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Wood Mackenzie: Oil Majors Invest $169bn in Exploration

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As the upstream companies grapple with oil price downturn, a new research from Wood Mackenzie has revealed that the majors invested $169 billion in exploration during the 2015-2016 period.

With the exploration spend shrinking by half in 2015 versus 2014, Wood Mackenzie’s report indicates that the majors are also adjusting to the new economics of exploration, with industry facing a leaner but potentially more profitable future

Wood Mackenzie predicted that the oil and gas industry is poised to emerge from the slump leaner, more efficient and more profitable.

According to Wood Mackenzie’s new report “Exploration Benchmarking – Majors 2006-2015,” the majors invested $169 billion in exploration during the period analysed, adding a total of 72 billion barrels of oil equivalent (boe) to their resource base.

Of this, 25 billion boe comes from unconventional plays, while resource discovery costs for the period averaged $1.78/boe.

The report also showed that returns over the period were not optimal, with returns of just six per cent, versus an industry average of 10 per cent.

Wood Mackenzie, however, noted that the majors moved quickly in 2015 to improve weak exploration returns.

“Steep cuts in exploration spending for the year have forced high-grading, which has led to enhanced prospect quality. Unconventionals are becoming increasingly important, attracting 15 per cent of the majors’ exploration spend and outperforming returns from conventional exploration since 2013,” said the report.

“Good conventional exploration volumes, together with large adds from unconventionals saw the majors add resources well ahead of the volumes they produced every year from 2011. Resource discovery costs also fell, with the lowest costs recorded in 2015,” the report added.

Commenting on the report, the Vice President of exploration research at Wood Mackenzie, Dr. Andrew Latham said “our research shows that a number of things needed to, and are, changing.”

Latham explained that one positive side effect of the downturn is that the majors have changed the way they approach exploration, leading to improved returns, even at lower prices.

He added that the new economics of exploration mean that rather than pursuing high-cost, high-risk exploration strategies – elephant hunting in the Arctic, for example – the majors have become more conscious of costs.

“Smaller budgets have required them to choose only their best prospects for drilling, including more wells close to existing fields. The industry now has in prospect a different – and potentially more profitable – future,” Latham said.

While insisting that “exploration has a new role – less is more,” Latham explained that the early indications are that the majors are now getting the exploration economics right.

“Their exploration spend halved in 2015 versus 2014, with spend per well drilled falling to levels not seen since 2008. However, there has been a shift in ambition. Companies are no longer trying to fully replace production via conventional exploration, as they used to. Now their reserves replacement will also require inorganic, brownfield or shale investments. Exploration has become incremental,” he said.

“Another big factor is gas – companies are not replacing volumes in the same ratios as their production, or in the same way. Discoveries break down to about one-quarter oil and three-quarters gas, while global production is currently nearer two-thirds oil and one-third gas. The future will become steadily more gassy,” Latham added.

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.

Investment

Afreximbank, AAAM to Drive Automotive Investment

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Afreximbank, AAAM to Drive Automotive Investment

The African Export-Import Bank (Afreximbank) and the African Association of Automotive Manufacturers (AAAM) have entered into a Memorandum of Understanding (MoU) for the financing and promotion of the automotive industry in Africa.

President of Afreximbank, Prof. Benedict Oramah and President of AAAM/Managing Director of Nissan Africa, Mike Whitfield, signed the MoU in early February, according to a statement yesterday.

The deal formalised the basis for a partnership aimed at boosting regional automotive value chains and financing for the automotive industry while supporting the development of enabling policies, technical assistance, and capacity building initiatives.

Oramah, said, “the strategic partnership with AAAM will facilitate the implementation of the Bank’s Automotive programme which aims to catalyze the development of the automotive industry in Africa as the continent commences trade under the African Continental Free Trade Area (AfCFTA).”

Under the terms of the MoU, Afreximbank and AAAM will work together to foster the emergence of regional value chains with a focus on value-added manufacturing created through partnerships between global Original Equipment Manufacturers (OEM), suppliers, and local partners.

The two organisations plan to undertake comprehensive studies to map potential regional automotive value chains on the continent in regional economic clusters, in order to enable the manufacture of automotive components for supply to hub assemblers.

“To support the emergence of the African automotive industry, they will collaborate to provide financing to industry players along the whole automotive value chain. The potential interventions include lines of credit, direct financing, project financing, supply chain financing, guarantees, and equity financing, amongst others.

“The MoU also provides for them to support, in conjunction with the African Union Commission and the AfCFTA Secretariat, the development of coherent national, regional and continental automotive policies, and strategies.

“With an integrated market under the AfCFTA, abundant and cheap labour, natural resource wealth, and a growing middle class, African countries are increasingly turning their attention to support the emergence of their automotive industries.

“Therefore, the collaboration between Afreximbank and AAAM will be an opportunity to empower the aspirations of African countries towards re-focusing their economies on industrialisation and export manufacturing and fostering the emergence of regional value chains,” the statement added.

“The signing of the MoU with Afreximbank is an exciting milestone for the development of the automotive industry in Africa. At the 2020 digital Africa Auto Forum, the lack of affordable financing available for the automotive sector was identified as one of the key inhibiters for the growth and development of the automotive industry in Africa and having Afreximbank on board is a game changer and a hugely positive development,” CEO of AAAM, David Coffey said.

“It is wonderful to have a partner that is as committed as the AAAM to driving the development and growth of our sector on the continent; this collaboration will ensure genuine progress for our industry in Africa,” Coffey added.

Other areas covered by the MoU include working with the African Union and the African Organisation for Standardisation to harmonise automotive standards across the continent and developing an automotive focused training program for both the public and private sector.

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FG Warns Foreign Investors Against Enslaving Nigerians

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FG Warns Foreign Investors Against Enslaving Nigerians

The Federal Government on Monday warned foreign investors against subjecting Nigerians working in their companies to industrial slavery.

The government said the warning became necessary following several complaints against foreign companies maltreating some of their staff.

The Chief Commissioner, Public Complaints Commission, Chile Igbawua, issued the warning during a courtesy call on him by a delegation of Pan Africa United Youth Developments Network who came to lay complaint against some foreign companies allegedly maltreating Nigerians working under them.

The PCC said that it would not allow only its state commissioners to handle the issues due to their magnitude as there had been so many complaints about the ways some of the foreign companies were treating their staff.

At the event, the leader of the delegation, Habib Muhammed, expressed concern over alleged injustice and irregularities perpetrated by some company on Nigeria youths whom they engaged as factory workers.

He called on the Federal Government to look into the alleged slavery and injustice meted on Nigerian youths.

While calling on the foreigners to obey the labour laws of Nigeria, Igbawua said, “Our resources cannot be used to enslave us again.”

He said, “We have labour laws in Nigeria for goodness sake and we also have industrial standards; people working in various industries are entitled to good working conditions and minimum conditions of service.”

He added that the law was clear on the issue of casualisation and should be implemented.

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Foreign Direct Investments into China Shot Up by 9% in 2020 to $163 Billion Against 49% US Decline

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Foreign Direct Investments into China Shot Up by 9% in 2020 to $163 Billion Against 49% US Decline

China had the highest inflow of Foreign Direct Investments (FDI) globally in 2020, surpassing the US which took the lead in 2019.

According to the research data analyzed and published by Comprar Acciones, China’s inflow shot up by 9% to $163 billion up from $140 billion the previous year. Meanwhile, the US had a 49% drop from $251 billion in 2019 to $134 billion.

Based on data from the National Bureau of Statistics, China reported a 2.3% growth in GDP in 2020. It was the only major economy to record a positive growth rate during the year.

Chinese Stock Market Saw 18 Million New Investors in 2020

Global FDI took a hit in 2020, falling by 42% year-over-year (YoY) from $1.49 trillion in 2019 to $859 billion. The figure was 30% lower than the one reported during the 2009 financial crisis.

Developed countries saw the worst performance, sinking by a cumulative 69% YoY to $229 billion. For developing economies, there was a 12% decline of $616 billion. By the end of 2020, developing countries accounted for a 72% share of global FDI, the highest on record. India had the highest growth among top-rated economies, shooting up by 13%.

China bore the brunt of the pandemic much better than its peers, posting a 6.5% GDP growth in Q4 2020. During the year, there were 18.02 million new investors in its mainland stock market, raising the total to 177.77 million. Driving the surge in interest was the stellar performance of Chinese stocks in 2020.

The Shenzen Component grew by 38.7% in 2020, and the CSI 300 increased by 27.2%, compared to the S&P 500’s 16.26% growth. IPO activity also soared, with China and Hong Kong accounting for 40% of global IPO volume in 2020 according to Ernst & Young.

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