- $2.8bn Pipeline Contract’ll Change Nigeria’s Energy Landscape – Presidency
The Presidency on Sunday said the nation’s energy landscape was set for a major change with the award of a $2,809,522,548.36 gas pipeline contract approved by the Federal Executive Council as proposed by the Ministry of Petroleum Resources.
The Senior Special Assistant to the President on Media and Publicity, Garba Shehu, disclosed this in a statement made available to journalists in Abuja.
Shehu quoted the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, as informing the FEC that the project was for the construction of a 40-inch pipeline across 614 kilometres from Ajaokuta to Abuja, Kaduna and Kano.
“This should mark an important landmark in the implementation of the first phase of the Nigerian Gas Master Plan approved in 2018,” Shehu said.
The presidential spokesman added that the second contract approved under what he called “massive, blockbuster investment” was for the engineering, verification, procurement and construction of a 40-inch 30 kilometres Odidi to Warri gas pipeline expansion project.
This, he explained, was meant to transport additional gas from upstream producers to various demand points at the costs of N7.7bn and $56m.
He added, “The projects, which can rightly be termed as being among the President’s pet projects, is owed, in part, to his vision and momentum back in his days as the Federal Commissioner for Petroleum Resources.
“That time, Colonel Buhari led think tanks to plan the country’s gas future and initiated the contracts for the laying of a massive network of petroleum pipelines, linking the length and breadth of the country, and laid the foundation for the construction of three refineries, Warri, the second Port Harcourt refinery and the one in Kaduna, in a bold move to augment the supply and distribution of petroleum products in the country.
“That was the golden period of the country’s petroleum industry when domestic refining not only met the requirements of home consumption, but also produced excess 150,000 barrels of refined products for export.
“The bold step taken by the President on Wednesday seeks the integration of the eastern and northern parts of Nigeria, which had suffered past neglect, into the gas economy.”
Shehu added, “Gas pipeline infrastructure had been concentrated in the coastal areas and the North and the East had been left largely untouched by the industrial revolution that has come with the gas pipeline network.
“It is, therefore, not surprising that the western part of the country is having more economic activity.”
Shehu said the ruling All Progressives Congress, which campaigned on the issue of inclusive growth, was of the view that the achievement of a balanced and equitable national development could only come with a balanced growth of the states and the regions.
The party manifesto, he added, had identified the development of natural gas transportation infrastructure as a key project in that regard.
He stated, “These contracts for pipelines and LNG terminals to be set up at various points will, therefore, expand opportunities for balanced national development to counter the backwardness and geographical disadvantages of the North and the East.
“In line with the country’s rapid growth in energy demand, the connection of the South and the North should serve as a boost to the nation’s energy security.
“The increased energy transportation networks will be a shot in the arm for the struggling manufacturing industry, which suffers from the acute crisis in the energy sector. It will cater to the needs of cement and fertiliser plants; power plants, transportation systems; and even household consumers, thereby increasing gas share in the country’s energy consumption mix.”
Oil Prices Recover Slightly Amidst Demand Concerns in U.S. and China
Oil Prices Continue Slide as Market Skepticism Grows Over OPEC+ Cuts
Global oil markets witnessed a continued decline on Wednesday as investors assessed the impact of extended OPEC+ cuts against a backdrop of diminishing demand prospects in China.
Brent crude oil, the international benchmark for Nigerian crude oil, declined by 63 cents to $76.57 a barrel while U.S. WTI crude oil lost 58 cents to $71.74 a barrel.
Last week, the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, agreed to maintain voluntary output cuts of approximately 2.2 million barrels per day through the first quarter of 2024.
Despite this effort to tighten supply, market sentiment remains unresponsive.
“The decision to further reduce output from January failed to stimulate the market, and the recent, seemingly coordinated, assurances from Saudi Arabia and Russia to extend the constraints beyond 1Q 2024 or even deepen the cuts if needed have also fallen to deaf ears,” noted PVM analyst Tamas Varga.
Adding to the unease, Saudi Arabia’s decision to cut its official selling price (OSP) for flagship Arab Light to Asia in January for the first time in seven months raises concerns about the struggling demand for oil.
Amid the market turmoil, concerns over China’s economic health cast a shadow, potentially limiting fuel demand in the world’s second-largest oil consumer.
Moody’s recent decision to lower China’s A1 rating outlook from stable to negative further contributes to the apprehension.
Analysts will closely watch China’s preliminary trade data, including crude oil import figures, set to be released on Thursday.
The outcome will provide insights into the trajectory of China’s refinery runs, with expectations leaning towards a decline in November.
Russian President Vladimir Putin’s diplomatic visit to the United Arab Emirates and Saudi Arabia has added an extra layer of complexity to the oil market dynamics.
Discussions centered around the cooperation between Russia, the UAE, and OPEC+ in major oil and gas projects, highlighting the intricate geopolitical factors influencing oil prices.
U.S. Crude Production Hits Another Record, Posing Challenges for OPEC
U.S. crude oil production reached a new record in September, surging by 224,000 barrels per day to 13.24 million barrels per day.
The U.S. Energy Information Administration reported a consecutive monthly increase, adding 342,000 barrels per day over the previous three months, marking an annualized growth rate of 11%.
The surge in domestic production has led to a buildup of crude inventories and a softening of prices, challenging OPEC⁺ efforts to stabilize the market.
Despite a decrease in the number of active drilling rigs over the past year, U.S. production continues to rise.
This growth is attributed to enhanced drilling efficiency, with producers focusing on promising sites and drilling longer horizontal well sections to maximize contact with oil-bearing rock.
While OPEC⁺ production cuts have stabilized prices at relatively high levels, U.S. producers are benefiting from this stability.
The current strategy seems to embrace non-OPEC non-shale (NONS) producers, similar to how North Sea producers did in the 1980s.
Saudi Arabia, along with its OPEC⁺ partners, is resuming its role as a swing producer, balancing the market by adjusting its output.
Despite OPEC’s inability to formally collaborate with U.S. shale producers due to antitrust laws, efforts are made to include other NONS producers like Brazil in the coordination system.
This outreach aligns with the historical pattern of embracing rival producers to maintain control over a significant share of global production.
In contrast, U.S. gas production hit a seasonal record high in September, reaching 3,126 billion cubic feet.
However, unlike crude, there are signs that gas production growth is slowing due to very low prices and the absence of a swing producer.
Gas production increased by only 1.8% in September 2023 compared to the same month the previous year.
While the gas market is in the process of rebalancing, excess inventories may persist, keeping prices low.
The impact of a strengthening El Niño in the central and eastern Pacific Ocean could further influence temperatures and reduce nationwide heating demand, impacting gas prices in the coming months.
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