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LAGOS – The Federal Government has unlocked over $1 billion in investments across the country’s oil and gas value chain since the inception of the current administration.

Olu Arowolo Verheijen, Special Adviser on Energy to the President of Nigeria, Office of Energy, disclosed this in a paper,”The Future of Energy: Shaping the Workforce of Tomorrow”,presented at the recent African Energy Week in Cape Town, South Africa, on November 5, 2024.

She disclosed that by the middle of 2025,Nigeria expects to see Foreign Direct Investments (FDI) on two more projects, including a multibillion billion-dollar deepwater exploration project, which will be the first of its kind in Nigeria in over a decade.

Apart from investments, the presidential aide, said in the last twelve months, her team has clarified the regulatory roles to create an enabling environment for investments and introduced reforms targeted at reducing high operational costs and project execution timelines

The team also introduced a clear set of fiscal incentives for non-associated has and deep offshore oil & Gas gas exploration and production, she said.

She said, this is the first time that Nigeria is outlining a fiscal framework for deepwater gas since basin exploration commenced in 1991.

She added: “Nigeria’s Petroleum Industry Act took twenty years to be passed into law and given Presidential assent, in 2021. We are now building on that foundation with an unprecedented sense of urgency, to completely rewrite the narrative of oil and gas investment in Nigeria. We are already seeing the fruit of our work. Regulatory approvals are being expedited; major upstream investment decisions are being finalised .

“We see the abundant opportunities that lie ahead. We see a Nigeria that is a leading global producer and exporter of energy – whether its fossil fuels or renewables. We are not held back by the outdated approaches and assumptions of the past. We are open, daring, and eager to leave a legacy that will stand the test of time.

“I will always be grateful to President Bola Ahmed Tinubu for giving me this opportunity, and I intend to pay it forward, in all the ways that I can, for multitudes of young women out there just waiting in the wings for their own chance to show what they are capable of doing. I hope that in every country across Africa, these stories will be replicated, and the gender gaps that have come to define our landscape will be aggressively narrowed and closed.

“There is no doubt that the continent will be the better for it. Bringing the perspectives, capacity and the energy of its women, who make up half of the population, into the mix, is a requirement for building the Africa of our dreams”.

On her appointment as a presidential aide, she said it was a bold experiment on the part of President Bola Tinubu picking her without traditional consideration.

Back online again...

Nov. 18, 2024 (All Africa Global Media) --

While the outage lasted, Akwa Ibom residents and entrepreneurs suffered losses as they resorted to powering their homes and businesses with power-generating sets.

Electricity has been restored to Akwa Ibom State after about three days of outage.

"Kindly be informed that supply has been restored to Uyo, Eket, Ekim, and Itu Transmission Stations.

"We sincerely appreciate our customers for their patience and understanding during the outage," Port Harcourt Electricity Distribution PLC (PHED) said on Saturday in a public notice to its customers.

PHED is responsible for the distribution of electricity to Akwa Ibom, Cross River, Rivers and Bayelsa states.

Akwa Ibom has an independent power plant, Ibom Power Plant, which enables the state to enjoy a steady power supply even when other parts of Nigeria are in darkness due to the frequent breakdown of the national grid.

Meyen Etukudo, shortly before his sack as the managing director of Ibom Power Company Ltd, had attributed the outage in Akwa Ibom to the alleged cutting off of gas supply to the power plant by its supplier, Savannah Energy, and the fault on the 132 KV Itu-Aba Transmission Line, which transports power from the national grid in and out of the state.

However, Accugas Limited, a subsidiary of Savannah Energy, denied the allegation that the gas company was responsible for the power outage in Akwa Ibom.

"The power cut in Akwa Ibom State is entirely due to the reported fault in the 132-KV Aba-Itu transmission line, which, unfortunately, is preventing power being transmitted from the National Grid into the State," the company said in a statement on Saturday.

"Ibom Power Company is one of 23 thermal power generation companies which channel power to the national grid, which in turn disseminates all accumulated power to each state of the federation through the electricity distribution companies ("Discos").

"Indeed, Accugas supplies gas to enable 20 per cent of Nigeria's thermal generation capacity and, as such, is a critical enabler of the Nigerian economy.

"Within Akwa Ibom State, Accugas has been the sole supplier of gas to Ibom Power Company since 2014 and, together with other Savannah subsidiaries, has invested over US$1.5 billion in gas development within the state," the company said, adding that its investment in Akwa Ibom demonstrates its commitment to the state and the Nigerian economy.

While the outage lasted, Akwa Ibom residents and entrepreneurs suffered losses as they resorted to powering their homes and businesses with power-generating sets.

"What we are going through right now is devastating, considering the high cost of fuel," a resident told this newspaper on Thursday. "How long can we continue to bear this suffering from incompetent managers of our resources?"

Good gracious. The poor people with no choice but to drink contaminated water.

For SAVE: How does all this add up? On one hand SAVE is pursuing a sustainable strategy, on the other hand it is pursuing a stake in SS.

From the article:

"He says spills from oil wells and pipelines were "a recurring situation", and that he was involved in transporting contaminated soil away from roads, so it would not be seen."

Even if SAVE push for better practices, the other partners in the consortium seem to favour a hush-hush approach. Might be different if SAVE were the sole operator of the fields. It could opt to change things and make life better for people around the fields.

I dont read it this way. The wording has been consistent in recent RNS. The main deal feel through as Petronas walked away, and now they are pursuing an alternative.

SAVE (or this forum) could just as well buy all of WCAT at GBP 4-5mm. And get WCAT out of the deal competition. SAVE has lost more on FX per month than what it currently costs to buy WCAT.

Having said that, market not pricing any good outcome here. WCAT trading below the price it traded before announcing the MOU. Either pricing little chance of success, or not much value/continuous interruptions should the deal conclude.

Good point. If SS assets are a RTO for SAVE, they are 10x a RTO for WCAT with barely any mcap to their share...

IF we have a MoU, wonder why WCAT can mention in a RNS, but we cannot? Maybe we don't, and AK's hopes/reason for continuous suspension to get deal done are just a silk thread..?

Https://www.shortsqueez.co/p/the-pe-firm-that-returned-79x

Lime Rock Management, a private equity firm specializing in energy investments, achieved a remarkable 79x return on its 17-year investment in CrownRock, a West Texas oil producer, reports the WSJ.

The firm had invested $96.5 million in 2007 and patiently held the asset through shifts in the oil industry. Their investment culminated in a $12.4 billion sale to Warren Buffett-backed Occidental Petroleum, marking one of the most impressive returns in private equity history.

Lime Rock’s decision to hold CrownRock for far longer than the typical 5-7 year private equity window allowed it to benefit from key advancements in oil extraction technologies, as well as increased cash flow from CrownRock’s operations.

Despite pressures to sell earlier, Lime Rock stood firm, confident in CrownRock’s potential. CrownRock doubled its production between 2019 and 2022, positioning itself as an attractive asset during a time of rapid consolidation in the U.S. oil sector.

The sale to Occidental followed a wave of mergers and acquisitions across the energy industry, driven by companies like Buffett’s Occidental seeking cash-flow-positive assets.

Lime Rock’s strategic patience, including a continuation fund raised in 2018, enabled early investors to cash out while allowing new backers to participate in CrownRock’s continued growth.

Takeaway: Lime Rock’s historic success highlights the value of patience and strategic timing in private equity, particularly in sectors where technological advancements and market conditions shift. It also shows that continuation vehicles, when used effectively can lead to outsized returns for investors. Kudos to Lime Rock for holding out for 17 years and securing their 79-bagger.

Good read, thanks. Looks like the consortium lacked funding and expertise to run the wells. Well done on the Government to reject it.

Nothing directly applicable to SAVE I would think, but wanted to share as I was surprised by the amount of gas being flared!

The Presidential Compressed Natural Gas Initiative (PCNGI) has revealed that Nigeria had flared about $12.5 billion worth of gas in the last five years. The programme director and chief executive officer of the initiative, Engineer Michael Oluwagbemi, was part of the reasons President Bola Tinubu introduced CNG as a way of turning waste to wealth and rescuing the economy.

Oluwagbemi noted that the country was the second largest gas flaring nation in the world.

https://leadership.ng/nigeria-flares-gas-worth-12-5bn-in-5-years-pcngi/

Don't think pre-emption period is relevant anymore after this:

(Aug, 20) South Sudan's state-run Nile Petroleum is set to assume ownership of Malaysian oil company Petronas' assets in the country, after an expected takeover by Savannah Energy fell through earlier this month.

https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/oil/082024-south-sudans-state-owned-nilepet-to-take-over-petronas-oil-fields

But I might be wrong.

What I hold against AK/SAVE is the total silence outside reporting. Yes they tweet, but this is more for ESG marketing purposes. I absolutely do not see a reason why they cant keep us updated on matters outside SS on a more regular basis. This would help investor sentiment immensely. AK mentioned at the AGM that SAVE will catch up everyone before re-listing. That is possibly too late as he might have lost a few long term investors to frustration.

We have credit support in place for 90% of Accugas customers, either via World Bank [for the two main customers], or credit letters issued by IG rated banks [for other customers]. However, the World Bank guarantees seem capped at $111m. No information is available on letters of credit. But since letters of credit are only for a small % of revenues, it is insignificant either way.

Think this is important when looking at recoverability of these debts.

In essence, the credit support barely covers the FX true up. Let alone trade receivables of $400mm+. I am wondering if the guarantees cover the FX true up at all, or just regular offtake payments?

From AR23:

The risk associated with Nigerian-based gas customers is mitigated through the external credit support covering the offtake contracts at Accugas where we have a Partial Risk Guarantee in place via the World Bank to provide credit support for Accugas’s principal customer for up to US$111.8 million of invoices and for other customers, letters of credit are normally required.

When people talking hedging, it is often in the classic case.

$ investors buys Nigerian asset (say a bond placing), in NGN, and hedges this back to USD to minimize currency risk.

The price of the FX forward is quite simply the interest differential between the two currencies. If carry of the asset is greater than NIBOR, you will "outearn" the hedging cost.

Our case is different in that we have the NGN, and we cant convert those to USD. So the NGN are earning interest close to the NIBOR rate. Hence the cost of the hedge in my example is a flat -25mm to SAVE.

Apologies for typos. My keyboard is splaying up and I didn't proof read previous post.

I was thinking about FX hedge a lot. Many posters here say it is stupid not to hedge. I dont think it is that easy.

Say SAVE want to hedge the entire $100mm worth of NGN cash. Say they put on the hedge start of 2024 at 900 USDNGN.

**** Unhedged: $56.25mm

01/01/2024 $100mm * 900 USDNGN FX = NGN 90bn

06/30/2024 NGN 90bn are now worth $56.25mm (1600 USDNGN FX spot)

You record a drop in cash balance in $ terms (although the NGN 90bn still sit on your balance sheet)

**** Hedged: $75mm

01/01/2024 $100mm * 900 USDNGN FX spot = NGN 90bn

Put on a 6m hedge, ie. sell NGN 90bn, buy USD 6m forward at 1200

06/30/2024 NGN 90bn are now worth $56.25mm (1600 USDNGN FX) at the spot rate

Your FX hedge matures and you settle the pnl in $: [ NGN 90bn / 1200 ] - [NGN 90bn / 1600 ] = $18.75mm

You record a drop in cash balance in $ terms as in the unhedged case,

You record a hedge gain of $18.75mm

I am disregarding NGN interest as this cancels out in both examples.

You notice the forward rate is much higher than spot because of the interest rate differential USD vs. NGN.

This is all well and good ex post.

However if NGN didnt move, ie. spot 06/30/2024 is trading around 900, we would be $25mm worse off with the hedge (that is the hedge pnl we need to pay out to the broker).

Similarly, if NGN strengthened to 700 by 06/30/2024, the unhedged version would again be $25mm worse off.

Here is a scenario analysis, using above example, but varying NGN spot rate on 06/30/2024:

Summary:

With the hedge you are guaranteed -$25mm.

Without the hedge your pnl can be -43.7 to +28.5mm [ie. 18mm worse off to 53mm better off vs. the hedged version]

It all depends on your outlook on NGN.

NGN

Spot $Cash Cash p&l Hedge p&l Total p&l

700 128,571,429 28,571,429 (53,571,429) (25,000,000)

800 112,500,000 12,500,000 (37,500,000) (25,000,000)

900 100,000,000 0 (25,000,000) (25,000,000)

1,000 90,000,000 (10,000,000) (15,000,000) (25,000,000)

1,200 75,000,000 (25,000,000) 0 (25,000,000)

1,400 64,285,714 (35,714,286) 10,714,286 (25,000,000)

1,600 56,250,000 (43,750,000) 18,750,000 (25,000,000)

I agree. Net debt is up, but that as SAVE say that is due too the FX.

Lets unpack this.

Net Debt = Short Term Debt + Long Term Debt - Cash/Liquid Instruments

Gross Debt = Nominal value all all Debt (STD+LTD)

SAVE mention that Gross Debt decreased, which means that we continue to pay down the balance.

Lets look out the main drive, change in Cash/Liquid Instruments. This item decreased by ca. 60%, to S$42.9 million from US$106.9 million at end 2023. That just mirrors the NGN move in H12024. Since our accounts are in USD, this could well reverse at some point when (if?) NGN rallies, since it seems we we haven't spent down any of the NGN cash.

Now how did we pay off some of the gross debt then? This could be from the transitional facility out of current cash flow?

Too little details out there on the mechanics of the transitional facility to work it all out. All we know is 5 Nigerian banks, signed Jan 31st 2024, NGN340bn, 4y.

In summary, not concerned about increase in leverage. It is the cost of doing business in a Frontier country such as Nigeria.

Deep expertise in Africa Oil&Gas there:

Mandhir Singh: Chairman

Mandhir Singh (BSc Hons, MSc) originally trained as a psychologist before migrating into the financial sector.

He worked for a number of stock broking firms (e.g. Brewin Dolphin). During this period, he qualified to deal in securities, options, futures and commodities. He also qualified to handle and manage clients’ money. During his career, he advised clients in respect of individual stock selections as well as helping them manage their stock portfolios

Interesting read. Many international actors at play in Sudan conflict. Does SAVE have the stamina and insight to play in this pit?

https://theconversation.com/sudan-is-burning-and-foreign-powers-are-benefiting-whats-in-it-for-the-uae-238695

Https://www.livemint.com/companies/news/nigeria-issues-first-license-to-build-delayed-floating-lng-plant-11725649391509.html

“This marks a significant milestone and aligns with the gas expansion ambitions of the government,” Farouk Ahmed, head of the regulatory agency, said on Friday.

The plant, located in offshore Akwa Ibom state in the oil-rich Niger Delta, is expected to be commissioned in 2028, with first-gas a year later. It will produce LNG, petroleum gas and condensate.

UTM had proposed getting feedstock for the project at an offshore oil field that’s operated by Exxon Mobil Corp. in partnership with the NNPC, but that asset is in the process of being sold to Seplat, which has ambitions of its own to develop its vast gas reserves.

Seplat didn’t immediately respond to request for comment.

“It is a stranded gas that can only be monetized through a floating LNG technology. It will only add to Seplat’s balance sheet to say they have a ready-made buyer for a gas they have not developed.”