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Kachikwu: Nigeria Will Need Extra 900,000b/d to Recover Oil Lost to Militancy

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oil

The Minister of State for Petroleum, Dr. Ibe Kachikwu, has said that Nigeria will have to increase oil output by an average of 900,000 barrels per day (b/d) in order to recover crude oil that has been shut in to a series of militant attacks on oil and gas assets in the Niger Delta in recent months.

Kachikwu, who spoke to CNN’s Richard Quest last night, however said he was not particularly optimistic about the possible talks on a production freeze by other oil producing countries to bolster prices, saying similar efforts a few months ago had failed.

Despite his lack of confidence, the price of crude oil rose yesterday following reports that Russia and the Organisation of Petroleum Exporting Countries (OPEC) may resume dialogue on a production freeze.

The petroleum minister said the federal government was in continuing dialogue with militants and their representatives in the Niger Delta and expressed confidence that in the next one or two months, a resolution will be reached to end the attacks on oil assets.

“There’s a lot of dialogue, a lot of security meetings and we expect that in the next one or two months, we will arrive at a lasting resolution on the problem in the Niger Delta,” he said.

He added that Nigeria would need to produce on average 900,000b/d extra to recover oil and the attendant revenue lost to the militancy in recent months.

“We are producing some 1.5 million barrels per day and would need on average 900,000 barrels per day to catch up on what we have lost. If we can achieve peace, this will be feasible,” he said.

However, when he was reminded by Quest that an extra 900,000b/d would run contrary to possible talks next month on a production freeze in order to shore up oil prices, Kachikwu said he was not optimistic that a consensus could be reached on an output cap, as efforts in the past had failed.

“I’m not too optimistic about an output freeze, because we tried this in the past and it failed.

“Also, OPEC accounts for 30 per cent of total global output, so we will need to be aggressive in our engagements with producers that account for 70 per cent of output, so it is only if a consensus is reached, then me have some hope,” he explained.

On yesterday’s criticism by parents of the Chibok girls that the military and its resources were being diverted to secure oil facilities instead of recovering the schoolgirls who were kidnapped from their school by Boko Haram two years ago, he said it was not true that the girls were less important than oil facilities in the Niger Delta.

“It is not true that oil facilities are more of a priority than the Chibok girls. As you know President Muhammadu Buhari from the outset of his administration built a coalition with neighbouring countries to defeat the terrorism in the North-east.

“He also had to set up a panel to probe the diversion of funds meant for the procurement of arms to fight the insurgency. All these suggest that the insurgency in the North-east is a major priority of this government.

“I am a father and I can imagine what it means to have my children kept in captivity in a forest and the president feels the same way. So he has not given up the girls,” the minister said.

Meanwhile, the price of crude oil rose yesterday following reports that Russia and OPEC may resume dialogue on a production cap.

The Wall Street Journal (WSJ) reported that the global oil benchmark Brent crude rose 0.9 per cent to $47.38 a barrel on London’s Intercontinental Exchange (ICE) futures exchange. It however traded on the New York Mercantile Exchange, West Texas Intermediate futures at $44.86 a barrel, up 0.8 per cent.

Both the WSJ and UK’s Telegraph reported that the price movements were triggered by comments made by Saudi Arabia’s Energy Minister, Khalid al-Falih and Russian Energy Minister, Alexander Novak that market action was likely if discussions at an upcoming meeting in Algeria between OPEC and its other ally producers go well.

According to WSJ, prices have gained since Saudi’s al-Falih signalled last week that his country was open to measures to stabilise the market which has been struggling with oversupply for the past two years.

Saudi is the biggest producer among members of OPEC and historically seen as the de facto leader of the oil cartel. The OPEC meeting in Algeria is scheduled as an informal gathering in September.

The Telegraph also reported that the price movement was in reaction to the OPEC Algeria meeting where the focus is expected to return to a possible supply cap deal after similar talks in Doha failed earlier this year.

Novak confirmed Russia’s participation at the Algeria meeting to Saudi newspaper, Asharq al-Awsat. Novak stated that his country – the world’s third largest supplier of oil – was also involved in early discussions.

He said: “We are co-operating in the framework of consultations regarding the oil market with OPEC countries and producers from outside the organisation, and are determined to continue dialogue to achieve market stability.”

At the weekend, al-Falih told the Saudi Press Agency that “we are going to have a ministerial meeting of IEF in Algeria next month, and there is an opportunity for OPEC and major exporting non-OPEC ministers to meet and discuss the market situation, including any possible action that may be required to stabilise the market”.

He added: “We’ve said before that market rebalancing is already taking place but the process of clearing crude and product inventories will take time. We are on the right track and prices should reflect that.”

Oil price recovery from a 12-year low of $28 a barrel in January had floundered last month when global economic fears reignited concern that there was a glut in the market, causing prices to slump back to $41.66 a barrel.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Gold

Gold Advances to Three-Month High on Virus Woes, Inflation

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Gold - Investors King

Gold rose to the highest in more than three months as concerns over the pace of a global recovery crept back in following a flareup in coronavirus cases in parts of Asia.

The pandemic is wiping out “entire families” in villages in India, where more people are saying the scale of the crisis is much bigger than official numbers reveal. The World Economic Forum is canceling the annual meeting it was planning to hold this August in Singapore, while cases in Thailand have surged.

Investors will turn to the minutes from the Federal Reserve’s April meeting due Wednesday for potential clues to officials’ views on the recovery and how they define “transitory” when it comes to inflation. Fed Vice Chair Richard Clarida said Monday that the weaker-than-expected U.S. jobs report for April showed the economy had not yet reached the threshold to warrant scaling back the central bank’s massive bond purchases. Meanwhile, Fed Bank of Dallas President Robert Kaplan said supply and demand imbalances and base effects will contribute to elevated inflation this year, but he expects price pressures to ease in 2022.

Gold’s rebound puts it close to erasing this year’s declines, with recent inflows into bullion-backed exchange-traded funds signaling a boost to investor sentiment. Expectations for further increases in consumer prices could start to bolster demand for gold as a hedge.

“It seems inflation fears are finally translating into higher precious metals prices,” said John Feeney, business development manager at Sydney-based bullion dealer Guardian Gold Australia. “ETF investors are starting to swing into net-buyers again, after the recent consolidation, and it makes sense for the metals to play catch up to the recent moves higher in other commodities. We also have a lot of uncertainty with Covid-19 strains and mutations in the Asia-Pacific region that would be leading to safe haven buying.”

Spot gold rose as much as 0.4% to $1,873.82 an ounce, the highest since Jan. 29, and was at $1,868.01 by 12:16 p.m. in Singapore. Silver and palladium gained, while platinum steadied. The Bloomberg Dollar Spot Index fell 0.1%.

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Energy

Hamburg’s German African Energy Forum to jumpstart Africa’s Economic Transformation

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green energy - Investors King

The African energy sector continues to solidify partnerships with German investors and technology with the aim of leading energy businesses from Germany, Europe and across the African continent. From upstream to downstream, Africa’s energy sector must accelerate its transition to net-zero, continue to adopt new technologies and start to embrace digitization and decentralization over the next decade.

The 14th German African Energy Forum in Hamburg hosted by Afrika Verein continues this dialogue and pushes for investment with a clear focus on highlighting the entire African energy mix, together with economic cooperation between Germany and Africa.

As stated by Afrika-Verein, “the economic impacts of the COVID-19 pandemic, climate change and the ongoing digital transformation of economies need a green, smart and quick response from the energy sector. Power generation is still one of the main enablers for inclusive economic growth in Africa.” With this said, the African Energy Chamber strongly endorses and supports the 14th German African Energy Forum in Hamburg in its efforts to do so.

In the same manner, there is a strong need for German and African businesses and policymakers to support policies that create an enabling environment for investment in a fair and evolving industry. Germany’s march to net-zero transition can’t be met if Africa is behind. The African energy sector’s ability to support the rapidly increasing demands for electricity, the deployment of smart infrastructure to manage energy more effectively, gas monetization, combating energy poverty and the approach we take to financing Africa’s clean energy transitions in a post Covid era makes this forum more important than ever.

The 14th German African Energy Forum is set to provide key market insights, trends and opportunities over the next decade as the energy sector prepares to support a global green economy.

“Year after year, Afrika Verein has been consistent in keeping Africa at the center of German foreign policy and energy policy. Their ability to bring together key stakeholders from Africa and Germany to work on energy matters including Germany and Africa is inspiring” stated NJ Ayuk, Executive Chairman of the African Energy Chamber.

“We are going to need a real net-zero transition that takes into consideration policy, regulation, innovation, technology and investment in Africa. A disorderly transition creates a stronger impulse for job losses, geographic inequity and a deterioration in inequality. In return, economic disenfranchisement can reduce public support for environmental policies over time Germans and Africans need to work together to avoid it.” Concluded Ayuk.

The Africa Energy Chamber believes Hamburg will be a great place for energy investors, project developers, policy makers and innovators to share insights and expertise on key transition trends and opportunities in Africa.

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Crude Oil

NNPC Closes Direct Sale and Direct Purchase Deals With 26 Firms

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NNPC Nigeria

The Nigerian National Petroleum Corporation (NNPC) has picked 26 foreign and local companies as well as 12 countries to lift the country’s crude oil for the next two years.

The crude term contracts, expected to run from 2021 through 2023, would see the firms and the selected nations, which would operate on a Government-to-Government (G2G) basis to purchase the commodity from the national oil company.

The deal is coming less than a week after the corporation chose 16 oil and gas consortia for its new crude-for-fuel swap contracts for one year starting in August.

The contracts, known as Direct Sale, Direct Purchase (DSDP) are high-stakes agreements used to supply nearly all of Nigeria’s petrol needs as well as cover some of its diesel and jet fuel consumption.

However, in the fresh crude oil term agreements, it was observed that the names of majority of the companies involved in the DSDP deal also appeared in the list of those picked by the national oil company for the crude term contracts.

The list sighted by the media showed that the preferred companies included Sahara Energy Resources Limited, Oando, Duke oil (an NNPC subsidiary), Petrogas, AA Rano, MRS, Mercuria and Vitol.

Other oil and gas concerns which scaled the NNPC selection hurdle were Oceanbed Trading Limited, Levene Energy, Bono Energy , Mocoh Energy, BP Oil, West Africa Gas Limited, Litasco SA, Emadeb, Hyde, Matrix and Brittania-U.

Other names listed by the NNPC as having qualified for the contracts included Masters, AMG, Casiva, Barbedos, Trafigura, Hindustan and Patermina.

NNPC has its own equity share of crude oil from its Joint Ventures (JVs), usually shared on a 60 to 40 basis and thereafter appoints companies and issues licences to lift its share of the oil on a Free on Board (FOB) basis.

The companies and countries nominate ships that transport the crude which is sold in the international market. Sometimes, the NNPC also awards contracts to governments to carry out the business.

In the document approving the qualified countries, China, Niger, Cote D’voire, Ghana, India, Togo, South Africa came tops, while Sierra Leone, Liberia, Turkey, Senegal, and Fujaira also made the cut.

Typically, entities qualified to take part in the contract bid are divided into four categories, namely a bonafide end user who owns a refinery and or retail outlets that can process Nigerian crude oil grades.

For the government to government contracts, or what is termed “bilateral relationships”, with what the corporation terms “high energy consuming nations”, bidding nations must provide proof that the entity is wholly owned by the relevant country or provide evidence of a bilateral agreement with the designated nation.

The third category is the internationally established and globally recognised large volume crude oil traders, while the fourth classification are indigenous companies engaged in Nigeria oil and gas downstream business activities.

In addition, qualifying foreign companies must demonstrate a minimum annual turnover of $500 million or the naira equivalent and a net worth of not less than $250 million or the naira equivalent for the previous financial year.

For indigenous firms, they are required to have a minimum turnover of $200 million or the naira equivalent and a net worth of $100 million for the preceding financial year ending.

Bidders are also to show their ability to handle supplies of crude and must list facilities and products processed or sold over the last three years, in addition to disclosing links to NNPC or the Bureau of Public Procurement (BPE) and confirming that directors have not been convicted of fraud or financial impropriety.

As with all Nigerian tenders, NNPC also highlights that the local content law must be strictly adhered to in terms of, among others, the use of Nigerian shipping companies, insurance and banks where possible.

In the past, Civil Society Organisations (CSOs) in the country’s oil and gas space had argued that G2G contracts with smaller, non-refining countries have high governance risks and low policy benefits for Nigeria.

For instance the Nigeria Natural Resource Charter (NNRC) has asked that term contracts should be carried out through a transparent and competitive tender process that includes robust pre-qualification standards and an end of sales to smaller non-refining countries unless NNPC can publicly explain the deals’ policy benefits.

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