Deals that made headlines for 2015

NNPC secures $1.2 billion drilling financing package

Nigeria’s state oil company has secured a $1.2 billion multi-year drilling financing package to contribute to the running of 36 oil wells to be operated as part of a joint venture deal. The Nigerian National Petroleum Corporation (NNPC) said the package, financed by a consortium of Nigerian and International lenders, would be used to supplement its contribution to a joint venture operation with Chevron Nigeria Limited.

Nigeria relies on crude sales for around 70 percent of government revenues. The state oil company’s ability to maintain its contributions to joint ventures has been hit by the fall in oil prices, and the resulting drop in revenues from crude sales, over the last year.

NNPC said that, in addition to supplementing its joint venture contribution, the $1.2 billion package would also help in the maintenance of current production levels in the short term.

NNPC issues 2016 crude oil contracts worth $13.5 billion

Nigeria’s NNPC has issued its 2016 crude oil term contracts to 21 companies, going directly to international refineries, trading houses and local downstream firms. The contracts cover 991,000 barrels per day (bpd) of oil, worth $13.5 billion at current crude oil prices, which is roughly half of Nigeria’s crude oil production of just fewer than 2 million bpd.

The list includes refiners such as Spain’s Cepsa, Italy’s Saras, India’s IOC and ENOC of the Emirates, as well as trading houses Trafigura, Mercuria and Vitol and international oil companies ENI, Total, Exxon and Shell.

Other beneficiaries include India National Oil Company, Emirates National Oil Company, the trading arms of Shell and ExxonMobil, and indigenous trader Sahara Energy.

The list is pared down from the final 2015 contract list, which comprised 46 companies and did not include any global traders.

Egypt struggles to pay for oil, LNG supplies amid foreign currency crisis

Egypt is struggling to pay for US dollar-priced oil product and liquefied natural gas (LNG) imports, cancelling purchases, and asking suppliers to extend payment terms amid an acute foreign currency crisis.

Egypt, which depends on oil and gas imports, has faced a sharper decline in foreign currency receipts since the Russian airliner disaster in October, which has hit tourism, while low oil prices limit aid from Gulf allies, banking and trade sources said.

The sources said that Egypt has asked oil and LNG suppliers to extend payment terms to 90 days after delivery earlier this month due to the currency crisis.

According to existing arrangements, Egypt is obliged to pay for LNG imports 15 days after a cargo unloads.

Short of dollars, Egypt has also cancelled the purchases of six gasoil cargoes initially scheduled for early January.

Payment delays have created a logjam of cargoes outside Egyptian ports, including at least six clean and three dirty product cargoes.

A source familiar with the matter estimated that Egypt is late in paying around $350 million to LNG suppliers.

Shell plans to complete BG merger by February 15

Royal Dutch Shell said it planned to complete its proposed $53 billion takeover of BG Group by February 15, outlining plans for further spending cuts next year in the face of low oil prices.

Shell also lowered the capital spending plan for next year for the combined group by $2 billion to $33 billion, saying it would bolster its ability to weather the industry’s downturn and to maintain dividend payments.

Shell said the addition of the BG business, especially its offshore oil production in Brazil and liquified natural gas facilities in Australia, will offer $3.5 billion of cost savings and strengthen its ability to maintain dividends at $1.88 per share even as oil prices are expected to stage a slow recovery from 11-year lows.

Shell and BG both issued their prospectuses seeking approval of the deal by their shareholders at Shell’s shareholder meeting on January 27 and BG’s meeting on January 28.

The Anglo-Dutch company said it expected the acquisition to be completed by February 15 and BG said its chief executive Helge Lund and chief financial officer Simon Lowth would both leave the company once the deal is concluded.

Shell also said its capital spending in 2015 would total $29 billion, in line with its previous expectations for it to be below $30 billion.

Looking ahead, Shell expects the BG deal to add positively to cash-flow in 2016, assuming oil prices do not drop below $50 a barrel on average.

BP agrees to $10 billion deal to supply LNG to China Huadian

BP Plc agreed to supply liquefied natural gas to China Huadian Corp. in a deal worth as much as $10 billion over two decades. The London-based company will supply as much as 1 million metric tons of LNG annually to the Beijing-based company that operates power stations.

BP and China National Petroleum Corp., the country’s biggest oil producer, also agreed to jointly explore and produce shale gas in China’s Sichuan basin and retail fuels in the nation, according to a separate statement.

The agreements are part of a host of deals signed during Chinese President Xi Jinping’s visit to London. Prime Minister David Cameron said Xi would bring more than $46 billion in deals and investment on his visit.

The partnership with CNPC “not only strengthens the relationship between the U.K. and China’s largest energy companies, it further cements the relationship between China and the UK as global business partners,” BP’s Chief Executive Officer Bob Dudley said in the statement.

UK awards 159 onshore blocks in latest licensing round

The UK’s oil and gas regulator, Oil & Gas Authority (OGA), announced that 159 onshore blocks under the 14th Onshore Oil and Gas Licensing Round have now been formally offered to successful applicants.

Around 75 percent of the 159 blocks offered, which are incorporated into 93 onshore licenses, relate to unconventional shale oil or gas. The OGA had announced in August that an initial tranche of 27 blocks were being formally offered to companies involved in shale gas exploration in the country’s latest licensing round.

Launched July 28, 2014, the 14th Onshore Oil and Gas Round includes acreage in Scotland, England and Wales. It closed October 28, 2014 and a total of 95 applications were received from 47 companies covering 295 blocks.

Commenting on the licensing development, OGA Chief Executive Andy Samuel said “I am pleased that the 14th Onshore Round attracted strong interest and a high quality of proposed work programs. This round enables a significant amount of the UK’s shale prospects to be taken forward to be explored and tested.

“Upon acceptance of these offers, applicants will be issued with licenses and will be able to begin planning their future strategies for exploration activities. These will be subject to further local planning, safety, environmental and other authorizations.”

Andrea Leadsom, Energy Minister said “Last month we set out the vital role gas will play in the UK’s transition to a low-carbon future. The licenses offered today move us a step closer – driving forwards this industry which will provide secure, home grown energy to hardworking families and businesses for decades to come.

Frank Uzuegbunam