INVESTIGATION: How Petronor OML Joint Venture was brokered


Oil field 113, better known as the Aje oil field, is popular for one unique reason. Aside from its abundant oil and gas reserves, Aje stands out as the only oil-producing field outside the Niger Delta.

Owned by a famous Nigerian Yoruba family – the Yinka Folawiyo family – OML 113 lies in the Dahomey-Benin Basin, 24 kilometers from the coast. The high number of oil and gas exploration prospects makes the field – with water depths ranging from 100 to 1,000 meters or 3,000 feet – an industry-scale attraction.

The latest attraction to Aje is PetroNor E &P, a Norwegian oil exploration and production company.  Petronor holds oil licenses in four African countries. The company has production in the Republic of Congo, development in Nigeria, and exploration in The Gambia and Senegal.

Before Petronor appeared on the scene, Aje had other players, including Chevron. Its history began with Yinka Folawiyo Petroleum (YFP) as the operator of OML 113 with a 60% interest. The remaining 40% was owned by a joint venture comprising Chevron Nigeria Deepwater, Vitol Exploration Nigeria, Panoro Energy, Energy Equity Resources, and Jacka Resources.

Chevron was appointed as the technical adviser to the operator for the project and was also assigned the responsibility to prepare a development plan for the field. Providence Resources Oil and Gas earlier held a 2.667% interest in the OML 113. It was sold to Jacka in December 2011. During the same period, Chevron announced its plans to sell its interest to Energy Equity Resources.

Aje was discovered by the Aje-1 well in 1996. The well encountered oil and gas over three zones. In 1997, the Aje-2 appraisal well was drilled 1km east of the Aje-1 well. It confirmed the presence of oil and gas in the Turonian reservoir. A third well, Aje-3, was drilled using a semi-submersible rig in 2005. In the first quarter of 2008, another appraisal well called Aje-4 was drilled by the Transocean Deepwater Pathfinder drill ship to carry out a complete appraisal of the field. The well encountered hydrocarbon reserves in the main Turonian reservoir. The field was declared a commercial prospect in February 2009.

The Aje-1, Aje-2, and Aje-4 wells were developed as producers. The production wells are connected to subsea wellheads and associated flowlines and manifolds in water depths of 320ft. The flowlines are connected to the FPSO through risers.

Produced hydrocarbons are processed by the FPSO and exported through the West African Gas pipeline or through a direct pipeline to connect to the Lagos gas infrastructure.

Back in October 2019, Panoro Energy entered into a sale agreement with Petronor to sell Panoro’s interest in OML 113, including the Aje field, and for Petronor to take over a lead technical and management role for the project in order to progress it further.

In the same year, Petronor signed an investment agreement with Yinka Folawiyo Petroleum (YFP) to forge a new path forward for the future development of Aje field.

This deal entailed the creation of a joint venture firm named Aje Petroleum – 55 percent owned by YFP and 45 percent owned by PetroNor.

Details of the Panoro-Petronor deal made available to BUSINESS LEAKS showed that the buy-out took 33 months to conclude – a much longer time than both oil and gas companies had anticipated. Even though Panoro and Petronor had long tied up the acquisition deal between them, the requisite stamp of approval from the Ministry of Petroleum Resources headed by the President, Muhammadu Buhari, was slow in coming. In addition to nail-biting bureaucracy, the transaction was held up by Covid-related issues.

In fulfillment of the regulator’s nod, Panoro Energy announced the completion of the sale of its fully-owned subsidiaries Pan-Petroleum Services Holding and Pan-Petroleum Nigeria Holding. According to Panoro, the two subsidiaries hold 100 percent of the shares in Pan-Petroleum Aje Limited (Pan Aje).  These subsidiaries of Panoro which participate in the exploration for and production of hydrocarbons in Nigeria and holds a 6.502 percent participating interest, with 16.255 percent cost-bearing interest, representing an economic interest of 12.1913 percent in OML 113.

Panoro further explained that an upfront consideration of $10 million was expected to be paid within fifteen business days by PetroNor via an allotment and issue of 96,577,537 new PetroNor shares with a fixed value of $10 million, plus contingent consideration of up to $16.67 million based on future gas production volumes.

John Hamilton, CEO of Panoro, said: “We are pleased to have finally concluded the sale of Panoro’s interest in OML 113 to PetroNor and unlock value for our shareholders who can continue to benefit from future gas successes at OML 113 through the upcoming distribution of the shares in PetroNor received as payment for the upfront consideration.

“This also represents a key milestone for Panoro’s strategy with the first dividend payment to its shareholders.  Meanwhile, the board and management of the company remain fully committed to initiating sustainable cash dividends at the earliest opportunity and to unlock further value for its shareholders.”

In a separate statement, PetroNor confirmed that it has completed the purchase of Panoro’s fully owned subsidiaries that together hold 100 per cent of the shares in Pan Aje, adding that the acquisition of Panoro’s interests in OML 113 clears the path for the establishment of Aje Production as a jointly owned venture with Yinka Folawiyo Petroleum, the operator of OML 113.

Jens Pace, PetroNor’s interim CEO, remarked: “We are pleased to confirm that this long-awaited transaction with Panoro has now been completed. The acquisition of the ownership interest in the Aje field is strategically attractive and supports our stated growth strategy of acquiring assets that add production, material reserves and resources to the company.

“With the establishment of Aje Production, YFP and PetroNor will form a dynamic and effective licence partnership to lead the redevelopment of the Aje field.”

The nod has finally come; exactly two years and nine months after PetroNor’s first expression of interest in the Aje condensate, gas and oil field. This deal will trigger a redevelopment on the shallow-water field close to Lagos and the West African Gas Pipeline, with the focus on commercializing its 1.1 trillion cubic feet of gas.

In effect, PetroNor has bought Panoro Energy’s 15.1% effective economic interest in Oil Mining Lease 113, which hosts the producing Aje field, for $10 million worth of new PetroNor shares, with its stake expected to rise to 20.2% over three years. The transaction also involves a contingent consideration of up to $16.67 million based on future gas production volumes.

Under the terms of the transaction, PetroNor has the option to pay a portion of the share consideration in cash, in the event PetroNor’s share price reduces to less than $0.13 per share (based on the current number of shares in issue), at the time of completion of the transaction.

Once Pan Aje has recovered all costs related to the accumulated investments incurred after the date of completion, PetroNor must pay Panoro additional consideration of $0.15 per 1,000 cubic feet of the Aje Natural Gas Sales Volume, such additional consideration being capped at $25 million.

BUSINESS LEAKS gathered that the Joint Venture’s board will consist of five directors, with two nominated by each of YFP and PetroNor and one independent director. One of YFP’s nominated directors will be the Chairman.

YFP, as the operator of OML 113, will engage Aje Petroleum as a technical service company. A joint project management team will be established by the Aje Board and be led by a member nominated by PetroNor (the “Technical Manager”).

BUSINESS LEAKS also learned of a new adjustment in favour of PetroNor. The acquisition clears the path for the establishment of the Aje Production joint venture to operate the field, with PetroNor holding 52% in the venture and Yinka Folawiyo Petroleum (YFP) 48%.

An excited PetroNor’s interim chief executive Jens Pace said: “We are pleased to confirm this long-awaited transaction with Panoro has now been completed.”

“The acquisition of the ownership interest in the Aje field is strategically attractive and supports our stated growth strategy of acquiring assets that add production, material reserves and resources to the company.

“With the establishment of Aje Production, YFP and PetroNor will form a dynamic and effective licence partnership to lead the redevelopment of the Aje field,” he said.

Osamede Okhomina, chief executive of Aje partner ADM Energy, said: “The conclusion of PetroNor’s acquisition of Panoro’s interest in OML 113 marks a significant event… as it now allows us to further concentrate on accelerating the development plans for Aje.”

He added: “PetroNor’s decision to acquire a stake in the Aje field is a strong endorsement of the quality and considerable potential of the asset and we look forward to working with them to take Aje to the next stage.”

A Liquefied Natural Gas Project (LNG) at Aje

Aje has been producing liquids via the Front Puffin floating production storage offloading vessel, while gas was flared.

The new operating joint venture has a redevelopment plan that could see production running at about 25,000 barrels of oil equivalent per day. This new plan aims to commercialise Aje’s gas resources by piping it to Lagos to feed a 500-megawatt power plant.

It was further gathered that PetroNor’s acquisition of a major stake in the Aje offshore field has cleared the path for a new floating production storage and offloading (FPSO) to be brought onto the asset. The deal could also prepare the ground for a potential floating liquefied natural gas project at the field.

The JV partners have decided not to commit to an extension of the current FPSO contract and will stop production in preparation for the demobilization of the vessel from the field. They are working to secure another FPSO that could allow for substantially increased production from the redevelopment of Aje.

Based on data released by PetroNor, there are two production wells – the Aje-4 with oil production and Aje-5ST2 with oil and gas production – along with a significant gas-condensate column ready for further development. The joint venture partners are said to be actively looking to replace the existing FPSO Front Puffin to increase capacity as part of long-term development plans for the surrounding OML-113 lease.

Top executive detained in Norway

BUSINESS LEAKS gathered that in December 2021 PetroNor’s chief executive, Knut Sovold, was detained by Norwegian authorities as part of an investigation that had the potential for a criminal offence. The arrest caused the company’s share price in Oslo to plummet 15 percent.

Norway’s National Authority for the Investigation & Prosecution of Economic & Environmental Crime said at the time “the investigation is related to projects in Africa.”

Before it got into Nigeria, PetroNor has been operating in Congo-Brazzaville, Gambia, and Guinea-Bissau. Two Senegal blocks originally awarded to PetroNor have remained the subject of a long-running arbitration process.

In Sovold’s absence, Jens Pace was appointed interim chief executive. Sovold holds 32 years of experience in the oil and gas industry. His LinkedIn profile shows that between 1998 and 2005, he worked as a reservoir specialist for Scandpower, Saga Petroleum, Norsk Hydro, and PGS. He joined AGR as a new ventures manager in 2005, before a one-year stint at Netherlands-based Pangea LNG in 2012, a posting that coincided with a director role at D&H Solutions. In March 2020 he was appointed chief executive of PetroNor.

This investigation was carried out under the Collaborative Media Engagement for Development Inclusivity and Accountability Project of the WSCIJ, with funding from the MacArthur Foundation

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