Amaka Obiefuna

Seplat Petroluem Development Company Plc’s gas business exceeded $100 million revenue milestone projection for the year 2016 despite various challenges in the sector.

At the firm’s 4th Annual General Meeting (AGM) on Thursday in Lagos, Chief Executive Officer, Austin Avuru explained that while force majeure at the forcados terminal has “materially affected our oil production, I am particularly pleased to see the growth in our gas business which in 2016 exceeded the $100 million revenue milestone demonstrating its robustness and providing a solid base from which to grow. It is easy to forget that in 2013 gas revenue were only $18 million, which shows how far we have come”.

According to him, gas revenue increased significantly year on year to $105.5 million compared to $76.9 million that was recorded same period in 2015.

Avuru said that this trend was driven by a 19 percent increase in the average realized gas price to $3.03/Mscf compared to $2.55/Mscf in 2015, which shows an increase of 11 percent in working interest production to 95 MMscfd (34.7Bscf) compared to 86 MMscfd (31.3Bscf) in 2015.

Giving details of the company’s challenge in the year under review, Avuru explained that it impacted on revenue due to the extended Trans Forcados shut-in as well as volatility in global oil prices.

The company has established a longer term alternative export route through the Warri refinery jetty and are nearing completion of upgrade works to the infrastructure enabling a doubling of barging volumes to a steady 30,000 bopd gross for second quarter of 2017.

He said: “Alongside this, we are collaborating and supporting government on completion of the Amukpe to Escravos pipeline that will offer a third export route through the Escravos terminal. With multiple export routes expected to be operational during the second half of 2017, we will have significantly de-risked our route to market”.

To significantly improve its alternative routes and avoid revenue losses from shut-ins, Avuru pointed out that they are also, in addition to the Warri and Forcados export routes, supporting the National Petroleum Investment Management Services (NAPIMS) a 100 percent subsidiary of the Nigerian National Petroleum Corporation (NNPC), he said on completion of the 160,000 bopd capacity Amukpe to Escravos pipeline that will offer a third export route through the Escravos terminal. With the intention is to utilize all three to ensure there is adequate redundancy in evacuation routes.

Explaining further, he said: “Seplat will continue to prioritized expansion of its domestic natural gas business which provides a revenue stream that is de-linked from the oil price and underpinned by the strong fundamentals of high demand and increasing pricing. Eliminating the outstanding NPDC receivables balance remains an absolute priority “.

On plans to grow the business, he said: “We have now establish a longer-term alternative export route via the Warri refinery jetty and are nearing completion of upgrade works to the infrastructure enabling a doubling of barging volumes to a steady 30,000 bopd gross during Q2 2017. Alongside this we are collaborating and supporting government on completion of the Amukpe to Escrvos pipeline that will offer a third export route through the Escrvos terminal. With multiple export routes expected to be operational during the second half of 2017, we will have significantly de-risked our route to market. Whilst the quality of our asset base remains undiminished we will continue to maintain strict financial discipline to ensure that we preserve a sufficient liquidity buffer in the current environment and at the same time discretion over spend in our portfolio of production opportunities.”

“To significantly improve its alternative route and avoid revenue losses from shut-ins Seplat is also, in addition to the Warri and Forcados export routes, supporting NAPIMS (a 100 % subsidiary of NNPC) on completion of 160,000 bopd capacity Amukpe to Escravos pipeline that will offer a third export route through the Escravos terminal. The intention is to ultilise all three to ensure there is adequate redundancy in evacuation routes.

Details of the company’s financial statement showed that gross profit for the year was $72 million, a decrease of 71 % on the prior year (2015: $249 million). This principally reflects the shut-in of the Forcados terminal resulting in lower production, lower oil price realization and higher costs associated with the alternative export route to the Warri Refinery, while Operating loss for the year was $158 million when compared with a prior year operating profit of $158 million. Included in the loss is a charge of $101 million relating to unrealized foreign exchange losses principally on amounts owed by our joint venture partner NPDC.

Looking ahead through 2017, the Company has said it will set full year production guidance at the lifting of the force majure by Shell but the immediate priority is to increase exports via the Warri refinery jetty to a gross average level of 30,000 bopd and looking further ahead support NAPIMS to achieve completion of the new Amukpe to Escrvos pipeline.

The Chairman, Dr. Ambrose Orjiako, said Seplat will also continue to priotise expansion of its domestic natural gas business which provides a revenue stream that is de-linked from the oil price, and underpinned by the strong fundamentals of high demand and increasing pricing. Eliminating the outstanding NPDC receivables balance remains an absolute priority.