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FG to Pay First Tranche of $5.1bn Cash Calls Debt to IOCs in April



Emmanuel Ibe Kachikwu
  • FG to Pay First Tranche of $5.1bn Cash Calls Debt to IOCs in April

The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has disclosed that the federal government will next month disburse the first tranche of the $5.1 billion Joint Venture (JV) cash calls debt it owes international oil companies (IOCs) operating in the country.

The government last December had negotiated terms with the IOCs to formally exit the JV cash call obligations it owes Shell, Chevron, Total, ExxonMobil and Nigeria Agip Oil Company (NAOC).

It got a discount of $1.7 billion from the companies and agreed to pay the balance of $5.1 billion over a five-year period.

Kachikwu said on Wednesday during the opening session of the maiden Nigeria Oil and Gas Opportunity Fair (NOGOF) in Uyo, the capital of Akwa Ibom State, that the government was in the final stages of making the first payment by April.

The NOGOF was initiated and organised by the Nigerian Content Development and Monitoring Board (NCDMB) to showcase opportunities for advancing local content application in the country’s oil industry.

Kachikwu equally explained that as part of the government’s four-year economic recovery plan during which the country hopes to grow its crude oil production to 2.5 million barrels per day (mbpd), the government also wants the IOCs and other operators to extend their investment commitments to other aspects of the country’s oil and gas sector.

He said the government would expect the oil majors to go beyond exploration and production activities, to refining in the country.

“Unless you find the funding, everything we say is entertainment, and so we must begin to focus very seriously as a nation on dealing with the financial challenges of the sector, not just for the big players but indeed more importantly the small players.

“So, we have taken the very first steps in the ‘7 Big Wins’ launched by the president to look at how to exit the cash calls.

“We had reached an agreement with the majors in December. We are trying to finalise the first stage of the payment in April,” Kachikwu said in his comments on the challenges facing Nigeria’s oil industry.

Speaking on capacity in the oil and gas sector as well as the opportunities, the minister said: “We have the capacity to grow oil production in this country in excess of three million barrels per day, so when we sit crying about the difficulties, I think we need to focus on the opportunities that are there with the resources that we have been given to find solutions to the problems that we see.”

He added: “We are focused on local refining because after 40 years, our refineries are decrepit, so the time has come to move away from transporting and exporting crude, to being able to refine petroleum in its every facet.
“The supply chain in the world has changed. Being a supplier of crude does not confer on you any advantage.”

He further argued that the business model in the country’s oil industry cannot continue to be all about drilling for oil for transportation and exports, adding: “It must be to drill to refine and export.”

Kachikwu also called on operators in the industry to deepen their areas of specialisation and prevent overcrowding in certain areas which he said muddles up the sector.

“The greatest problem of the Nigerian space is overcrowding. There are tonnes and tonnes of opportunities but we must succeed in creating business models.

“Once we succeed in creating business models, the time for individual selective creativity would emerge. For us to move forward as a country, we have to reduce the time we spend on bureaucracy,” he stated.

He equally explained that his ministry had begun processes to reduce the amount of time lost to bureaucracy, adding that it is absolutely necessary to provide services and not add more bottlenecks to the system.

In his opening remarks, the Executive Secretary of NCDMB, Simbi Wabote, explained that the conference was initiated to showcase the business opportunities available to local content providers in the industry’s upstream, downstream and midstream segments.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.

Crude Oil

Oil Posts 2% Gain for the Week Despite India Virus Surge



Crude Oil - Investors King

Oil prices steadied on Friday and were set for a weekly gain against the backdrop of optimism over a global economic recovery, though the COVID-19 crisis in India capped prices.

Brent crude futures settled 0.28% higher at $68.28 per barrel and U.S. West Texas Intermediate (WTI) crude advanced 0.29% to $64.90 per barrel.

Both Brent and WTI are on track for second consecutive weekly gains as easing restrictions on movement in the United States and Europe, recovering factory operations and coronavirus vaccinations pave the way for a revival in fuel demand.

In China, data showed export growth accelerated unexpectedly in April while a private survey pointed to strong expansion in service sector activity.

However, crude imports by the world’s biggest buyer fell 0.2% in April from a year earlier to 40.36 million tonnes, or 9.82 million barrels per day (bpd), the lowest since December.

In the United States, the world’s largest oil consumer, jobless claims have dropped, signalling the labour market recovery has entered a new phase as the economy recovers.

The recovery in oil demand, however, has been uneven as surging COVID-19 cases in India reduce fuel consumption in the world’s third-largest oil importer and consumer.

“Brent came within a whisker of breaking past $70 a barrel this week but failed at the final hurdle as demand uncertainty dragged on prices,” said Stephen Brennock at oil brokerage PVM.

The resurgence of COVID-19 in countries such as India, Japan and Thailand is hindering gasoline demand recovery, energy consultancy FGE said in a client note, though some of the lost demand has been offset by countries such as China, where recent Labour Day holiday travel surpassed 2019 levels.

“Gasoline demand in the U.S. and parts of Europe is faring relatively well,” FGE said.

“Further out, we could see demand pick up as lockdowns are eased and pent-up demand is released during the summer driving season.”

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Lagos Commodities and Futures Exchange to Commence Gold Trading



gold bars

With the admission of Dukia Gold’s diversified financial instruments backed by gold as the underlying asset, Lagos Commodities and Futures Exchange is set to commence gold trading.

According to Dukia Gold, the instruments will be in form of exchange-traded notes, commercial papers and other gold-backed securities, adding that it will enable the company to deepen the commodities market in Nigeria, increase capacity, generate foreign exchange for the Nigerian government to better diversify foreign reserves and create jobs across the metal production value chain.

Tunde Fagbemi, the Chairman, Dukia Gold, disclosed this while addressing journalists at Pre-Listing Media Interactive Session in Lagos on Thursday.

He said, “We are proud to be the first gold company whose products would be listed on the Lagos Futures and Commodities Exchange. The listing shall enable us facilitate our infrastructure development, expand capacity and create fungible products.

“This has potential to shore up Nigeria’s foreign reserve and create an alternative window for preservation of pension funds. A gold-backed security is a hedge against inflation and convenient preservation of capital.”

“As a global player, we comply with the practices and procedures of London Bullion Market Association and many other international bodies. Our refinery will also have multiplier effects on the development of rural areas anywhere it is located,” he added.

Mr Olusegun Akanji, the Divisional Head, Strategy and Business Solutions, Heritage Bank, said the lender had created a buying centre for verification of quality and quantity of gold and reference price to ensure price discovery in line with the global standard.

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Crude Oil

Oil Nears $70 as Easing Western Lockdowns Boost Summer Demand Outlook



Crude oil

Oil prices rose for a third day on Wednesday as easing of lockdowns in the United States and parts of Europe heralded a boost in fuel demand in summer season and offset concerns about the rise of COVID-19 infections in India and Japan.

Brent crude rose 93 cents, or 1.4%, to $69.81 a barrel at 1008 GMT. U.S. West Texas Intermediate (WTI) crude rose 85 cents, or 1.3%, to $66.54 a barrel.

Both contracts hit the highest level since mid-March in intra-day trade.

“A return to $70 oil is edging closer to becoming reality,” said Stephen Brennock of oil broker PVM.

“The jump in oil prices came amid expectations of strong demand as western economies reopen. Indeed, anticipation of a pick-up in fuel and energy usage in the United States and Europe over the summer months is running high,” he said.

Crude prices were also supported by a large fall in U.S. inventories.

The American Petroleum Institute (API) industry group reported crude stockpiles fell by 7.7 million barrels in the week ended April 30, according to two market sources. That was more than triple the drawdown expected by analysts polled by Reuters. Gasoline stockpiles fell by 5.3 million barrels.

Traders are awaiting data from the U.S. Energy Information Administration due at 10:30 a.m. EDT (1430 GMT) on Wednesday to see if official data shows such a large fall.

“If confirmed by the EIA, that would mark the largest weekly fall in the official data since late January,” Commonwealth Bank analyst Vivek Dhar said in a note.

The rise in oil prices to nearly two-month highs has been supported by COVID-19 vaccine rollouts in the United States and Europe.

Euro zone business activity accelerated last month as the bloc’s dominant services industry shrugged off renewed lockdowns and returned to growth.

“The partial lifting of mobility restrictions, the expectation that tourism will return in the near future, and the lure of the psychologically important $70 mark are all likely to have contributed to the price rise,” Commerzbank analyst Eugen Weinberg said.

This has offset a drop in fuel demand in India, the world’s third-largest oil consumer, which is battling a surge in COVID-19 infections.

“However, if we were to eventually see a national lockdown imposed, this would likely hit sentiment,” ING Economics analysts said of the situation in India.

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