Connect with us

Economy

Rising Hope for Higher Crude Oil Production

Published

on

crude

Reports from Reuters within the week indicated that Mobil Producing Nigeria Unlimited (MPN), a unit of ExxonMobil, will resume shipment of Qua Iboe crude, Nigeria’s largest grade of crude oil in October, three months after the company declared a force majeure on the exports of the grade.

Accordingly, ExxonMobil is offering an October-loading cargo of Qua Iboe crude oil, the first offer since it declared the force majeure. The report however stated that it was not clear if the pipeline through which the crude grade passes had been repaired, or if the company expected it to be back on stream in time to load crude in October.

Notwithstanding, the report noted that the cargo had been offered for October 8 to 16 loading at a premium of $1.80 per barrel to dated Brent. If this sails through, Nigeria could perhaps be on the path to recovery in terms of production and sales volumes.

Before Mobil declared the force majeure, the last ship to reportedly load crude at the Qua Iboe terminal was the Ottoman Nobility on July 9. One of the three other ships scheduled to load the crude had been near the terminal since July 12.
A vessel loads one million barrel of the grade every three to four days, and exports of 250,000 barrels per day aboard eight vessels were scheduled for July when Mobil observed a leak caused by what it described as a “system anomaly” during a routine check of its loading facility on July 14, 2016.

When MPN took this decision, the cause of the leak was not clear, but it came just days after a militant group, the Niger Delta Avengers (NDA), claimed to have bombed the company’s 48-inch Qua Iboe crude oil export pipeline on July 11.
24 hours after the claim by the militants, the company’s spokesperson, Todd Spitler, however debunked the claim, saying, “there was no attack on our facilities.”

And while ExxonMobil said at the time it declared the force majeure that the export terminal was operating, traders reportedly said the company did not release a revised loading schedule for the crude exports. The new development however suggests that Nigeria was ramping up its production.

Is Stability Returning in Nigeria’s Oil Fields?

In March, Nigeria lost its longstanding position as Africa’s top oil producer to Angola when its oil production dropped to 1.677 million barrels per day (mbpd). Compared to Angola’s 1.782mbpd production then, the country was behind Angola by about 105,000bpd of production volumes.

Nigeria’s trailing Angola was primarily occasioned by resumed militancy in her oil-bearing Delta region in February. From when militant groups resumed bombing oil installations in the region, the country’s production began to slide away from the 2016 budget target of 2.2mbpd.

Six months after, the OPEC in its Monthly Oil Market Report (MOMR) for September, which was released last Monday, indicated that Nigeria’s oil output had taken a further dip to 1.468mbpd in August from 1.52mbpd recorded in the previous month.

OPEC, which nevertheless, based its report on direct communication with the country, also stated that Angola saw its oil output rise to 1.775mbpd in August from 1.767mbpd the previous month.

The cartel also said Libya’s production dropped to 292,000bpd from 313,000bpd, while Venezuela produced 2.104mbpd, down from 2.117mbpd, Ecuador, 542,000bpd from 549,000bpd it previously recorded, while Iraq saw its production dropped by 2,000 barrels to 4.354mbpd.

The MOMR equally stated that Saudi Arabia, the biggest producer in the group, recorded the biggest increase in August as it produced 10.605mbpd, up from 10.577mbpd in the previous month and Iran which has just come out of a global embargo, continued to increase output in a bid to snap up more market share with 3.653mbpd, up from 3.631mbpd.

Coming with the unstable oil prices in the global market, the situation appears quite difficult for Nigeria. This is even more with OPEC’s forecast of an oversupply into 2017.

Hopes of Stability Still Guarded

About 90 per cent of Nigeria’s foreign earning comes from oil and gas produced in the Niger Delta but the situation in the region has not improved even with the federal government’s attempt at dialogue with militants.

It is also a fact that for Nigeria to improve her foreign exchange earnings and work out ways to get out of her current economic recession, the Niger Delta region will have to be considered as an important factor.

The region’s light crude oil is sought after by refineries in the US and Europe. Aside this, Nigeria also holds the world’s seventh largest proven gas reserves and supplies up to 10 per cent of global liquefied natural gas, if production shuts-in continue on the scale it is now, the country will produce less as well as have less foreign exchange to balance its trade and perhaps get out of recession.

In addition, terrorism in the Middle East makes Niger Delta an alternative supply source for countries like China and India whose economies have good demands for oil. A restive Niger Delta will however cut whatever gains the country stands to make from such conditions.

Fuelled by agitation for resource control and environmental pollution, the Niger Delta unrest has continued to impact heavily on Nigeria’s oil production. The region has continued to ask for increased control of its oil resources, and adequate compensation for the oil spillage in the area.

Its militants have also indicated the willingness to dialogue with the government, which some weeks back said it had secured their commitment to a ceasefire on vandalism of oil installation and production disruption; the situation has however, remained unchanged going by a recent bombing of an oil pipeline and OPEC’s August production report.

Although the government has not said anything new about its planned dialogue with the militants, it would however appear like the plan has encountered some hitches, thus leading to the bombing of the Afiesere-Iwhrenene major delivery line to UPS/UQCC, operated by Nigeria Petroleum Development Company (NDPC) and Shorelines Petroleum in Ughelli North Local Government Area of Delta State by the Niger Delta Greenland Justice Mandate (NDGJM), one of the many militant groups in the early hours of Tuesday.

The attack, which was reportedly confirmed by a leader of the group, Aldo Agbalaja, was almost at the same time the foremost Niger Delta Avengers (NDA) which ceased its bombing of oil facilities last month to dialogue with the government, accused the country’s military of harassing old men, women and innocent youths in the region under the guise of hunting for militants. This therefore raises suspicion that the dialogue may not have started.

Unfavourable Market

According to OPEC, Nigeria in July recorded the biggest increase in oil output from her field. That was however not enough to bring her back to Africa’s top producer.

It said that while OPEC’s collective crude oil production in August was 33.24mbpd, a decrease of 23,000bpd, Nigeria and Libya contributed immensely to the drop.

“Crude oil output increased mainly from Saudi Arabia and Iran, while Nigeria and Libya showed the largest drop,” the MOMR said.
It also said that Africa’s oil supply is projected to average 2.12mbpd in 2016, representing a decline of 20,000bpd year-on-year, with increases however expected from Congo by 50,000

bpd to average 320,000bpd, and Ghana’s production start-up in the Tweneboa, Enyenra, Ntomme project, as well as a production ramp-up in the country’s Jubilee field in the second half of the year.

OPEC also raised its forecast of oil supplies from non-member countries in 2017. It said new fields were expected to come online especially from US shale drillers who have proved more resilient than expected to cheap crude.

It added that demand for its crude will average 32.48mbpd in 2017, down by 530,000bpd from the previous forecast. These forecasts, however, do not look favourable to Nigeria.

With oil prices still under pressure at an average of $47 per barrel, and renewed oversupply concerns, Nigeria now appears to have to contend with two tough challenges – dealing with instability in price and her production levels. The combined effect of these pose serious threats to forex earnings and naira exchange rate stability.

As stated by PricewaterhouseCoopers (PwC) in 2016 edition of its ‘Africa Oil and Gas Review’ published in August, Nigeria is not only affected by the decline in the oil price, but also by the reduced production due to the severe security issues onshore and increased piracy incidents.

PwC further said that: “This is adding an additional layer of complication, causing hesitation among oil majors to invest further. Consequently, many are considering postponing additional investment.”

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.

Continue Reading
Comments

Economy

Nigeria’s Plan to Review Oil Companies’ Gas Flaring Strategies

Published

on

Oil

Nigeria is ramping up its efforts to address environmental concerns in the oil and gas sector with a comprehensive plan to review gas flaring strategies of international and indigenous oil companies.

The Minister of State for Environment, Dr. Iziaq Salako, announced this initiative during a national stakeholders engagement meeting on methane mitigation and reduction held in Abuja, Investors King reports.

Gas flaring, a common practice in the oil industry, releases methane—a potent greenhouse gas—into the atmosphere, contributing to climate change and posing health risks to communities near oil facilities.

Nigeria aims to end routine gas flaring by 2030, aligning with global climate goals and commitments.

Dr. Salako explained the importance of reducing methane emissions and highlighted the detrimental effects on public health, food security, and economic development.

He outlined practical steps being taken to tackle methane emissions, including the development of methane guidelines and the engagement of government institutions.

The ministry, through the National Oil Spill Detection and Response Agency, will conduct periodic reviews of oil companies’ plans to ensure compliance with the gas flaring deadline.

Deloitte management consultants will assist in conducting comprehensive forensic audits to scrutinize the legitimacy of forward-contracted transactions.

President Bola Tinubu’s commitment to environmental sustainability underscores the government’s dedication to addressing climate change and fulfilling its multilateral environmental agreements.

The engagement event served as a platform for stakeholders to discuss methane mitigation strategies, existing policies, and implementation challenges.

Collaboration and dialogue among diverse sectors are crucial in charting a unified course towards sustainable methane reduction in Nigeria’s oil and gas industry.

As the country navigates its environmental agenda, ensuring accountability and transparency in gas flaring practices remains paramount for achieving a greener and healthier future.

Continue Reading

Economy

Interest Rate Jumps to 24.75% as CBN Takes Aggressive Stance Against Inflation

Published

on

Dr. Olayemi Michael Cardoso

The Central Bank of Nigeria (CBN) has announced a significant increase in the monetary policy rate, known as the interest rate, to 24.75%.

This move disclosed by CBN Governor Olayemi Cardoso during the 294th Meeting of the Monetary Policy Committee press briefing in Abuja, represents a bold step by the apex bank to address the mounting inflationary pressures faced by the country.

With inflation soaring to 31.70% in February, the CBN aims to moderate this upward trend by tightening its monetary policy stance.

This decision follows the previous hike in the interest rate to 22.75% in February, showcasing the CBN’s commitment to combatting inflationary forces.

While the bank opted to maintain the Cash Reserve Ratio at 45%, the significant increase in the interest rate underscores the urgency of the situation and the need for decisive action.

Governor Cardoso emphasized that these measures are essential to stabilize the economy and safeguard the purchasing power of the Nigerian currency.

The 294th MPC marks the second meeting under Governor Cardoso’s leadership, indicating a proactive approach to addressing economic challenges.

The next MPC meeting is scheduled for May 20th and 21st, 2024, highlighting the ongoing commitment of the CBN to navigate Nigeria’s economic landscape amidst inflationary pressures.

Continue Reading

Economy

Nigeria Braces for 10th Consecutive Interest Rate Hike by Central Bank

Published

on

Central Bank of Nigeria (CBN)

As Nigeria grapples with persistently high inflation, the Central Bank of Nigeria (CBN) is gearing up to implement its tenth consecutive interest rate hike in a bid to curb the soaring prices and attract investment.

Analysts surveyed by Bloomberg are anticipating a substantial 125 basis-point increase in the key rate to 24%, marking one of the most significant adjustments in the current tightening cycle.

The decision, expected to be announced by Governor Olayemi Cardoso on Tuesday at 2 p.m. in Abuja, comes on the heels of inflation accelerating to 31.7% in February, far surpassing the central bank’s target range of 9%.

This surge has been primarily attributed to the sharp depreciation of the naira, prompting authorities to devalue the currency twice since June to narrow the gap with the unofficial market rate and encourage investor confidence.

While these measures have seen the naira strengthen in recent days and bolstered investment inflows, including a fourfold increase in overseas remittances and significant foreign investor portfolio asset purchases, there remains a palpable need for more decisive action.

Giulia Pellegrini, a senior portfolio manager at Allianz Global Investors, emphasized the necessity for the CBN to intensify its tightening efforts to regain foreign investors’ confidence in the local bond market.

While acknowledging the positive strides made by the central bank, Pellegrini stressed the importance of a more assertive approach to prevent the diversion of investor attention to other frontier markets.

As the Nigerian economy navigates through these challenging times, the impending interest rate hike signals the CBN’s determination to address inflation head-on and foster a more stable economic environment.

Continue Reading
Advertisement




Advertisement
Advertisement
Advertisement

Trending