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Lagos Oilfield Dispute Worsens, Another Investor Heads for Court

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  • Lagos Oilfield Dispute Worsens, Another Investor Heads for Court

The dispute among joint venture partners in Aje oil field, offshore Lagos, appears to have escalated as another partner, EER (Colobus) Nigeria Limited, has gone to court.

One of the partners, Panoro Energy, announced in December that it was in disagreement with its JV partners over cash call and intended to initiate arbitration and legal proceedings to protect its interests.

The company holds 6.502 per cent participation interest in Oil Mining Lease 113, where the Aje field is located, through its subsidiary, Pan Petroleum Aje Limited.

The commercial court division of the High Court in London granted the PPAL an interim injunction, restricting the JV partners from taking any action under the default provisions of the Joint Operating Agreement that would prevent the PPAL’s continued participation in the JOA and OML 113.

Panoro Energy said in a new update that the EER (Colobus) Nigeria applied for and, on July 13, 2017, was granted an order by the Federal High Court of Nigeria, adding that the court set the time to hear the motion on notice as July 24, 2017.

It said, “It is Panoro’s understanding that the EER, like Pan Petroleum, is in default of certain of its cash calls under the JOA and, therefore, the court’s order restrains any of the non-defaulting joint venture partners from issuing a notice under the JOA requiring the EER and, perhaps Pan Petroleum, to withdraw from and transfer all its interests and rights in the OML 113 and the JOA to all the non-defaulting parties.”

According to the company, under the JOA, the potential consequence of a JV partner not making payment of its share of a cash call on or before the expiry of the 45-day grace period is that two or more of the other JV partners, who are not themselves in default and represent a majority of the interests not in default, have the option to require the defaulting party to withdraw from the OML 113 and the JOA by issuing a notice of withdrawal.

“However, any such action may currently be prevented by the Nigerian injunction referred to above,” Panoro said.

It said, “Should Pan Petroleum in future be issued with a withdrawal notice, it will vigorously dispute its forced withdrawal from the OML 113 and the JOA, and will explore all legal and diplomatic avenues to ensure the notice is withdrawn or the withdrawal is held to be unenforceable.

“Although Panoro has sufficient funds available, Pan Petroleum has at this time not paid its share of certain cash calls under the JOA. The 45-day grace period permitted under the JOA has now expired and Pan Petroleum continues to be in payment default. Pan Petroleum’s share of these unpaid cash calls currently stands at approximately $6.8m net of crude entitlements.”

Pan Petroleum said many of the cash calls that had been made were made in a manner inconsistent and prohibited by the JOA procedures, adding that an external audit of the JV’s procedures and accounting had been commissioned.

The company said its arbitration proceeding was ongoing, and the arbitral tribunal had recently pushed the timetable for the hearing out, now likely to be heard during the first quarter of 2018.

Yinka Folawiyo Petroleum Company Limited, a wholly owned indigenous firm, is the operator of the OML 113. Other partners are New Age Exploration Nigeria Limited and PR Oil & Gas Nigeria Limited (the holder of MX Oil’s investment in the field).

First oil was achieved on the Aje field in May last year, 20 years after it was discovered.

A London-based energy firm, MX Oil, which has an indirect investment in the OML 113, said on May 24 that production from the Aje-4 well field had stabilised after an initial period of decline associated with rising water cut.

It said the production from the Aje-5 well had been limited and required subsurface intervention, adding that the intervention was in the process of being completed and would include re-connection to the subsea tree.

“To date, the company has completed its share of the payments required to get to this stage of the project’s development,” MX Oil said.

The company said it was previously anticipated that a further well, Aje 6, would be drilled in the short term to increase oil production from the field, but the drilling of the well would be deferred until the partners had concluded on the most appropriate next steps.

It said, “As has previously been announced, the Aje field is believed to hold significant resources of gas. The partnership has been progressing the field development plan for the development of the gas and has also held discussions with various potential gas off-takers.

“The partners in the Aje Field are therefore currently considering whether it would be more appropriate for the next stage of the field development to focus on gas production rather than drilling additional oil wells.

The Chief Executive Officer, MX Oil, Stefan Oliver, said given the potential scale of the gas opportunity versus the risk and reward of drilling additional oil wells, it made sense for the partners to consider and reflect on what the next stage of the development should be.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Economic Strain Halts Nigeria’s Cocoa Industry: From 15 Factories to 5

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Once a bustling sector, Nigeria’s cocoa processing industry has hit a distressing low with operational factories dwindling from 15 to just five.

The cocoa industry, once a vibrant part of Nigeria’s economy, is now struggling to maintain even a fraction of its previous capacity.

The five remaining factories, operating at a combined utilization of merely 20,000 metric tons annually, now run at only 8% of their installed capacity.

This stark reduction from a robust 250,000 metric tons reflects the sector’s profound troubles.

Felix Oladunjoye, chairman of the Cocoa Processors Association of Nigeria (COPAN), voiced his concerns in a recent briefing, calling for an emergency declaration in the sector.

“The challenges are monumental. We need at least five times the working capital we had last year just to secure essential inputs,” Oladunjoye said.

Rising costs, especially in energy, alongside a cumbersome regulatory environment, have compounded the sector’s woes.

Farmers, who previously sold their cocoa beans to processors, now prefer to sell to merchants who offer higher prices.

This shift has further strained the remaining processors, who struggle to compete and maintain operations under the harsh economic conditions.

Also, multiple layers of taxation and high energy costs have rendered processing increasingly unviable.

Adding to the industry’s plight are new export regulations proposed by the National Agency for Food and Drug Administration and Control (NAFDAC).

Oladunjoye criticized these regulations as duplicative and detrimental, predicting they would lead to higher costs and penalties for exporters.

“These regulations will only worsen our situation, leading to more shutdowns and job losses,” he warned.

The cocoa processing sector is not only suffering from internal economic challenges but also from a tough external environment.

Nigerian processors are finding it difficult to compete with their counterparts in Ghana and Ivory Coast, who benefit from lower production costs and more favorable export conditions.

Despite Nigeria’s potential as a top cocoa producer, with a global ranking of the fourth-largest supplier in the 2021/2022 season, the industry is struggling to capitalize on its opportunities.

The decline in processing capacity and the industry’s current state of distress highlight the urgent need for policy interventions and financial support.

The government’s export drive initiatives, aimed at boosting the sector, seem to be falling short. With the industry facing over N500 billion in tied-up investments and debts, the call for a focused rescue plan has never been more urgent.

The cocoa sector remains a significant part of Nigeria’s economy, but without substantial support and reforms, it risks falling further into disrepair.

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Nigeria’s Power Sector to Get $7.5bn from $30bn African Electrification Initiative, Says Minister Adelabu

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Minister of Power Adebayo Adelabu has said that Nigeria is set to receive a portion of a $30 billion investment aimed at electrifying Africa.

During a visit to Splendor Electric Nigeria Limited, Adelabu revealed that the World Bank and the African Development Bank (AfDB) have committed to this ambitious initiative with Nigeria slated to receive approximately $7.5 billion, or 25% of the total fund.

The groundbreaking initiative is designed to extend electrification to an additional 300 million Africans over the next five years.

This large-scale project aims to address the energy deficit that has long plagued the continent and is expected to transform the power infrastructure significantly.

Adelabu expressed optimism about Nigeria’s role in the project, citing the country’s large population and ongoing power sector reforms as key factors in securing a substantial share of the funds.

“I want to inform you of the proposal or the intention, which is at an advanced stage, by the World Bank and the African Development Bank to spend about $30 billion to extend electrification to an additional 300 million Africans within the next five years. Nigeria is going to participate fully in this. I am confident that nothing less than 20% or 25% of this fund would come into Nigeria because of our population,” Adelabu stated.

The minister’s visit to Splendor Electric Nigeria Limited, a porcelain insulator company, underscores the government’s commitment to involving local businesses in the electrification drive.

The investment will focus on enhancing and upgrading power infrastructure, which is crucial for improving electricity access and reliability across Nigeria.

Despite the promising news, Nigeria continues to face significant challenges in its power sector. The country’s power grid has suffered frequent collapses, with the Nigerian Bureau of Statistics reporting less than 13 million electricity customers and frequent nationwide blackouts.

The International Energy Agency highlighted that Nigeria’s national grid experienced 46 collapses from 2017 to 2023, exacerbating the nation’s energy crisis.

To combat these issues, the government is also advancing the Presidential Power Initiative, a project in collaboration with Siemens, which aims to build thousands of new lines and numerous transmission and injection substations.

Adelabu noted that the pilot phase of this initiative is nearing completion and that Phase 1 will commence soon.

With over 200 million people and a chronic energy shortfall, Nigeria’s power sector is in urgent need of overhaul.

The additional $7.5 billion from the African Electrification Initiative represents a critical step toward achieving reliable and widespread electricity access.

The investment is expected to stimulate not only infrastructure development but also economic growth, creating opportunities for local companies and improving the quality of life for millions of Nigerians.

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Oil Prices Climb as Markets Eye Potential US Rate Cuts in September

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Oil prices rose during the Asian trading session today on speculation that the U.S. Federal Reserve may begin cutting interest rates as soon as September.

Brent crude oil, against which Nigerian oil is priced, increased by 32 cents to $82.95 a barrel, while U.S. West Texas Intermediate crude oil climbed 34 cents to $80.47.

The anticipation of rate cuts stems from recent U.S. inflation and labor market data indicating a trend towards disinflation and balanced employment, according to ANZ Research.

The Federal Reserve is set to review its policy on July 30-31, with expectations of holding rates steady but providing clues for potential cuts in September.

The potential rate cuts could stimulate economic activity, increasing demand for oil. This optimism has been partially offset by recent concerns over China’s slower-than-expected economic growth, which could dampen global oil demand.

President Joe Biden’s announcement to not seek re-election and endorse Vice President Kamala Harris had minimal impact on oil markets.

Analysts suggest that U.S. presidential influence on oil production is limited, although a potential Trump presidency could boost oil demand due to his stance against electric vehicles.

In response to economic challenges, China surprised markets by lowering key policy and lending rates. While these measures aim to bolster the economy, analysts remain cautious about their immediate impact on oil demand.

With OPEC+ production cuts continuing to support prices, the focus remains on the U.S. Federal Reserve’s next moves.

Any decision to cut rates could further influence oil prices in the coming months, highlighting the interconnectedness of global economic policies and energy markets.

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