Minister of Petroleum, Dizeani Allison Madueke
On November 9, 2012, Heritage announced the successful completion of
the acquisition of a 45 per cent interest in Oil Mining Lease (OML) 30,
with effect from November 1, 2012.
In August last year, the company announced its intention to sell part
of a gas block and borrow money from Genel Energy Plc to raise $450
million, easing concerns about how it will fund oil field purchases in
Nigeria.
The cash, the company said, would partly fund Heritage Oil's
acquisition of a stake in Nigeria's OML 30 oil assets announced last
month.
Heritage’s entry into the Nigerian oil and gas sector, according to a
report in the London-based Financial Times (FT), is an unlikely
alliance: a polo-loving local businessman and an oil company founded by a
former supplier of mercenaries, with ties to coup plotters trying to
overthrow African governments.
But it could provide the prototype for a new wave of companies hoping
to take on the majors that have long dominated the Nigerian oil
industry.
At least that is what investors in Heritage Oil are being asked to
believe following a sale of assets in the Kurdistan region of northern
Iraq to help finance a push into Nigeria’s troubled energy sector.
Heritage’s ambitions to transform itself into a significant producer in
Nigeria, alongside local partner Shoreline Power, is based on its $850
million purchase of a cache of oil blocks in the conflict-scarred Niger
Delta from Royal Dutch Shell, Total of France and Eni of Italy, which
was completed in November.
The deal brings together Tony Buckingham, the founder, chief executive
and leading shareholder of Heritage with Nigerian businessman Kola
Karim.
Karim’s Shoreline Energy International conglomerate is partnering the FTSE 250 company to create an indigenous Nigerian company seeking to reverse the fortunes of Shell’s neglected OML 30.
Karim’s Shoreline Energy International conglomerate is partnering the FTSE 250 company to create an indigenous Nigerian company seeking to reverse the fortunes of Shell’s neglected OML 30.
Buckingham’s colourful history, which ranges from helping to supply
mercenaries to fight insurgents as well his links to coup plotters
trying to overthrow the government of oil-rich Equatorial Guinea, to
creating fortunes for himself and investors through a range of oil and
mining deals, is well known to London-based investors.
Less well known is western-educated Karim. His business interests have
extended to co-ventures with companies such as Costain, the UK support
services group, and Schlumberger, the US-based oil services company.
Beyond his ambitions to build an indigenous group capable of becoming a
significant upstream oil operator in Africa’s biggest energy industry,
Karim is also patron of the Lagos Polo Club.
His group’s interests span construction, power generation, engineering
and telecoms across sub-Saharan Africa. Shoreline is, however, less
experienced in managing oil operations than some of the other Nigerian
groups seeking to establish themselves as the government encourages
indigenous participation in the industry.
Paul Atherton, chief financial officer at Heritage, said the new
venture was expected to raise production from OML 30, located in the
western delta near Warri, Delta State, from a current level of 35,000
barrels a day to 55,000 b/d in the short term by improving extraction
techniques, FT reported.
But further investment could see the block, which will formally be
operated by the state-controlled, crisis-prone Nigerian National
Petroleum Corporation (NNPC), increase production to 150,000 b/d within
three to four years, according to Atherton.
Previous attempts to reinvigorate production at OML 30, one of
Nigeria’s most prolific blocks, have faltered. Production, which began
in 1963, has declined sharply from a peak rate of 280,000 barrels
attained in 1973.
Shell, which has long been Nigeria’s foremost foreign investor, is
reorganising its interests in the country. The company has yielded
handsome revenues there for decades, but it has also been implicated in
environmental corruption scandals and became embroiled in the banditry
that stalks the delta.
Shell sold stakes in three licences in the Niger Delta in 2010 to
Seplat, which has since improved output at the fields. Shell went on to
sell stakes in other licences to First Hydrocarbon Nigeria, an affiliate
of London-listed Afren, and Neconde Energy, a local consortium.
Atherton argued that the security situation in the area is now stable,
following an amnesty, which the government said brought more than 20,000
armed men from their bases in the Niger Delta’s creeks.
Production from OML 30 between 2006 and 2009 was severely hit by a
combination of funding and security issues. Heritage said it would
prevent interruptions in production by improving relations with the
community and giving it a share of profits in exchange for helping to
reduce vandalism.
International oil companies “have so many licences, they don’t have the
capital and manpower to focus on all of their licences”, said Atherton.
With oil theft still rife in the Niger Delta and a contentious overhaul
of industry legislation in the offing, some western groups are
gradually selling down their Nigerian interests – particularly
vulnerable onshore fields – to local operators, who in turn are forming
alliances with less familiar western players or Asian groups.
Three weeks ago ConocoPhillips, the US oil group, announced it was
selling its Nigerian businesses for a total of $1.79 billion to
Lagos-based, Toronto-quoted Oando, one of the most ambitious local
integrated energy groups. Oando will take on onshore and offshore
interests delivering 43,000 barrels of oil a day.
But the challenge facing the new wave of indigenous companies, some
backed by western groups, is to prove that they can turn round the
long-term decline in output in Nigeria, one of the world’s largest oil
producers.
Investors in Heritage will be hoping the polo-loving Karim and the
swashbuckling Buckingham can succeed where others have failed.
-culled from THISDAY
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