Shell to negotiate with Nigerians over oil spill compensation

Compensation talks will begin in Nigeria between lawyers for Royal Dutch Shell and for 15,000 Nigerian villagers who say their livelihoods were destroyed by oil spills from pipelines operated by the company. The Nigerians launched a suit against Shell at the High Court in London in March 2012, seeking millions of dollars in compensation for two oil spills in 2008 that polluted the waterways of the Bodo fishing communities in the Niger Delta. The legal action is being closely watched by the industry and by environmentalists for precedents that could have an impact on other big pollution claims against oil majors.

A vast maze of mangrove swamps and creeks, the Niger Delta is home to communities of subsistence farmers and fishermen living alongside the multi-billion-dollar oil industry.

A Shell spokesman confirmed that talks would begin on Monday September 9, 2013 between Leigh Day and lawyers for the Anglo-Dutch firm. They will take place in Port Harcourt, the main city in the Delta, and will be attended by representatives of the Bodo communities. The region has been plagued by a range of problems including sabotage, kidnappings of oil workers for ransom, theft of crude from pipelines, armed rebellions, and conflict between communities over clean-up contracts or compensation deals.

Shell accepts responsibility for the Bodo spills but the two sides disagree about the volume spilt and the number of local people who lost their livelihoods as a result. A previous round of compensation talks broke down in 2012, before the lawsuit.

Nigeria warns oil block buyers could lose operating rights

Nigeria's state oil company warned investors interested in three shallow water oil blocks offered for sale by Chevron that buyers may lose the right to operate them. U.S.-based Chevron is selling minority stakes in joint ventures that operate five oil blocks. The majority owner is the Nigeria National Petroleum Corporation (NNPC). Nigeria wants more direct ownership of its oil and gas through NNPC or local firms, leading several oil majors including Chevron to dispose of assets in Africa's top oil and gas producer. NNPC published a notice in local newspapers saying that there had been a "recent high level of interest shown by various investors in the ongoing divestment program for OMLs 52, 53 and 55 by Chevron Nigeria". It reminded those considering investing that, although Chevron currently operates the blocks, the state oil firm has the right to take over the operatorship as majority shareholder. Chevron owns 40 percent of the blocks and NNPC 60 percent. "Chevron shall cease to be the operator upon assignment of their participating interest," it said. "Therefore prospective buyers should note that automatic operatorship does not come with the acquisition of any of these blocks." Not having operatorship poses significant risks for would be investors in the fields, not least that the NNPC's development subsidiary, NPDC, lacks the finance and expertise. It has usually had to call in a third-party operator anyway. The notice seemed calculated to avoid messy tussles that ensued when Shell sold some oil blocks two years ago.

Dangote plans Nigeria's largest oil refinery

Dangote Group has received a loan toward a $9 billion project that will give Nigeria its largest oil refinery and petrochemical and fertilizer complex, reducing the country's reliance on international markets. Aliko Dangote, president of Dangote Group, signed a loan worth $3.3 billion from 12 Nigerian and international banks toward the project which will be built in Nigeria's southwest.

"At the completion of these projects we expect Nigeria to become not only self-sufficient in fertilizer and refined petroleum products but indeed to become recognized as a leading exporter of these products," Dangote said at the signing.

Nigeria is Africa's biggest oil producer, and is a top supplier of crude to the U.S., but the West African country has to import most of its fuel because of decrepit refineries unable to meet the nation's demand for gasoline due to years of mismanagement and sabotage.

The 400,000 barrels-per-day oil refinery and complex will become operational by 2016, the company said. The plant will also produce 2.8 million tons of urea for fertilizing crops and to produce polypropylene, used to make plastics, a statement said.

Dangote said the company is still seeking an additional $2.5 billion in development funds to augment the $3.5 billion of its own equity put into the project. The $3.3 billion loan deal was led by Standard Chartered and Nigeria's Guaranty Trust Bank.

Dangote's estimated worth is $16.1 billion according to Forbes, which has also ranked him among Africa's richest men for the past few years. The Nigerian has made his wealth in cement, flour and sugar.

Oil Prices Could Fall Following A Limited U.S. Led Strike In Syria

While the geopolitical risk has been falling in Europe as European governments and central banks stepped up to ease Eurozone tensions, the latest events in Syria have raised the temperature and the ugly geopolitical risk has raised its head again. The growing possibility of some form of a limited U.S. led strike in Syria has increased fears about the stability of the world's key oil producing region. Until the nature of the possible military intervention becomes apparent, these concerns are likely to put upward pressure on oil prices.

Oil markets have reacted strongly to the deteriorating situation in the Middle-East and prices have spiked sharply due to the unpredictable consequences of a likely military action against Syria. Brent crude spot is currently trading at a six-month high of $115 and prices are expected to remain volatile leading up a military strike on Syria. However, prices could fall sharply after a strike, as the actual supply losses remain small and the chances of a violent response from Syria, Russian, or Iran also remain low. Nevertheless, unpredictable factors weigh heavily in the market for good reasons.

Iraq names pre-qualified builders for Jordan oil pipe project

Iraq has pre-qualified 12 companies and joint ventures to build an $18-billion export pipeline to Jordan, the oil ministry said. The plan is to export 1 million barrels per day (bpd) of Iraqi crude to Jordan, of which 150,000 bpd will supply Jordan's Zarqa refinery. The remainder would be exported through the Red Sea port of Aqaba, reducing Iraq's reliance on the Strait of Hormuz shipping route.

After stagnating for years due to war and sanctions, Iraq's oil output began to rise significantly in 2010 and output reached 3.1 million bpd in August. Iraq expects output to rise by 400,000 bpd by the end of this year, mainly due to the start-up of the Majnoon oilfield operated by Royal Dutch Shell.

The short-listed companies and partnerships set for the next stage of the selection process to build the pipeline from Haditha near Baghdad to the Jordanian border are:

China National Petroleum Corporation (CNPC), Consolidated Contractors Company (CCC)

Daewoo International, Lukoil, Marubeni, Mitsui, Saipem, Toyota Tsusho, Go Gas, Larsen & Toubro and Fius Capital, Orascom with Petrojet, Petrofac and Stroygazconsulting, Punj Lloyd Group and Mass Global International (Iraq)

Accugas wins African Quality Service Award for Gas Processing & Transportation

Seven Energy International Limited (“Seven Energy”), the oil and gas exploration, development and production company with interests in Nigeria, and its wholly owned subsidiary, Accugas Limited (“Accugas or the Company”) are proud to announce that  Accugas  has won the 2013 African Quality Service Award for Gas Processing and Transportation. The award was presented by the Institute for Government Research & Leadership Technology (the “Institute”) during its 2013 African Governance and Corporate Leadership Awards in Abuja.

Ambassador Moses Essien, Chief Executive of the Institute, commended Accugas for its contribution to gas processing services in Nigeria. The key performance indicators used to select the winner include: excellence in gas processing and transportation services; safety, health and environment considerations; brand integrity; and customer service delivery. Further indicators are: product and service track record and value creation; corporate performance and operational excellence; compliance with local content policy and development; and compliance with professional codes, ethical standards and regulatory laws and guidelines.

Phillip Ihenacho, Chief Executive Officer, Seven Energy commented: “We would like to thank the Institute for this prestigious award.  It is a fantastic recognition for the on-going efforts and achievements of Accugas and Seven Energy in contributing to the development of the Nigerian gas market in a responsible way.”

Stephen Tierney, Managing Director, Accugas Limited, added: “Accugas is committed to aiding in the development of Nigeria’s gas resource, improving power supply and supporting local economic growth.  Through the processing and distribution infrastructure Accugas is constructing, we are capable of providing a long-term supply of gas for power generation and lower cost of fuel for local industries. This will create an attractive environment for investment for gas-based enterprises in Nigeria, particularly the Niger Delta.”

Accugas currently has two long-term take-or-pay gas sales agreements in place to sell over 1 Tcf of gas, to Ibom Power station and Calabar NIPP power station. The Company remains on course to complete the development of necessary infrastructure to deliver the gas to both power stations.  The first 100MMcfpd train of the two train 200MMcfpd gas processing plant at Uquo, and the 62km 18-inch Uquo to Ikot Abasi pipeline, were commissioned in the first quarter of 2013, to deliver gas to the 190 MW Ibom Power station. An additional 37 km 24-inch pipeline from Uquo to Oron is under construction to supply gas to the 560 MW Calabar NIPP power station’.