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The East African : Mar 1st 2015
The EastAfrican BUSINESS FEBRUARY 28 - MARCH 6, 2015 MININ G Local service providers opt for joint ventures in oil production P≥epa≥ing fo≥ development phase which is capital intensive By HALIMA ABDALLAH Special Correspondent gas sector are opting for joint ventures with international companies in preparation for the production phase, which is capital intensive. Sources in the industry say L production will demand more specialised skills, huge capital investment, complex technology and high standards. “We are looking at joint ventures because they are sources of equity, technology transfer and skills development,” Geoffrey Bihamaiso, the group managing director at Three Ways Shipping told The EastAfrican. For example, Bemuga, a local logistic company, has partnered with Chinese company Sanny, a firm dealing in construction equipment. Service providers have re- cently experienced a downturn in business as exploration activities wind down due to a combination of the recent drop in international prices for crude and the apparent lack of progress towards licences for production “Currently, we are review- ing production licence applications with the oil companies, and the reduction in oil activities will only be for a short time. Service providers need to prepare for the development phase, which will take up to 70 per cent of their services,” said Kabanda Fred, the principal geologist at the Petroleum Exploration and Production Department. Oil exploration in Turkana, Kenya. In Uganda, locally owned service providers in the oil and gas sector are preparing for the development phase. Picture: File The Association of Uganda Oil and Gas Service Providers recently held a forum in Kampala where members were taught how to secure contracts and practise good corporate governance and received information on issues related to joint ventures and partnerships. Oil companies rely on services provided by other businesses, like drilling companies that own the rigs, handling services, local transportation, logistics, cleaning, legal, security and catering services and others. These services are required only when there are ongoing activities. “The industry is suffering from a downturn in activity, and many service providers are laying off people or closing shop. But there is hope that things will get back to normal soon,” said Mr Bihamaiso, Emmanuel Mugarura, the as- sociation’s CEO, said the current downturn is a blessing in disguise, because it is giving the service providers more time to prepare and train staff and build partnerships and joint ventures with international partners that have better capacity. According to the Petroleum Exploration, Development and Production Act 2013, tier two foreign companies must have 48 per cent local ownership to be licensed to participate in the Ugandan oil and gas sector. The construction of the refinery, pipelines, oil storage facilities and new licensing rounds give hope for the service providers. Last week, the government announced competitive bidding rounds for six blocks in the Albertine Graben. This means that successful bidders will start exploration drilling. A week before, the government had announced the lead Production will demand specialised skills, huge capital investment, and complex technology investor for the 60,000 bpd refinery in Hoima It is expected to create employment opportunities for service providers and the public. Late last year, oil companies Total E&P, CNOOC and Tullow completed most field appraisals, except for Lyech field. They presented their field development plans and applications for production licences to the government. Traidlinks, a non-governmen- tal organisation, is now helping farmers in the Albertine Graben to supply food to oil camps. Other service providers are diversifying their products in order to compete for tenders in mega projects like hydropower dam construction and road projects. “Markets that demand similar good and services have to be developed,” states a World Bank report Leveraging the Oil and Gas Industry for the Development of a Competitive Private Sector in Uganda, which was issued in January. Casualties mount in global i≥on o≥e p≥ice wa≥ By A SPECIAL CORRESPONDENT Bloomberg THE FIRST fractures are appearing in an escalating iron ore price war that is putting some producers out of business. The biggest mining companies led by Rio Tinto, BHP Billiton and Vale, have persisted with multibillion-dollar expansion plans, citing still-healthy earnings even in the wake of a price collapse. Now, for the first time, one of the big three has voiced concern they may have gone too far. “Other competitors have more capital to invest in expanding,” Andrew Mackenzie, chief executive officer of BHP, the world’s largest mining company, told analysts on a conference call last Tuesday after reporting a 35 per cent decline in underlying profit from his iron-ore division. “We look to the future and see a degree of pressure downwards on iron-ore prices.” BHP, Rio and Vale have been squeez- ing smaller rivals in their quest for market share, while demand growth in China, the biggest consumer, slows. From Sierra Leone’s jungle to Sweden’s Lapland, abandoned mines are beginning to dot the global landscape. Having embarked on $120 billion of spending on new projects since 2011, the biggest producers have so far refused to blink in the face of a worsening outlook. Plans to expand giant rail, port and mine projects in Australia and Brazil are largely undisturbed, with the miners content to see higher-cost rivals go out of business before they rein back investment in their most profitable divisions. Sierra Leone’s fledgling iron-ore industry has been among the hardest hit, losing 25 million tonnes of annual capacity after its biggest producers ran out of cash. African Minerals closed its Tonkolili mine in December, while London Mining was taken over by administrators in October. ocally owned service providers in Uganda’s oil and secto≥ ≥ound-up Aminex to sell 13pc of Kiliwani North gas field to Solo Oil Aminex Plc intends to sell a 13 per cent interest in Kiliwani North natural gas field in Tanzania to Solo Oil Plc for $7 million. Solo is required under the terms of the agreement to pay $3.5 million for a 6.5 per cent stake and to acquire the balance within 30 days. Tanzanian Authorities have approved the sale by Aminex’s subsidiary Ndovu Resources Ltd, the 65 per cent owner of the Kiliwani North development licence, in which RAK Gas owns 25 per cent stake and Bounty Oil & Gas NL 10 per cent. “The completion of the transaction will allow us to pay down our debt and have a strengthened balance sheet as we move towards first production,” said Aminex’s CEO Jay Bhattacherjee. The company is building the new Dar es Salaam to Mnazi Bay pipeline that will be connected to another pipeline from the Kiliwani North-1 well currently under construction. Africa Oil Corporation closes private placement of 57m shares Africa Oil Corporation has closed a private placement of 57 million shares for $125 million to fund oil exploration activities. Africa Oil, which is listed on the Toronto and Stockholm Stock Exchanges, closed the offer on Monday last week. Africa Oil and Tullow Oil Plc are required to submit to the Kenyan government field development plans for two blocks on the South Lokichar basin where 600 million barrels of crude oil have been discovered for approval. The two companies own the blocks — 10BB and 13T — on a 50-50 basis. Africa Oil CEO Keith Hill said net proceeds would fund the appraisal of four exploration wells, and extend well tests in the Amosing and Ngamia fields as well as reservoir and engineering studies meant to increase resource certainty. Lion Petroleum loses $26m, plugs dry well in northeastern Kenya Lion Petroleum Inc has taken a hit of $26 million from the drilling of the Badada-1 exploration in onshore block 2B in north eastern Kenya, where no hydrocarbons were encountered. Lion, a subsidiary of Taipan Resources Inc of Canada, is now plugging the dry well for abandonment. Taipan, as the operator, has a 30 per cent stake in block 2B covering 5,464 square kilometres, while Premier Oil Plc and Tower Resources Plc, both of the UK, hold 55 and 15 per cent equity interest respectively. Tapian’s CEO Maxwell Birley said the company would further evaluate results from the well before making a decision on future exploration in the block. Taipan has asked the Kenyan government for more time to decide on its next phase of exploration. Kibo enters joint venture with Metal Tiger for uranium exploration Kibo Mining Plc has entered into a joint venture with Metal Tiger Plc for exploration of uranium in southwestern Tanzania. The agreement will be finalised when Metal Tiger completes a due diligence review of Kibo’s Pinewood portfolio. Kibo 45 A uranium mine in Tanzania. Picture: File Uranium Ltd, a subsidiary of the London and Johannesburg-listed Kibo Mining, owns 43 uranium exploration licences in Iranga, Mbeya and Songea regions. Metal Tiger is expected to acquire half of Kibo Uranium Ltd, pay exploration costs of $800,000 and maintain Pinewood estimated at $100,000 per year for a maximum of three years. After that, the costs would be shared equally.
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Mar 9th 2015