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Nigeria’s Petroleum Minister Expects Oil Prices to Rebound

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  • Nigeria’s Petroleum Minister Expects Oil Prices to Rebound

President Muhammadu Buhari recently unveiled a road map for Nigeria’s petroleum industry, highlighting the short and medium term priorities of the government for the sector. CNBC Africa’s Wole Famurewa speaks to Nigeria’s Minister of State for Petroleum Resources, Ibe Kachikwu about the outlook for Nigeria’s oil and gas sector.

KACHIKWU: A lot of the targets in the other parts of the 7 big wins are quite frankly internal. They are basically executive driven. Costs of production are executive driven. Refineries are executive driven. The one that concerns obviously the assembly a lot more are deregulations and the petroleum governance bill and the engagements that I’ve had so far is that they have a lot more energy to get this done than even we have. They have so far been the ones propelling me, saying, you need to come forward, you need to get involved with us, we need to begin to meet. I think there’s an urgency regarding how we move this forward. Obviously a lot of collaboration is going to happen and nothing says that once we begin there won’t be disagreements but the nice thing about how the present go forward reform bill is being structured is that first you have the governance aspect which deals with institutional framework, where hopefully there shouldn’t be too much difficulty in identifying what works or the lapses in the current system, and then you get into the fiscal side of things, which tends to be a bit more contentious in terms of what are the numbers that are right for investors versus the numbers that are right for the government, so you expect some engagement and then of course, the rest are basically the structures that your putting in place which are again largely executive driven.

I anticipate that at least some in a few areas should be easy to solve. We’re going to try and stay away from some of the contentious areas that usually pull you back like host community issues and other things like that, and we’ll see how this is worked in later parts of the bill. From the fiscal angle we’ll look at whether it makes more sense to amend existing laws to capture the changes that you want as opposed to writing a brand new fiscal bill. What is important is that we’re committed and if all my timelines do is ginger everybody back up because they have deadlines to deliver then that is a plus.

Can you provide more detail into the $10 billion infrastructure fund and also if you can provide some colour into role of the Ministry of Petroleum resources and other ministries and the private sector in getting these funds to the region?

KACHIKWU: I know a lot of papers made this their headlines basically saying $10 billion fund to be set up. What I said is that we’re putting together an institutional framework to enable us drive that. What I expect is that this is not asking the Federal or State government to give the full amount. I do expect them to contribute something but I’m looking to Oil companies, International Development Organisations, I’m looking to business opportunity revenues to invest in some of the projects. For example, if you set up a gas park, how much do you pull from the income generated by the business. It isn’t going to be like you bring in $10 billion, put it in an account and say hey guys come we need to start spending money. No. It is the total opportunity galvanisation into the area that is going to yield the $10 billion, and obviously there’ll be contributions from the oil companies who will hopefully see an advantage in the fact that if there’s more infrastructure in their area of operations they will have less of a problem in the future. You’ve got to compare what you’re losing in terms of security surveillances and what you’re spending versus what you will save if in fact you put in some money. So we’re going to look at what the oil companies are doing in community development.

How do we pull that in in a way that is representable, accountable and reflects the wishes of the local community. What most of the oil companies do is that they get in there and they say this is what I want to run. I want to run a malaria free program. I want to run an economic empowerment program. And increasingly over the last five years, they’ve dove tailed away from infrastructure, and placed more emphasis on economic empowerment. But the question is, economic empowerment for who? By who? What is the spread? What aspects of the population are affected. I’d like to go back and push them towards infrastructure, but even in doing infrastructure I’d like to see collectives. Say four or five companies come together and do a South-South road, involve the governors so they can contribute to it as well. The ten billion is the capacity of generative funds that you can have over a ten year period. So we’re going to launch it, get several international organisations and oil companies to back it up, and then begin to say where is the business that helps us generate that much. The mechanisms haven’t been completely worked out. We’re going to have to clear it with the Federal Executive Council, and the president, but the key thing is that we need to have a fund that addresses infrastructure because the gaping hole in the Niger Delta is infrastructure.

You’ve discussed $70 billion of investments that could potentially come from China, can you just provide an update about when those flows will be coming and where we can see those monies going?

KACHIKWU: Well, what we did when we went to the Roadshow in China was to take what we call the infrastructural gap in the oil sector: the dilapidated pipelines that have the potential for tariffing, the gas pipelines that have the potential for tariffing, the storage facilities that you can pay lease fees on, the refineries that you can turn profitable. We took all that and we came to a figure of about $50 billion and that’s what we went to sell. In terms of commitments we’ve sold all of them, but we need to move from commitments and memorandums of understanding to seeing the money physically realised. We’ve set up an internal team that is driving this process, trying to identify the specific interests of the companies that have signed up. We’re drawing up contracts and coming up with ways to provide security so that they feel comfortable investing in the sector. We’d love to push more towards investment as opposed to just a facility because we only have so much oil to pursue the payment of facilities. So we’d rather push for joint venture investments in the refining, depot, and pipeline areas and use tariffs as a means of paying back as opposed to looking for sovereign guarantees and providing collateral backed by crude.

It’s still early days, but, if all we do is obtain 20-30 per cent of the $80 billion, it will still be a massive injection into the infrastructure in the oil sector. It’s easier for you to do this in the oil sector than it is in most of the others, because for each element of the oil sector there’s a pay out sequence. You can charge the people that use your pipelines a tariff, and you can sell the end products of refineries, and you can always sell raw crude, especially in extreme cases. Once you can galvanise the oil sector to take advantage of those then the gains will percolate down to other sectors of the economy, and certainly the regenerative income will enable the government get into massive mining and agriculture. Ultimately the oil sector got us here, the oil sector will get us out of it too.

There’s been an ongoing conversation around the sale of assets in Nigeria to provide much needed foreign exchange to the private sector in a difficult time. Can you speak to the government’s thinking around this.Many have suggested for instance that we could potentially sell the government’s interests in joint oil ventures.

KACHIKWU: There isn’t yet a policy on that, there is conversation going on around that. I don’t believe that the President is mindful of selling assets. There’s a lot of politicisation of asset sales usually. But at some point, if we find that there are unproductive assets, we’ll need to look at the best way to realise yield from them. It isn’t likely to be a JV equity or anything from NLNG, but there is the opportunity to leverage income from some of the successful assets to fill up the gap and resuscitate the economy, so they are two different things altogether.

We also have to consider what other alternatives we have; where else we can get money. One way to do this is to be more efficient. I’m more keen on selling government assets where there is an uncorrectable efficiency lapse. For Joint Ventures the organisation is excellent so there’s no efficiency issue.

The only way that we’ll sell that is if there was a dire shortfall in cashflow. But then again, we can always forward sell our crude like we’re doing in India and get that cash. There are lots of mechanisms that could put money in your hands. You can leverage your dividends and get cash to put back in the system. We need to look very conservatively about having to sell assets because once they’re sold they’re gone. So you’re carrying a moral burden for society. We need to save our assets for the future.

We also have to look at the timing of sales, oil stocks are very depreciated. If you sell oil assets now you’ll get paltry assets on what would have been a very valuable national asset.

Thanks for that answer. Now, I want us to talk about your expectations for the oil price.

KACHIKWU: The Market is trending from conservative to medium term stable, that’s what I see. We started the year with prices as low as 27 or 28 dollars per barrel, and at that time everybody was shaking but I said, “no I think the market will eventually trend and we’ll end the year with an average that’s above-above $40 a barrel”. And we have. I think that in 2017 because OPEC finally listened to my push that we cannot afford to just let this go on.

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.

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Crude Oil

Goldman Sachs Revised Down Brent Oil Forecast for Q3 2021

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Goldman Sachs Group, an American multinational investment bank and financial services company, has revised down its Brent oil price projection for the third quarter (Q3) of 2021 by $5 from $80 per barrel previously predicted to $75 a barrel following the surge in Delta variant COVID-19.

The investment bank predicted that the surge in Delta variant COVID-19 cases will weigh on Brent oil price in Q3 2021 even with the expected increase in demand.

However, the bank projected a stronger second half of 2021, saying OPEC+ adopted slower production ramp-up will offset 1 million barrel per day demand hit from Delta.

Goldman said, “Our oil balances are slightly tighter in 2H21 than previously, with an assumed two-month 1 mb/d demand hit from Delta more than offset by OPEC+ slower production ramp-up.”

The leading investment banks now projected a deficit of 1.5 million barrels per day in the third quarter, down from 1.9 million barrels per day previously predicted.

Therefore, Brent crude oil is expected to average $80 per barrel in the fourth quarter, a $5 increase from the $75 initially predicted and the bank sees 1.7 million barrels per day in the fourth quarter.

The oil market repricing to a higher equilibrium is far from over, with the bullish impulse shifting from the demand to the supply side,” the bank said.

Goldman added that even if vaccinations fail to curb hospitalisation rates, which could drive a longer slump to demand, the decline would be offset by lower OPEC+ and U.S. shale output given current prices.

Oil prices may continue to gyrate wildly in the coming weeks, given the uncertainties around Delta variant and the slow velocity of supply developments relative to the recent demand gains,” it said.

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Crude Oil

Oil Extends Gains on Thursday on Expectations of Tighter Supplies

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Oil prices rose about $1.50 a barrel on Thursday, extending gains made in the previous three sessions on expectations of tighter supplies through 2021 as economies recover from the coronavirus crisis.

Brent crude settled at $73.79 a barrel, up $1.56, or 2.2%, while U.S. West Texas Intermediate (WTI) settled at $71.91 a barrel, rising $1.61, or 2.3%.

“The death of demand was greatly exaggerated,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. “Demand is not going away, so we’re back looking at a very tight market.”

Members of the Organization of the Petroleum Exporting Countries and other producers including Russia, collectively known as OPEC+, agreed this week on a deal to boost oil supply by 400,000 barrels per day from August to December to cool prices and meet growing demand.

But as demand was still set to outstrip supply in the second half of the year, Morgan Stanley forecast that global benchmark Brent will trade in the mid to high-$70s per barrel for the remainder of 2021.

“In the end, the global GDP (gross domestic product) recovery will likely remain on track, inventory data continues to be encouraging, our balances show tightness in H2 and we expect OPEC to remain cohesive,” it said.

Russia may start the process of banning gasoline exports next week if fuel prices on domestic exchanges stay at current levels, Energy Minister Nikolai Shulginov said, further signalling tighter oil supplies ahead.

Crude inventories in the United States, the world’s top oil consumer, rose unexpectedly by 2.1 million barrels last week to 439.7 million barrels, up for the first time since May, U.S. Energy Information Administration data showed.

Inventories at the Cushing, Oklahoma crude storage hub and delivery point for WTI, however, has plunged for six continuous weeks, and hit their lowest since January 2020 last week.

“Supplies fell further by 1.3 million barrels to the lowest level since early last year, theoretically offering support to the WTI curve,” said Jim Ritterbusch of Ritterbusch and Associates.

Gasoline and diesel demand, according to EIA figures, also jumped last week.

Barclays analysts also expected a faster-than-expected draw in global oil inventories to pre-pandemic levels, prompting the bank to raise its 2021 oil price forecast by $3 to $5 to average $69 a barrel.

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Energy

RES4Africa, Enel Green Power and the European Investment Bank Encourage African Youth to Find Green Energy Solutions to Community Challenges

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European Investment Bank - Investors King

The second Micro-Grid Academy Young Talent of the Year Award today acknowledged energy innovation from across Africa that can accelerate the green transition and improve economic opportunities.

Backed by the RES4Africa Foundation, Enel Green Power and the European Investment Bank the yearly competition encourages young energy entrepreneurs from across the continent to develop projects that expand enegy access, enable greater use of renewable eneryg and accelerate sustainability.

Young finalists from across West, East and Southern Africa presented their innovative ideas to expert judges from the RES4Africa Foundation, Enel Green Power and the European Investment Bank.

The 2021 edition of the Micro-Grid Academy Young Talent of the Year Award has arrived to its final steps. Today, the eight young African innovators selected as finalists out of nearly 50 applicants presented to the international public their disruptive projects for the first time. The presentation took place during the event Public Competition for the MGA Young Talent of the Year 2021 finalists, and represents a preparatory step for the announcement of the three winners, that will be held the 28th of September in the framework of the Precop26.

The three entities strongly believe that renewables and innovation will be the response to the climate changes and energy deficit that Africa faces. In this deeply needed path towards its just energy transition, the continent can and must rely on one of its most precious resources : its youth. With this joint initiative, RES4Africa, Enel Green Power and the European Investment Bank put together their efforts to support those young people from all Africa countries who are committed and motivate to create a real change in their communities.

These are the finalists identified by the selection committee, who publicly presented their project ideas and among which there are the three future winners:

• Adekoyejo Ifeoluwapo Kuye, 26 years old from Nigeria, introduced a project focused on a sustainable cold chain for food;

• Alex Makalliwa, 31 from Kenya, presented his initiative of electrical tricycles for heavy loads in Nairobi;

• Benson Kibiti, 34 also from Kenya, performed an overview on an PV-powered trolley for heating up food and providing power;

• Lucas Filipe Tamele Junior, 24 from Mozambique, focused on waste management, biofertilizers and biogas;

• Matjaka Ketsi from Lesotho is 28, and presented an initiative aiming at building solar-powered Learning Centres for rural communities;

• Shedrack Charles Mkwepu is instead 26 and comes from Tanzania: he designed a system that allows farmers to control irrigation and other soil parametres from a mobile phone;

• Carol Ofafa, 32 from Kenya, proposed the installation of a PV system for health facilities;

• Kumbuso Joshua Nyoni, 34 from Zambia, envision an integrated Water-Food-Energy model for PV power and a water pumping system.

The webinar benefitted from the presence of Salvatore Bernabei, President of RES4Africa and Head of Enel Global Power Generation, as well as of Maria Shaw Barragan, Director of Lending in Africa, Caribbean, Pacific, Asia and Latin America, European Investment Bank. They introduced the objectives of the MGA Young Talent of the Year Award, while reflecting upon youth’s impact on the just energy transition.

Moreover, after the finalists’ presentation, a final feedback was provided, with closing remarks, by Roberto Vigotti, Secretary General at RES4Africa Foundation, Carmelo Cocuzza, Head of Corporates Unit, European Investment Bank, and Silvia Piana, Head of Regulatory Affairs Africa, Asia and Australia Area at Enel Green Power.

“The ability to generate innovation will be a fundamental driver to pave the way for a transformation that goes well beyond the dynamic of the Energy sector” commented Salvatore Bernabei “We are here give voice and visibility to young talents, innovators, entrepreneurs promoting the best innovative ideas to stimulate socio-economic progress from within and free the creativity of the younger generations in designing the Africa of tomorrow”.

Increasing energy access and enabling more sustainable energy use is crucial to unlock opportunities for communities across Africa. The finalists in this year’s Micro-Grid Academy Young Talent Awards all demonstrate inspirational and innovative thinking that combined world-class energy expertise with unparalleled understanding of local energy needs and all deserve to win. The European Investment Bank is pleased to join RES4Africa and Enel Green Power to support talented young innovators and encourage them to become green energy leaders of the future.” said Maria Shaw-Barragan, European Investment Bank Director for Global Partners.

RES4Africa Foundation (Renewable Energy Solutions for Africa) envisions the sustainable transformation of Africa’s electricity systems to ensure reliable and affordable electricity access for all, enabling the continent to achieve its full, resilient, inclusive and sustainable development. The Foundation’s mission is to create favourable conditions for scaling up investments in clean energy technologies to accelerate the continent’s just energy transition and transformation.

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