Category: News

The international prices of crude oil spiked yesterday, raising hopes in the country that Nigeria could meet its financial obligations to its citizens and fulfil its global commitments in the short term as the Brent sold for $34.42 per barrel With dwindling prices of the country’s major revenue earner in the last few weeks, the federal government had had to realign its 2020 budget in the face of current economic realities which have seen the price fall from close to $60 per barrel to just about $20.

But yesterday, the price of crude oil spiked, gaining as much as 15 per cent in just a few hours, with increasing reports that the members of the Organisation of Petroleum Exporting Countries (OPEC) and their allies would be holding a virtual meeting to discuss an end to the price war, mainly between Russia and Saudi Arabia.

Consequently, the oil market, which was already experiencing a glut, saw prices crash to an 18-year low in March as the two countries engaged in a price war after Russia declined to join OPEC in deepening production cuts, prompting Saudi Arabia to lower prices and increase output.

The country’s financial projections for the year were also compounded by the impact of the COVID-19 pandemic, which has led to the international buyers of the country’s crude oil cutting down on their purchase and consumption, leaving Nigeria’s crude stranded at sea.

But as the prices began to tumble, the Muhammadu Buhari-led government announced some significant changes to its 2020 budget as measures to contain the effect of the outbreak of coronavirus on the nation’s economy.

It outlined a plan to implement a 50 per cent cut in revenue from privatisation proceeds and a review in crude oil benchmark price down to $30, while crude oil production, but kept daily production at 2.18m barrels per day.

With an initial oil benchmark of $57 per barrel in the 2020 budget, the Federal Executive Council was also forced to approve reductions in capital budget by 20 per cent, and 25 per cent cut in recurrent expenditure.

The federal government also adjusted downwards Customs revenue of N1.5 trillion, in anticipation of a significant reduction in economic activities, cut down capital expenditure by 20 per cent across ministries, departments and agencies and also a 25 per cent cut of all government owned enterprises.

However, the upswing in the price of crude oil which started on Thursday continued yesterday with Brent crude oil, the international benchmark, climbing as much as 15 percent to $34.42 per barrel while West Texas Intermediate crude oil, the U.S. benchmark, gained as much as 12 percent to $28.31.

There were reports that the alliance was willing to cut production, after President Donald Trump indicated in a tweet that he expected Russia and the Saudis to slash production by about 10 million barrels per day.More in Home

A Reuters report indicated that OPEC and its allies could meet as early as Monday to discuss a production cut amid the coronavirus pandemic.

“US West Texas Intermediate crude surged as much as 13 per cent to $28.56 per barrel after gaining 25 percent on Thursday. International benchmark Brent crude jumped 17 per cent to $34.91 per barrel at its yesterday intraday highs, continuing the previous day’s 21% gain” the report said.

It added that the cut could be around 10 per cent of global supply, citing an OPEC source, although with this week’s gains, oil prices are still down roughly 50 per cent year-to-date.

SOURCE: This Day

Nigeria has cut the official selling prices for its crude oil to record lows to clear a glut of unsold April-loading cargoes before releasing the May programme on Monday.

The country has had to grapple with an unprecedented excess of oil triggered by the coronavirus outbreak and a price war between Saudi Arabia and Russia for market share.

The Nigerian National Petroleum Corporation cut its April official selling prices for Bonny Light and Qua Iboe by $5 per barrel to dated Brent minus $3.29 and minus $3.10 per barrel, respectively, Reuters reported on Monday.

Brent crude, the international benchmark, has fallen by over 60 per cent since the start of this year. It stood at $26.44 per barrel as of 7:40pm on Monday.

May loading programmes emerged with key grades seeing an increase over the previous month, Reuters reported on Monday.

Bonny Light and Forcados are both higher and due to load 245,000 barrels per day, Bonga 123,000 bpd and Qua Iboe 215,000 bpd.

There will also be two cargoes each of Usan and Yoho, five cargoes each of Brass River and Agbami, six of Egina and four Amenam, according to the report.

The Group Managing Director of the Nigerian National Petroleum Corporation, Mallam Mele Kyari, said recently that the country was already struggling to find buyers for its crude oil, saying over 50 cargoes were yet to be sold.

The unsold cargoes represented more than 70 per cent of the country’s total oil exports and puts the country in a very difficult spot, according to S&P Global Platts.

Kyari said Nigeria’s crude cargoes had been stranded due to the higher selling price compared with its fellow OPEC members such as Saudi Arabia and Iraq, which could afford to offer discounts of around $5 to $8 per barrel to buyers.

Source: Punch

United Kingdom’s liquefied natural gas import terminals on the Milford Haven waterway are set to receive a pair of cargoes over the week.

According to the shipping data by Milford Haven Port Authority, the first of the three cargoes is scheduled to arrive at the Dragon LNG terminal on March 24.

The cargo is being transported onboard the GasLog Seattle LNG carrier capable of transporting 155,000 cubic meters of the chilled fuel. The vessel loaded the cargo at the Nigeria LNG facility on Bonny Island.

The second cargo is set to arrive at the South Hook LNG facility on March 31. The cargo, loaded at the Qatari Ras Laffan LNG complex is being transported by the 263,000-cbm Q-Max carrier, Al Samriya.

Natural gas flows from the South Hook LNG terminal to the UK’s national grid on Tuesday was around 44.13 mcm per day, according to the data from the National Grid.

Source: LNG World News

Sarki Auwalu is the Director/Chief Executive Officer of the Department of Petroleum Resources. In this interview with the Business Editor, CLARA NWACHUKWU and FEMI ADEKOYA, he talks about a wide range of issues bordering on oil licensing, compliance with production quotas, gas-to-power, as well as other regulatory issues.

Covid 19 is a global pandemic ravaging the whole world and impacting heavily on oil-producing countries. How is DPR coping with the challenges of this virus?
I will say this is a pandemic that the whole world is facing. Coronavirus is something that has had a huge impact on the energy balance of the world. Once people cannot move, aircraft cannot fly; once energy demand is low, definitely the industry will go low. So, for DPR, we are very careful as we relate with a lot of international oil companies, international service providers, as people fly from different parts of the world and work in the facilities that we monitor, so we consider it very critical. Right before the number of cases rose to the number it is now, we made sure that hand sanitizers are everywhere in the facilities we monitor and in our offices while taking other precautionary measures. This is because we considered that if this virus gets into our operational areas, we will have to shut dow. If we shut down in this era of low oil prices, it will be double jeopardy.

Even at very low oil price, our cost of production per barrel is still very high and the government has for so long said it would address the situation, but that is not happening yet. What is DPR going to do in this regard?
When you talk about production cost, you talk about the average. We are so blessed that we have oil in every terrain. We have it onshore, nearshore, in swamps, offshore, deep offshore and you know that as we go deeper offshore, the cost of production also rises. Again, we have these great reserves whereby the vaults that trap the crude itself is not in a big pool but in several of such pools that require for more wells to be drilled. When you drill, you need a collection point where you need to have flowlines because of the terrain; so all these contribute to the cost of production per barrel as we speak. When you compare Nigeria with countries like Saudi Arabia where they have onshore mainly and the cost of a barrel is just to punch a well here and sell it over there with shorter pipelines and distances, shallower wells, so the cost is lesser compared to us when you add the aggregate cost. To do this, we deployed technology because there are research and development every day and there are two things – one is that the cost of drilling a well at an average is almost the same everywhere, but it is the terrain that differs. When you work over a well to increase production from that well, definitely there is a cost in that number which is economies of scale, so we encourage improved production and enhanced recovery and also cheaper technology that will enable you to produce at a lower price. For example, when you drill a well and you do conventional completion, it is more expensive when you compare it to a smart completion, so we encourage people to go for that smart completion whereby if you change that well into an injectible well or a producing well, you can make it versatile so that it will lower the price because the natural occurrence of hydrocarbon in all the terrain will not allow us to achieve the expected lower cost the way you will put it on a straight line to see it. What we do is to get an aggregate cost and get the cost element to see how we can use technology to reduce it and that is what we are doing.

But the problem mostly is that those costs are usually padded, operators will tell you that they are taking account of their environment plus inflation, but then, the same scenario plays out in other environments?
In DPR, there is a unit called economic value and bench-marking. We developed a solution like software which would aggregate the cost. By law, every company, every year will come and make presentations to us about their work programme and under this work programme, we take cognizance to ask who spent what, which we use to develop the economic value and benchmarking. For investments that have government interests, we now say that for any approval for field development, we use an archive to see the cost. Right now, we have values and that is why we call it to value and benchmarking. Definitely, you will see people resisting and this is a fact, and that was why there was a time we wanted to see how we can reduce the value by some certain percentages because we have empirical data in the sense that we will not approve the field development plan till we now see the economic value. This is because before now, we do not have empirical data and that is helping a lot greatly.

Sarki Auwalu is the Director/Chief Executive Officer of the Department of Petroleum Resources
But does that ensure that producers declare actual production?
Yes of course, because when it comes to actual production, it is different from field development. These are two different things. When you talk about field development, you talk about the cost of developing a field and how you reduce it and make it optimal and when you talk about the cost of production which implies the cost per barrel. Yes, they declare because the unit cost is a function of the investment you make based on the terrain, number of wells you drill, number of people you employ and the companies have no option but to declare. After all, we charge them royalty based on what they produce.

Despite government promises to jumpstart activities in the industry, apart from ExxonMobil and Total, the rest are probably on holiday. What is happening in terms of new finds, exploration and production activities?
Well, I do not know what ExxonMobil or Total did, but I can tell you that the industry is very active, and why do I say this? At present, the industry is maturing and you know that the last time we did license was around 2007 and people invested, people paid bonuses and developed the fields. Right now, what the industry is doing is to see how they revamp and upgrade the fields. There is no international oil company that does not have de-bottlenecking, upgrading or deeper-drilling. Most of the companies that are involved for example in LNG projects, go to drill deeper so that they can get gas to supply rather than going to spend money to explore in new areas. In 2018 and 2019, Seplat alone invested $4 billion. All the investments that came through a gas are Shell; look at Obi-Obi, it is Agip; Egina, it is Total. So, if you look at each of these companies, there is one thing or the other that they are doing because they come here to present their work programmes and for work programmes, the moment you are not active in any field, not making any investment, what we do is carve the field out and put in the offing, there might not be any find and it is not affecting us alone it is affecting them as well because the volume of the reserve they declare from Nigeria determines their price in the international market as they are in the stock market. So, it is in their best interest also to make the finds. It is also in their best interest to be profitable; profitable in the sense that we explore this and we invest, let us see what we can do so that we increase the line of this project and none of the IOCs is thinking of leaving Nigeria in the next 30 years.

Even though you say a lot of them are involved in a number of activities, the belief out there is that a whole lot of blocks are lying fallow and like you said if there is no investment they will relinquish some after five or ten years, but that does not seem to be happening. The IOCs are reluctant to relinquish and DPR is not enforcing that relinquishment policy.

Not only relinquishment, but it is also in the news that we revoked even some active fields; we revoked 98 licences. We revoked many fields and the essence is that it is not in the interest of the company for them to relinquish. What we rate them with is the rate at which they renew the oil mining lease (OML), and a lot of these IOCs take for example Shell, they renewed over 27 OMLs and for the country, it means that we are getting more money. If you come and you renew your mining lease, you are telling me that you are ready to stay in the country for the next 30 years and all of them are doing that. So, this gives us the confidence to say yes, this is real and they come to us and say we want to renew the OML and they renew. When we issue the renewal, we are confident that they are going to stay for the next 30 years and that is our number one pointer.

Secondly, all the known active dormant fields were identified and we asked why are they dormant. Take for example, for an IOC, if a field that is discovered, the risk reserves is 50 million or 40 million barrels, it will be too marginal for Shell to go because of their overhead cost. For some, if the risk reserve is like 200 million or 250 million, they will now decide to say; look, we reserve the right to farm out so that we can still make money out of this if we get somebody to farm-in, and there are lots of applications for that to show that these IOCs are ready.
The Local Oil Companies (LOCs) that farm-in are active as well. So for me, the way I see the industry is an industry that is maturing. The IOCs do not want to take more of overheads, the dormant fields they allow the government to take and the active fields they tell the government to renew and they pay all the renewal fees. They tell the government that we are in it and here they are renewing their licences to say they are going to work with the government for the next 25 years. Those fields that are not economical enough for them are good enough for them to farm-out. They keep it in view and they want to do that and that is why you see some of these IOCs trying to say they have marginal fields they want to give out, but what they really want to do is to farm-out because they have spent money, time but unfortunately, it is not economical for them because it would affect their profit margins. So they rather value it and let someone else farm-in so that government will still make money as the resource does not belong to them anyway, even though they own the lease. However, they want to farm-out of the lease so that someone else will farm-in, and it is a win-win situation for the parties involved.

Since you raised the issue of farm-in and farm-out, I remember what Shell did some years ago when they sold some of their marginal fields and most of the Nigerian companies that bought those assets paid highly because they believed they were going to be operators of those assets, but unfortunately, NNPC came with NPDC with right of first refusal, and many of them complained, saying they thought they would become operators rather than just being a shareowner. Is that fair?
There is a lot to be done when a company wants to farm-out or farm-in, the Nigerian companies did not do their due diligence very well. I want to buy something and I need to know what I am buying and again, a lot of companies seldom come to DPR for due diligence, but rely on consultants that do not know anything. This is a house that has data for everybody; we have a national data repository and this an authentic data which IOCs rely on, but yes, I am a Nigerian company where Shell has agreed to divest to me, so I will only rely on consultants that Shell recommends to me rather than coming to DPR. I want to know what is the available resource here, who does what and what is the history of this growth? They had the advantage, but they did not do that. Secondly, they did not know the rule of engagement for Joint Venture Partnership, nobody reads; and remember, the stake of Shell is not Shell alone, it is Shell, Agip, Total and the likes, so there are no operating venture partners who are the main owners, and the owner of the venture is NNPC, so they have the right of first refusal. If you have 20 per cent or 30 per cent and you want to go out and the person coming in wants to feel that I am to operate, then there is a big problem and that is why we advise them to do their due diligence. Again, look at it this way; NPDC is the only 100 per cent Nigerian company owned by 200 million people, you, me and everybody, we own NPDC. And going into a time where NPDC is the only Nigerian company, where its production is not up to 10000 barrels is a shame, because every country that produces oil and gas, their national oil gas company is up there, look at Petrobras, look Equinor, all these are national oil companies. NNPC is not an oil company it is a corporation housing many other companies, but NPDC is the truly national E&P company that explores oil and gas, and sells crude for 200 million people, so that company needs to be very strong and they are in onshore and offshore. 

If somebody will come, NNPC owns 60 per cent and they have an E&P company, to allow an incoming person who does not have the experience of NPDC, it does not make sense for Nigeria to allow that to happen, and today, NPDC is producing over 200,000 barrels daily. That will never have happened if NNPC does not exercise its right of refusal. So I see it from a perspective of having to protect the interest of 200 million people as against a limited liability company that borrows money at the international market or from national market to take over a field and operate for a limited number of people rather than operating for 200 million people. This is my view, and I think we should be thinking about how NPDC will be better than Equinor or Petrobras or Petronas. Today, Equinor is all over the world, it is a national company of Norway, Petronas is all over the world and it is a national company of Malaysia, Petrobras is all over the world and it is a national company of Brazil. NPDC is the replica and it is only a few years back it hit over 800,000 barrels which is a shame. A country that exports about 1.7 million to 2 million barrels, the production capacity of the company the entire nation own it. I see it from a nationalistic point of view that we need to empower that national company that will bring more accountability, probity and transparency. If people are aware that this is our company, they will not look at Shell. Look at Amni when they decided to leave, nobody believed that NPDC could run the Okoro field and that was the first time the jinx was broken. Thank God for that management who authorised NPDC to take over, look at it now, NPDC is the cash cow for NNPC and the nation.

source: Guardian

Oil prices dropped yesterday as governments’ escalated lockdowns to curb the spread of the global Coronavirus outbreak that has slashed the demand outlook for oil and threatened a global economic contraction. 

Brent crude futures fell $1.09, or 4 percent, to $25.89 a barrel while West Texas Intermediate, WTI, crude futures were down 15 cents, or 0.7 percent, at $22.48 a barrel. 

Oil prices have fallen for four straight weeks and have given up about 60 percent since the start of the year. Prices of everything from coal to copper have also been hit by the crisis, while markets in bonds and stocks enter rarely charted territory. 

The coronavirus, which has infected more than 325,000 and killed over 14,000 worldwide, has disrupted business, travel and daily life. Many oil companies have rushed to cut spending and some producers have already begun putting employees on furlough. 

The market has had to contend with the twin shocks of the demand destruction caused by the coronavirus pandemic and the unexpected oil price war that erupted between producers Russia and Saudi Arabia earlier this month. 

“We believe oil prices will continue to fall into the teens in the short term amid disaster demand destruction, building global stocks and no production limits after April 1,” said Joseph McMonigle, senior energy policy analyst at Hedgeye Potomac Research, in a note. 

Almost a third of Americans are now under orders to stay at home as states took extra measures to stem the rising numbers of cases in the world’s biggest economy, while in New Zealand Prime Minister Jacinda Adern said all non-essential services and businesses are to be shut down.

source: https://www.independent.ng/global-lockdown-crashes-oil-price/

•FAAC meeting deadlocked as states reject amount presented for sharing

AS another economic recession looms in the wake of the global Covid-19 pandemic, there are very present fears among workers of the 36 state governments over the ability of their governments to continue to pay their salaries.

On Friday, Brent crude futures fell $1.49 or 5.2%, to settle at $26.98 a barrel. United States crude futures for April fell $2.69, or 10.7%, to settle at $22.53 a barrel, whereas Nigeria’s 2019 budget benchmark for crude oil was $57 per barrel.

Group Managing Director of Nigerian National Petroleum Corporation (NNPC), on Wednesday charged Nigerians to prepare for more economic trouble in view of the current multi-year low level of crude price in the international market.

Already, tension has started brewing within the Federation Accounts Allocation Committee (FAAC) whose members could not agree on Wednesday over the amount presented for sharing.

An official in the ministry hinted that members of the committee could not agree on the amount presented for sharing by the revenue generating agencies.

The amount presented for sharing was far below what the members of the committee were expecting to be shared by the three tiers of government.

And since the committee could not agree on the amount to be shared, the issue would have to be taken to the National Economic Council meeting scheduled to hold on Thursday.

With the oil price now more than 50 per cent lower than Nigeria’s budget benchmark, the country’s oil-dependent economy has come under more pressure.

The fresh crisis is coming even while workers in the states are beginning to heave a sigh of relief after the economic recession of 2016 which threw workers of most states into economic misery.

At a point, 27 states were owing workers and pensioners salaries and entitlements ranging from one to 36 months.

A 2017 survey showed that many states defaulted in the payments of pensions and gratuities, with Imo, Taraba and Niger states owing pensioners two to three years in entitlements.

Kogi, Abia, Benue, Oyo, Ekiti and Ondo states had not paid their workers’ salaries in 2017, owing at least four months’ salary. Lagos and Rivers, however, did not owe any salary arrears.

It is likely that the current crisis will hit states and their workers harder than it happened in 2016 because the lowest price then was $29 per barrel and it quickly moved up to $35 per barrel and continued climbing.

But now, however, experts are predicting that oil price could fall to as low as $10 per barrel with the rampaging c oronavirus and oil war between Saudi Arabia and Russia.

Now again, minimum wage in the country has been raised from the then N18, 000 to N30, 000.

Aside funds from federation accounts, the only other source of income for the states is their internally generated revenue (IGR), which was still paltry for most states and is unable to meet their recurrent needs.

In the nine months to September 2019, the National Bureau of Statistics (NBS) reported the 36 states and FCT to have generated N986.29bn as their IGR.

Seven states recorded growth in IGR while 30 states and the FCT recorded decline in IGR at the end of Q3 2019. Lagos state has the highest Internally Generated Revenue with N297.09bn recorded, closely followed by Rivers with N107.03bn while Yobe State recorded the least Internally Generated revenue.

Aside their paltry IGR, states were still groaning under the yoke of the repayments of massive bailout given them by the Federal Government during the 2016 recession.

A total of N614 billion was issued out to 35 states except Lagos during the recession under the National Budget Support Loan Facility.

Federal Government in 2019, demanded the repayment of the sum.