The Nigerian Content Development and Monitoring Board (NCDMB) has ordered Seplat Petroleum Development Company Plc to suspend work on its ANOH Gas Plant project in Oil Mining Lease (OML) 53.
In a letter with reference number NCDMB/MED/UP/18/049, NCDMB’s Director of Project Monitoring and Evaluation, Mr. Tunde Adelana, accused Seplat of commencing engineering and fabrication of ANOH Gas Plant for OML 53 through Global Process Systems of UAE.
This the agency noted is in violation of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act of 2010 by using a UAE firm for the engineering and fabrication as well as tenders for other integration and construction work without the approval of the agency.
Dr. Chioma Nwachuku, Seplat Petroleum’s spokesperson, however debunked claims that the company violated the Nigerian Content law in the ANOH Gas project, noting that the partners have not signed the Final Investment Decision (FID) for the gas project, which is a joint venture with the Nigerian National Petroleum Corporation (NNPC) and could not have violated the Nigerian content law in a project that has not been awarded.
In her words:
“We have not taken the FID. How can we award contracts without funding? Where will the money come from? Seplat and partners have not taken the FID. There is no contract that has been awarded at this stage. We don’t know where they (NCDMB) are getting the report from.”
Seplat in its 2018 guidance, listed some of the projects to be undertaken during the year part of which include the drilling of two oil production wells in Ohaji South in OML 53 and one oil production well workover at Jisike and flow line installation to enhance productivity and also plans to upgrade its Sapele gas plant during the year.
The company also noted a progress towards FID for the large-scale ANOH gas and condensate development at OML 53 in 2018.
Likely effect on the company bottom line
Seplat incorporated a new subsidiary, ANOH Gas Processing Company Limited in 2017, the major activity of the subsidiary is the processing of gas from its OML 53. It is described as one of the largest greenfield gas condensate development projects in Nigeria.
In its Q1 2018 report for the period ended 31st March 2018, the company recorded improved earnings from the gas revenue. Net working interest gas production of 158 MMscfd which translates into gas revenues of US$40 million, a new quarterly high.
A total stoppage on the new ANOH Gas Plant project may impact negatively on the company’s revenue from gas business.
Also, in its recently released Q1 2018 results show a strong quarterly performance with US$181 million in revenue and gross profit US$93 million (51% gross profit margin); EBITDA of US$116 million which was driven by higher total production and higher oil price realization of US$65.78/bbl; average gas price US$2.79/Mscf. While Profit Before Tax for the period stood at US$59 million and Net profit stood at US$21 million.
Recall that Seplat recently successfully refinanced its existing US$300 million revolving credit facility due December 2018 with a new four year US$300 million revolving credit facility due June 2022 the proceeds will be used to repay and cancel existing indebtedness.
Seplat Petroleum Development Company Plc was incorporated on 17 June 2009 as a private limited liability company and re-registered as a public company on 3 October 2014.
The company is listed on both the Nigerian Stock Exchange and London Stock Exchange. Its shares are currently trading at ₦734.70 on the floor of the Nigerian Stock Exchange, with a 104.83% one-year return.
The Nigerian Content Development and Monitoring Board (NCDMB) was established by the Nigerian Oil and Gas Industry Content Development Act (NOGICD) of 2010.