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Power Output Drops by 30% in 2Q, Says Report

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PHCN Power Plant

THE power sector recorded a drop of 30.01 per cent in the second quarter (Q2) due to poor generation caused by militants’attacks in the Niger Delta, a new report has said.

The report said the attacks led to the shut down of pipelines and the shut-in of gas that powered thermal plants between last April and June.

A report, released by the Transmission Company of Nigeria (TCN), stated the status of power generation and distribution during the period.

According to the report, 2,046,821,132.72 kilowatts-hour (kwh) of electricity was generated in April with average daily output of 68,227,371.09 kwh.

In May, grid output was 1,765,782,918.34 kwh with average daily production at 56,960739.30 kwh while in June production was 1,426,183,518.94 kwh and daily output was 47,539,450.63 kwh.

According to the data, Egbin Power Station made the highest contribution to the national grid with 15.81 per cent, Shell’s Afam VI Power Station came second with 13.81 per cent and Geregu Power station provided the least at 0.46 per cent.

However, Afam I-V, Gbarain, AES, Rivers IPP and Omoku Power Stations operated at zero levels. A new Independent Power Plant, Paras Energy, contributed 0.94 per cent. Paras Energy, on the Lagos–Ibadan Expressway, has a bilateral Power Purchase Agreement (PPA) with Eko Electricity Distribution Company to supply its generated electricity.

Generation output from the thermal power stations, especially those outside the Niger Delta, continued to be adversely affected by pipeline vandalism, the report said.

In May, energy dipped by as much as 13.73 per cent compared to April’s output.

Shell’s Afam VI Power station beat Egbin Power Station by making the highest contribution to the grid with 17.32 per cent.

Egbin came second with 15.63 per cen. The new entrant, Gbarain Power Station (one of the NIPP plants constructed by the Niger Delta Power Holding Company), contributed the least with 0.38 per cent while Olorunsogo Power Station, which contributed 0.72 per cent in April, made no contribution.

Total generation went down by 19.23 per cent in June compared with energy generated in May. However, for the first time, Jebba Hydro Power Station contributed the highest energy into the grid with 15.57 per cent.

Egbin came second with 14.58 per cent, while another hydro station, Kanji power station, came third with 14.58 per cent. Omoku power Station resumed production with the contribution of 0.18 per cent.

Throughout the second quarter, AES Power Station, Rivers IPP, and Afam 1-V did not produce any power. The hydro power stations steadily improved their contributions to the grid in the second quarter from 21.78 per cent in April to 23.10 per cent in May and 32.46 per cent in June.

The hydro power stations made the highest contribution in June. Thermal plants (legacy stations) experienced a marginal rise from 30.71 per cent in April to 31.66 per cent in May and dropped to 28.77 per cent in June.

The National Integrated Power Plants (NIPP) produced 20.72 per cent in April, went down to 17.33 per cent in May and dropped marginally to 17.06 per cent in June.

The most significant difference in contribution during this period under review was in the independent power plant (IPP) group. In April, the group contribution was 26.80 per cent and it went up marginally to 27.91 per cent in May and dropped drastically to 21.72 per cent in June.

During the quarter, the national grid witnessed 14 total system collapses and four incidents of partial system collapse.

“In April, the grid witnessed three instances of total system collapses and no incidence of partial system collapse but in May, the grid witnessed six instances of total system collapses and one incident of partial system collapse while in June the grid witnessed five instances of total system collapses and three incidents of partial system collapse. The incidents of total and partial collapses occurred, especially due to generation limitations,” the TCN said.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Slip as Japan’s Rising Inflation Signals Rate Hikes

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Crude oil fell in early trading on Friday as concerns over sustained high interest rates in both Asia and the United States weighed on the outlook.

This trend is attributed to Japan’s increasing inflation, which is prompting expectations of imminent rate hikes by its central bank.

Brent crude edged declined by 11 cents to settle at $85.60 per barrel while the U.S. crude oil declined by 9 cents to $81.20 per barrel.

Recent data revealed that Japan’s core consumer prices rose by 2.5% in May compared to the same month last year. This increase marks a growth from the previous month, suggesting that the Bank of Japan is likely to raise interest rates in the upcoming months to curb inflation.

In the United States, data released on Thursday showed a decrease in the number of new unemployment claims for the week ending June 14, indicating continued strength in the job market.

This persistent robustness in employment raises the likelihood that the U.S. Federal Reserve will maintain higher interest rates for a longer period.

Higher interest rates typically have a dampening effect on economic activity, which can subsequently reduce oil demand.

The prospect of prolonged elevated interest rates in two major economies has therefore put downward pressure on crude oil prices.

Despite the downward trend, oil prices received some support from the latest figures from the Energy Information Administration (EIA).

The data showed a drawdown in U.S. crude inventories by 2.5 million barrels in the week ending June 14, bringing the total to 457.1 million barrels. This exceeded analysts’ expectations, who had predicted a 2.2 million-barrel reduction.

Also, gasoline inventories fell by 2.3 million barrels to 231.2 million barrels, contrary to forecasts that anticipated a 600,000-barrel increase.

“Gasoline finally came to life and posted its first strong report of the summer driving season,” remarked Bob Yawger, director of energy futures at Mizuho in New York, highlighting the surprising uptick in gasoline demand.

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Crude Oil

Nembe Creek Oil Field Halted After Leak, Impacting 150,000 bpd

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Nigeria’s oil output has taken a significant hit following the shutdown of the Nembe Creek oil field due to a major oil leak.

The Nembe Creek oil field, responsible for producing approximately 150,000 barrels of crude oil per day (bpd), was forced to cease operations on June 17, 2024.

The leak occurred on the Nembe Creek Trunk Line (NCTL), a critical pipeline that transports oil from the Nembe Creek oil field to the Bonny Oil Export Terminal.

The operator of the pipeline, Aiteo Eastern Exploration and Production Company, confirmed the leak and the subsequent shutdown in a statement released yesterday.

Aiteo reported that the leak was discovered during routine operations in the Nembe area of Bayelsa State, located in Nigeria’s oil-rich Delta region.

This region is notorious for environmental degradation due to decades of oil spills, which have severely impacted local agriculture and fishing industries.

Following the discovery of the leak, Aiteo activated its Oil Spill and Emergency Response Team and shut down all production from Oil Mining Lease (OML) 29 as a precautionary measure to prevent further environmental damage.

“While we regret the production losses and the potential environmental impact, our current priority is to expedite an efficient spill management process in line with regulatory standards and collaborate with all stakeholders to restore production and mitigate associated risks,” said Victor Okronkwo, Managing Director of Aiteo Eastern E&P.

The exact cause of the leak remains unknown. Aiteo emphasized that the shutdown was a precautionary step to contain the spill and minimize environmental harm.

The company has notified its joint venture partners and relevant regulatory bodies, including the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the National Oil Spill Detection and Response Agency (NOSDRA), about the incident.

This development comes as a setback for Nigeria, which holds Africa’s largest natural gas reserves and is a major oil producer.

The country’s oil sector has faced numerous challenges, including aging infrastructure, theft, and environmental issues, which have hindered its ability to maximize production and exports.

The Nembe Creek shutdown also highlights ongoing concerns about the safety and reliability of Nigeria’s oil infrastructure. The NCTL has been a frequent target of oil theft and sabotage, exacerbating the challenges of maintaining a steady oil output.

Energy analysts believe that the latest incident could impact Nigeria’s ability to meet its export commitments and exacerbate the country’s economic challenges.

The Nigerian government, under President Bola Tinubu, has been making efforts to attract investment into the energy sector to boost production and address infrastructure deficits.

“The government will hope this offers confidence not only in the quality of the Nigerian resource base, but also in the government’s pledge to improve ease of doing business,” said Clementine Wallop, director of sub-Saharan Africa at political risk consultancy Horizon Engage.

As Nigeria works to address the immediate spill and restore production, the broader implications for the country’s oil sector and its environmental impact remain to be seen.

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Brent Crude Nears Seven-Week Highs as Market Eyes US Inventory Report

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Brent oil, the international benchmark for Nigerian crude oil, remained steady on Thursday, hovering just below seven-week highs as the escalating conflict in the Middle East raised concerns over potential supply disruptions.

At the same time, the market eagerly awaits U.S. inventory data for further indications of demand trends.

August Brent crude rose 28 cents, or 0.3%, to $85.35 a barrel while the U.S West Texas Intermediate (WTI) oil gained 13 cents, or 0.2%, to $81.70 a barrel.

“There was no WTI settlement on Wednesday due to a U.S. public holiday, which kept trading subdued,” noted Ricardo Evangelista, an analyst at ActivTrades.

“However, oil prices are likely to remain supported around current levels due to a growing geopolitical risk premium driven by conflict in the Middle East.”

Israeli forces have intensified their operations in the Gaza Strip, targeting areas in the central region overnight while tanks advanced into Rafah in the south.

The escalating violence has heightened fears of a broader conflict that could impact oil supplies from the region.

“Expectations of an inventory build appear to be overshadowing fears of escalating geopolitical stress for now,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.

Investors are keenly awaiting the release of U.S. inventory data from the Energy Information Administration (EIA) later on Thursday, delayed by a day due to the Juneteenth holiday.

An industry report released on Tuesday by the American Petroleum Institute (API) indicated that U.S. crude stocks rose by 2.264 million barrels in the week ending June 14, while gasoline inventories fell, according to market sources.

The summer season typically sees an uptick in oil demand due to increased refinery runs and weather-related risks.

“Ongoing production cuts by the OPEC+ group, combined with seasonal demand, should tighten oil balances and lead to inventory draws during the summer months,” J.P. Morgan commodities analysts wrote.

Refining margins have also improved, with the ICE gasoil futures premium to Brent crude jumping to $20.63 a barrel on Wednesday, a two-month high.

“Firmer fuel refining margins provide a healthy dose of encouragement for those expecting improvements on the demand side,” commented Tamas Varga, an analyst at PVM.

In other economic news, the Bank of England’s decision to keep its main interest rate unchanged at a 16-year high of 5.25% ahead of the national election on July 4 has been noted by market observers.

Higher interest rates generally increase the cost of borrowing, which can slow economic activity and dampen oil demand.

As the market braces for the upcoming EIA inventory report, analysts and traders are closely watching for any signals that could influence oil prices in the near term.

The delicate balance between geopolitical tensions and supply-demand fundamentals continues to play a critical role in shaping the oil market landscape.

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