-Lagos Pipeline System (ELPS). ND Western has notably increasingly positioned itself as an enabler of industrialisation in Nigeria. The company already supplies gas to several power plants in the country via ELPS and exports gas to West African markets via the West Africa Gas Pipeline (WAGP). On OML 34, it has recently embarked on the development of an industrial park providing industries with direct access to cheaper gas directly at the pump. The rise of gas-to-industry in Nigeria Because the power sector remains illiquid, the promotion of gas utilization across other industries is seen as a priority under Nigeria’s Decade of Gas initiative. Chief amongst them is the expansion of the downstream gas sector, especially Autogas for cars and piped natural gas (PNG) for industries. Consequently, industrial gas off-takers are on the rise, and the volumes of domestic gas monetised by Nigerian industries (gas-to-industry) have doubled between 2015 and 2021. To know more about the trends, actors, and projects shaping up Nigeria's natural gas sector, please log into your Hawilti+ research terminal at plus.hawilti.com.

Experts To Discuss Global Opportunities For Nigeria Energy Sector At NOG 2022

The 21st edition of Nigeria’s foremost energy event, NOG Conference and Exhibition is set to hold in person at the International Conference Centre, Abuja from 4 – 7 July 2022. dmg Nigeria events, the organisers of the event stated that NOG 2022 will host key stakeholders from across the global energy value chain to discuss unique opportunities for Nigeria’s energy resources in the face of global energy demand. The conference will also discuss key issues such as financing opportunities for energy projects in sub-Saharan Africa, bridging infrastructure gap for improved domestic gas market, opportunities for indigenous companies in the PIA era, technology innovations for decarbonatization across the value chain, and other critical topics, that will help set the nation’s energy agenda for the next 12 months and beyond. The conversation at this year’s conference is significant as the industry navigates the growing global demand for renewable energy and climate friendly sources of energy in the face of Africa’s unique energy mix requirements. Many industry leaders have also dubbed this to be an opportunity to seek a lasting solution to Africa’s energy poverty and bring the much-needed socioeconomic development. As part of its commitment to the development of the Nigerian energy industry, NOG will also provide the opportunity to showcase and train industry stakeholders on best in class technology innovations across the value chain through its CPD certified NOG Technical Seminar. The Technical Seminar will host sessions in 5 different streams covering upstream operation, midstream, downstream, digitization and project management. The NOG Conference and Exhibition annually hosts over 500 delegates, 300 exhibiting companies, 80 industry expert speakers and 40 sessions across 2 conference streams. 2022 Sponsors include: NNPC, ExxonMobil, Nigeria LNG Limited, Shell, Chevron, Total Energies, Oando, NCDMB, Prime Atlantic, DCPL, Coleman Wires And Cables, UTM FLNG Limited, First E & P, ND Westers, Samsung, Montego, Nivafer, Russell Smith, Vurin Group, MG Vowgas, WAV, Trexm Chemicals, and MicCom, Niger Delta Exploration & Production Plc, Eleva Group and Heritage to date. Hawilti is a proud Research & Content Partner of the 21st NOG Conference & Exhibition.