opportunities and challenges of divested asset management ......why the gale of assets disposal by...

Opportunities and Challenges of Divested Asset Management – NPDC’s Experience

Kareem Folorunso (Manager , NPDC Onshore Assets)

Nigerian Petroleum Development Company Limited (A subsidiary of NNPC)

OUTLINE

Introduction

Why Divestment of Assets by the Oil Majors

Status of Asset At Takeover

The Opportunities Presented to NPDC by the Divestments

The Challenges in Managing the divested Assets

Conclusion

INTRODUCTION

The Oil and gas industry has been the mainstay of the Nigerian Economy sincethe early 70s contributing over 80% of foreign earnings

The industry which started production in the late fifties was dominated by theIOCs – SPDC, Exxon Mobil, Chevron, Total, NAOC, etc.

Federal Government acquired majority shares in the Oil Companies throughseveral Participation Agreements

NNPC was set up to manage Government Interests in the industry

From 2009, the industry witnessed sale of oil block by the Oil Majors (Shell, BG, Agip,Total, Petrobras ,Chevron, ConocoPhillips)

INTRODUCTION CONT’D

OPL 332, 286 and 284

OML 4, 38 and 41

OML 26 and 30

OML 34, 40 and 42

OMLs 60-63

Many Indigenous Oil Companies participated in the bidding process thereby emerging as marginal field operators. Indigenous companies contributes less than 15% of the total oil production as at 2010

In 2010 Nigerian Oil and Gas Content Development (NOGIC) Act was passed .

Proponent of indigenization of the Nigerian Oil industry saw it as a golden opportunity for local participation in the sector and a sure avenue to boost the Nigerian economy

NPDCs involvement in some of the divested assets was brought about by NNPC assignment of her equities to her wholly owned subsidiary

WHY DIVESTMENT OF ASSETS BY THE OIL MAJORS?

Why the gale of assets disposal by the IOC?

Reasons behind divestment provide insight to the challenges to be faced in themanagement of these assets:

Reduced productivity of the assets

Hostile host communities

Insecurity

Change in business model

Operational difficulties due to aged facilities

Dwindling margins as a result of high operating costs in the Nigerian oil industry

Asset has been abandoned for over sevenyears

Equipment in the flowstation had lost theirfunctionality due to lack of preservation

Extensive corrosion on the flow stationequipment

All flowlines harvested by unknownindividuals

Wellhead structures were vandalized

The existing field logistic base was in stateof disrepair

Access to the wells and flow station washeavily silted

The Aged Crude Oil Export Pipelineseverely affected by corrosion and severalpoints were vandalized and damaged byvandals

STATE OF THE ASSET AS AT TAKEOVER – SHALLOW WATER ASSET (OML 40)

STATUS OF ASSET AT TAKEOVER – OML N42 ( CONT’D)

Batan was the only producing fields as at takeover

Flow-station was operational with aged equipment

All other flow stations in the fields were heavily vandalized

All the wellheads were vandalized

All flowlines were stolen

Export pipelines were completely removed by unknown persons

Access ways highly silted - well location accessibility impossible

No crude oil production activity

No visible community development project

TRANSFORCADOS PIPELINE NETWORK

Good condition

De-rated

Integrity not assessedReplacement required

TFP

24” x 31.31km

28”

x 4

2.4

6km

Chanomi mf

Eriemu mf

13.32km

STATUS OF THE ASSET AT TAKEOVER : TRANS – FORCADOS PIPELINE (TFP)

ERIEMU M/F TO UPS

• 16” X 13.48 KM

• 24” X 13.22 KM

UPS TO RAPELE M/F

• 24” X 31.31KM

RAPELE M/F TO FORCADOS RIVER CROSSING M/F

• 28” X 42.46KM

9

9

FORCADOSTerminal

BATAN (30Kbpd)

BatanMFLD

8” x 2.21km

28”

KeremoMFLD

JONES CREEK (150Kbpd)

EGWA 1

(30Kbpd)

8” x 1.2km

EGWA 2

(40Kbpd)

ODIDI 2 (40Kbpd)

8” x 1.5kmODIDI 1 (60Kbpd)

20” x 6.45km

8” x 1.55km

28”

8” x 4.16km

16” x 18.88km

Delivery pipeline (in production)

Stolen Delivery Pipeline(Replacement required)

20” x 2.74km

TFP

28”

FLB

Flowstaion (in operation)

Remote Manifold

Key

FLB Field Logistic Base

Trans Forcados Pipeline (TFP)

2.5km River crossing

Vandalized Flowstaion (to be Revamp)

STATUS OF ASSET AS AT TAKEOVER -SURFACE OIL PROCESSING FACILITIES

STATUS OF THE ASSET AS AT TAKEOVER (CONT’D)

Well Heads/ Xmas tree

valves stolen

1

0

Platform vandalized

11

Flowlines stolen

ROW encroached by mangroves

Flowlines cut at the well head

STATE OF THE ASSET AS AT TAKEOVER (CONT’D)

STATUS OF ASSET AS AT TAKEOVER (CONT’D)

Gas lift Compressor in Jones Creek FSDysfunctional Control room in Odidi CPF

Opportunities in the Divested Assets

NPDC’s Experience

TRANSFORMATION OF NPDC TO AN OIL MAJOR

•Oil = 313 MMSTB

•Condensate = 60 MMSTB

•Gas = 2 TSCF

•Oil = 3.168 BSTB

•Condensate = 330 MMSTB

•Gas = 18.4 TSCF

Post Divestment Huge Hydrocarbon resources become available

NPDC is the 3rd largest oil company in Nigeria in terms of oil reserves and has the 4th

largest gas reserves in Nigeria

Countless opportunities for partnership and collaboration with other business entities also became available as a result of the divestment

NPDC Pre-New Asset Divestment

NPDC Post-New Asset Divestment

ABUNDANT FIELD DATA

Divested assets under NPDC operations consist majorly of matured Oil fields

Critical data for decision making are abundant and readily available

Seismic coverage of blocs is beyond 90%

Well documented geological and petrophysical information

Well logs

Reservoir models

Facility Asset Reference Manuals

EARLY CASH INFLOW

To establish crude oil production is a daunting task

Huge capital investment is required and there are uncertainties in the outcomes

Divested assets are already in production phase

Some of the assets were in production while others require minimal work to re-establish

production

Availability of third party facilities to leverage on – FOT, TFP, NGC gas plants etc

Discovery Evaluation Development Production

Exploration

5 – 10 years 1 – 5 years

PRODUCTION GROWTH OPPORTUNITIES

Quick win opportunities for oil and gas production growth abounds in the divestedassets.

Several non producing wells in the field can be brought into production with minimalwork:

Flowline construction

Wellhead and Xmas tree repairs

Swabbing

Gas lift optimisation

Non producing fields can be re-streamed through re-entry program

Revamp and installation of OML 26 and 30 Gas lift Compressor stations to increaseproduction from 2000bopd to 9000bopd and 15000 to 55000bopd respectively

Drilling of infill wells.

Odidi /Jones creek re-entry projects were conceived in 2013 to re-establish oil and gas production in OML 42

Wellhead platforms and Xmas trees successfully revamped

Dredging of Access ways and heavily silted well slots

Engineering , Procurement , Construction & Installation of Flowlines and Export pipelines

Flowstation and gas plant equipment rehabilitated

Oil production was re-established in Odidi & Jones Creek on October 2014 and September 2015 respectively.

Gas commercialization is planned to commence in Nov 2017 @ 40MMSCF/D.

PRODUCTION GROWTH OPPORTUNITIES – ODIDI /JONES CREEK RE-ENTRY

New Export Pumps at Odidi FlowstationWellhead after revamp

New Control System at OdidiNew 2 x 4.5MW Turbo Generators Installed

PRODUCTION GROWTH OPPORTUNITIES – ODIDI RE-ENTRY

Ubefan

Jones Creek

280 mmboe

150 mbbl/dEgwa478 mmboe30 mbbl/d

30 mbbl/d

AjujuForcefully

closed

since Feb 2006

Batan100 mmboe30 mbbl/d

Rapele Field Rapele MF

Warri River100 mmboe15 mbbl/d

Warri River MF

CrawfordUtorogu463 mmboe30 mbbl/d270 mmcfd capacity

Ughelli West100 mmboe30 mbbl/d

Ughelli East401 mmboe

30 mbbl/d

15 mmcfd

capacity

Afisere192 mmboe60 mbbl/d

Kokori283 mmboe60 mbbl/d

Urhure

Eriemu

295

mmboe30 mbbl/d

Osioka0 mmboe5 mbbl/d

Oroni187 mmboe15 mbbl/d

UzereEast / West361 mmboe60 mbbl/d

Oweh60 mmboe30 mbbl/d

Olomoro371 mmboe60 mbbl/d

Ogini

301 mmboe 20 mbbl/d

Evwreni204 mmboe30 mbbl/d

Keremo MF

Forcados River MF

Production from OML 4, 38, 41

OML 40

Opuama

75 mmboe

4 mbbl/d.

Shut-in

since 2006

GBetiokun115mmboe

20mbbl/d

Staddle with

OML 49

Adagbasa MF

Saghara MF

Escravos MF

Odidi635 mmboe30 mbbl/d60 mbbl/dGas Devt. plan.300mmcfd cap. by 2013

OML 34

OML 42

OML 30

OML 26

TFP OIL delivery line

Manifolds Injection points

Fields

LEGEND

Trans Forcados Pipeline

TFP covers a total length of approx. 87 km

PRODUCTION GROWTH OPPORTUNITIES :TRANS – FORCADOS PIPELINE (TFP)

OML-30ASSET OVERVIEW

MANY PRODUCTION GROWTH OPPORTUNITIES – OTHER ACHIEVEMENTS (OML 26)

Drilling and Completion of 5nos Horizontal wells (Drilled in 9 months)

Successfully carried out OginiFDP.

Reprocessed 483 Sq.Km of 3D Seismic Data

Well intervention campaign

Gas lift Compressors installation

Installation of new export pumps

Sectional replacement of Flowlines and Gaslines

MANY PRODUCTION GROWTH OPPORTUNITIES – OTHER ACHIEVEMENTS

(OML 34)

NAG 1 plant improvement project

NAG 1 plant operated at Name plate capacity (360MMSCF/D) for the 1st

time

Ughelli gas plant upgrade

Utorogu-Ughelli East DOM gas pipeline

Drilling and completion of 2nos wells

Peak gas production of 414MSCF/D in March 2015

MANY PRODUCTION GROWTH OPPORTUNITIES –

OTHER ACHIEVEMENTS (OML 40)

Opuama re-entry project

Well 1 and 3 interventions

Well 7 Intervention

Gbetiokun development

MANY PRODUCTION GROWTH OPPORTUNITIES –

OTHER ACHIEVEMENTS (OML 42)

Odidi re-entry

Jones Creek re-entry

Egwa re-entry

Odidi Gas plant revamp

Work-over activities

Batan drilling

HUGE GAS COMMERCIALIZATION POTENTIALS

Through the divested assets; NPDC is the highest producer of hydrocarbon gas for thedomestic market

NPDC has the 4th largest gas reserve in Nigeria as at date

Plans to harness the huge gas resources in NPDC includes:

Re-streaming of Odidi CPF for AG monetization after revamp of facility

OML 42 NAG Development

Completion and commissioning of Utorogu NAG 2

Cluster Development of NPDC OML 26 & 30 to back-fill Utorogu Gas Plant

Supply of rich gas to Pan Ocean gas plant

HUGE GAS COMMERCIALIZATION POTENTIALS-

NPDC GAS DEVELOPMENT PLANS

S/N

OMLMajor Fields

AG+NAG Reserves(2P) BCF

Existing Infrastructure Gas Development Plan

1. 42 Odidi, Egwa

3716 Odidi AG Gas Plant (80 mmscfd)

5.5km x 24’’ pipeline from Odidi GasPlant to ELPS

NPDC is currently undertaking studies for exporting excess gas from Jones Creek Field to Odidi Gas Plant

In the medium term, plan is to develop the 1.2Tcf Gas Reserves at Egwa for processing at Odidi Gas Plant

2. 34Utorogu, Ughelli East

2927

Utorogu NAG Plant 1 (360 mmscfd)

Utorogu NAG Plant 2 (150 mmscfd)

Ughelli East Gas Plant (90 mmscfd)

Utorogu NAG 2 Plant has been installed and successfully commissioned. Total available gas processing capacity at Utorogu is 510MMscfd

NPDC’s plan is to carry out aggressive development of the AG at Utorogu plant

3. 26&30

Isoko,Ovo, UzereWest,Evwreni, Oroni, Eriemu

3211Expected to use Utorogu gas plant

Medium term plan for cluster development of AG & NAG reserves

Plan to install a Gas Handling Facility of 150mmscfd at OML 30 to process AG and NAG from both OML 26 and 30 and deliver lean gas to ELPS

S/N OML Major Fields

2P AG+NAG

Reserves (2P)

(BCF)

Existing Infrastructure Gas Development Plan

4. 111 Oredo 1365

100mmscfd Integrated Gas Handling Facility (IGHF)

Existing 16” x 20km line linking the IGHF to ELPS

• New 10” x 22km pipeline connecting the IGHF to Pan Ocean JV’s Ovade-OgharefeGas Plant completed. LPG will be stripped out at the Ovade-OgharefePlant while the lean gas will be injected into the ELPS line

• Oziengbe Flare out project is currently being developed. Plans exist to transport gas from nearby Aroh and Ogharekifields in OML 49 to Oziengbe for onward transmission to the IGHF for processing.

5 64 Kukaku 364

Odidi AG gas Plant (80 mmscfd)

5.5km x 24’’ pipeline connecting OdidiCPF to ELPS

Construct gas pipeline from the existing well heads in Kukaku field to OML 42 Odidi field to utilize the 50MMscfd NAG module currently at the Nigerian Ports Authority.

NPDC GAS DEVELOPMENT PLANS

OPPORTUNITY FOR NIGERIAN FINANCIAL INSTITUTIONS TO PLAY BIG IN

THE INDUSTRY

The divestment of assets also open up a vista of opportunities for Nigerianfinancial institutions

Acquisition financing

Project financing – directly or indirectly

Asset insurance

Operations

Other structured financial products

Challenges in Managing Divested Assets

NPDC’s Experience

NPDC’S ORGANIZATION AND OPERATIONAL STRUCTURE

NPDC being a government owned entity presents bureaucratic bottlenecks

Decision making is not as fast as private entities

Asset growth not commensurate to efforts and initiatives

Approval authority limits

Lack of enough manpower

LIMITED SUPPORT FROM JV PARTNERS AND STRUGGLE FOR OPERATORSHIP

JV partners believe they are better qualified to be an operator of divestedassets given SPDC/NNPC JV arrangement

Difficulties in getting JV alignment on work programs and development plans atSUBCOM, TECOM and OPCOM

Irregular cash call payments

Duplication of activities by the JV partners

FUNDING CONSTRAINTS

Work programs required to attain productiontargets has huge monetary implications.

Failure of the strategy alliance partnership

created paucity of fund for asset development

Work programs have to be rationalized based onfund availability

Project deliveries are negatively affected bydelays in payments to contractors.

INSECURITY & VANDALISM

Insecurity prevalent in the Niger Delta region is one of themajor reasons for the divestment of the Assets

Security challenge still pose a big threat to oil and gasproduction in the region

Huge budgetary provision is made yearly for the provisionof security cover for personnel and facilities

Pipelines and facilities are easy targets for militant in theregion

Gun boats are now prerequisites for Oil and gas operationsin the swamps of Niger delta

About 20- 25% of crude oil injected into the main trunk linenever gets to the Terminal

Circa. 17.5million barrels of crude oil has been deferred inonly OML 42 alone from 2012 to date due to vandalism

Scarce resources is used to repair damaged equipment andfacilities.

Bombed Pipeline on Fire

Jones Creek Well 34 Fire –

Millions of dollars was spent to

put off fire and kill the well

Incessant pipeline ruptures

A total of 10 ruptures/leakages within 2 months.

Huge community and environmental issues

Hostility

Exorbitant demands for settlements and compensations

Provision of relief material

Spill clean-up and remediation challenges

Difficult work terrain

Difficulty in accessing work site

Highly unstable soil condition

INSECURITY & VANDALISM CONT’D


Illegal tap on Trunk Line

Bombed Section of Trunk Line

Illegal tap on Trunk Line for crude theft

Bombed Manifold

TFP INCIDENTS ( SEPT 2014 – OCT 2015)

37

BRIEF HISTORY OF THE 28” TFP REPAIR WORKS

TFP Bunkering and Vandalism is a total of 56 Nos repair works

33 32

49

40


Batan area

Chanomi Creek

Yeye

Egbokodo-Itsekiri

Bunkering or Vandalism Point

BRIEF HISTORY OF THE 28” TFP REPAIR WORKS

TFP MAJOR INCIDENTS SPOTS; Chanomi Creek, Rapelle and Batan axis


TFP CHALLENGES/RECOMMEDATIONS INSECURITY & VANDALISM CONT’D

Year Deferment Days Revenue loss(million$)

2013 22 308

2014 71 497

2015 77 539

Total 170 1,344

DEMANDS FROM THE HOST COMMUNITIES

Most host communities see oil companies as the “government” in their area

Basic amenities for good life are absent in most of the communities even aftera long period of oil exploitation

Communities want the company to immediately develop their areasirrespective of the financial implications and budgetary constraints

Great efforts and resources is needed to manage these communities

Production activities and project works are sometimes stopped due to unmetdemands resulting in production deferment

NPDC OPERATORSHIPPERFORMANCE

50

50

Pre SPDC Divestment

•NPDC 55% Equity Acquisition

•SPDC Operation

SPDC Divestment

•SPDC Equity divestment

•Operatorship by SPDC

•Documentation Transfer

Operatorship Transfer

•Facilities integrity evaluation at Opuama Field

•Opuama Facilities rehabilitation

Field re-entry

•Oil and Gas production re-streaming at the Opuama field

•Opuama field development program review

•In-fill development drilling

Field redevelopment

•Further Opuama in-fill development drilling

•Production optimization

•Well & reservoir Management

Field redevelopment


Field redevelopment


•Gbetiokun development

2011 2012 2013 2014 2015 2016 2017

OML 40 NPDC OPERATORSHIP PERFORMANCE/PROGRAM

51

OML 26 NPDC OPERATORSHIP PERFORMANCE/PROGRAM)

51

Pre SPDC Divestment


•SPDC Operation

•Fields partially down due to Community issues

SPDC Divestment

•SPDC Equity Transfer

•Operations Documentation Transfer

•Operatorship by SPDC

•2 Fields developed and producing

•Issues with Gas lift compressors

•1 field shut-in for technical depletion

Operatorship Takeover

•Operatorship transfer from SPDC

•Three fields Developed but 2 Producing at takeover

•Compressor revamp and restoration of Gas lifted Wells

•Reviewed Ogini Field Development Plan

Production Stabilisation

•Obtained DPR approval for revised Field Development Program

•Purchase of Long-lead items for drilling campaign

•Contracting for drilling rig for new development wells program

Optimisation & Re-development

•Isoko Field Production Optimisation

•Isoko & Ogini Well Interventions/ Workovers

•Commence Ogini Field re-development













2010 2011 2012 2013 2014 2015 2016 2017

52


52

Pre SPDC Divestment


•SPDC Operation

SPDC Divestment

•SPDC Equity Transfer

•SPDC Operation

•Operations Documentation


•Operatorship Transfer

•8 Fields shut-in due to Community issues

•1 Field shut-in due to vandalism

•Community Engagement and

Optimisation & Interventions

•All OML 30 Fields Optimisation

•Well interventions to stabilise production & reduce Water production

Well Workovers & Re-development Planning

•Well workovers to improve wells productivity

•Review of the asset field development program

25,890 28,78524,117

40,534 45,371 47,000 65,000

Performance Forecast

Assets' Production (bopd)

Performance Forecast







2011 2012 2013 2014 2015•Exploration drilling•Exploration drilling 2016 2017

53

53

2011 2012 2013 2014 2015Development Program Review

Pre SPDC Divestment


•SPDC Operation

SPDC Divestment

•SPDC Equity Divestment




•Production Optimisation

•Restreaming Closed-in Wells

•Progressed NAG facilities development

•Fields

Production Stabilisation & Optimisation

•Utorogu & Ughelli West Wells interventions

•NAG facilities development

•AG Gathering facilities development

Production Ramp-up

•Ughelli East Gas infill development

•Utorogu Oil infill development

•Warri River field reentry









20172016


54

54

2011 2012 2013 2014 2015

Pre SPDC Divestment


•SPDC Operation




•2 fields producing

•4 fields shut-in due to community and vandalism issues

•1 field technically shut-in due to depletion

Production Stabilisation

•Batan & Ajuju Reservoir surveillance

•Batan & Ajuju Production optimisation

•Integrity testing on shut-in Odidi & Jones Creek fields

Facilities rehab at shut-in fields

•Facilities rehabilitation at Odidi & Jones Creek fields commenced

•Further Reservoir surveillance and optimisation at Batan/Ajuju

•Batan field development plan review

Re-open shut-in Field & re-developments

•Fully re-stream the Odidi & Jones Creek Oil & Gas production

•Batan in-fill development

•Odid & Jones creek re-entry




•Well & reservoir management




2016 2017


55

Completed Buffer Tank (6 x 500 bbl)

Installation for Water Dehydration

Completed Manifolding and

Connection of Tank Vents to Flowstation

Flare Header

Completed Modification of F/S Surge

Vessel to feed the Trucking bay

Completed repair of failed sections

of Ogini field & Oleh roads in

preparation for crude oil trucking.

Construction work at Ogini Loading

Facility almost completed (Exit Road, 2nd

Gate, Security Hut, Lighting Utility,

Operations Cabin)

Completed Piping construction to

link the Ogini Loading Facility to the

Flowstation

Ogini Truck Loading Facility:

Tank vents manifolding and overfill connection piping

ALTERNATIVE EVACUATION -LAND ASSETS

ALTERNATIVE CRUDE EVACUATION BY BARGING (SWAMP ASSETS)

barging 19 km

Shuttle tanker to FSO from

Escravos River

64 km

FSO

Shuttle Tanker

Location

CONCLUSION

NPDC sees many opportunities in the divested assets

Great efforts made to maximize the opportunities amidst numerouschallenges

NNPC and NPDC Leaderships developed innovative solutions to overcomethe numerous challenges:

GMOU to address community and security issues

Creating Host Community dependency on NPDC’s facilities to help foster a

symbiotic relationship with the communities

Constitution of Asset Management Team (AMT) to remove administrative

bottlenecks

Alternative crude oil evacuation to reduce deferment during TFP/FOT

outage

Incorporated Joint Venture (IJV) to eliminate funding issues

ALTERNATIVE EVACUATION -LAND ASSETS.odp

THANK YOU

APPRECIATION

• Management of NPDC & NNPC

• Colleagues in OMLs 26, 30, 34, 40 & 42.

• JV partners ( FHN, HERITAGE, ND WESTERN, ELCREST &NECONDE )

opportunities and challenges of divested asset management ......why the gale of assets disposal by...

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