Page 5 - AfrOil Week 37 2019

AfrOil COMMENTARY AfrOil
This is equivalent to nearly 60% of the Middle  Eastern country’s production capacity – and more than 5% of global oil production. Moreo- ver, the loss of these barrels has effectively elim- inated Saudi Arabia’s ability to act as the world’s
swing producer.
To its credit, Riyadh has acted quickly to
minimise the disruptive impact of the attacks on global oil markets. It has rushed to hire for- eign and local contractors capable of assessing and repairing the damage done to the Khurais oilfield and the Abqaiq processing facility.
As a result, industry sources have told Energy Intelligence Group that Saudi Aramco had already brought 40% of its lost capacity, or nearly 2.3mn bpd, back on stream as of September 16.
Lower grades
Additionally, the Saudi national oil company (NOC) has promised major buyers in Asia that it will not reduce the volume of deliveries, according to a Bloomberg report dated Septem- ber 16. Sources told the news agency, though, that this pledge to stick to the regular supply schedule despite production cuts came with a qualification.
Specifically, they said, Saudi Aramco has informed its customers that it will probably have to substitute heavier crudes such as Arab Medium or Arab Heavy for Arab Light and Arab Extra Light grades.
This switch has the potential to be a problem. Refineries are typically configured to process certain types of crude, and they cannot simply swap light sweets out for heavier or more sour grades unless they first suspend regular opera- tions and adjust their equipment.
Of course, refinery operators will not have to
make adjustments of this type if the Saudi out- ages are short-lived. But in the event that Saudi Aramco runs into unexpected difficulties and cannot resume full production by the end of the month, as predicted by Energy Intelligence Group’s sources, it may have to keep swapping Arab Medium and Arab Heavy for Arab Light and Arab Extra Light. If so, the Asian buyers in question will have to decide whether to make the changes necessary to process what they have on hand or to strike a deal with alternative suppliers of light sweets.
Africa to the rescue?
The latter choice has the potential to create an opening for African suppliers.
In theory, at least, Nigeria and other produc- ers of light sweet crude could seize this oppor- tunity and try to fill the hole left by the attacks on Saudi Arabia. In practice, though, African producers will face challenges, especially in the near term.
Even if they are capable of producing the light sweet grades that buyers of Arab Light and Arab Extra Light want, they may not be able to move those barrels to market quickly. Their storage depots are not nearly as large as those of Saudi Aramco, and their production facilities will need time to ramp up output.
If Riyadh acts quickly and succeeds in revers- ing the outages by the end of this month, Afri- can producers will not have time to do this. But if Saudi production remains constrained, they will be in a better position to put themselves forward as alternative suppliers. As such, much will depend on the success (or failure) of dam- age control efforts at the Khurais oilfield and the Abqaiq processing facility. ™
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INVESTMENT
Lukoil buys 25% stake in Marine XII block
Much w
ill depend on the success
(or failure) of damage control efforts at the Khurais oilfield the Abqaiq processing facility
CONGO
New Age M12 Holdings, a subsidiary of Jer- sey-registered New Age (African Global Energy), has wrapped up the sale of its 25% stake in Marine XII, a shallow-water block located off- shore Republic of Congo (Brazzaville), to Lukoil, Russia’s largest privately owned oil operator.
The parties finalised the sale last week, in line with the sale and purchase agreement (SPA) they signed in June, according to press reports. As a result, equity in the Marine XII project is now split between Eni (Italy), the operator of the block, with 65%; Lukoil, with 25%; and Societe Nationale des Petroles du Congo (SNPC), the national oil company (NOC), with 10%. Neither the Russian company nor Eni nor SNPC com- mented publicly on the transaction last week.
The Russian company paid $800mn for its minority stake in Marine XII, which contains both crude oil and natural gas. As a result, it is now a party to the production-sharing contract (PSC) covering the block.
Marine XII, which covers an area of 571
square km, is believed to contain as much as 1.3bn barrels of oil equivalent (boe) in proven and probable reserves, according to an inde- pendent audit. It lies 20km off the coast of the Republic of Congo in water ranging from 20 to 90 metres deep.
Eni and its partners have found crude oil, gas condensate and natural gas at the block. They began developing two sections of Marine XII, Litchendjili and Nene, in 2015. These two fields are currently yielding around 28,000 barrels per day (bpd) of crude and condensate, as well as 1.7mn cubic metres per day of gas.
New Age said in June that the sale of its stake in the offshore block “marked the culmination of a successful investment cycle.” It added that it intended to “utilise the proceeds from this transaction to further strengthen its balance sheet and to redeploy into earlier-stage opportu- nities within its African portfolio, including the Marine III licence, which is also in the [offshore zone of the] Republic of Congo.” ™
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