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Nigeria Loses N3.45bn Daily as Shell Shuts Bonga

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Shell profit drops 44 percent
  • Nigeria Loses N3.45bn Daily as Shell Shuts Bonga

Nigeria’s first deepwater development, the Bonga field, has been shut down, causing oil firms and the nation a huge loss of revenue estimated at N3.45bn daily.

Shell Nigeria Exploration and Production Company Limited announced on Monday that the field was shut down on Saturday to enable it to commence turnaround maintenance on the field.

It said, in a statement signed by the Corporate Media Relations Manager, Precious Okolobo, that executing the statutory activities would ensure continuous optimum operations at the deepwater field, which began producing in November 2005.

Production from the field is expected to resume at the conclusion of the exercise next month, according to SNEPCo.

The Managing Director, SNEPCo, Mr. Bayo Ojulari, was quoted as saying, “The exercise will help ensure sustained production and reduced unscheduled production deferments. This is the fourth turnaround maintenance since Bonga began production.”

A major focus is the Bonga Floating, Production, Storage and Offloading vessel, which is at the heart of the Bonga operations. The Bonga FPSO has the capacity to produce 225,000 barrels of oil and 150 million standard cubic feet of gas per day.

Reuters reported that market sources had expected work on the field because there were no exports planned in March, compared with typical exports of roughly 200,000 barrels per day.

Using an oil price of $54.4 per barrel, as seen on the Central Bank of Nigeria’s website, the 200,000 bpd would amount to $10.8m or N3.32bn (at the official exchange rate of N305.25 per dollar).

With the price of natural gas put at $2.83 per 1,000 scf as of March 3, 2017, the 150 million scf capacity translates to a loss of $424,500 or N129.58m.

The shutdown of Bonga field is coming a year after Shell declared force majeure on Forcados export after the terminal was shut. It has yet to be lifted as of the time of filing this report.

The force majeure, a legal clause that allows it to stop shipments without breaching contracts, came a week after the Forcados export line was attacked by militants in the Niger Delta.

According to the Nigerian National Petroleum Corporation, at the Forcados terminal alone, about 300,000 bpd were shut-in since February 2016 following the force majeure declared by Shell Petroleum Development Company.

“For the Bonga team, this is another opportunity to excel, having won the ‘Asset of the Year’ Award 2016 in the Shell Group, followed by runners-up in Norway and Malaysia. We are pleased that the award recognised the continuing collaboration towards optimum production with a focus on safety, cost and Nigerian content development, which will be invaluable in the maintenance work,” Ojulari said.

Bonga is in depths of more than 1,000 metres and is located 120 kilometres offshore Nigeria, according to the statement.

SNEPCo said it expanded the project with further drilling of wells in Bonga phases 2 and 3 and through a subsea tie-back that unlocked the nearby Bonga North West field in August 2014. Bonga Phase 3 achieved first oil in October 2015.

SNEPCo operates Bonga in partnership with Esso Exploration and Production Nigeria (Deep Water) Limited; Total E&P Nigeria Limited; and Nigerian Agip Exploration Limited under a Production Sharing Contract with the NNPC.

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.

Economy

Oil Firms Borrowed N130B From Banks in February – CBN

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Operators in the downstream, natural gas and crude oil refining sectors of the Nigerian oil and gas industry borrowed N130b from Nigerian banks in February amid the significant rise in global crude oil prices.

The debt owed by the oil and gas companies rose to N4.05tn in February from N3.92bn in January, according to the latest data obtained from the Central Bank of Nigeria on Monday.

Operators in the upstream and services subsectors owed banks N1.26tn in February, down from N1.27tn a month earlier.

The combined debt of N5.31tn owed by oil and gas operators as of February 2021 represents 25.29 percent of the N21tn loans advanced to the private sector by the banks, according to the sectoral analysis by the CBN of deposit money banks’ credit.

Oil and gas firms received the biggest share of the credit from the deposit money banks to the private sector.

The slump in oil prices in 2020 as a result of the coronavirus pandemic hit many oil and gas companies hard, forcing them to slash their capital budgets and suspend some projects.

A global credit rating agency, Moody’s Investors Service, said last month that the outlook for Nigeria’s banking system remains negative, reflecting expectations of rising asset risk and weakening government support capacity over the next 12 to 18 months.

“Nigerian banks’ loan quality will weaken in 2021 as coronavirus support measures implemented by the government and central bank last year, including the loan repayment holiday, are unwound,” said Peter Mushangwe, an analyst at Moody’s.

The rating agency estimated that between 40 percent and 45 percent of banking loans were restructured in 2020, easing pressure on borrowers following the outbreak of the pandemic.

Another global credit rating agency, Fitch Ratings, had noted in a December 8 report that Nigerian bank asset quality had historically fallen with oil prices, with the oil sector representing 28 percent of loans at the end of the first half of 2020.

It said the upstream and midstream segments (nearly seven percent of gross loans) had been particularly affected by low oil prices and production cuts.

“However, the sector has performed better than expected since the start of the crisis, limiting the rise in credit losses this year due to a combination of debt relief afforded to customers, a stabilisation in oil prices, the hedging of financial exposures and the widespread restructuring of loans to the sector following the 2015 crisis,” it said.

The rating agency predicted that Nigerian bank asset quality would weaken over the next 12 to 18 months.

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Fall in Economic Activities in Nigeria Created N485.51 Billion Fiscal Deficit in January -CBN

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Dollar thrive in Nigeria

The drop in economic activities in Africa’s largest economy Nigeria led to a N485.51 billion fiscal deficit in January, according to the latest data from the Central Bank of Nigeria (CBN).

In the monthly economic report released on Friday by the apex bank, the weak revenue performance in January 2021 was due to the decline in non-oil receipts following the lingering negative effects of COVID-19 pandemic on business activities and the resultant shortfall in tax revenues.

In part, the report read, “Federally collected revenue in January 2021 was N807.54bn.

“This was 4.6 per cent below the provisional budget benchmark and 12.8 per cent lower than the collection in the corresponding period of 2020.

“Oil and non-oil revenue constituted 45.4 per cent and 54.6 per cent of the total collection respectively. The modest rebound in crude oil prices in the preceding three months enhanced the contribution of oil revenue to total revenue, relative to the budget benchmark.

“Non-oil revenue sources underperformed, owing to the shortfalls in collections from VAT, corporate tax, and FGN independent revenue sources.

“Retained revenue of the Federal Government of Nigeria was lower-than-trend due to the lingering effects of the COVID-19 pandemic.”

“At N285.26bn, FGN’s retained revenue fell short of its programmed benchmark and collections in January 2020, by 41.3 per cent and 7.5 per cent respectively.

“In contrast, the provisional aggregate expenditure of the FGN rose from N717.6bn in December 2020 to N770.77bn in the reporting period, but remained 14.4 per cent below the monthly target of N900.88bn.

“Fiscal operations of the FGN in January 2021 resulted in a tentative overall deficit of N485.51bn.”

The report noted that Nigeria’s total public debt stood at N28.03 trillion as of the end-September 2020, with domestic and external debts accounting for 56.5 percent and 43.5 percent, respectively.

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Economy

NNPC Supplies 1.44 Billion Litres of Petrol in January 2021

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Petrol Importation - investorsking.com

The Nigerian National Petroleum Corporation (NNPC) supplied a total of 1.44 billion litres of Premium Motor Spirit popularly known as petrol in January 2021.

The corporation disclosed in its latest Monthly Financial and Operations Report (MFOR) for the month of January.

NNPC said the 1.44 billion litres translate to 46.30 million litres per day.

Also, a total of 223.55Billion Cubic Feet (BCF) of natural gas was produced in the month of January 2021, translating to an average daily production of 7,220.22 Million Standard Cubic Feet per Day (mmscfd).

The 223.55BCF gas production figure also represents a 4.79% increase over output in December 2020.

Also, the daily average natural gas supply to gas power plants increased by 2.38 percent to 836mmscfd, equivalent to power generation of 3,415MW.

For the period of January 2020 to January 2021, a total of 2,973.01BCF of gas was produced representing an average daily production of 7,585.78 mmscfd during the period.

Period-to-date Production from Joint Ventures (JVs), Production Sharing Contracts (PSCs) and Nigerian Petroleum Development Company (NPDC) contributed about 65.20%, 19.97 percent and 14.83 percent respectively to the total national gas production.

Out of the total gas output in January 2021, a total of 149.24BCF of gas was commercialized consisting of 44.29BCF and 104.95BCF for the domestic and export markets respectively.

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