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Oil Exemption: Nigeria, Libya Know Fate Soon

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  • Oil Exemption: Nigeria, Libya Know Fate Soon

Will Nigeria and Libya continue to enjoy their exemption from the oil production cut deal? Or, will the two members of the Organisation of Petroleum Exporting Countries (OPEC) be asked to seal their production quotas? They are to know their fate soon.

Both countries were on November 30, last year, exempted from the oil production cut deal with non-OPEC countries. The implementation of the decision began on January 1, this year. Nigeria and Libya have been invited to participate in the producer group’s latest ministerial committee meeting scheduled for September 22.

The two countries have been invited to the meeting billed for Vienna, Austria for a review of the latest developments in their oil sectors, Kuwait’s OPEC Governor Haitham al-Ghais told Al-Rai newspaper.

Going by the account of the Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu, Nigeria’s oil production, including crude oil and condensates, is between 2.2 million and 2.3 million barrels per day (bpd). Ccondensates, according to him, accounts for about 300,000bpd to 400,000 bpd.

The latest S&P Global Platts OPEC survey in Bloomberg report said the Libyan output recovered to reach an average of 990,000 bpd in July, its highest level in three years up from 180,000 b/d in June.

This was before the closure of three fields, including the 300,000 bpd Sharara, 90,000bpd El-Fil and 10,000 bpd Hamada fields, shutting-in around 360,000 bpd of output since the middle of last month.

OPEC is expected to consult with Nigeria and Libya to identify their plans, Ghais said. The group will hold a technical committee meeting on September 20, looking at the continued effects of the United States (U.S.) shale oil on the global market and the impact of Hurricane Harvey.

Ghais said: “The amount of production affected by the hurricane is estimated at 700,000bpd, which may strengthen the status of the market.”

He added that U.S. production had increased by 500,000bpd so far this year, compared to last year’s.

The September 20 meeting will be followed by another meeting on September 22, where a committee overseeing the deal, composed of oil ministers from Kuwait, Russia, Venezuela, Algeria, Oman and Saudi Arabia.

According to Platts, Saudi Arabia and Russia are seeking to extend the deal for a further three months to June, to demonstrate their commitment to market management and dampen fears that the producers will return to a market-share battle as soon as the deal expires.

But there indications that Libya and Nigeria may be asked to cap their crude oil productions at the meeting.

The two African nations were invited to the committee meeting in St. Petersburg, Russia, on July 24, to discuss the stability of their production. Kuwait Oil Minister, Issam Almarzooq, hinted that the decision would be in an effort to help rebalance the oil market.

Almarzooq, the Chairman of the Committee monitoring the compliance of OPEC and non-OPEC suppliers with output cuts, confirmed this in an interview with a news agency in Istanbul, Turkey.

“We invited them to discuss the situation of their production. If they are able to stabilise their production at current levels, we will ask them to cap as soon as possible. We don’t need to wait until the November meeting to do that”, Almarzooq said, in reference OPEC’s upcoming meeting scheduled for November 30.

Nigeria and Libya were exempted from the cuts due to disruptions of oil production by militants in the Niger Delta. The agitations of the restive militants and the internal crisis in Libya, led to serious drop in oil output in both countries.

However, productions have improved following negotiations with leaders from the region. The Pan Niger Delta Development Foundation (PANDEF) has been negotiating with the Federal Government as part of efforts to restore peace to the oil producing region.

In Libya, the oil output has climbed to more than one million barrels a day for the first time in four years, while Nigeria’s production rose by 50,000 barrels a day in June, according to the Bloomberg survey.

Abdulsamad Al-Awadhi, a London-based analyst and Kuwait’s former representative to OPEC, said capping Libya and Nigeria might help but would not cut the supply by much.

Al-Awadhi: “OPEC needs to have better compliance, and it must respect the right of Libya and Nigeria to go back to the market.

“Other countries that raised output while Libya and Nigeria are out should do more and give space to these two countries to go back to the market.”

The decision to grant Libya and Nigeria exemptions to production cuts was a collective decision, and any proposal to include them in OPEC’s plans will also require a joint decision, Secretary-General Mohammed Barkindo told reporters at an event in Istanbul.

OPEC oil output rose in June by 280,000bpd to a 2017 high, a Reuters survey showed, which was due to further recovery in supply from the two member countries’ exclusion from a production cut deal.

High compliance by Gulf producers, Saudi Arabia and Kuwait, helped keep OPEC’s adherence with its supply curbs at a historically high 92 per cent in June, compared to 95 per cent in May, the survey discovered.

But extra oil from Nigeria and Libya, exempted from the cut because conflict curbed their output, means supply by the 13 OPEC members originally part of the deal has risen far above their implied production target.

The recovery adds to the challenge the OPEC-led effort to support the market is facing from a persistent inventory glut. If the recovery lasts, calls could grow within OPEC for the exempt countries to be brought into the production deal.

“The rise in OPEC production will further delay the point at which balance is restored on the oil market,” said Carsten Fritsch, an analyst at Commerzbank in Frankfurt.

OPEC and non-OPEC members agreed to cut oil production at its meeting in Vienna, Austria on November 30 last year. This was fallout of an agreement by OPEC members at a meeting in Algiers, Algeria on September 28 to limit supply with special conditions given to Libya, Nigeria and Iran, whose output has been hit by wars and sanctions. The agreement was tagged ‘Algiers Accord.’ The production cut agreement, which began January 1, calls on OPEC’s 14 members along with 10 non-OPEC countries, led by Russia, to cut a combined 1.8 million bpd in output through March.

With the production cut, oil prices spiked above $50 per barrel but within the past few months, prices had slipped below $50 per barrel due to market oversupply and increased output from U.S.’ shale.

OPEC oil output in July rose by 90,000 bpd to a 2017 high, a Reuters’ survey showed. The rise was due to a further recovery in supply from Libya. A dip in supply from Saudi Arabia and lower Angolan exports, however, helped to boost OPEC’s adherence to its supply curbs to 84 per cent. While this is up from a revised 77 per cent in June, compliance in both months has fallen from levels above 90 percent earlier in the year.

According to the Head, Energy Research Desk of Ecobank Group, Mr. Dolapo Oni, the production cut deal has advantage and disadvantage.

He said that as the production cut boosts price, such increase in price also puts shale production in an advantage production. As the price of crude oil rises, it makes the production of shale profitable and competitive.

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

Electricity Consumers Get 611,231 Meters Under MAP Scheme

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Electricity Consumers Get 611,231 Meters Under MAP Scheme

A total of 611,231 meters have been deployed as at January 31, 2021 under the Meter Asset Provider initiative since its full operation despite the COVID-19 pandemic and other extraneous factors, the Nigerian Electricity Regulatory Commission has said.

NERC disclosed this in a consultation paper on the review of the MAP Regulations.

The proposed review of the MAP scheme is coming nearly four months after the Federal Government launched a new initiative called National Mass Metering Programme aimed at distributing six million meters to consumers free of charge.

“The existence of a huge metering gap and the need to ensure successful implementation of the MYTO 2020 Service-Based Tariff resulted in the approval of the NMMP, a policy of the Federal Government anchored on the provision of long-term low interest financing to the Discos,” NERC said.

The commission had in March 2018 approved the MAP Regulations with the aim of fast-tracking the closure of the metering gap in the sector through the engagement of third-party investors (called meter asset providers) for the financing, procurement, supply, installation and maintenance of meters.

It set a target of providing meters to all customers within three years, and directed the Discos and the approved MAPs to commence the rollout of meters not later than May 1, 2019.

But in February 2020, NERC said several constraints, including changes in fiscal policy and the limited availability of long-term funding, had led to limited success in meter rollout.

NERC, in the consultation paper, highlighted three proposed options for metering implementation going forward.

The first option is to allow the implementation of both the NMMP and MAP metering frameworks to run concurrently; the second is to continue with the current MAP framework with meters procured under the NMMP supplied only through MAPs (by being off-takers from the local manufacturers/assemblers).

The third option is to wind down the MAP framework and allow the Discos to procure meters directly from local manufacturers/assemblers (or as procured by the World Bank), and enter into new contracts for the installation and maintenance of such meters.

“Customers who choose not to wait to receive meters based on the deployment schedule of the NMMP shall continue to have the option of making upfront payments for meters which will be installed within a maximum period of 10 working days,” NERC said.

The regulator said such customers would be refunded by the Discos through energy credits, adding that there would be no option for meter acquisition through the payment of a monthly meter service charge.

“Where meters have already been deployed under the meter service charge option, Discos shall make one-off repayment to affected customers and associated MAPs. Such meters shall be recognised in the rate base of the Discos,” it added.

NERC urged stakeholders to provide comments, objections, and representations on the proposed amendments within 21 days of the publication of the consultation paper.

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Economy

Nigeria’s Economy Moving in Right Direction but Slow – Amina Mohammed

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Nigeria’s Economy Moving in Right Direction but Slow – Amina Mohammed

Nigeria is moving in the right direction economically but its movement is not fast, the United Nations stated on Thursday.

Deputy Secretary-General of the United Nations, Amina Mohammed, said this during a meeting at the headquarters of the Federal Ministry of Industry, Trade and Investment in Abuja.

She said the challenges in Nigeria were huge, its population large but described the country’s economy as great with lots of opportunities.

The UN scribe stated that after traveling by train and through various roads in the Northern parts of Nigeria, she discovered that the roads were motorable, although there were ongoing repairs on some of them.

Mohammed said, “This is a country that is diverse in nature, ethnicity, religious backgrounds and opportunities. But these are its strengths, not weaknesses.

“And I think the narrative for Nigeria has to change to one that is very much the reality.”

Speaking on her trips across parts of Nigeria, she said, “What I saw along the way is really a country that is growing, that is moving in the right direction economically. Is it fast enough? No. Is it in the right direction? Yes it is.

“And the challenges still remain with security, our social cohesion and social contract between government and the people. But I know that people are working on these issues.”

She said the UN recognised the reforms in Nigeria and other nations, adding that the common global agenda was the Sustainable Development Goals.

Mohammad commended Nigeria’s quick response to the COVID-19 pandemic, as she expressed hope that the arrival of vaccines would be the beginning of the end of COVID-19.

On his part, the Minister of Industry, Trade and Investment, Adeniyi Adebayo, told his guest that the Federal Government was working hard to make Nigeria the entrepreneurial hub of Africa.

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N10.7tn Spent on Fuel Subsidy in 10 Years – MOMAN

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N10.7tn Spent on Fuel Subsidy in 10 Years – MOMAN

Nigeria spent a total of N10.7tn on fuel subsidy in the last 10 years, the Chairman, Major Oil Marketers Association of Nigeria, Mr Adetunji Oyebanji, has said.

Oyebanji, who was the guest speaker at the 18th Aret Adams Lecture on Thursday, said N750bn was spent on subsidy in 2019.

He highlighted the need for a transition to a market-driven environment through policy-backed legislative and commercial frameworks, enabling the sustainability of the downstream petroleum sector.

“Total deregulation is more than just the removal of price subsidies; it is aimed at improving business operations, increasing the investments in the oil and gas sector value chain, resulting in the growth in the nation’s downstream petroleum sector as a whole,” he said.

The managing director of 11 Plc (formerly Mobil Oil Nigeria Plc) said steps had been taken, “but larger and faster leaps are now required.”

According to him, deregulation requires the creation of a competitive market environment, and will guarantee the supply of products at commercial and market prices.

“It requires unrestricted and profitable investments in infrastructure, earning reasonable returns to investors. It requires a strong regulator to enable transparency and fair competition among players, and not to regulate prices,” Oyebanji said.

He noted that MOMAN had recently called for a national debate by stakeholders to share pragmatic and realistic initiatives to ease the impact of the subsidy removal on society – especially on the most vulnerable.

He said, “A shift from crude oil production to crude oil full value realisation through deliberate investment in domestic refining and refined products distribution, creates the opportunity to transform the dynamics of the downstream sector from one of ‘net importer’ to one of ‘net exporter’, spurring the growth of the Nigerian economy.

“Effective reforms and regulations are key drivers for the growth within the refining sector. Non-functional refineries cost Nigeria over $13bn in 2019. If the NNPC refineries were operating at optimal capacity, Nigeria would have imported only 40 per cent of what it consumed in 2019.”

Full deregulation of the downstream sector remains the most glaring boost to potential investors in this space, according to Oyebanji.

He said, “As crude oil prices will fluctuate depending on the prevailing exchange rates, it will be astute to trade in naira to avoid inevitable price swings.

“There needs to be a balance between ensuring the sustainable growth of the crude oil value chain (upstream through downstream) and providing value for the Nigerian consumer and the Nigerian economy.”

He said the philosophy should be for the government to put the legislative and commercial framework in place and let the market develop by itself.

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