July 2023, Vol. 250, No. 7
Features
Changing Ownership Structure of Africa’s Pipeline Companies
By Shem Oirere, Africa Correspondent
(P&GJ) – Recent buying and selling of upstream oil and gas assets in Africa has opened new growth opportunities for the region’s pipeline market as new players make entry into the management and ownership structure of existing pipeline operating companies.
The development of assets in the continent has been closely tied to the construction and operations of pipeline transportation systems in the evacuation of natural gas, crude oil either to processing plants or ports destined for the export market.
The potential for further licensing and development of oil and natural gas resources is still huge in Africa as only a fraction of region’s proven 125.3 barrels of oil and 625.6 Tcf of natural gas has been commercialized.
Existing pipeline systems would have to be modernized or additional pipeline networks constructed in tandem with the exploration and production of this huge oil and gas resource.
Although Africa reported a mixed performance of its upstream oil and gas segments with a 0.3% decline in proven oil reserves in 2022 due to depressed investment in exploration activities and associated infrastructure, there is optimism in the industry driven largely by good prospects especially in natural gas segment that reported a 37% increase in 2022.
Several multinational oil and gas companies have been re-aligning their investment priorities in Africa, explaining the growth in the selling and buying of oil and gas blocs in the continent’s hydrocarbon-rich countries.
Exxon Mobil Corporation is the latest multinational oil and gas player in Africa to complete a major sale transaction, which has given listed U.K. oil and gas company Savannah Energy Plc a footing in the continent’s existing oil and gas pipeline market.
The American multinational announced, in December 2022, it had completed the sale of its operations in Chad and Cameroon to Savannah Energy Plc including the relinquishing of its 40% indirect interest in the Chad-Cameroon export transportation system.
The Chad-Cameroon export transportation system comprises a 672-mile (1,081-km) pipeline and the Kome Kribi 1 floating storage and offloading facility, off the coast of Cameroon, according to Savannah Energy Plc.
The 30-inch pipeline has a nameplate capacity of 250,000 bpd and an estimated throughput in 2022 of 124,000 bpd, from more than 15 fields.
Earlier, Savannah Energy Plc had been associated with the 1,211-mile (1950-km) Niger-Benin crude oil export pipeline connecting the Agadem Rift Basin (ARB) in Niger to Port Seme on the Atlantic Coast in Benin.
China National Petroleum Corporation, a major national oil and gas corporation of China and one of the largest integrated energy groups in the world, signed a transportation convention with the government of Niger for the construction of the pipeline that was initially scheduled for completion in 2021.
CNPC, which was contracted to construct the pipeline along with the West African Oil Pipeline Company, had also signed a similar agreement with the government of Benin for the $7 billion pipeline that is expected to increase Niger’s oil production from the current 20,000 bpd to 120,000 bpd in 2024.
In the first phase, an estimated 808-miles (1,300-km) of the pipeline will be laid within Niger at an estimated cost of $4.5 billion.
Moreover, CNPC had been granted in 2018 an upstream approval by Niger in relation to the Agadem Production Sharing Contract (PSC) exclusive exploitation Area 3. The oil output from Area 3 is expected to be exported from Niger using the pipeline.
Savannah Energy Plc, which has made five oil discoveries from five exploration wells in the ARB with a combined estimate of 6.7 billion barrels of oil initially in place in its two licenses, is entitled to access the pipeline under Niger’s Petroleum Code and its Implementing Decree in relation to the company’s R1/R2 and R3/R4 production sharing contracts.
The structure of shareholding of oil and gas pipeline companies in Africa has been shifting, influenced by the operatorship of upstream assets with a number of multinationals increasing their share of the midstream infrastructure.
For example, TotalEnergies, a French multinational integrated energy and petroleum company, has ramped up its interest in Africa’s pipeline market with the progress of the East African Crude Oil Pipeline (EACOP) project.
Total holds a 62% stake in EACOP alongside Uganda National Oil Company and Tanzania Petroleum Development Corporation that have a 16% shareholding each, as well as China National Offshore Oil Corporation, one of the largest national oil companies in China, and the third-largest national oil company in the country, with 8% interest.
These EACOP shareholders have an interest in the Tilenga oil exploration and production in Uganda’s Lake Albert region. An estimated 190,000 bpd of oil is expected from the project by 2025 from six fields where an estimated 426 wells will be drilled across 31 locations.
The crude will then be transported via buried pipelines to a processing plant at Kisenyi in Uganda before being pumped into the buried 896-mile (1,443-km) pipeline from the city of Kabaale in Uganda to Tanga port in neighboring Tanzania.
Meanwhile, Chevron, one of the largest listed companies in the world and ranked second-largest oil company in the U.S. by revenue after ExxonMobil, joins the list of international oil and gas companies with substantial stakes in oil and gas pipelines in Africa.
Chevron, which earned $176 billion in revenues in 2022 and is one of the top petroleum producers in Nigeria and Angola, holds a 36.9% interest in West African Gas Pipeline Company (WAPCo), a limited liability company that owns and operates the 421-mile (678-km) West African Gas Pipeline. The pipeline supplies natural gas to Benin, Ghana and Togo.
Chevron also operates and holds a 40% interest in eight concessions in the onshore and near-offshore regions of the Niger Delta under a joint-venture agreement with the Nigerian National Petroleum Corporation (NNPC).
NNPC holds 24.9% interest in WAPCo alongside Shell Overseas Holdings Limited (17.9%) and Takoradi Power Company Limited (16.3%), Société Togolaise de Gaz (2%) and ‘Société BenGaz S.A. (2%).
Looking forward, growth trends of Africa’s oil and gas pipeline market is likely to be influenced by implementation of the African Continental Free Trade Area (ACFTA). Governments party to the ACFTA, a free-trade area established in 2018 to promote intra-Africa trade are likely to push for more cross-border oil and gas pipelines to expand the distribution network within the continent, such as the 3,106-mile (5,000 km) Nigeria-Morocco pipeline project.
The proposed pipelines will traverse coastlines of 13 countries and is expected to reach Europe via Spain and Portugal. However, the $25 billion project has faced delays after Algeria, after one of the project signatories, terminated the contract for the project after a diplomatic spat with Morocco.
With more midstream and upstream projects underway across Africa, such as BP’s Greater Tortue Ahmeyim, Chevron’s Sanha Lean Gas Connection, Coral South FLNG and TotalEnergies’ Namibia Graff discovery, the continent is yet to see the end of the restructuring in the ownership and operatorship of oil and gas pipeline companies in the region.
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