Nigeria Needs Oil above $40 for Offshore Fields

Global oil prices need to stay above $40 a barrel to keep deep offshore oil production and exploration economically viable in Nigeria, the Managing Director of the Nigerian National Petroleum Corporation has said.

Oil’s sharp drop in the last six months and the global credit crunch have raised concerns that many offshore projects may be delayed or cancelled in the world’s eighth largest oil producer.

“Deepwater developments in the region, particularly in the ultra-deep, require a sustainable crude price in excess of $40/bbl to support continued production, exploration and development,” Mohammed Sanusi Barkindo, head of the NNPC, said at an offshore oil and gas conference.

Oil prices have tumbled from a peak of around $147 a barrel last July to $44 on last Tuesday.

At the same time, costs of construction, labour and security, have risen significantly in the last few years for domestic and international oil companies operating in Nigeria like Royal Dutch Shell and Exxon Mobil.

“Given the uncertainty in crude prices in the long run, the industry needs to examine ways of achieving a steep reduction in costs,” Barkindo said.

Nearly all of Nigeria’s oil production growth is expected to come from offshore, which already represents 40 per cent of current output of less than two million barrels per day.

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Lists 2: 20/40 BUSINESS PROJECTS US EX-IM BANK IS READY TO FINANCE IN NIGERIA (II)

The United States of America Export-Import Bank (Ex-Im Bank) is the official export credit agency of the United States. Ex-Im Bank assists in financing the export of U.S. goods and services to international markets. This enables large and small U.S. companies to turn export opportunities into real sales that help to maintain and create U.S. jobs and contribute to a stronger national economy.

The Ex-Im Bank provides Working Capital Guarantees (Pre-Export Financing), Export Credit Insurance, Loan Guarantees and Direct Loans (Buyer Financing) to beneficiaries in countries around the world. These beneficiaries are availed the opportunity to fund new business initiatives and to finance the expansion of ongoing business concerns through accredited agents of the Ex-Im Bank.

One of the accredited agents of the US Ex-Im Bank with special focus on Nigeria’s business environ-ment is Financial-Bridge, a Florida, USA Corporation providing Export Finance and Business Credit Consulting Services to U.S. and international private companies and govern-ment agencies. Financial Bridge is represented in Nigeria by Energy Industry Development Initiative. In this review, continued from last week, we highlight business projects the US Ex-IM Bank is ready to finance in Nigeria.

Hospitality and tourism

Pre-Engineered 3-5 Star Hotels: Pre-engineered 3 to 4 Star Hotel with 80-100 rooms can be established at an estimated cost of $12-$14.8 million, while a 5 Star – 125 Room Hotel is estimated to cost over $25 million, complete with civil engineering & foundation construction, installation, furnishing, room TVs, VSAT based wireless telephone and Internet network systems, stand-by power generators, standard swimming pool, tennis court and dry-run of all equipment and fittings. The hotel project can be run by a technical expatriate management company or a renowned hotel chain for five-ten years, pending when local staff are trained to take over management.

Amusement Park Project: The Amusement Park Project will provide leisure to the public, complete with popular rides, indoor/outdoor soft playground equipment as well as the installation of a wide range of entertainment attractions.

The rides will include Shuttle Loop Roller Coaster, Mobile Play and Giant Games, Triple Giant Wheel, Coaster Wheel, Soft Style Children Playground, Water and Magic Arms Rides as well as Theme Park Amusement facilities such as Concession Stands and Theme Stores. An artificial Lake can also be developed adjacent to the project site or the project can be sited near a natural lake.

The design concept will provide innovative products and theme park attractions, which will include popular cartoon character themes and/or any other local themes recommended.

The indoor rides and games will make for a safe place for children to visit while conquering the boredom factor and providing entertainment for them and their adult parents. Safety, cleanliness, good customer service, low prices and exciting staff will be the selling points of the proposed Amusement Park. The Park will be capable of organizing groups and school tours events, birthday parties and family outings.

Batting Cages: Base Ball enthusiasts will be able to practice hitting a home run safely within the Batting Cages. Balls will be pitched from automatic Pitching Machines and can be enjoyed by Beginners and Experts alike.

In door Game room: Complete with State-of-the-art Arcade Games, Pool and Air Hockey Tables and Snack Bar. The Game room will organize games for Children to play and be able to win all kinds of prizes.

Stock & Go Karts: Miniature Stock Car racers are popular with children and adults alike and will be part of the Amusement Park.

Miniature Golf: An 18-hole Golf Course with challenging obstacles of various themes as integrated in the Park.

Inflatable Jumpers: – Jumps Specifications: Size: 13′ X 15′ Height: 15′, Area needed: 15′ X 18′ minimum, each capable of accommodating 8-10 children.

Estimated Cost – CIF, Installation and Start-up: From $5.7 million.

Oil, gas and power projects – Modular Oil Refineries, Gas Gathering & Processing Plants, Downstream Petrochemical and Power Projects

Mini Refinery & Portable Crude Oil Distillation Plant: The Mini Refinery & Portable Crude Oil Distillation Plant is capable of processing from 2,000 Barrels Per Day (BPD) of any stream of Light or Heavy Crude Oil within API Gravity of 29°- 42.8°, into Naphtha, Diesel, Kerosene and Fuel Oil.

Mini Refineries are ideally suited for remote locations and are viable for Investments by Private and Public Sector Groups as a source of rapid production of primary fuel products and raw materials for Petrochemical Downstream Industries. Estimated Cost – CIF, Installation, Training, & Start-up: $12.75 million.

Integrated Natural Gas Field Gathering, LPG Processing and Co-Generation Power Project: The project will involve development of integrated Natural Gas Field Gathering, Liquefied Petroleum Gas (LPG) Processing and Co-Generation Power Plant, to recover Flared Natural Gas as raw material from Oilfield Natural Gas Streams and fractionate the Gas into Liquefied Petroleum Gas (LPG), for Commercial Bottling and Condensates – C5 + Liquid Light Naphtha, for sale as Gasoline Blend Stock, Base Feedstock for the Plastic Industry and Solvents for Paint and Chemical Industries.

The Co-Generation Electricity Power Plant will utilize the by-product of Lean Dry Gas as fuel to power the Plant. The Integrated Plant will be designed to produce three commercial products, including 55 MW/Day of Electric Power, 4,500 BPD of Liquefied Petroleum Gas (LPG) and 1,275 BPD of Condensates – C5 + Liquid Light Naphtha. Estimated Cost: CIF, Installation, Training & Start-up – $125 million.

Modular 6,000 or 12,000 BPD Crude Oil Refinery Plant: Modular Crude Oil Refinery with capacity of 6,000 BPD, complete with 3,000 BPD Catalytic Reformer/ Hydrotreater can be designed to produce Unleaded Gasoline, Diesel, Kerosene/ Aviation Fuel and Fuel Oil. The Plant can also be expanded to 12,000BPD, complete with Stabilizer Tower.

The Modular Refinery can be configured to process Crude Oils with API Gravity of 20°- 42.8°, with typical products yield as follows:

Equipment List of a 6,000 and 12,000BPD Modular Refinery Plants & Machinery include:

a. Plants & Machinery:  6,000BPD Crude Topping Unit (Distillation System)  Boiler System and Cooling Tower System and Stabilizer Tower  Blower System and Desalter System, 1 MW Power Generator System  Flare System and Air Compressor System, 3,000 BPD Catalytic Reformer/ Hydrotreater  Pre-Engineered Steel Buildings Admini-strative, Project & Auxiliary  Internal Piping Systems and 120,000bbl Tank farm with Piping and Loading Systems  Pipeline & Accessories, capable of constructing up to 10 km 6 inch dual Pipelines connecting the Refinery Tank Farm with Crude Oil Source (1 Pipeline to carry Crude Oil Feedstock and the other Refined Petroleum Products) Water Treatment Systems & Lightning Protection Equipment  Ocean Freight and Transit Insurance, P&M Installation Costs and Spare Parts, etc.

b. Local In-country Project Site Construction Components:  Site Survey & Clearing, Environmental Impact Assessment (EIA), Soil Boring, Topographical Survey, Borehole Construction, Water Analysis, Topsoil Stripping and Stockpiling (available size of land 15-20 Hectares)  Fencing, Erection of Site Office and General Site Engineering Design Construction  Right of Way (ROW) Survey of Pipeline Route to connect the Refinery’s Tank Farm to Crude Oil Terminal Source of up to10 km away  Construction of Pre-Engineered Project Buildings Foundations and Foundations for Equipment, Plants and Machinery Layout and Construction of Tank Farm Foundations  Installation of Pre-Engineered Project Buildings Local Engineering Costs.

Total Project Cost 6,000BPD, 120,000 bbl Tank Farm and 3,000BPD Catalytic Reformer/ Hydrotreater, including cost of Installation, Training, and Start-up $59.73 million.

To raise the capacity to 12,000BPD with the additions of 6,000BPD Distillation Unit, 120,000 Barrels Tank Farm and 3MW Power Generators, the combined cost is estimated at $112.94 million.

Modular Gas Gathering and Processing Plant – 5 MMSCFD of Mixed Natural Gas and LPG: The 5 million standard cubic feet per day (mmscf/d) Natural Gas Gathering and LPG Processing Plant has capacity to produce Lean Gas suitable for use in power generation and LPG for commercial bottling. ThePlant will be skid mounted and come complete with Liquid Recovery, Field Compression Systems, Control Panel, LPG Storage, Power Generation and Pre-Engineered Control Building, etc.

The plant will be capable of gathering Raw Natural Gas being flared from wellheads / flare-heads and piped into a holding tank. The Gas will then be processed to remove impurities and separated into components such as Propane and Butane. Estimated Cost: $25 million, covering CIF, Installation, Training, & Start-up.

Blended Bunker Fuel and Low Pour Fuel Oil (LPFO) Plant: This plant can produce Blended Bunker Fuel consisting of Gas Oil (AGO) and Low Pour Fuel Oil (LPFO) with a capacity of 500 Barrels Per Day (BPD) or 80,000 liters per day, used for firing boilers, furnaces, air heaters, fuel for ships and power generating sets. Bunker Fuel for Ships and Vessels can be produced from residue of petroleum refining operations. Estimated Cost: CIF, Installation, Training and Start-up: From $4.5 million.

Specialty Solvents Plant: A typical Solvents Plant utilizes Naphtha produced from the Crude Oil Refining Process as raw material for the production of commercial solvents used by the Ink, Aluminum and Paint Industries. The plant will be capable of producing Ink Oils used in the manufacture of lithographic printing inks for printing high-grade magazines, fine-quality commercial work and newspapers.

The plant can also produce Odorless Paint Thinners and Mineral Spirits for Oil Based Paints, packed in 5 gallons, 1 gallon and quart containers. Estimated Cost From $4.5 million for a portable solvent plant capable of producing 70,000 liters per day of mixed products, including CIF, Installation, Training and Start-up.

Industrial Lubricants, Greases and Gear Oil Plant: The modular plant is capable of producing a mixed quantity of Industrial Lubricants, Greases and Gear Oil with a capacity of 15,000 gallons per day. The Plant will manufacture various grades of Lubricant Oils produced by blending quantities of Naphthenic base oils with various additives and packed in 55-gallon drums, 5-gallon pails and smaller containers.

The plant could also produce various blends of higher concentration of Lubricants, Greases and Gear Oil products. The products will be designed to have long lasting friction free coating to penetrate, protect and lubricate moving and stationary metal surfaces. Estimated Cost – CIF, Installation, Training and Start-up: From $3.75 million.

Liquid Asphalt Production and Batch Plant: The Liquid Asphalt Plant can be designed to produce 1,000BPD 3,000BPD of Liquid Asphalt from Crude Oil or Fuel Oil/Residium as Raw Material. The Plant can be integrated with an Asphalt Batch Line for the production of Bituminous Pavement Materials used for Road Construction and Surfacing.

The Batch Line will be capable of producing Hot Mix Asphalt for Road Patching & Paving by mixing aggregates with Liquid Asphalt and Cement to produce from 3 tons/hr. Bituminous Pavement Material. Estimated Cost – Integrated 1,000BPD Liquid Asphalt and 3 tons/hr. Batch Plant – CIF, Installation, Training & Start-up – From $7.98 million.

Liquefied Petroleum Gas (LPG) Filling Plant: The LPG Filling Plant will commercially bottle Liquefied Petroleum Gas sourced from Processing Unit of a Gas Gathering Plant or a local Crude Oil Refinery, which will be bottled for domestic consumers. The LPG Filling Plant will have capacity to bottle a mix of 600-1,500 12.5kg, 15kg & 45kg cylinders per hour.

The Plant will come complete with 12-18 Heads Gas Filling Carousel, Piping System, Sprinkler System, Standby Power Generator, Chain Conveyor, Loading and Unloading Compressor Systems, 3 x LPG Tank Lorry Trucks and Gas Storage Tank, Pre-Engineered Factory Building, etc. Estimated Cost: CIF, Installation, Training & Start-up – $3.5 million.

Natural Gas & Diesel Power Generation Projects: Natural Gas & Diesel Electricity Power Plants are available for installation as independent and reliable continuous-run power generating units. The capacity of each unit range between 1MW and 3.25MW designed to utilize Natural Gas connected to a pipeline from a Gas Recovery and Processing Unit or Depot as well as Diesel, as fuel to power the plants. Estimated cost: From $980,000.

The Plants can be combined in multiple units to form a large power project with generating capacity of between 15MW and +100MW per location, complete with central control system allowing multiple units to function in parallel as load is added or dropped. A compact Trailer Unit of 25 MW Gas Turbine can also be supplied within 12 months of placing order. Estimated cost: From $16 million.

Aviation – New & Used Passenger & Cargo Aircrafts, Helicopters, Airport and Heliport Development & Expansion, Aviaonics & Spare Parts

Cargo Airport & Aircraft Maintenance Facility: A Cargo Airport and Aircrafts Maintenance Facility Project can serve as a hub for fast growing and evolving global Air Cargo as well as cost-effective regular Maintenance and C & D Checks of Aircraft Fleets in a developing region.

The development of a new international standard Cargo Airport & Aircraft Maintenance Facility or expansion of an existing Airport to serve the same purpose is estimated to cost between $180 million and +$250 million, covering the construction of facilities and structures to include:

 3,600 meter Runway and adjoining Taxiways & Air Traffic Control Tower

 Apron Area for Overnight Parking of Aircrafts

Pre-Engineered Terminal Building with four (4) Gate Loading Bridges

 Aircraft Maintenance Facility & Aircraft Tooling and Equipment

Eight Low Bay Cargo Buildings, High Bay Cargo Building and High Bay Cargo Facilities

 Airport Internal and External Roads, Gates and Parking Area

Fire Station, Fuel Depot, Electric Power Plants and Water Treatment & Supply System

Facilities for Shops and Concessionaire Operations, Air Cargo Handling Systems,

Storage and Warehousing

 Aircraft Maintenance Training School

A Pre-Engineered 4-Star 100 Room Hotel, complete with Furnishing & Fittings

The project will include the purchase of two Boeing 727 Cargo Aircrafts to provide Air Cargo services to local and International freight routes, as integrated part of the overall project implementation.

Services to be provided include:

 Air Cargo Processing & Handling Services

Scheduled Aircraft Maintenance Checks

 C and D Maintenance Checks

 Airline Passenger Service

Commuter Transportation

Helicopter Passenger & Emergency Services

Concessionaire Operations

Hotel Services

Etc

Used / Pre-Owned Commercial Aircrafts:

Boeing 737-204 Advanced Aircraft available for Inspection and Supply.

Navigational, Communication, Electronic Systems, Furnishing & Equipment List. Estimated Cost: From $3million to $8million depending on Aircraft Age and Flight Hours.

1982 Boeing 737-200:

Typical Specifications:

Airframe

Total Hours: 69553

Total Cycles: 76015

Weights:

Maximum taxi: 116000

Maximum takeoff: 115500

Maximum landing: 103000

Maximum zero fuel: 95000

Operator’s empty weight: 65037

Fuel capacity: 34552

Interior:

Seating capacity: 122 Y CLASS

Galleys: 2 FWD & 2 AFT

Lavatories: 2 FWD & 2 AFT

Estimated Cost: From $3million to $5million depending on Aircraft Age and Flight Hours.

1985 Boeing 737-300 PAX:

Typical Specifications:

Avionics:

Auto flight Autopilot/FLT

Director , Air Data Computer, Flight Control Computer, Flight Mode Control Panel Auto Throttle Computer , Commun-ications VHF/Comm Panel

Audio SEL Panels , VHF Comm Transceiver Collins

PSGR Address , ACARS

Cockpit Voice Recorder , Instruments Flight Data Recorder Central Aural Warning Unit , TCAS, DME Transceiver and ADF Receiver, Standby Horizon and Marker Receiver

Equipment: 12 First Class / 112 Coach max seating per TCDS = 1491 fw lav / 2 aft , 4 Atlas Galleys, Life Vests, Escape path lighting

Extra Features: APU GTCP85 129CKB/ Honeywell TT 28,172 Time since last shop visit 2,264

Times: Total Time = 52,420 Cycles = 27,318 fresh “C” upon return, ” D” due March 07

Estimated Cost: From $12 million

 Helicopters and Heliports: Available new and used 2-7 Seater Basic & Executive series Helicopters are ideally suited for Private, Business and Utility Missions including Air Taxi, Sightseeing, Aerial Photography, News Reporting, Medical Emergencies, Police, Border & Coastal Patrol, Agricultural Spraying, Urban and Maritime Surveillance, etc.

Estimated Cost – CIF, including Painting to buyer’s colors, Test Flight and basic Training Run, from $455,000 through +$2 million.

Heliports can also be turnkey designed and constructed for hospitals, businesses and government offices. For rooftops, modular, steel and aluminum platforms can be constructed complete with lighting and fire protection system. Estimated Cost from $500,000.

Next week, we continue with business projects being financed at the moment in Nigeria by the US Ex-Im Bank through FinancialBridge and the process for securing this offshore funding for projects in the country.

HOW TO PROTECT YOUR INVESTMENT IN BEARISH MARKET

By West Africa Capital Market School

After having reflected on the fact that there is now little doubt that the Nigeria Stock Market is in the midst of a bear run and that the bear would dominate the market over a long period, experts at the West African School of Capital Market, have offered to avail capital market operator the appropriate trading strategies for the bearish market.

“Economic fundamentals do not support a swift return to an upward price trend,” the experts noted in a dispatch to operators and investors. “With oil hovering in the low $40s, there is precious little money flowing from the public sector unless of course there are draw downs from dedicated accounts to fund some sort of large scale infra-structural investment and even this will take some time to trickle through based on emergent large bets against the local currency.”

The experts highlighted eight broad approaches to managing clients’ portfolio for stockbrokers.

1. Avoid investment diversification. Diversification is a great idea in good markets as it cuts down market and sector risk. However, in a bear market, the problem is with the broad market. The broader your selling of low performers, and concentrating your investments in fewer stocks that have shown the best performance, is the way to go. Your risk is no longer corporate performance but low confidence in the overall market and so it does not make sense to be broadly represented.

2. Help clients identify and preserve core capital – you will have to trace client investments by contribution/performance to identify core capital. Let clients know that you are focused on ensuring that they remain “in the game” and are positioned for a market rebound when it eventually comes.

3. Review your website and its contents to reflect the new realities and change research recommendations from “buy’ “sell” “hold” to a “preserve”, “growth” and “aspire” type recommendations. Preserve stocks will provide growth and income necessary to preserve core capital and maintain lifestyles. Growth will beat the overall index and Aspire is for long term gains when the market picks up. Conservative clients may choose to start out with 50 per cent Preserve, 40 per cent Growth and 10 per cent Aspire and then mechanistically adjust the portfolio later.

4. Shift emphasis from selling stocks to financial planning and wealth management if you have the skills for these. Financial planning is far more defensive than wealth management which requires the identification of non-financial wealth and the setting up of the right trust structures.

5. Be wary of new investment types that you don’t fully understand. The property market, for instance, will in all probability self correct especially at the high end where oversupply and tighter bank credit is now becoming an issue. If you are just getting into property come in at the middle and low end. Avoid the Lekki-Epe axis by all means.

6. If you choose to bet against the naira, do so in an intelligent way and realize that dollar rates can crash if government so desires. You need to get an inside track on just what government thinking is. A strong dollar will cut imports in the medium term and do long term good to the reserves but this strategy might go horribly wrong. We have to wait and see.

7. Keep your people engaged as much as you can. The obvious reaction is to slash and cut and sometimes this may be necessary but rather stay positive and prepare for the bull market because it will come back and for a fairly sustained period too. This means lighter more qualified and educated personnel and wise investments in scalable technology. If you are going to sell optimism abroad then sell it at home too and stay on message.

8. How do you know when the market is recovering? You will need to get some of your people busy on creating and maintaining the A/D Line of the NSE All share. Each day deduct the number of stocks gaining from stock shedding value and graph the resultant values. This will show clearly when the broad market begins to recover.

Technically, the market is in base formation right now with small gains being matched by exits/loss capping. Traditionally, base formation is followed by a sharp and sustained movement to the up or downside. You can estimate this by looking carefully at the volume on up days and the volume on down days. The whole idea is to cancel out the noise being generated by the overall index to see where recovery is likely to begin from.

The other option to these suggestions is to do nothing and hope for the best. While hope might be a laudable trait it is certainly not an advised business strategy. We believe that the market is transiting from high volatility/high gain frontier market status to a more sustained emerging market growth type of market. Such transitions are always painful but unavoidable,” the experts submitted.

THEY SAY ADENUGA’S WISH TO SIGN OFF ETB SUFFERS A SET BACK

Perhaps some ETB staff that were in the know of the negotiation of the acquisition of the bank by FirstBank were excited at the prospect of changing boss from the authority of Otunba (Dr.) Mike Adenuga to the structured management of FirstBank. Feelers from the bank owned by Adenuga indicated that some staff members were really perturbed when months after the very discreet discussion between ETB and FirtBank hit the dirt.

Background sourcing indicated that Adenuga is intent at concentrating on his money spinners, the telecom and oil and gas ventures in his vast business empire and considered the relinquishing what they claimed to be the troubles of running his ETB to the banking giant.

Some of the staff considered this a momentary set back though.