Nigeria’s Trans Forcados Pipeline (TFP) is back on stream after more than a year of closure, following repeated attacks by militants in the oil rich Niger Delta.
A re opening of the pipeline will likely boost Nigeria’s oil production to about two million barrels per day (mbd), according to investment firm Renaissance Capital, in a note released last month.
“The Trans Forcados pipe- line is back and up and running and the Forcados Terminal is also available for exports,” said.
A.B.C Orjiako, chairman of Seplat Petroleum Development Company Plc, in an interview with BusinessDay.
“We have started production and putting oil through the pipeline. The Force Majeure is no longer in place.”
Trans Forcados is owned by the Nigerian Petroleum Development Company (NPDC) and operated by Shell Petroleum
Development Company (SPDC).
The pipeline has remained shut since February 2016 and an attempt to resume production, following repairs in November last year was frustrated by an- other militant attack.
The Trans Forcados pipeline system usually transports an average of 250,000 barrels per day (bpd).
Orjiako acknowledged the blows dealt to Seplat which faced a challenging operating environment in 2016 by the extended Trans Forcados shut-in, as well as volatility in global oil prices.
The shut-in and declaration of force majeure saw Seplat’s average daily production fall from 52,000 boepd as at mid February 2016 to 25,877 boepd by year end.
Oil revenue fell by 55 percent from $570 million in 2015 to $254million in 2016 whilst the total volume of crude lifted in the year was 3.422 MMbbls, com-pared to 8.129 MMbbls in 2015.
Gas revenues on the other hand, increased significantly year on year to $105.5 million compared to $76.9 million in 2015.
This trend was driven by a 19 percent increase in the average realised gas price to $3.03/Mscf, compared to US$2.55/Mscf in 2015 and an 11 percent increase in working interest production to 95 MMscfd (34.7Bscf) compared to 86 MMscfd (31.3Bscf) in 2015.
The increase in gas processing volume is because of the full- year benefit being felt of the new 150 MMscfd Oben gas processing facility installed mid-year 2015 that doubled plant processing capacity to 300 MMscfd.
“We expedited action on our gas commercialisation efforts. Seplat’s gross gas processing capacity is now at a minimum of 525 million scf a day,” Orjiako said on the side lines of the firm’s Annual General meeting (AGM) held in Lagos yesterday.
“Our gas business in 2016 exceeded the $100 million revenue milestone, demonstrating its robustness and providing a solid base from which to grow. It is easy to forget that in 2013 gas revenues were only $18 million, which shows how far we have come.”
Seplat is seeing increasing demand for gas, as prices are getting better, according to Orjiako.
The firm has aligned itself with the Federal Governments gas to power, gas to industry and gas to agriculture programmes, he said.
Seplat also announced that it is actively pursuing alternative crude oil evacuation options whereby crude oil production from OMLs 4, 38 and 41 is sent via the company’s own 100,000bopd capacity pipeline to available storage tanks at the Warri refinery. As at 31 Decem- ber 2016, a gross volume of 3 million barrels had been evacuated via this route.
The Forcados Oil Terminal is one of Nigeria’s largest crude grades and SPDC, owner and operator ,was the biggest oil company that shipped through the terminal, until about 2010 when it began a divestment campaign.
In the last five years, Shell has shrunk to a fringe exporter in the Niger Delta west and Forcados (which it still operates); with mainly Nigerian owned independents now the major exporters through Forcados.
The return of Forcados should improve the earnings of the indigenous oil firms and enable them service their debts.
Several upstream oil and gas companies use the pipeline, including Seplat, Shell Nigeria; Shoreline Resources; First Hydrocarbon Nigeria; the government-owned Nigerian Petroleum Development Company (NPDC), Pan Ocean, Mid- western oil and gas, Eland oil & gas, Neconde, Aiteo, Newcross, Walter Smith and Oando Energy Resources.
“We remain cautiously optimistic on the upstream oil & gas space, especially given that the TFP should be operational soon positive not only for Seplat, but also for Nigerian oil production; the TFP will likely increase Nigeria’s production by about 200,000 bl/d to about two million barrels per day,” Renaissance Capital said.
Militant activity has eased recently in Nigeria, as Acting President Yemi Osinbanjo began talks with groups in the Niger Delta.
A new N702 billion electricity market bailout fund for the Nigerian Bulk Electricity Trading Company Plc (NBET) Plc to guarantee payment to gas suppliers is positive for Seplat, according to Orjiako.
Nigeria, the holder of Africa’s largest gas reserves, with about 182 Tcf of proven gas, raised the price of gas to power plants to $2.50 per million standard cubic foot, plus 80 cents for transport in 2015.
In a previous interview with BusinessDay, Seplat CEO Austin Avuru, said the company could get as much as $5 per million standard cubic feet, for supplying industries like cement or petrochemical plants.
Gas supplies have been constrained in Nigeria by low gas prices set by the government, which barely cover the cost of production and processing.
PATRICK ATUANYA
