Chrome, Essar, and the Chinese partner may be one of the two consortia that make the final evaluation process because of late documents and bids by two of the other consortia.
The bid marks the first time that a long-expected connection between the Chinese and ERHC Energy's chairman has been publically made since the latter went to Taiwan last summer. Chinese Petroleum Corp., with 14,000 employees, is the Republic of China's largest oil company, has 57 producing well in western Taiwan and recovered more than 5 million barrels of crude from fields in Ecuador and Indonesia in 2004. It is currently exploring other blocks in Venezuela and Australia.
But the fact that a major Indian firm has also partnered with us is icing on the cake; Essar already owns a US$2.14 billion refinery in Vadinjar, India, and its shipping arm, which enjoyed a 50 percent rise in profits last year, owns at least one supertanker and was the first Indian company to ship North Sea crude. The company's oil exploration arm is expected to hit oil in the Bombay High and another offshore field at a substantial depth and at onshore sites in Rajasthan and elsewhere, and its technology arm is focused on the oil and gas sector. See its well-produced Website at http://www.essar.com/ for more information, but note this blurb from its shipping division:
In the first six months of this fiscal we have moved 150 million barrels of crude for different oil companies the world over, which is the highest amount of crude moved by any Indian shipping company. And this is primarily because we are able to control the full logistic chain, as is being now sought by oil companies," says Mr. Sanjay Mehta, CEO and Managing Director of the company.
The supply chain solutions provided by the company include shipping, terminal activities, storage, lighterage, ultimate delivery of oil to refineries and taking the products out of the refineries for onward transportation.
"We envisage that in one year from now, oil companies will no longer work with just traditional shipping companies, but with companies which can provide full logistic solutions," Mr. Mehta told Business Line.
Essar Shipping has firmed up long-term contracts involving provision of such supply chain solutions with global oil majors such as Exxon, Chevron and BP. While the company handles shipping and related activities such as lighterage and storage, other operations like terminal activities are outsourced. "This is one reason for consistency in our operating revenues because of the incremental earnings. At every stage we earn money," according to Mr. Mehta.
With the company planning to focus on energy transportation and management further in the coming years, it has opened offices in New York and Beijing. "For example, Exxon Mobil operates seven refineries in the US. Logistic experts from our New York office visit the refineries and study the crude mix - that is from where the crude will be shipped for the whole year. And then we prepare a supply chain proposal, which we totally execute. We have saved Exxon about 15 cents a barrel in transportation cost during the last two years, which is quite significant," he said.
Oduniyi is a veteran oil industry writer who has broken major stories in the recent past. The revelation that Chrome's Emeka Offor has teamed with a Chinese partner to bid for the Port Harcourt Refining Company, a refinery that Chrome Oil Services has long been contracted to maintain, is sure to excite speculation about Chinese participation in the output of the Nigeria-Sao Tome Joint Development Zone, where ERHC Energy has substantial equity in five blocks and Production Sharing Contracts are due to be finalized this Spring or sooner.
It also fulfills a recommendation ERHC On The Move made to ERHC Energy Chairman Sir Emeka Offor last year to buy or build a refinery, and bears out the warning we made to U.S. officials last month that Chinese oil companies will seek hegemony in West Africa and must be successfully challenged all across the value chain - drilling, platforms, pipelines, refineries and shipping. At least on the refinery front, it now appears to be almost too late for other American players to do so in Nigeria, as other refineries in Nigeria are in poor shape and require large investments to restore their productivity.
Should Taiwan's Chinese Petroleum or India's Essar Oil partner with ERHC Energy in the Sao Tome EEZ, where it is expected to gain substantial equity from treaty rights granted in 2003, America's opportunity to find new, rich and long-lived oil reservoirs in West Africa - expected to account to a quarter of U.S. imports within the next 20 years - may largely be lost.
The situation is made only slightly less grave because the Chinese firm is Taiwanese, and both Taiwan and India are American allies. Nonetheless, Taiwan yet must live in the giant aggressive shadow of the mainland People's Republic of China, and India's government has gyrated wildly over the past three decades in its diplomatic relations with the United States, which are currenly near an all-time high. What is Taiwanese today is always in danger of becoming PRC property tomorrow, and a move back to India's controlled economy could shift the diplomatic balance against us again. For the time being, however, especially for ERHC Energy, everything's rosy.
The failure of the U.S. government to bond with ERHC Energy lies primarily with ExxonMobil and Anadarko Petroleum, its rivals in the pitched battle for Block 4 that was ultimately won by ERHC, more than the U.S. government.
Using its connections back home and in Sao Tome, the two companies have pushed delays and probes and problems at the tiny West Nigerian-owned, Houston-based company rather than deal with it as the most promising of the new African players in the Gulf of Guinea, and have used their collective influence to turn the media and politicians against the company.
Here is the article by Oduniyi from Tuesday's ThisDay Online:
Chrome, Oando, Transcorp Jostle for PH Refinery;
BPE releases guidelines
By Mike Oduniyi, 12.06.2005
Submission of bids for the sale of the Port Harcourt Refining Company Limited (PHRC), closed weekend with four consortia meeting the deadline out of the 10 firms that had expressed interest in acquiring controlling stake in the country’s biggest refinery.
The consortia are the Chrome/Chinese Petroleum Corporation/Essar Oil Conso-rtium, the Oando/Shell Group, Transnational Corporation (Transcorp) and Refinee Petroplus Consortium.
The Bureau of Public Enterprises (BPE), the Federal Government agency managing the privatisation of state owned enterprises, yesterday released the guidelines for the conduct of the open bidding for the PRHC.
According to the BPE, the company, which houses two refineries, namely the Old Port Harcourt refinery and the New Port Harcourt refinery, will be sold before the end of this year.
The BPE had issued Final Bid Documents to 10 prospective bidders on November 18, 2005 but only four consortia were able to submit the bid packages at the expiration of the deadline for the submission Friday.
The agency said yesterday that while two of the firms that had expressed interest entered into alliances, two other firms wrote to request for an extension of the deadline, while the three remaining bidders did not respond.
However, of the four consortia that met the deadline, indications are that two may not qualify for the final opening of bids.
According to the Head of Public Communications of the BPE, Mr. Chigbo Anichebe, the agency was briefed by Credit Suisse First Boston (CSFB), London, its Transaction Advisers for the PHRC privatisation, that while one of the bidders did not meet the deadline for submission of the duplicate copy of the technical bid, another one which met the deadline for submission of the duplicate copy of the technical bid to CSFB did not meet the deadline for submission to the BPE.
“The BPE is presently evaluating the implication of these developments. Subject to satisfactory evaluation of the above developments, the BPE will proceed with the technical evaluation of these submissions to determine bidders who qualify to have their financial bids opened,” Anichebe said.
The bids, he added, will be evaluated on the following criteria: Experience in the ownership, operation and management of a crude oil refining plant; Firms must demonstrate financial capacity to finance up to $200 million (N26 billion) of capital expenditure by PHRC within the next three years; Quality and credibility of the bidder’s Post Acquisition Plan (“PAP”) for the refinery, and, Adequate measures for addressing labour and other social considerations.
“Only bidding consortia that score above the minimum technical score of 60 will be eligible to have their financial bids opened,” added Anichebe.
Meanwhile, Mr. Raj K. Varma, Chief Executive Officer (Marketing Division) of Essar, who led the consortium to submit the bid, told THISDAY that his company, which has competences in exploration, production, refining and marketing, is using the refinery as a bridgehead to enter into the Nigerian oil and gas industry.
Varma said that beside the availability of capital, the consortium has the technical expertise to operate the refinery. “We have a large number of very experienced people in the refinery, processing and maintenance and projects,” he said. “The China Petroleum Corporation (CPC) has a large number of refineries in Taiwan.”
Also, speaking to THISDAY on the chances of Transcorp in the bid for the Port Harcourt refineries, the Chairman of Transcorp Technical Committee on Oil and Gas, Mr. Femi Otedola, said that the company was seeking to manage the PHRC with the objective of ensuring that such national assets remain in the control of Nigerians.
“We believe in the process of making sure the general public of this country get the opportunity to participate in the oil and gas business; we also believe that a strategic national asset such as PHRC should be managed and run by efficient hands, with an interest very close to home,” said Otedola.
“As a direct consequence, the resulting benefits will be realised by our shareholders and will subsequently trickle down into the economy, thus benefiting Nigerian citizens as a whole,” he added.
The PRHC, according to BPE data, has an authorised share capital of N5 million, divided into 5 million ordinary shares of N1 each.
Only one of the two refineries in the company is currently in operation, following the closure of the Old refinery while plant capacity utilisation presently stands at 60 percent.
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