Sinopec today announced a tender offer for Addax Petroleum of Switzerland. Addax management has okayed and recommended the deal to shareholders. Addax has some valuable assets in West Africa and Iraq, both areas where GET has been extending our business, and so of particular interest to us.
Seems like the dragon's expansion is likely to continue, as predicted in a previous post by Ian Rushby. Will there be a nationalist pushback like the Rio Tinto or CNOOC- Unocal deal, or would the invisible hand of the market triumph?
Showing posts with label Africa. Show all posts
Showing posts with label Africa. Show all posts
Wednesday, June 24, 2009
Thursday, April 23, 2009
Ghana: A New Growth Area for Oil & Gas
In an earlier post we’ve discussed how Africa is becoming a new frontier for oil and gas exploration for western countries as well as new emerging Asian powerhouses like China and India. We review one country – Ghana which is emerging as an oil and gas exploration hub.
Ghana was the first African nation to have gained independence from British rule. Since its independence in 1957, the country is slowly yet surely moving forward with the help of abundant natural resources especially minerals like gold, diamond, bauxite and manganese. What makes Ghana important to the oil and gas industry is the presence of light oil which was discovered recently in 2007.
As demand for energy has increased in Ghana, many projects relating to the importation of gas via pipeline from nearby Nigeria and Cote d'Ivoire have come up. Although as yet, its upstream oil industry has no crude oil production, Ghana is one of four West African countries with an oil refinery. Oil-derived products supply 70% of Ghana's commercial energy needs and the downstream sector is well structured.
Much of Ghana's emerging oil industry is underpinned by the discovery and early development successes of the “Jubilee field” located in an area straddling the West Cape Three Points and Deepwater Tano contract blocs. The development of the Jubilee field is currently in the first phase, involving the drilling of nine production wells and an additional eight support wells.
Currently, exploration and commercial activity is limited to mid cap players. Texas-based oil exploration company E&P outfit Kosmos is amongst the major players in Ghana’s oil and gas sector, although there have been some reports of Kosmos’ interest in divesting some of its stakes in the country. The other big player is UK based Tullow.
Smaller companies are finding it easier to explore in Ghana than in some of its neighbors in West Africa. This is due in part to advantageous terms of the contract which include factors like no front end payments such as signature or production bonuses; negotiable royalties and income tax; no limit on cost recovery, low rental payments, no restrictions on the repatriation of funds and no import duties on exploration and production equipment and materials.
With such advantages for exploration and development coupled with the quality of light crude, Ghana is poised to be one of the new growth economies in the oil sector.
Ghana was the first African nation to have gained independence from British rule. Since its independence in 1957, the country is slowly yet surely moving forward with the help of abundant natural resources especially minerals like gold, diamond, bauxite and manganese. What makes Ghana important to the oil and gas industry is the presence of light oil which was discovered recently in 2007.
As demand for energy has increased in Ghana, many projects relating to the importation of gas via pipeline from nearby Nigeria and Cote d'Ivoire have come up. Although as yet, its upstream oil industry has no crude oil production, Ghana is one of four West African countries with an oil refinery. Oil-derived products supply 70% of Ghana's commercial energy needs and the downstream sector is well structured.
Much of Ghana's emerging oil industry is underpinned by the discovery and early development successes of the “Jubilee field” located in an area straddling the West Cape Three Points and Deepwater Tano contract blocs. The development of the Jubilee field is currently in the first phase, involving the drilling of nine production wells and an additional eight support wells.
Currently, exploration and commercial activity is limited to mid cap players. Texas-based oil exploration company E&P outfit Kosmos is amongst the major players in Ghana’s oil and gas sector, although there have been some reports of Kosmos’ interest in divesting some of its stakes in the country. The other big player is UK based Tullow.
Smaller companies are finding it easier to explore in Ghana than in some of its neighbors in West Africa. This is due in part to advantageous terms of the contract which include factors like no front end payments such as signature or production bonuses; negotiable royalties and income tax; no limit on cost recovery, low rental payments, no restrictions on the repatriation of funds and no import duties on exploration and production equipment and materials.
With such advantages for exploration and development coupled with the quality of light crude, Ghana is poised to be one of the new growth economies in the oil sector.
Tuesday, February 24, 2009
Thirsty Dragon- China’s Energy Security
In little more than a decade China has changed from being a net exporter of oil into the world's second-largest importer, trailing only the United States. Despite the current economic slowdown the country’s oil demand is still forecast to grow by 2.3% this year. With some of the world’s largest and fastest growing cities and an emerging middle-class, demand is coming from both consumer and industrial sectors, including rapidly expanding automobile ownership. This growth in demand cannot be met from domestic production - currently domestic crude oil production supplies only two-thirds of the country’s needs. China’s government estimates that it will need 12 million barrels/day of crude oil by 2020 from the current demand of 7.95 mb/day (IEA).
Securing stable access to oil and gas supplies has become central to China’s economic growth which in turn underpins political stability. So China has been looking outside, in different corners of the world, to find its energy supplies. Until recently the country focused primarily on the Middle East for oil supplies. It was one of the few countries trading with the former regime in Iraq and had large production sharing contracts which were cancelled with the US and allies invasion in 2003. China has also been doing deals in Iran; earlier this year a Chinese state-owned enterprise signed a $2 billion deal to develop the Azadegan field. Nevertheless China recognizes the geopolitical issues and the significance strategically of the Middle East for both the United States and Europe so has set its sights on other areas. China has been prospecting aggressively in the Caspian region and Africa.
Although Africa holds only about 9% of the world’s total proven oil reserves compared to more than 60% in the Middle East, it may hold significant untapped resources. From 2002 to 2003, trade between China and Africa doubled to $18.5 billion; by 2007, it had reached $73 billion – including substantial crude oil imports from Sudan and other African countries. Hydrocarbon rich African countries have decade long relationships with Western oil companies. Wood Mackenzie estimates Chinese companies hold under 2 percent of Africa's known oil reserves – many of these assets were previously held, explored and relinquished by the IOCs. And much of the potential resource growth is in technically challenging deepwater blocks in Angola and Nigeria.
China’s share of Africa’s oil is however growing. Two factors have been driving this. Firstly China’s foreign policy of non-interference in the domestic affairs of its trading partners. Sudan’s government resisted international pressure over its actions in Darfur. How significant was the combination of China’s veto in the UN Security Council and the export of 60% of Sudan’s oil production to China? China also uses aid to provide leverage, supplying easy credit and development knowhow in places as diverse as Gabon and Congo. The Council on Foreign Relations put out a very thoughtful paper last year detailing the growth of Sino-African relations. Oil is the common denominator and China is expected increasingly to use a combination of aid, trade and knowledge transfer to expand its influence in the region and increase its imports. Will the new Obama administration’s clearly stated preferences for reducing its oil import dependency and diversifying to alternative sources of energy give China an opening to construct more deals and expand its presence in Africa in the coming years?
We’ve also recently seen China adopt a model of more direct ownership, fully or partly, of foreign companies. The US congress shot down CNOOC’s attempt to buy into Unocal during the last phase of industry consolidation - but that was in a very different world and has not stopped China’s NOCs from evaluating other options. Will the announcement earlier this month of Chinalco’s proposed massive investment in Rio Tinto be a precursor of similar deals in the oil & gas industry ?
About the author:
Ian Rushby had a 30-year career in BP plc where he held various business leadership, commercial, planning and control positions in BP’s Head Office and Exploration, Finance, Coal and Gas divisions, working in London, the Netherlands, Indonesia, USA and Russia. His most recent assignment was Group General Auditor of BP plc, reporting to the Group Chief Executive, the Board Audit Committee and the Ethics and Environment Assurance Committee. He is also a non-executive Director, Ministry of Defence, UK and Chairman of the Defence Audit Committee.
Securing stable access to oil and gas supplies has become central to China’s economic growth which in turn underpins political stability. So China has been looking outside, in different corners of the world, to find its energy supplies. Until recently the country focused primarily on the Middle East for oil supplies. It was one of the few countries trading with the former regime in Iraq and had large production sharing contracts which were cancelled with the US and allies invasion in 2003. China has also been doing deals in Iran; earlier this year a Chinese state-owned enterprise signed a $2 billion deal to develop the Azadegan field. Nevertheless China recognizes the geopolitical issues and the significance strategically of the Middle East for both the United States and Europe so has set its sights on other areas. China has been prospecting aggressively in the Caspian region and Africa.
Although Africa holds only about 9% of the world’s total proven oil reserves compared to more than 60% in the Middle East, it may hold significant untapped resources. From 2002 to 2003, trade between China and Africa doubled to $18.5 billion; by 2007, it had reached $73 billion – including substantial crude oil imports from Sudan and other African countries. Hydrocarbon rich African countries have decade long relationships with Western oil companies. Wood Mackenzie estimates Chinese companies hold under 2 percent of Africa's known oil reserves – many of these assets were previously held, explored and relinquished by the IOCs. And much of the potential resource growth is in technically challenging deepwater blocks in Angola and Nigeria.
China’s share of Africa’s oil is however growing. Two factors have been driving this. Firstly China’s foreign policy of non-interference in the domestic affairs of its trading partners. Sudan’s government resisted international pressure over its actions in Darfur. How significant was the combination of China’s veto in the UN Security Council and the export of 60% of Sudan’s oil production to China? China also uses aid to provide leverage, supplying easy credit and development knowhow in places as diverse as Gabon and Congo. The Council on Foreign Relations put out a very thoughtful paper last year detailing the growth of Sino-African relations. Oil is the common denominator and China is expected increasingly to use a combination of aid, trade and knowledge transfer to expand its influence in the region and increase its imports. Will the new Obama administration’s clearly stated preferences for reducing its oil import dependency and diversifying to alternative sources of energy give China an opening to construct more deals and expand its presence in Africa in the coming years?
We’ve also recently seen China adopt a model of more direct ownership, fully or partly, of foreign companies. The US congress shot down CNOOC’s attempt to buy into Unocal during the last phase of industry consolidation - but that was in a very different world and has not stopped China’s NOCs from evaluating other options. Will the announcement earlier this month of Chinalco’s proposed massive investment in Rio Tinto be a precursor of similar deals in the oil & gas industry ?
About the author:
Ian Rushby had a 30-year career in BP plc where he held various business leadership, commercial, planning and control positions in BP’s Head Office and Exploration, Finance, Coal and Gas divisions, working in London, the Netherlands, Indonesia, USA and Russia. His most recent assignment was Group General Auditor of BP plc, reporting to the Group Chief Executive, the Board Audit Committee and the Ethics and Environment Assurance Committee. He is also a non-executive Director, Ministry of Defence, UK and Chairman of the Defence Audit Committee.
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