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Renewed Oil Search Pushes NNPC’s Deficits to N19bn

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  • Renewed Oil Search Pushes NNPC’s Deficits to N19bn

The renewed search for crude oil in the frontier inland basins has started impacting the monthly trading financials of the Nigerian National Petroleum Corporation (NNPC), its monthly financial and operations report for November 2016 has disclosed.

Specifically, as a result of the fresh oil search activities, the NNPC, in November, incurred additional cost of N1.87 billion over the October figures, pushing the deficits in the review month to N18.72 billion.

The monthly report, released last week in Abuja, stated that Integrated Data Services Limited (IDSL), NNPC’s subsidiary, which is in charge of hydrocarbon exploration services and provision of seismic data acquisition, has witnessed an increase in its operating costs, following oil search activities in the frontier basins.

The report stated that despite an improved revenue generation profile, upholding its oil finds in the frontier basins contributed to the deficits recorded by the NNPC in the month.

According to the report, “The corporation has been operating in challenging situations which limits its aspiration to profitability. This 16th publication of NNPC monthly financial and operations report indicates a trading deficit of N18.72 billion. This represents an increase of N1.87 billion in trading deficit as against October, 2016.”

It explained that, “The marginal increase in the trading deficit was due to an upsurge in IDSL operating costs attributed to the on-going mobilisation activities in both Benue Trough seismic data project located in Bauchi and Party 05 in Elele, Rivers state, despite an improved revenue generation.”

Apart from the oil finds, NNPC, however, added that there were other activities that contributed to its deficit business closure in November.
“The strike action by Bristow Helicopters workers delayed the planned lay-time of Okono Blend resulting to nil NPDC offshore export sales for the month. Other factors that pulled down NNPC’s performance include force majeure declared by SPDC (Shell Petroleum Development Company) as a result of the vandalised 48inch Forcados export line after the restoration on 17th October, 2016 amongst others,” it stated.

While the Federal Government in 2016 renewed its desire to grow Nigeria’s oil reserves with exploration in the Chad Basin, and Benue Trough, the IDSL, which undertakes seismic data procession and interpretation, as well as reservoir management services in Nigeria’s oil and gas industry, was awarded the job to acquire over 500 square kilometers of 3D seismic data acquisition in the first instance from the basins.

NNPC also stated that it was collaborating with the Republic of Niger to share geological data that could boost its ongoing exploratory activities in the Chad Basin and Benue Trough.

It disclosed that it was in discussion with the Chinese company that is operating the Agadem, Niger Republic oil field for the construction of an over 1, 000 kilometres alternative crude oil supply pipeline to its Kaduna Refinery.

Past reports on Nigeria’s oil exploration in the frontier basins indicated that between 1977 and 1996, the NNPC commenced exploration activities in the Chad Basin during which 23 wells were drilled and only two wells – Wadi-1 and Kinasar-1, recorded non-commercial gas discoveries before exploration was suspended in the Chad Basin in 2000 for lack of commercial finds.

Similarly on the Gongola Basin, the government had between 1993 and 2000 awarded blocks in the basin to Chevron, Total and Shell Nigeria Exploration and Production Company (SNEPCo), and they reportedly acquired 3,153km of 2D seismic data, drilled one well each and made a non-commercial gas discovery in one of the wells – Kolmani River-1, before they suspended operations and abandoned the blocks.

Meanwhile, the corporation also gave an update on the operations of some of the country’s crude oil lifting terminals that have been impacted by acts of vandalism in the Niger Delta region. It said both Brass and Forcados were still shut.

“Forcados terminal; a force majeure declared since 15th February, 2016 was still in place in October 2016 due to the damage on the 48” sub-sea export which triggered a disruption in cargo lifting. The force majeure is still in place pending repairs of the line and stable/uninterrupted crude oil production

“Brass terminal; the force majeure declared on 22nd May, 2016 was still in place in October 2016 as a result of the sabotage on the Clough Creek-Tebidaba pipeline. Some wells were shut down from 1st to 31stOctober, 2016 for maintenance of critical equipment. A total of about 95,000bopd was shut in throughout the month of October 2016,” it explained in the monthly report.

In another development, NNPC has said 50 companies submitted bids to provide sea-worthy tug boats on charter basis for its maritime operational requirements in Lagos, Warri and Port Harcourt.

A statement from its Group General Manager, Public Affairs, Ndu Ughamadu, in Abuja explained that the public bid opening was held at the corporation’s headquarters, and had in attendance representatives of the bidding companies with officials of the Bureau of Public Procurement (BPP), Department of Petroleum Resources (DPR), Nigerian Extractive Industries Transparency Initiative (NEITI), Nigerian Content Development and Monitoring Board (NCDMB), and some members of the civil society organisations as observers.

Though the statement did not disclose the corporate identities of the 50 firms or the number of them that would be selected for the term contract, it however said the successful companies would be engaged on a two-year term contract in the first instance, with an option of renewal for a further one year.

Winners, it noted, were expected to provide services, which include aiding the berth and un-berth of all ships operating at the NNPC jetties/buoy, logistics support for safe ship-to-ship operations, which covers movement of fenders, horses, documents, rigging and unrigging of fenders, among others.

The statement also quoted the corporation’s Group General Manager, Supply Chain Management, Mr. Shehu Liman, to have said at the bid opening that the NNPC under Dr. Maikanti Baru was determined to instill and sustain the values of transparency, accountability and integrity in all its procurement process.

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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Energy

Africa Renewable Energy Fund II Secures €125 Million First Close With SEFA and CTF Investments

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The Africa Renewable Energy Fund II has achieved its first close at €125 million, following a joint investment of €17.5 million from The Sustainable Energy Fund for Africa and the Climate Technology Fund through the African Development Bank.

AREF II, a successor to the original Fund, is a 10-year closed-ended renewable energy Private Equity Fund with a $300 million target capitalization. The Africa Renewable Energy Fund II, managed by Berkeley Energy, invests in early-stage renewable energy projects, thereby not only de-risking the most uncertain phase of power projects, but also promoting increased green baseload in Africa’s generation mix.

The Sustainable Energy Fund for Africa and the Climate Technology Fund will each contribute roughly €8.7 million to mobilize private-sector investment into Africa’s renewable energy sector. The Sustainable Energy Fund for Africa will also contribute financing to the AREF II Project Support Facility, which funds technical assistance and early-stage project support to improve bankability.

Other investors include the U.K’s CDC Group, Italy’s CDP, the Netherlands Development Finance Company (FMO) and SwedFund.

“We are proud to be associated with Berkeley Energy and other like-minded investors, and look forward to AREF’s continued success and leadership in promoting sustainable power development on the continent,” said Dr. Kevin Kariuki, the African Development Bank’s Vice President for Power, Energy, Climate and Green Growth.

In 2012, the African Development Bank selected Berkeley Energy, a seasoned fund manager of clean energy projects in global emerging markets to set up AREF. AREF II has a sharper strategic focus than its predecessor on “green baseload” projects that will deliver firm and dispatchable power to African power systems through hydro, solar, wind and battery storage technologies.

Luka Buljan, Berkeley Energy’s Managing Director, said: “We are very excited to have reached this milestone with strong support from our backers. The catalytic tranche from the Sustainable Energy Fund for Africa and the Climate Technology Fund will assist in mobilising private institutional investors up to full fund size of €300 million. We now look forward to concluding the fundraising and delivering projects that will provide clean, reliable and affordable energy across African markets.”

“AREF is intertwined with the Sustainable Energy Fund for Africa’s history and success, and we have worked closely over the last decade to create precedents in difficult markets and challenging technologies. We look forward to continued collaboration to accelerate the energy transition in Africa,” said Joao Duarte Cunha, Manager for Renewable Energy Initiatives at the African Development Bank and Coordinator of the Sustainable Energy Fund for Africa.

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FG Earned $34.22B From Crude Oil and Gas in 2019 – NEITI

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The Nigeria Extractive Industries Transparency Initiative (NEITI) on Thursday released its 2019 oil and gas industry audit report, which shows that Nigeria earned N34.22 billion from the oil and gas industry in 2019.

The audit, conducted by Adeshile Adedeji & Co. (Chartered Accountants), an indigenous accounting and auditing firm, reconciled payments from 98 entities. They include 88 oil and gas companies, nine government agencies and the Nigerian Liquefied Natural Gas (NLNG).

The 2019 figure is an increase of 4.88 percent over the $32.63billion revenue realised from the sector in 2018. A breakdown of the earnings showed that payments by companies accounted for $18.90billion, while flows from federation sales of crude oil and gas accounted for $15.32billion.

The report further showed that 10 years (2010-2019) aggregate financial flows from the oil and gas sector to government amounted to $418.544billion, with the highest revenue flow of $68.442 recorded in 2011, while the lowest revenue flow of $17.055 was recorded in 2016.

According to NEITI, the total crude oil production in 2019 was 735.244mmbbls, representing an increase of 4.87 percent over the 701.101mmbbls recorded in 2018. Production sharing contracts (PSCs) contributed the highest volumes of 312.042mmbbls followed by Joint Venture (JV) and Sole Risk (SR) which recorded 310,284mmbbls and 89.824mmbbls respectively. Others are Marginal Fields (MFs) and Service Contracts (SCs) which accounted for 21,762mmbbls and 1,330mmbbls respectively.

The report also showed that total crude oil lifted in 2019 was 735.661mmbbls, indicating a 4.93 percent increase to the 701.090 mmbbls recorded in 2018, with companies lifting 469.010mmbbls, while 266.650mmbbls was lifted by the Nigeria National Petroleum Corporation (NNPC) on behalf of the federation.

Analysis of crude oil lifted by NNPC showed that 159.411mmbbls was for export, while 107.239mmbbls was for domestic refining. 97 percent of the volumes for domestic refining (104.475mmbbls) was utilised for the Direct Sale Direct Purchase (DSDP) programme while the remaining 3 percent (2.764mmbbls) was delivered to the refineries.

NEITI reported that the value of the 2019 domestic crude oil earnings was N2.722 trillion. Of this figure, N518.074billion was deducted for Petroleum Motor Spirit (PMS) under-recovery by the NNPC.

This figure was N213.074billon above the approved sum of N305billion for under-recovery in 2019. Similarly, the sum of N126.664billion was incurred by the Corporation as costs for pipeline repairs and maintenances which showed a difference of N96.378billion from the approved sum of N30.287billion for that purpose.

The report also pointed out that N31.844billion was also deducted for crude and product losses due to theft.

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Crude Oil

Oil Prices Drop on Stronger U.S Dollar

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The strong U.S Dollar pressured global crude oil prices on Thursday despite the big drop in U.S crude oil inventories.

The Brent crude oil, against which Nigerian oil is priced, dropped by 74 cents or 1 percent to settle at $73.65 a barrel at 4.03 am Nigerian time on Thursday.

The U.S West Texas Intermediate crude oil depreciated by 69 cents or 1 percent to $71.46 a barrel after reaching its highest since October 2018 on Wednesday.

Energy markets became so fixated over a robust summer travel season and Iran nuclear deal talks that they somewhat got blindsided by the Fed’s hawkish surprise,” said Edward Moya, senior market analyst at OANDA.

The Fed was expected to be on hold and punt this meeting, but they sent a clear message they are ready to start talking about tapering and that means the dollar is ripe for a rebound which should be a headwind for all commodities.

The U.S. dollar boasted its strongest single day gain in 15 months after the Federal Reserve signaled it might raise interest rates at a much faster pace than assumed.

A firmer greenback makes oil priced in dollars more expensive in other currencies, potentially weighing on demand.

Still, oil price losses were limited as data from the Energy Information Administration showed that U.S. crude oil stockpiles dropped sharply last week as refineries boosted operations to their highest since January 2020, signaling continued improvement in demand.

Also boosting prices, refinery throughput in China, the world’s second largest oil consumer, rose 4.4% in May from the same month a year ago to a record high.

This pullback in oil prices should be temporary as the fundamentals on both the supply and demand side should easily be able to compensate for a rebounding dollar,” Moya said.

 

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