Trump administration hampers US oil

Plains All American Pipeline company has been denied a request for an exemption from steel import tariffs. This will hit plans to build much needed takeaway capacity for the evacuation of oil from the Permian Basin. The capacity bottleneck has already manifested in large discounts for Midland-Permian crude which is trading at a discount of c.USD12/bbl to WTI.

Plains sought an exemption for high-grade steel from Greece for its 585mbopd Cactus II pipeline to the port of Corpus Christi. However the government purports that the steel is domestically produced in “sufficient and reasonably available” quantities in denying the request. Plains is now looking to challenge the decision.

Plains released a strong statement criticising the government following the decision: “Collecting a tariff on steel pipe orders for projects like this constitutes a tax on the construction of critical U.S. energy infrastructure…and is a significant unintended consequence of current trade policy and risks U.S. energy security and American jobs.”

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Kenya goes alone with first oil targeting 2021 - plays catch-up with Uganda

Kenya was left at the pipeline “altar” in 2016 when Uganda decided to export its crude via a Tanzanian pipeline instead. The years of work around a joint Ugandan-Kenyan pipeline went to waste as the two countries could not agree on the development with security as well as political factors hindering co-operation between the two countries.

Kenyan oil discoveries in the Lokichar Basin had been left in limbo with no export plan in sight. However, over the course of 2017, Kenya realised it had to go it alone and started evaluating plans for a standalone export pipeline. In October 2017 the Lokichar owners, Tullow, Africa Oil and Maersk, initiated a study including FEED for the proposed pipeline. The ministry announced at the time that it was planning for an 820km pipeline between Lokichar and Lamu at a cost of USD2.1 billion to be completed in 2021.

The pipeline is expected to be FID-ed in 2019 and it has been reported that significant work has been carried out on the routing which has to deal with the complications of security risk, avoiding nature reserves, population displacement, elevation as well as cost.

Tullow’s commitment to the pipeline was followed by a commitment by Total in January 2018, which appears to have been part of the deal to obtain approval for taking over Blocks 10BA, 10BB and 13T from Maersk as part of the Maersk Oil acquisition.

On 7th February, Tullow announced that it progressing Kenya further with plans for an initial small scale development of 210mmbbl with peak production of 60-80mbopd. This would be the first phase of a wider development which originally had a 560mmbbl 2C resource number and peak production of 100mbopd+.

The Tullow-led JV will develop the Amosing and Ngamia fields as an initial 210mmbbl “Foundation Stage” which will include the export pipeline to Lamu, allowing for earlier FID than a full scale project. Foundation Stage upstream capex is estimated at USD1.8 billion and pipeline capex is estimated at USD1.1 billion – this is significantly below the USD2.1 billion estimate announced last year and the USD2.7-3.0 billion a few years ago (for the Kenyan leg only).

This export infrastructure is critical for monetising the discoveries in the Lokichar and also unlock remaining exploration potential in Kenya along the pipeline route. Tullow is targeting an FID in 2019 with first oil in 2021/22.

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Sub-Saharan Africa - newsflow update

Gabon Deepwater - Leopard discovery

• Leopard-1 was drilled on licence BCD10
• Shell 75%*, CNOOC 25%
• Encountered substantial gas column with 200m net gas pay
• Further appraisal required
• FLNG? 3-4 tcf may be required, although economics of sales into Europe are marginal
• Government is also keen to grow domestic gas market

Congo Offshore - Eni/NewAge - follow up discovery in Marine XII

• Minsala Marine discovery
• Estimated 1bnboe in place, of which 80% oil
• In same shallow water block as the Litchendjili and Nene Marine fields, both of which are currently undergoing development

Angola - first discovery in Kwanza Basin

• Pre-salt offshore Kwanza Basin - oil discovery made by Repsol
• Will evaluate commerciality of the Locosso oil field
• Located in Block 22, immediately to south of Cobalt's Block 21 which contains the play opening Cameia field
• Given remote location and water depth, Wood Mackenzie estimates will require 300mmbbl to be commercial on standalone basis

Liberia, Cote d'Ivoire - Anadarko's non-commercial wells

• Anadarko wells in West Africa all encountered non-commercial oil
• Liberia: Iroko-1 and Timbo-1
• Cote d'Ivoire: Morue-1
• http://www.anadarko.com/SiteCollectionDocuments/PDF/Operations%20Reports/APC%203Q14%20Ops%20Report%2010-28-14.pdf

Nigeria - NNPC pre-empts sale of OML25

• NNPC has pre-empted on the sale of OML25
• Post transaction, NNPC will own 100% and likely transfer the interest to NPDC
• NPDC's portfolio is already overstretched and future investment will be heavily constrained
• The winning bidder of the Shell, Eni, Total process was Crestar Integrated Natural Resources Limited
• It is believed that the pre-emption, a decision made by the Minster of Energy, is due to Crestar's Chairman being  Osten Olorunsola
• The Minister of Energy had fired Osten Olorunsola as Director of Petroleum Resources in June 2013
• http://africaoilgasreport.com/2014/11/farm-in-farm-out/nnpc-in-desperate-search-for-funds-to-pay-for-oml-25/

South Sudan - fighting likely to intensify around fields

• Government and rebels now re-arming following end of rainy season
• Sudan is providing South Sudanese Machar-led rebels with weapons and intelligence
• Rebels likely to set-up bases where they can attack oil fields
• Local self defence militia are guarding fields bolstered by Chinese peacekeepers
• Should prevent rebels gaining control of fields, but fighting likely to intensify

East African export pipeline

• World bank has pledged USD600mm funding towards Ugandan/Kenyan export pipeline
• Total cost estimated to be >USD4bn
• Project still remains in early stages - commercial structure, construction, ownership and operations all yet to be determined
• FEED contracts expected to be awarded end of 2014

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