Monday, 27 April 2020

Tullow Oil’s exit from East Africa is gathering steam after the firm signed a deal to sell all its assets in Uganda.

In an announcement made Thursday, Tullow said it’s transferring its assets for Lake Albert Development project and the proposed East African Crude Oil Pipeline System to Total Uganda at $575 million (Sh57.5 billion).

The British firm made the deal at a time it’s bidding for 20 per cent of the 50 per cent shares it owns in Kenya’s South Lokichar oil project. The transaction is likely to be concluded in less than two months.

Tullow said the Ugandan deal is part of its plan to raise more than $1 billion, adding that proceeds would go to reducing debts and strengthening its balance sheet.

“It is part of Tullow’s strategy to move to a more conservative capital structure. The cash consideration consists of $500 million payable at completion and $75 million payable following final investment decision of the Lake Albert project,” the company said.

The sale and purchase agreement was signed with an effective date of January 1, 2020, in which Tullow Uganda Ltd and Tullow Uganda Operations Pty Ltd committed to transfer their interests in blocks 1, 1A, 2 and 3A in the Lake Albert project and the pipeline to Total Uganda.

PORTFOLIO MANAGEMENT

Tullow owned 33 per cent interests in each. The deal was struck after weeks of discussions between the two companies, the Ugandan government and the Uganda Revenue Authority.

“Having evaluated the alternatives for the project and discussed its future with Tullow’s joint venture partners and the government of Uganda, Tullow’s board and senior management believe the transaction represents an attractive outcome,” the company said.

Tullow executive chairperson Dorothy Thompson said the deal would form a basis for the firm to improve its finances.

“This is important for Tullow and forms the first step for our programme of portfolio management. It represents an excellent start towards our previously announced target of raising $1 billion,” she said.

Tullow announced plans to sell the assets on December 9. It expects to conclude the deal in the second half of this year.

This was shortly after a plan to reduce its shareholding for the Lake Albert project from 33 to 11 per cent by selling to Total and China National Offshore Oil Corporation failed.

The sale came as the London-listed firm continues to surrender its assets in East Africa, despite having established itself as an African market-focused company.

 

Credit: Daily Nation Kenya

Published in Business

Kenya’s president extended a nationwide night-time curfew by 21 days and said people won’t be able to enter or exit the capital and some coastal areas for a similar period.

The East African nation has 343 confirmed cases of Covid-19, President Uhuru Kenyatta said in an emailed statement. The government has mapped out economic sectors and activities on the basis of infection risk and decided to allow some restaurants and eateries to reopen, he said.

“We will reopen this economy, but it must be in a way that does not endanger many thousands of lives,” Kenyatta said.

The president also assented to tax law amendments designed to cushion businesses and households from the impact of the pandemic, according to a separate statement. The changes include an increase in the threshold for sales tax, a drop in income and corporation tax and lower value-added tax.

 

Credit: Bloomberg

Published in Economy

As international oil companies (IOCs) grapple with a historic plunge in crude prices, a rise in piracy is also poised to threaten supply chains.

The first quarter of 2020 saw a spike in piracy around the world, with 47 attacks compared to 38 for the same period last year, according to the International Maritime Bureau (IMB).

The Gulf of Guinea, a key production hub surrounded by eight oil exporting countries in West Africa, has emerged as a global hot spot, accounting for 21 attacks so far this year and 90% of all kidnappings at sea in 2019.

Most attacks still occur in Nigerian waters, but piracy is expected to rise in 2020 and 2021 and expand further into neighboring states, posing serious concerns for shipping and international oil companies, according to research by political risk consultancy Verisk Maplecroft.

The number of crew kidnapped off the Gulf of Guinea climbed 50% to 121 in 2019, up from 78 in 2018, and the Gulf has now surpassed more well-known areas such as the Strait of Malacca – a waterway which separates Malaysia and Singapore from Indonesia – to become the global hotspot.

"This trend will continue into 2020 and into 2021 as regional security forces, hampered by security hot spots across the continent, and a lack of adequate equipment, continue to be unable to effectively tackle piracy," Alexandre Raymakers, senior Africa analyst at Verisk Maplecroft, said in a research note.

"The prospect of international assistance is equally remote as international shipping routes avoid the Gulf of Guinea. Both regional shipping and oil and gas operators should expect further disruptions to supply chains, export routes and increased costs as more ransom payments will be necessary to liberate crews."

Around 60% of incidents in 2019 occurred in Nigerian territorial waters, specifically in the areas surrounding the Niger Delta and, to a lesser extent, the shipping hub of the Port of Lagos. Raymakers highlighted that the socio-economic factors underpinning these incidents were unlikely to change.

"Driven by their experience fighting in the Delta's secessionist armed groups and embittered by their lack of access to the oil riches around them, the region will remain an abundant reservoir for budding pirates," he added.

"Although pirates have not noticeably changed their tactics, the regular payments of ransoms have likely emboldened them to seek more attractive targets further out at sea, expanding their net outwards."

On March 22, seven crew members of the MSC Talia F were abducted off the coast of Gabon, and while most of the spike in cases is expected in Nigerian waters, Verisk Maplecroft analysts also anticipate upticks in the waters around Togo, Benin, Cameroon, Gabon, Equatorial Guinea and to a lesser extent Ghana.

Risks to the oil industry

While pirates traditionally limited their operations to raiding oil tankers in order to sell their hold on the black market, the collapse of oil prices in 2015 forced them to alter their strategy, refocusing their efforts on abducting crews for ransom, Raymakers highlighted.

Unlike their Somali counterparts, pirates in the Delta do not have use of secured ports or beaching areas for captured ships, which limits their ability to hold a vessel or its contents for ransom and means operators in the region therefore rarely lose ships or cargo. However, they do face delays and increased costs due to the disappearance of the ship's crews and subsequent ransom payments.

"IOCs like Shell, ExxonMobil, Total, Chevron and Eni operating out of Gabon, Equatorial Guinea and Nigeria are particularly at risk of experiencing sporadic yet highly disruptive instances of piracy in their supply chains," Raymakers said.

"While many have learned lessons from developing comprehensive security structures in order to protect their assets and personnel in Nigeria, smaller supply and service companies will be highly exposed to expanding piracy risks."

PREMIUM: Nigeria oil 180514 EU

The Egina floating production storage and offloading vessel, the largest of its kind in Nigeria, is berthed in Lagos harbor on February 23, 2017.
 

Given the recent collapse in global oil prices due to falling demand, Verisk anticipates that pirates are likely to attempt to board static tankers used as offshore storage facilities for unsold production. The ships' crews and cargo represent "ideal and relatively simple targets for pirates," the report said.

The indiscriminate nature of abductions means pirates are likely to target IOCs' supply chains and oil shipments leaving export terminals in the Niger Delta, as evidenced by the abduction of seven crew members on the ExxonMobil-contracted supply vessel Zaro off the coast of Equatorial Guinea in December 2019.

IOCs will also have to contend with the risk that pirates will seek to abduct workers, particularly expatriates, directly from oil platforms in the Niger Delta.

"The kidnapping of three oil workers from a Chevron oil platform in Ogbele in April 2019 highlights the ease and speed with which such an operation can be conducted," Raymakers said.

"Indeed, pirates have easy access to high speed crafts and a plethora of small arms giving them the firepower and agility to conduct such operations."

 

Credit: CNBC

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Published in Engineering

The magnitude of how damaged the energy industry is came into full view on April 20 when the benchmark price of U.S. oil futures, which had never dropped below $10 a barrel in its nearly 40-year history, plunged to a previously unthinkable minus $38 a barrel.

In just a few months, the coronavirus pandemic has destroyed so much fuel demand as billions of people curtail travel that it has done what financial crashes, recessions and wars had failed to ever do - leave the United States with so much oil there was nowhere to put it.

While the unusual circumstance of negative oil prices may not be repeated, many in the industry say it is a harbinger for more bleak days ahead, and that years of overinvestment will not correct in a period of weeks or even months.

"What happened in the futures contract the other day indicated things are starting to get bad earlier than expected," said Frederick Lawrence, vice president of economics and international affairs at the Independent Petroleum Association of America.

"People are getting notices from pipeline companies that say they can't take their crude anymore. That means you're shutting down the well yesterday."

Evidence of the erosion of value for a product that has been a mainstay of global society since the late 19th century abounded across the world last week.

In Russia, one of the world's top producers, the industry is considering resorting to burning its oil to take it off the market, sources told Reuters.

Norwegian oil giant Equinor slashed its quarterly dividend by two-thirds. Next week will bring earnings reports from the world's largest oil companies including Exxon Mobil Corp, BP PLC and Royal Dutch Shell PLC. They are all expected to detail additional spending cuts, and investors will be watching closely for how those companies plan to manage dividends.

U.S. billionaire Harold Hamm's Continental Resources Inc sent servicers out into fields in Oklahoma and North Dakota in the middle of the week to abruptly shut wells, and the company declared it could not make crude deliveries to customers due to poor economics.

Continental's decision to declare force majeure - usually reserved for wars, accidents or natural disasters - came as a shock, bringing a sharp response from the leading refinery industry group. But some say there is a logic behind it, even if it may not pass muster in court.

"You sign contracts based on the average norms that a society has experienced over the last 100 years. If we have a new event that is not covered by those norms, it goes into force majeure. That's what Harold Hamm and others are saying - that these are circumstances outside the norm," said Anas Alhajji, an energy market expert based in Dallas.

Even the long-rumored decision by the White House to tell Chevron Corp last week it could no longer operate in Venezuela, where it has had a presence for nearly 100 years, met with a shrug.

"The global climate is terrible," said one person close to a Western oil company in Venezuela. "The license almost didn't matter anymore."

The market is forcing the hands of all producers. Across the world, governments and companies are preparing to shut down output, and many have already begun.

The Organization of the Petroleum Exporting Countries and its allies had already committed to record cuts of 10 million barrels of daily supply that have yet to take full effect. That commitment was not enough to prevent oil's fall below zero.

Saudi Arabia has said it and other OPEC members are prepared to take further measures, but made no new commitments. It is a measure of the depth of demand destruction that even if OPEC stopped producing altogether, supply may still exceed demand.

More than 600,000 barrels per day in production cuts have already been announced in the United States, along with another 300,000 bpd of shut-ins in Canada. Brazil's state-run Petrobras has reduced output by 200,000 bpd.

Azerbaijan, part of the group of nations known as OPEC+, is forcing a BP-led group to cut output for the first time ever. Oil majors in those countries have generally been excluded from government-imposed cuts.

“We have never done it before since they came to the country in 1994 and signed the contract of the century,” a senior Azeri official told Reuters.

That accommodation can no longer be made with the world running out of space to put oil. As of Thursday, energy researcher Kpler said onshore storage worldwide is now roughly 85% full.

Demand is expected to fall by 29 million bpd in April, the International Energy Agency estimated. Paris-based IEA expects consumption to pick up in May, but researchers cautioned that its expectation of a mere 12 million bpd fall in year-over-year demand may be too optimistic.

"I'm sure hearing the same numbers about demand destruction of 20 to 30 million barrels a day," said Gene McGillian, analyst at Tradition Energy, who was working at the New York Mercantile Exchange when U.S. crude futures were launched in 1983. "Until we see some kind of alleviation of that, you have to wonder what is in store."

 

Reuters

Published in Engineering

South Africans “celebrate” Freedom Day through gritted teeth, with a wry smile and an acute sense of irony, this year. Many, if not most, will be lamenting the loss of freedom due to the COVID-19 lockdown.

For most professionals, there will be no public holiday, since days slide seamlessly into one another, punctuated only by an endless succession of Zoom appointments and regular bouts of existential crisis and unease about lack of productivity.

For working class South Africans, the angst will cut even deeper, as food will have run out, accompanied in many cases by an even deeper fear about the future. They may be asking themselves, “will I ever work again?”. Both bemoan the ban on alcohol sales.

Twenty-six years ago black South Africans voted for the first time. Twenty-five years ago, a freshly minted democratic parliament was immersed in the process of writing a final constitution – one that contains a bill of rights that is widely admired by legal scholars and human rights activists across the globe.

It contains 26 rights, many of which have seen active service in the years since the constitution came into effect in early 1997. The constitution, including the charter of rights enshrined in chapter 2, is inevitably and appropriately the subject of frequent, deep and sometimes bitter contestation. Rights have frequently been claimed by individuals and communities to defend themselves from irrational, unreasonable or otherwise unlawful conduct by both state and private sector entities.


Read more: Is South Africa's Constitutional Court protecting democracy?


But these human rights victories may be far from front of mind this particular Freedom Day, in the shadow of the COVID-19 pandemic. Democratic governments throughout the world have been compelled to claim rarely used powers and authority and limit freedoms in response to the threat posed by a deadly virus.

President Cyril Ramaphosa chose to invoke the provisions of the Disaster Management Act at a relatively early stage, on 15 March. This extended the authority of his government so that it can impose restrictions on, for example, the number of people who may gather in any one place.

Consequently, citizens have had to accept stringent restrictions on their normal civil liberties. South Africa’s lockdown is one of the “hardest” in the world. Everyone except for “essential workers” is confined to home, permitted out only when buying food or medicine.

Freedom curtailed

For South Africans, especially black South Africans old enough to remember the pre-1994 era of apartheid rule, this must be especially hard to bear. The sight and sound of the police and the army patrolling the streets to enforce the lockdown regulations must surely stir a painful sense of déjà vu.

The need to have a permit to move from town to town or province to province, or simply to transport produce, is perhaps even more evocative – redolent of JM Coetzee’s novel The Life and Times of Michael K.

Clearly, the right to freedom of movement enshrined in section 21 of the bill of rights is now severely curtailed.

Several other rights are now, in effect, also suspended or limited. Most obviously, the right to freedom of assembly: congregations present a real risk of increasing transmission of the disease, as President Ramaphosa pointed out in his most recent address to the nation.

South African President Cyril Ramaphosa has imposed one of the most stringent COVID-19 lockdowns. EFE-EPA/Jerome De Lay

Equally self-evidently, the right to freedom to trade is curtailed. Most businesses and places of work are required to be closed, unless they are providing an essential service. And students are currently denied the right to education, since schools and university campuses are closed.

Other, more subtle, limitations will apply; for example, to the right to privacy. A crisis of this scale and danger may justify greater intrusion into people’s online and cellular telephonic personae. Substantially reduced levels of data protection, ordinarily a matter of very great concern, may well be justified.

Infringement and protection

This provides an interesting example of how rights’ infringement may cut both ways. As The Guardian has reported, digital surveillance has been a crucial part of South Korea’s apparently successful response to the threat of COVID-19.

Clearly, there is an upside; and a legal justification for the infringement of rights.

On one level, there is nothing extraordinary about this. Rights are not absolute. In a constitutional democracy such as South Africa’s they can be lawfully limited, provided the limitation passes the test in section 36 of the constitution. This includes the principle of proportionality. In essence, this means that the government may only use the least restrictive measure for achieving its aim, the one that causes least damage to protected rights and interests.

Similarly, the regulations issued in a national disaster must comply with the provisions of the bill of rights. A court can declare specific regulations unconstitutional if they impose limitations on rights in a way not justified by the limitation clause.

The execution of Ramaphosa’s five-level “risk-adjusted” exit strategy could well give rise to constitutional litigation if the regulations that give effect to it are either unclear or unfair.

At this point, both the right to equality (and equal treatment) and the right to trade could come into play.

If there is a big surge in COVID-19 infections and illness, then the right to access to health care would be relevant in ensuring that everyone gets the treatment that they need to recover from the virus.

Right to life

Above all, perhaps, the bill of rights protects the right to life. As the lockdown begins slowly to ease, it will be worth remembering that the constraints on freedom were and remain justifiable on this ground alone.

COVID-19 represents a deadly threat to life and to livelihoods. In this sense, it threatens freedom in the most fundamental fashion. And the government is obliged to protect its citizens, limiting civil liberties in defence of freedom.


Read more: Zimbabwe's shattered economy poses a serious challenge to fighting COVID-19


The socio-economic impact of COVID-19 will be deep and could denude many people of their right to human dignity and substantive equality. That impact, in itself, undermines the notion of transformative constitutionalism that underpins South Africa’s constitutional settlement and the concept of freedom hinged with equality and human dignity that the Constitution articulates.

South Africans will not be feeling particular free and probably not especially inclined to contemplate more nuanced, philosophical interpretations of freedom as they celebrate Freedom Day, even though the post-COVID world will likely present competing conceptions of liberty.

They are not alone. Throughout the world, billions of people are having to adjust to a “new normal”. For how long, and to what extent, civil liberties should be limited or suspended will depend in large measure on the future trajectory of the coronavirus.

Active vigilance will be required to ensure continued restrictions are fully justified and the pandemic is not used as an excuse to impose authoritarian rule in service of devious and despotic political purposes.

Many times in the country’s modern, democratic era the bill of rights has proved to be more than just a piece of paper. For South Africans, hard-won rights will be vigorously defended, just as the limitations on freedom will be scrutinised every step of the way.

Only the secret and not-so-secret autocrats, extreme-right nationalists and populist authoritarian demagogues will want the bill of rights to fall victim to this pernicious pandemic.The Conversation

 

Richard Calland, Associate Professor in Public Law, University of Cape Town

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Published in Economy

Rwanda’s RwandAir will cut the salaries of its lowest paid employees by 8% and by 65% for its top earners as it seeks to survive the coronavirus crisis, an internal memo seen by Reuters on Sunday showed.

The carrier, which flies a fleet of 12 Boeing and Airbus planes to 29 destinations across three continents, has been one of the rising stars in Africa.

In February, Qatar Airways said it was in talks to buy a 49% stake in the airline.

“We considered several other alternatives and the choice we made is the best option at this time,” RwandAir’s management wrote in the memo, which two employees told Reuters they have received.

The management of the young airline, which is owned by the government and has not yet made a profit, could not be reached immediately for comment.

Airlines around the world have been forced to ground their planes after governments imposed travel restrictions and closed borders to slow the spread of the COVID-19 pandemic.

Air Mauritius said this week that it has entered voluntary administration due to the crisis, joining Virgin Australia and South Africa Airways who have called in administrators.

 

Reuters

Published in Travel & Tourism
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