Seplat Petroleum Development Company plc, the largest indigenous crude explorer, has shipped 3 million barrels of crude oil through an alternative route using the Warri Refinery export route, as the company looks to stabilise production at 30,000 barrels per day (bpd).
This is a far cry from the 84,000bpd the company produced from its OMLs 4 (Edo State), 38 and 41 (both in Delta State) in January 2016, after ramping up production from 14,000bpd when it acquired the assets.
Rerouting crude transport routes and employing barges were measures it adopted to mitigate the impact of militancy that saw sustained attacks on key export terminals that onshore producers rely upon to sell their products in the Niger Delta.
“In response to the protracted shut-in of the Forcados terminal, the Board accelerated various initiatives to diversify risk by reducing our reliance on a single export route, both in the short and the long term,” ABC Orjiakor, Seplat’s board chairman, says.
Seplat was forced to halt exports through the Forcados terminal when the terminal operator, Shell Nigeria, declared force majeure on February 21, 2016, following disruption by militants to the terminal subsea crude export pipeline.
The terminal remained under force majeure for the remainder of the year, meaning operators reliant on that system were faced with an unprecedented level of disruption in 2016.
This development impacted the company’s 2016 fourth quarter earnings, indicating a sales decline of 66 percent to $52 million. Seplat also posted a loss after tax of $64 million, 88 percent more than the $34 million it reported in the fourth quarter of 2015.
Seplat is pursuing alternative crude oil evacuation options for production at OMLs 4, 38 and 41, and potential strategies to further grow and diversify production in order to reduce any over-reliance on one particular third-party operated export system in the future.
“In line with this objective, we successfully implemented an alternative export solution during the second quarter of 2016, whereby crude oil production from OMLs 4, 38 and 41 is sent via the JV owned 100,000bopd capacity pipeline to available storage tanks at the Warri Refinery and sold Free On Board (‘FOB’) to Seplat’s offtaker Mercuria at the Warri Refinery jetty, from where the oil is then transported by barge to a mother-tanker positioned offshore,” the company says in its released audited accounts.
Orjiakor further says, “One such initiative is the barging solution that utilises our own 100,000 bopd capacity pipeline to the Warri refinery from where crude is exported via barge. Barging commenced in May 2016 and by the end of the year 3 MMbbls (1.4 MMbbls working interest) of Seplat crude had been monetised via this route.
“Going forward, our target is to export a gross average of 30,000bpd on a regular basis. Separately, a government led project to complete a new 160,000bpd pipeline to the Escravos terminal has gathered pace and will open up a long-term alternative export route for Seplat and other operators when completed in the coming months.”
The Federal Government has since increased engagement with militants in the Niger Delta, and national production is gradually climbing towards 2million bpd.
Oil prices that hit floor prices of about $30 per barrels have risen to over $50 in the second quarter of 2017, raising hopes of modest recovery in 2017.
“Our focus is on protecting our core business through optimising production performance of the existing asset base and mitigating the infrastructure concentration risk so apparent in 2016, through long-term availability of alternative export routes capable of handling our full volume,” Austin Avuru, managing director of Seplat, says.
