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Senate to Award Zero Allocation to Aviation in 2017 Budget

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  • Senate to Award Zero Allocation to Aviation in 2017 Budget

Senate House Committee on Privatisation has disclosed that the aviation sector will get zero allocation in the 2017 budget proposal that the president will present soon.

The committee, led by its chairman, Senator Ben Murray-Bruce, said that the plan to concession the airports and readiness of private investors to assume responsibility means that the Federal Government would no longer need to commit revenue to run the facilities.

Meanwhile, the committee has also said it would summon the Minister of State for Aviation, Hadi Sirika, to explain why the Murtala Muhammed Airport II (MMA2) terminal concession agreement failed and still not resolved till date.

The botched agreement, according to them, remains a bad reference point for future dealings with the Federal Government and would make no sense continuing with privatisation of other airports without first resolving the MMA2 impasse.

Murray-Bruce explained that from his understanding of happenings in the aviation sector, the private sector is able and willing to fix problems in the industry.

He, therefore, said: “I will lobby my colleagues to give aviation zero allocation henceforth. There is no point giving them money where private investors can do better. When you don’t give them money, then you’ll solve a lot of problem.

“The advantage is that the billions we could have spent in aviation can now be spent in education, healthcare and in the north east where children are hungry due to the catastrophe of the Boko Haram. So, we’ll give up this economy completely to the private sector as it is done in other parts of the world,” he said.

Murray-Bruce, shortly after the tour of the MMA2 terminal in Lagos recently, said underlining such project, and others like it, were legally binding agreements reached by the Federal Government and private investors.He said Nigerians need to know why agencies of the government would not honour agreements they freely entered and onus is on the minister to explain.

Recall that the Federal Airports Authority of Nigeria (FAAN) and Bi-Courtney Limited in 2003 reached a Build-Operate-Transfer concession agreement on MMA2 terminal that was burnt in 2000. Shortly after the terminal was rebuilt, years of operations (15 or 35years), before it is transferred to FAAN, became a subject of protracted legal battle between FAAN and Bi-Courtney.

While Bi-Courtney insisted on 35, FAAN in disagreement began to violate the agreement with the construction of the General Aviation Terminal (GAT) to rival the MMA2, prevention of the Regional Operations to take off at MMA2, among others that led to loss of revenue to the concessionaire.

Murray-Bruce said: “We have listened to Bi-Courtney’s side of the argument and we will summon the Minister of Aviation to the Assembly to present his side of the argument. It is not enough to tell me what FAAN is doing or not doing. FAAN is a parastatal of the ministry of aviation and there is no point talking to FAAN on this,” he said.The chairman said that the invitation was ultimately to broker a solution to the problem, which past committees had not been able to address.

He said further that the Senate would ensure that agreement signed by government are henceforth honoured, otherwise officials that participated in the deal are tried for sabotaging the Federal Government.

His words: “Either you honour the agreement or prosecute all those that signed the lousy agreement on behalf of the government. You have a choice. We already raised the issue with the Attorney General and we will also raise it with the minister. We want to protect the integrity of the country and of the government of Nigeria.

“We will not spend tax payers’ money on businesses that can be run by private sector while Nigerians are dying of hunger. This is as fundamental as it can get. We are gradually reducing cost of governance.

It is time for aviation, but we will not allow the process to continue until they have solved the problem with MMA2 agreement. You cannot tell me that you will concession four more airports while the first one you concession is a disaster. You have to fix it first.”

Member of the committee, Senator Yahaya Abdullahi, who was impressed with the MMA2 terminal, though still underutilised, said that they would make their findings known to Senate and also draw attention of the Committee on Aviation to its plight.

Abdullahi said: “What I’ve seen in this airport is disturbing. There is a whole part of it that is not been used, while a part is crowded. It is not acceptable that agreements are not been honoured. We are not here to find fault, but to say that agreements, when signed, must be honoured and facilities utilised to the maximum.”

Chief Executive Officer of Bi-Courtney, Capt. Jari Williams, lamented that the company has continued to lose revenue on daily basis with government officials failing to honour the pact.Williams urged the committee to prevail on FAAN to comply with laws of the country, various court rulings and arbitration proceedings and recommendations regarding the concession agreements.

He said, as already determined by the Court of Appeal, the Federal Government and FAAN should respect the guaranteed clauses, which states that all scheduled domestic flights in and out of FAAN’s airport in Lagos State shall, during the concession period, operate from the terminal and Bi-Courtney is entitled to all revenues accruing from specified sources of income ceded to the concessionaire under this agreement.

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.

Crude Oil

Brent Crude Rises to $69 on IEA Report

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Oil prices rose after the release of the International Energy Agency’s (IEA)  closely-watched Oil Market Report, with WTI Crude trading at above $66 a barrel and Brent Crude surpassing the $69 per barrel mark.

Prices jumped even though the agency revised down its full-year 2021 oil demand growth forecast by 270,000 barrels per day (bpd) from last month’s assessment, expecting now demand to rise by 5.4 million bpd. The downward revision was due to weaker consumption in Europe and North America in the first quarter and expectations of 630,000 bpd lower demand in the second quarter due to India’s COVID crisis.

The excess oil inventories of the past year have been all but depleted, and a strong demand rebound in the second half this year could lead to even steeper stock draws, the IEA said yesterday, keeping an upbeat forecast of global oil demand despite the weaker-than-expected first half of 2021.

However, the upbeat outlook for the second half of the year remains unchanged, as vaccination campaigns expand and the pandemic largely comes under control, the IEA said.

Moreover, the global oil glut that was hanging over the market for more than a year is now gone, the agency said.

“After nearly a year of robust supply restraint from OPEC+, bloated world oil inventories that built up during last year’s COVID-19 demand shock have returned to more normal levels,” the IEA said in its report.

In March, industry stocks in the developed economies fell by 25 million barrels to 2.951 billion barrels, reducing the overhang versus the five-year average to only 1.7 million barrels, and stocks continued to fall in April.

“Draws had been almost inevitable as easing mobility restrictions in the United States and Europe, robust industrial activity and coronavirus vaccinations set the stage for a steady rebound in fuel demand while OPEC+ pumped far below the call on its crude,” the IEA said.

The market looks oversupplied in May, but stock draws are set to resume as early as June and accelerate later this year. Under the current OPEC+ policy, oil supply will not catch up fast enough, with a jump in demand expected in the second half, according to the IEA. As vaccination rates rise and mobility restrictions ease, global oil demand is set to soar from 93.1 million bpd in the first quarter of 2021 to 99.6 million bpd by the end of the year.

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Crude Oil

OPEC Expects Increase In Global Oil Demand Raises Members’ Forecast on Crude Supply

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The Organisation of Petroleum Exporting Countries (OPEC) yesterday lifted its forecast on its members’ crude this year by over 200,000 bpd and now expects demand for its own crude to average 27.65mn bpd in 2021.

This is almost 5.2mn bpd higher than last year and around 2.7mn b/d higher than an earlier estimate of the group’s April production.

According to the highlights of the organisation’s latest Monthly Oil Market Report (MOMR), OPEC crude is projected to rise from 26.48 million bpd in the second quarter to 28.7 million bpd in the third and 29.54 million bpd in the fourth quarter of the year.

The report also indicated a fall in Nigeria’s crude production from 1.477 bpd in February to 1.473, a difference of just about 4,000 bpd before rising again in April to 1.548 million bpd, to add 75,000 bpd last month.

OPEC stated that its upward revision of members’ crude was underpinned by a downgrade in the group’s forecast for non-OPEC supply, which it now expects to grow by 700,000 bpd to 63.6mn b/d against last month’s report’s projection of a 930,000 bpd rise to 63.83mn bpd.

The oil cartel projected that US crude output would drop by 280,000 bpd this year, compared with its previous forecast for a 70,000 bpd decline.

On the demand side, OPEC kept its overall forecast unchanged from last month’s MOMR, stressing that it expects global oil demand to grow by 5.95 million bpd to 96.46 million bpd this year, partly reversing last year’s 9.48mn bpd drop.

Spot crude prices fell in April for the first time in six months, with North Sea Dated and WTI easing month-on-month by 1.7 percent and 1 percent, respectively.

On the global economic projections, the cartel said stimulus measures in the US and accelerating recovery in Asian economies might continue supporting the global economic growth forecast for 2021, now revised up by 0.1 percent to reach 5.5 percent year-on-year.

This comes after a 3.5 percent year-on-year contraction estimated for the global economy in 2020.

However, global economic growth for 2021 remains clouded by uncertainties including, but not limited to the spread of COVID-19 variants and the speed of the global vaccine rollout, OPEC stated.

“World oil demand is assumed to have dropped by 9.5 mb/d in 2020, unchanged from last month’s assessment, now estimated to have reached 90.5 mb/d for the year. For 2021, world oil demand is expected to increase by 6.0 mb/d, unchanged from last month’s estimate, to average 96.5 mb/d,” it said.

The report listed the main drivers for supply growth in 2021 to be Canada, Brazil, China, and Norway, while US liquid supply is expected to decline by 0.1 mb/d year-on-year.

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Crude Oil

Oil Rises Over Concerns of Fuel Shortages

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Oil prices rose on Tuesday, as lingering fears of gasoline shortages due to the outage at the largest U.S. fuel pipeline system after a cyber attack brought futures back from an early drop of more than 1%.

Brent crude futures rose 35 cents, or 0.5%, to $68.67 a barrel. U.S. West Texas Intermediate (WTI) crude futures rose 49 cents, or 0.8%, to $65.41.

Benchmark gasoline futures prices rose 1 cent to $2.14 a gallon.

On Monday, Colonial Pipeline, which transports more than 2.5 million barrels per day (bpd) of gasoline, diesel and jet fuel, said it was working to restore much of its operations by the end of the week.

Right now there’s a generalized anxiety premium being built into prices because of Colonial and it’s keeping a floor under the market,” said John Kilduff, partner at Again Capital LLC in New York.

Fuel supply disruption has driven gasoline prices at the pump to multi-year highs and demand has spiked in some areas served by the pipeline as motorists fill their tanks.

Traders booked at least four tankers to store refined oil products off the U.S. Gulf Coast refining hub after a cyber attack that knocked out the pipeline, shipping data showed on Tuesday.

North Carolina, the U.S. Environmental Protection Agency and Department of Transportation issued waivers allowing fuel distributors and truck drivers to take steps to try to prevent gasoline shortages.

OPEC on Tuesday raised its forecast for demand for its crude by 200,000 bpd and stuck to its prediction of a strong recovery in global oil demand this year as growth in China and the United States counters the coronavirus crisis in India.

Meanwhile, the rapid spread of infections in India has increased calls to lock down the world’s second-most populous country and the third-largest oil importer and consumer.

India’s top state oil refiners have already started reducing runs and crude imports as the new coronavirus cuts fuel consumption, company officials told Reuters on Tuesday.

On the bullish side for crude, analysts are expecting data to show U.S. inventories fell by about 2.3 million barrels in the week to May 7 after a drop of 8 million barrels the previous week, a Reuters poll showed.

Gasoline stocks are expected to have fallen by about 400,000 barrels, analysts estimated ahead of reports from the American Petroleum Institute on Tuesday and the U.S. Energy Information Administration on Wednesday.

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