WTI $91.07 -69c, Brent $93.54 +57c, Diff -$2.47 +$1.26, NG $4.43 -6c, UKNG 167.0p -4.67p

Oil price

Presidents Day in the US today so markets are shut and above WTI price is a bit high wide and handsome. As with last week it is Russia/Ukraine on the one side and the US/Iran talks on the other. With regard to the former there are talks of talks or even a summit and in the latter apparently a deal might come this week with a ‘gradual framework’ for return of Iranian oil in the package. A gradual return, if you believe that you will believe anything…

Savannah Energy

Savannah Energy PLC, the British independent energy company focused around the delivery of Projects that Matter in Africa, is pleased to announce that its Accugas subsidiary has entered into a new gas sales agreement with the Central Horizon Gas Company, a subsidiary of Axxela Limited, and a major gas distribution company situated in the South-South region of Nigeria.

CHGC operates a 17km gas pipeline infrastructure network with a throughput capacity of 50 MMscfpd, which provides natural gas to industrial and commercial customers in the Trans Amadi Industrial Area of Port Harcourt as well as the Greater Port Harcourt Area, Nigeria.  

CHGC is majority owned and controlled by Axxela, which delivers natural gas to over 185 industrial and commercial customers via its gas infrastructure network across cities in Southern Nigeria including Lagos and Port Harcourt.

Under the terms of the GSA, CHGC can nominate to be delivered up to a maximum daily quantity of 5 MMscfpd. The GSA is initially for a one-year period but is extendable by mutual agreement. Accugas will deliver gas via its Ikot Abasi Gas Receiving Facility and then via third-party gas infrastructure to CHGC in the Port Harcourt area. First gas deliveries are expected to commence within the next 12 months and are dependent on CHGC completing certain works to connect to the third-party gas delivery infrastructure. Accugas is not expected to incur any additional capital expenditure in this regard.

Andrew Knott, CEO of Savannah Energy, said:

“We are delighted to announce this new gas sales agreement with CHGC and the Axxela Group. This transaction once again demonstrates Accugas’ position as gas supplier of choice in South East Nigeria. We look forward to a successful future partnership with both CHGC and the wider Axxela Group.”

Commenting on behalf of Axxela, Chief Executive Officer, Bolaji Osunsanya, said:

“One of our core values is partnership and we believe in the power of collaboration as a way of unlocking unlimited possibilities. This new arrangement demonstrates our commitment to delivering value-adding energy solutions across Nigeria, and most importantly, it further underscores our overarching goal of spurring the socio-economic development of key hubs across Nigeria and the African region.”

Further good news from Savannah this morning as they tie up another GSA in the Port Harcourt area and one which will be a building block for further coverage in the region. This plays into Savannah’s strategy to add higher margin industrial customers and that this deal is potentially the precursor to broader collaboration in future with the Axxela Group which is developing gas hubs in the region. 

Finally it is worth noting a technical matter that occurred at the end of last week. I spotted that there was a huge cross in the market of some 51m shares which I understand was a clearing out of historic bond sellers and that the buyers were high quality institutional players, this can only be good for Savannah and I remain confident that the market situation will tighten up and the shares have plenty of upside from here. 

Genel Energy

Genel today updates on oil reserves across its portfolio.

 

Net oil Reserves (MMbbls) 1P 2P 3P
31 December 2020 69.4 117.2 177.2
Production (11.6) (11.6) (11.6)
Technical revisions 4.8 (1.4) (28.9)
31 December 2021 62.6 104.2 136.6

 

International petroleum consultants DeGolyer and MacNaughton, working on behalf of the operator DNO, assess that Tawke licence (Genel 25% working interest) gross year-end 2021 2P reserves stood at 357 MMbbls, compared to 394 MMbbls at year-end 2020, after adjusting for production of 40 MMbbls and an upward technical revision of 3 MMbbls.

Pending further analysis of the performance of the Enhanced Oil Recovery project, Genel continues to hold 23 MMbbls of those 2P gross reserves in 2C resources.

At Taq Taq (44% working interest, joint operator), 2P gross reserves stood at 26 MMbbls at year-end 2021 (33 MMbbls at end-2020), following a downward technical revision of 5 MMbbls and production of 2 MMbbls. McDaniel & Associates carried out the independent assessment of the Taq Taq licence.

At Sarta (30% working interest, operator) Genel’s gross 2P reserve estimate relating to Phase 1A of the Sarta development remains unchanged, less production, at year-end 2021 at 32 MMbbls (34 MMbbls at the end of 2020), following production of 2 MMbbls.

Flow testing of Sarta-1D is currently ongoing, and the appraisal results of Sarta-5 and Sarta-6 will be incorporated into our assessment of the reserves of Sarta at the appropriate time.

Regulation update from Genel today that shows quite how large the portfolio is and that Genel has the firepower for a very long time to deliver on its strategy to deliver a substantial return to shareholders from its asset base. Genel shares deserve a significant premium rating on portfolio quality delivering total return to investors. 

IOG

IOG has provided the following operational update.

Saturn Banks Reception Facilities (SBRF), Backgassing and First Gas

SBRF preparation for First Gas is now 99% complete. IOG senior management attended a final Pre-Start Up Safety Review and inspected the facilities on Thursday 17 February as part of pre-completion assurance. Final pre-commissioning checks and cause-and-effect function testing and final construction activities continue to be undertaken, albeit severe weather from the named storms passing over the UK  has been hindering progress with further stormy weather likely to impact crane lifting operations. Once the terminal operator Perenco UK Limited (PUK), the Company and its pipeline duty holder ODE Asset Management (ODEAM) have fully signed off the onshore facilities to safely introduce hydrocarbons, then backgassing operations can commence. This is now targeted for the week beginning 28th February, with First Gas expected to occur approximately a week later. The unsettled weather may also potentially impede the operations required at the Blythe platform as part of the backgassing and start-up procedures, although the bulk of this work is now complete. As a result of a planned inspection the UK Health and Safety Executive have raised a number of clarifications required to be resolved ahead of start-up and this is being addressed.

Southwark

In parallel, the Company has continued to progress suitable options for a timely and safe return to Southwark drilling, after unstable conditions due to seabed scouring forced operations to be suspended in January. During February to date the forward plan has been defined with the assistance of subject matter experts and agreed with the rig owner. This essentially entails creating pads on the seabed with suitable sized rocks to enable stable positioning of the rig spud cans. This solution is now being expedited with drilling expected to be resumed at Southwark in March subject to completion of the necessary regulatory approvals and commercial processes.

Andrew Hockey, CEO of IOG, commented: 

“The IOG leadership team attended Bacton terminal late last week to go through a Pre-Start Up Safety Review ahead of final Saturn Banks commissioning. Terminal operator Perenco, executing works on IOG’s behalf, advised us that the current stormy weather has hampered the final construction and leak testing programme with a knock-on impact on commissioning of the safety instrumentation systems.  As a result the plant will likely not be ready to start backgassing until the week beginning 28th February, with First Gas from both Blythe and Elgood around a week later. Albeit frustrating, this delay facilitates a safe and reliable start-up.”

Not a great surprise that the various storms of the last week have slightly delayed first gas at Phase 1 will come as no surprise and given that this will come in early March will be good news for management and shareholders alike. The whole project has been completed in a very short time from a standing start for which IOG should be given substantial credit. Once up and running this will be a model development in the provision of low carbon gas to the UK market something that we seriously need. 

And finally…

In the Prem there were wins for Liverpool and Chelski whilst the Noisy Neighbours lost to Spurs at home. The Red Devils beat Leeds 2-4, the Hammers drew and the Gooners and the Wolves both won to keep the pressure on those above.

Down in Bristol to complete the celebrations the Robins beat Boro 2-1 after remembering the Ashton Gate Eight who saved the club 40 years ago.

And my joke bet that Adele would win more Brits than the Team GB in the Winter Olympics  actually worked, Adele ran out the winner 3-2…