First Hydrocarbon Nigeria Limited (FHN) was established in direct response to the Nigerian government’s policy to increase indigenous participation in the Nigerian upstream oil and gas sector. FHN began its operations on a strong footing thanks largely in part to the backing of its parent company and core investor, Afren which already had significant experience and a successful track record of assisting indigenous companies in Nigeria. Based on this foundation the company was able to obtain the necessary technical expertise, access to finance and market position required to contribute substantially to the growth of indigenous production in Nigeria. On the 1st of December 2011, FHN acquired a 45 per cent interest in OML 26, onshore Nigeria from the Shell, TOTAL and ENI joint venture with the NNPC. FHN was able to secure finance of US$280 million enabling it to complete the acquisition and its share of future capital requirements associated with the initial development of the block.
The gross average production on the block from its Ogini and Isoko fields totalled 6,010 bpd. Production came in below expectation during the period owing to gas-lift compressor outage and maintenance and repair work on the SPDC operated Trans Forcados Trunkline during the first half of 2012. Full gas compression was restored by the end of June 2012, following which increased production to 10,500 bpd.
An independent assessment of the reserve and contingent resource potential of the Ogini and Isoko fields for FHN in March 2013, has estimated the gross remaining 2P oil reserves at the fields at 134.6 million barrels and gross contingent resources at 68.0 million barrels (gross 2P & 2C reserves and resources 202.6 million barrels; 91.2 million barrels net to FHN). This represents a 231% increase on 2P reserves previously carried by FHN and a 10% increase on previously carried 2P & 2C volumes as at 31st December 2011. In addition, significant upside potential of 144 mmboe also exists within the undeveloped Aboh, Ovo and Ozoro discoveries, together with an estimated 615 mmboe gross unrisked prospective resources defined across multiple prospects that will continue to be worked up in parallel to, and integrated with, future development plans. The proposed forward work programme consists of the drilling of new horizontal wells in 2013.
Furthermore, Afren Plc recently improved its stake in FHN to a majority position by getting an additional 10.4 % of FHN’s shares, equivalent to 15 million shares, giving Afren a majority interest of 54.8 % interest in FHN. Afren paid somewhere in the region of US$37.05 million for the shares. Prior to this transaction Afren was a 45% shareholder with 55% being held by Nigerian investors. As a result Afren is now able to consolidate the FHN assets into its reported assets. Afren is however, still keen on keeping FHN’s indigenous status so they are separating their legal from their beneficial holdings, hence 45% will be held by Afren directly and 9.8% will be held by an Afren Nigerian incorporated affiliate.
It’s important to stress that aside from the Nigerian Independents we mentioned in this feature, there are several more emerging from the shadows of the multinational oil companies but the level of sophistication, strategic alliances and exploration and production activities of the five independents we featured highlight that there is clearly a changing dynamic within the Nigerian oil and gas industry that has come to stay. And with rumours of further divestments by multinational oil companies looking to adjust their current portfolios there is a very good chance that in the next few years we may see an industry that is clearly dominated by more and more Nigerian independents.