Connect with us

Economy

OPEC Cut, Militancy Pose Danger to Oil Output

Published

on

Oil
  • OPEC Cut, Resumed Militancy Pose Danger to Nigeria’s Oil Output

Nigeria faces two serious developments likely to impact its oil production in the coming months, writes Chineme Okafor.

In the course of the week, two crucial developments with the propensity to affect Nigeria’s crude oil production and, thus, its execution of the 2017 budget marks, took place. They are the acceptance of the country’s proposal to cap its oil production to 1.8 million barrels a day and a reported resumption of oil militancy in the oil-rich Niger Delta. Both developments, which are made worse by the unstable prices of crude oil in the international market, could delay Nigeria’s reported gradual exit from economic recession that it officially slumped into last year.

OPEC Cap

The Organisation of Petroleum Exporting Countries and non-OPEC producers, led by the Russian Federation, approved the decision of the Nigerian government to cap its oil production at a sustainable volume of 1.8 mbd, having pressed Nigeria and Libya, which got an initial exemption from a production cut agreement to stabilise prices, to consider coming into the agreement.

At the Joint OPEC and Non-OPEC Ministerial Monitoring Committee meeting on Monday in St. Petersburg, Russia, OPEC and its ally reviewed the June 2017 report on its freeze agreement. JMMC also listened to the presentations made by the representatives of Libya and Nigeria on their production recovery plans, prospects and challenges.

The oil producers groups, which agreed to cut oil output by a combined 1.8mbd starting from January 2017 until the end of March 2018, then accepted Nigeria’s proposal to cap its output on 1.8mbd. This was amid difficulties with Nigeria’s recovery of its production from destructions caused by internal strife in the Niger Delta.

In a communiqué issued at the end of the St. Petersburg meeting, the JMMC said it welcomed Nigeria’s flexibility in this regard, “which despite its commitment to recover its pre-crisis production level, voluntarily agreed to implement similar OPEC production adjustments as soon as its recovery reaches a sustainable production volume of 1.8 million barrels per day.” It, however, did not back capping of Libya’s output because, according to it, the country’s production was unlikely to exceed 1mbd in the near future. Libya’s production capacity is between 1.4mbd and 1.6mbd, which it did before the unrest in the country broke out in 2011, leading to its balkanisation.

Compliance Review

At the meeting, the groups reviewed the June 2017 report as well as how they had fared in the first six months of the “Declaration of Cooperation”, as submitted by the Joint OPEC and Non-OPEC Technical Committee. From the JTC report, including the presentations made by Libya and Nigeria on their production recovery plans, prospects, and challenges, they acknowledged the upside limitations of both countries beyond their current production levels. JMMC said concerning the two countries, “Once their production levels stabilise, participating producing countries should further cooperate in a manner that contributes to the stabilisation of the market.”

They equally noted that the JMMC will continue to monitor and recommend further actions, including the holding of an extraordinary conference of the 24 producing countries, if needed, to keep up its efforts at stabilising the oil market. The committee said the oil market was making steady and significant progress towards rebalancing, in line with the report of the JTC for June 2017, which reviewed market developments and the results of the first six months of progress made after OPEC’s 171st Ministerial Conference Decision and the respective voluntary adjustments in keeping with the Declaration of Cooperation.

Furthermore, the meeting stated that the continued strengthening of the global recovery was underway, with stability in the oil market remaining a key determinant. It emphasised that market volatility had been lower in recent weeks and investment flows had visibly started to improve in the industry.

According to the JTC report, the several positive indicators going forward include expected significant increase in oil demand in the second half of 2017 compared to first half of 2017, with the growth reaching a level of 2mbd, which should sustain the inventory draws.

The report equally noted that participating OPEC and non-OPEC producing countries achieved a conformity level of 98 per cent in June 2017, adding that the same high level of conformity was observed for the first six months of January to June 2017.

Between January and June 2017, it explained that participating producing countries adjusted their production downwards by an estimated volume of 351 million barrels. This, the JMMC said, it would sustain by continuing to engage with all participating countries individually, and in particular, those that were yet to achieve 100 per cent conformity for the remaining period of the Declaration of Cooperation.

Reappearance of Militancy in Nigeria

In his remarks at the opening of the JMMC, OPEC Secretary General, Mohammed Barkindo, who was once head of Nigeria’s national oil corporation, Nigerian National Petroleum Corporation, assured other producers that Nigeria had no intention of going beyond its oil production target of 1.8mbd until the end of March 2018. Barkindo explained that Libya had an output target of 1.25mbd by December, but that remained a target given the challenges the country faced.

But just as Nigeria’s output cap proposal was approved at the St. Petersburg meeting, the country reported a fresh break on one of its crude lines – the 180,000 barrels a day Trans-Niger Pipeline. The attack upset its recovery from low production levels.

Already, the country had benchmarked in its 2017 budget a daily production of 2.2mbd, but the attack on the TNP located in the western Niger Delta in the early hours of Monday resulted in the shut in of 150,000bpd.

Confirming the breach on the TNP, Group Managing Director of NNPC, Dr. Maikanti Baru, told journalists on the side-lines of the extraordinary session of the council of ministers of the African Petroleum Producers Organisation in Abuja that culprits of the attack were yet to be identified. Baru said the fresh militant attack on the TNP, which crisscrossed the Ogala, Alakiri, Cawthorne Channel and Bonny areas of the western Niger Delta, transporting about 180,000bpd to the Bonny export terminal in Rivers State, would lead to a loss of 150,000bpd of oil from the pipeline. Data from Shell Petroleum Development Company indicate that the TNP is operated by SPDC under a joint venture with NNPC, Nigerian Agip Oil Company, and Total E&P, and is part of the gas liquids evacuation infrastructure system critical to the Afam VI power plant and liquefied gas exports.

Baru said, when asked about the country’s oil production mark, “Unfortunately, we have not been able to sustain it (oil production) because we got challenges. As I am talking to you this morning, the Trans-Niger pipeline has been breached in Ogoniland and that is 150,000 barrels of oil that have been knocked off. That has been an issue with that area.”

He added that NNPC and its partners would continue to dialogue with the communities and expressed hope that production would be restored.

Effect of the Production Cap on Nigeria

Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, however, stated that the country’s budget would not be seriously affected by the recent developments. Kachikwu said in Abuja that the production cap was not yet effective, and would not be until the country was comfortably placed to report to the groups a consistent production pattern in line with the cap. He explained that out of the 2.2mbpd production volume in the budget, about 450,000 barrels were purely condensate, leaving the balance as crude oil alone, thus indicating that the country was still in line.

According to the minister, “First of all the 1.8mbd has not gone into effect., I am meant to report back to them within the nine months timeframe we were given exemption to confirm that we have stabilised production and stabilisation of production does not mean that we produce 1.8mb in one day then there is stabilisation.

“There is going to be a month-to-month analysis where we will get comfort that all things that prevented us from stabilising our production have ebbed and we can consistently produce above 1.8mbd.

“Again, 1.8mbd refers to crude, it does not refer to our production, our production is about 2.2mb, we have not been asked to attack that, but 450,000 barrels of that is condensate, which are a separate number. We did a very careful work before this whole process began to ensure that OPEC recognise like other countries have done, that condensate weren’t part of the crude analysis and we’ve done that and taken it out.

“Really, in terms of its effects in the 2017 budget, there is really no effect because we are going to continue to use the 2.2mbd number. Barring all the other incidentals in terms of pipeline ruptures, or stoppage of work for one reason or the other, we are going to continue to run to those numbers. The 1.8mbd, like I said, is purely crude.”

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.

Continue Reading
Comments

Economy

ECOWAS@46: Commission Seeks Trade Partnership With OPS To Deepen Intra-African Trade

Published

on

ecowas

The Economic Community of West African States (ECOWAS) in commemoration of its 46th anniversary has sought partnership with the Organised Private Sector (OPS) to deepen intra-African trade and lift millions out of poverty.

This was revealed yesterday by the president of the ECOWAS Commission, Mr. Jean-Claude Brou, at a webinar organised in collaboration with the Lagos Chamber of Commerce and Industry (LCCI) yesterday.

The theme of the webinar is “Optimising Sustainable Trade, Investment and Regional Economic Integration through Effective Partnership between ECOWAS Institutions and the Organised Private Sector”.

Jean-Claude, represented by Mr. Kolawole Sopola, Acting Director, Trade, ECOWAS, said the commission, in recognition of the private sector’s role, created a stronger framework to boost the sector’s capacity for enhanced trade.

He said that the commission had also adopted more than 100 regional standards with 70 others under development on some products.

Brou listed mango, cassava, textile and garments as well as information and communication technology among such products.

“The growing importance of informal trade compels the ECOWAS to create a framework expected to engender more availability and reliability of up to date information on informal trade.

“The framework also seeks to implement reform that is essential to eliminate obstacles to informal trade among others.

“It is important to improve investment, particularly, private investment, in all sectors and I stress that digitalization must be at the center of activities for economic recovery.

“Infrastructural deficit must be addressed as well as sustainable and cheaper energy for the competitiveness of products.”

“The commission is developing projects on roads, renewable energy and education, needed for private sector development; all these to lift millions in the sub-region out of poverty,” he said.

Dr. George Donkor, President of, ECOWAS Bank for Investment and Development (EBID) said that many western states showed numerous hurdles to overcome as countries continue to export raw materials, therefore maintaining low levels of development.

Donkor, however, said that reforms were already underway to accelerate the capacities of the Micro, Small and Medium Enterprises (MSME) to spur private sector development for intra-African trade.

He noted that the EBID 2025 strategy was aimed at ensuring that the private sector benefitted up to 65 percent of the $1.6 billion available facilities.

“A vibrant private sector is key in driving regional integration and securing its active participation and has the potential to create a win-win situation for all participants.

“Increasing credit to the private sector will enhance capacity and the EBID is ready with strategies to ensure that the sector’s capacity is boosted,” he said.

Also, Otunba Niyi Adebayo, Minister of Industry, Trade and Investment, said that collaboration across societal sectors had emerged as one of the defining concepts of international development in the 21st century.

He stressed the need for ECOWAS member states to work together as a bloc to take advantage of the opportunities in the African Continental Free Trade Area.

“Since the establishment of ECOWAS in 1975, various protocols and supplementary protocols regulating member countries conduct have been signed.

“Our world has limited resources — whether financial, natural, or human — and as a society we must optimize their use.

“The fundamental of a good partnership is the ability to bring together diverse resources in ways that we can together achieve more impact, greater sustainability and increased value for all.

“This is so because it emphasises the need to work together as a bloc to leverage and take advantage of the opportunities offered by the African Continental Free Trade Area.

“My Ministry will do everything possible to ensure that the vision of the commission is taken to the next level,” he said.

Continue Reading

Economy

IMF Retains 2.5 Percent Economic Growth Estimate For Nigeria

Published

on

IMF

The International Monetary Fund (IMF) has retained Nigeria’s 2.5 percent economic growth forecast for 2021.

The institution said this in its World Economic Outlook (WEO) for July titled “Fault Lines Widen in the Global Recovery” released on Tuesday in Washington DC.

According to it, the slow rollout of vaccines is the main factor weighing on the recovery for Low-Income Developing Countries (LIDCs) which Nigeria is part of.

It also retained its 6.0 percent growth forecast for the global economy for 2021 and 4.9 percent in 2022, adding that though the global forecast was unchanged from the April 2021 WEO, there were offsetting revisions.

The IMF had at its 2021 Virtual Spring Meetings in April, projected a 2.5 percent growth for Nigeria’s economy in 2021, up from 1.5 percent it projected in January.

It said that in LIDCs, the overall fiscal deficit in 2021 was revised up by 0.3 percentage points from the April 2021 WEO, mainly because of the re-emergence of fuel subsidies as well as the additional COVID-19 and security related support in Nigeria.

“Still, at 5.2 percent of Gross Domestic Product (GDP), the overall fiscal deficit remains well below that of advanced and emerging market economies, reflecting financing constraints, about 60 percent of LIDCs are assessed to be at high risk of or in debt distress.

“The public debt-to-GDP ratio for 2021 is projected at 48.5 percent.

“Several LIDCs have announced an intention to restructure their debts and some have sought debt relief under the G20 Common Framework (Chad, Ethiopia, and Zambia),” it said.

On the global scene, the IMF said that uncertainty surrounding the global baseline remain high, primarily related to the prospects of emerging market and developing economies.

It added that although growth could turn out to be stronger than projected, downside risks dominated in the near term.

“On the upside, better global cooperation on vaccines could help prevent renewed waves of infection and the emergence of new variants, end the health crisis sooner than assumed, and allow for faster normalisation of activity, particularly among emerging market and developing economies.

“Moreover, a sooner-than-anticipated end to the health crisis could lead to a faster-than-expected release of excess savings by households, higher confidence and more front-loaded investment spending by firms.”

On the downside, it said growth would be weaker than projected if logistical hurdles in procuring and distributing vaccines in emerging markets and developing economies led to an even slower pace of vaccination than assumed.

The report added that such delays would allow new variants to spread, with possibly higher risks of breakthrough infections among vaccinated populations.

“Emerging market and developing economies, in particular, could face a double hit from tighter external financial conditions and the worsening health crisis, further widening the fault lines in the global recovery.

“Weaker growth would, in turn, further adversely affect debt dynamics and compound fiscal risks.

“Finally, social unrest, geopolitical tensions, cyber-attacks on critical infrastructure, or weather-related natural disasters, which have increased in frequency and intensity due to climate change could further weigh on the recovery.”

On ensuring a fast-paced recovery, the IMF said the highest priority was to ensure rapid, worldwide access to vaccines and substantially hasten the timeline of rollout relative to the assumed baseline pace.

According to it, the global community needs to vastly step up efforts to vaccinate adequate numbers of people and ensure global herd immunity.

This, it said, would save lives, prevent new variants from emerging and add trillions to the global economic recovery.

Continue Reading

Economy

FG to Put an End to N360 Billion Annual Electricity Subsidy Payments in 2022 – Osinbajo

Published

on

Electricity - Investors King

Vice President Yemi Osinbajo on Monday said the Federal Government will end an estimated N360 billion annual subsidy payments in the electricity sector in 2022. This represents a monthly subsidy payment of N30 billion.

Osinbajo disclosed this while speaking at the 14th Nigerian Association for Energy Economics/IAEE conference in Abuja on Monday.

At the conference titled “Strategic responses of energy sector to COVID-19 impacts on African economies“, the vice president, who was represented by Engr. Ahmad Zakari, the Special Assistant to the President on Infrastructure, said the federal government would be investing over $3 billion in the sector to strengthen distribution and transmission infrastructure across the nation.

He stated that the numerous efforts of President Muhammadu Buhari at ensuring the power sector plays a critical role in the growth of the nation’s social and economic well-being will materialise fully once the ongoing reform in the energy sector is complete.

He said: “Electricity tariff reforms with service-based tariff has led to collections from the electricity sector by 63 per cent, increasing revenue assurance for gas producers and stabilizing the value chain.

“It is anticipated that all electricity market revenues will be obtained from the market with limited subsidy from next year as reforms in metering and efficiency with the DISCOs continue to improve.

“Accelerated investment in transmission and distribution, over $3 billion will be out into this sub-segment of the electricity value chain that will put us on the path to delivering 10 gigawatts through the interventions of the Central Bank of Nigeria, Siemens partnership, World Bank and Africa Development Bank, and others.”

He said as the electricity sector continued to be stabilized, more power was needed for the country’s large population.

“That is why this administration continues to invest in generation to cater for our current and future needs,” he said.

Osinbajo charged the participants to come up with solutions to key energy challenges facing the country, especially with the COVID-19 pandemic and energy transition.

Continue Reading




Advertisement
Advertisement
Advertisement

Trending