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Debts: Nestoil to Sell Some Shares in Neconde’s OML 42 Asset

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  • Debts: Nestoil to Sell Some Shares in Neconde’s OML 42 Asset

The management of Nestoil, the oil service arm of the Obijackson Group, owned by Nigerian business mogul Dr. Ernest Azudialu, is to offload part of its shares in oil mining lease (OML) 42 in the Western Niger Delta, which is operated by Neconde Energy Limited, to pay its debts to banks.

According to Oil+Gas Report, Nestoil holds 80 per cent of Neconde and is the prime mover of its special purpose vehicle (SPV) creation, which took over Shell/Total/ENI’s 45 per cent stake in the acreage in 2012. The remaining 55 per cent is held by the Nigerian National Petroleum Corporation (NNPC) and managed by its exploration and production arm, Nigerian Petroleum Development Company (NPDC).

Explaining the reason for the planned sale of equity by Nestoil, the report noted that creating value from the asset has been an epic struggle. While Neconde paid $585 miliion to buy the 45 per cent, it has found it difficult to reach and maintain optimum output and price to pay back the debts and also fund the needed expansion.

The struggle first started with the NPDC, which was chosen as the operator of the OML 42 field on takeover from Shell and partners. NPDC’s alleged inefficiency and struggle for the operatorship of the asset kept production at a very suboptimal level of less than 20,000 barrel per day (bpd) for over three years.

Besides, within the same period of struggle for the operatorship of the field, crude oil price crashed and worsened a bad situation and the Niger Delta militants struck and bombed the crude evacuation pipeline of the field, the Forcados pipeline, forcing the terminal to shut down for 16 months between February 2016 and June 2017.

However, out of the $585 million paid for the asset, the consortium partners (Nestoil, Yinka Folawiyo and KOV) paid $435 million as equity and collectively raised $150 million as debt, but what’s not clear is how much of the $435 million equity was raised as debt by the members of the SPV.

Efforts made by us for further clarifications from the Managing Director/Chief Executive Officer of Neconde Energy, Mr. Frank Edozie, did not yield any fruit as calls and short messages sent to him were not responded to.

But last year, Obijackson Group Chairman, Dr. Ernest Azudialu and Mr. Edozie, at a press briefing in Lagos, lamented the huge financial challenges facing Neconde Energy following the hiccups faced by the downturn in the global oil gas industry since 2014. The challenges, especially crash in price coupled with security issues in the Niger Delta and struggle for operatorship, which stalled production increase, made it difficult to operate profitably to pay the banks.

At a press briefing meant to alert the public of the plans by Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) to picket Neconde Energy, following labour issues within the company, the management decried PENGASSAN’s action, considering the enormous challenges already facing the firm.

Azudialu said the Neconde employees, including those that had left the company, wanted transfer allowances for being transferred to Delta State where the oil field is located while the $558million borrowed from Nigerian banks and other international finance firms to acquire the asset have not been repaid in its and another loan, which is almost the same amount used to repair the facilities and interests are only being serviced. Therefore, the employees, who want to leave the company should take the company’s existing severance package.

According to Edozie, the potential production from the asset was 100,000 barrels per day (bpd) at the time of purchase, but on completion of the acquisition, production was about 52,000 bpd. Following the long battle for operatorship of the field, attacks on oil facility, especially the blowing up of the Forcados pipeline on February 13, 2016, which is the only means of transporting oil from the fields to the terminal, production dropped to zero. He added that the firm has started to ramp up production and expects to increase output to 70,000bpd.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Decline for Third Consecutive Day on Weaker Economic Data and Inventory Concerns

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Crude Oil

Oil prices extended their decline for the third consecutive day on Wednesday as concerns over weaker economic data and increasing commercial inventories in the United States weighed on oil outlook.

Brent oil, against which Nigerian oil is priced, dropped by 51 cents to $89.51 per barrel, while U.S. West Texas Intermediate crude oil fell by 41 cents to $84.95 a barrel.

The softening of oil prices this week reflects the impact of economic headwinds on global demand, dampening the gains typically seen from geopolitical tensions.

Market observers are closely monitoring how Israel might respond to Iran’s recent attack, though analysts suggest that this event may not significantly affect Iran’s oil exports.

John Evans, an oil broker at PVM, remarked on the situation, noting that oil prices are readjusting after factoring in a “war premium” and facing setbacks in hopes for interest rate cuts.

The anticipation for interest rate cuts received a blow as top U.S. Federal Reserve officials, including Chair Jerome Powell, refrained from providing guidance on the timing of such cuts. This dashed investors’ expectations for significant reductions in borrowing costs this year.

Similarly, Britain’s slower-than-expected inflation rate in March hinted at a delay in the Bank of England’s rate cut, while inflation across the euro zone suggested a potential rate cut by the European Central Bank in June.

Meanwhile, concerns about U.S. crude inventories persist, with a Reuters poll indicating a rise of about 1.4 million barrels last week. Official data from the Energy Information Administration is awaited, scheduled for release on Wednesday.

Adding to the mix, Tengizchevroil announced plans for maintenance at one of six production trains at the Tengiz oilfield in Kazakhstan in May, further influencing market sentiment.

As the oil market navigates through a landscape of economic indicators and geopolitical events, investors remain vigilant for cues that could dictate future price movements.

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Commodities

Dangote Refinery Cuts Diesel Price to ₦1,000 Amid Economic Boost

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Aliko Dangote - Investors King

Dangote Petroleum Refinery has reduced the price of diesel from ₦1200 to ₦1,000 per litre.

This price adjustment is in response to the demand of oil marketers, who last week clamoured for a lower price.

Just three weeks ago, the refinery had already made waves by lowering the price of diesel to ₦1,200 per litre, a 30% reduction from the previous market price of around ₦1,600 per litre.

Now, with the latest reduction to ₦1,000 per litre, Dangote Refinery is demonstrating its commitment to providing accessible and affordable fuel to consumers across the country.

This move is expected to have far-reaching implications for Nigeria’s economy, particularly in tackling high inflation rates and promoting economic stability.

Aliko Dangote, Africa’s richest man and the owner of the refinery, expressed confidence that the reduction in diesel prices would contribute to a drop in inflation, offering hope for improved economic conditions.

Dangote stated that the Nigerian people have demonstrated patience amidst economic challenges, and he believes that this reduction in diesel prices is a step in the right direction.

He pointed out the aggressive devaluation of the naira, which has significantly impacted the country’s economy, and sees the price reduction as a positive development that will benefit Nigerians.

With this latest move, Dangote Refinery is not only reshaping the fuel market but also reaffirming its commitment to driving positive change and progress in Nigeria.

The reduction in diesel prices is expected to provide relief to consumers, businesses, and various sectors of the economy, paving the way for a brighter and more prosperous future.

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Crude Oil

IEA Cuts 2024 Oil Demand Growth Forecast by 100,000 Barrels per Day

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Crude Oil

The International Energy Agency (IEA) has reduced its forecast for global oil demand growth in 2024 by 100,000 barrels per day (bpd).

The agency cited a sluggish start to the year in developed economies as a key factor contributing to the downward revision.

According to the latest Oil Market Report released by the IEA, global oil consumption has continued to experience a slowdown in growth momentum with first-quarter growth estimated at 1.6 million bpd.

This figure falls short of the IEA’s previous forecast by 120,000 bpd, indicating a more sluggish demand recovery than anticipated.

With much of the post-Covid rebound already realized, the IEA now projects global oil demand to grow by 1.2 million bpd in 2024.

Furthermore, growth is expected to decelerate further to 1.1 million bpd in the following year, reflecting ongoing challenges in the market.

This revision comes just a month after the IEA had raised its outlook for 2024 oil demand growth by 110,000 bpd from its February report.

At that time, the agency had expected demand growth to reach 1.3 million bpd for 2024, indicating a more optimistic outlook compared to the current revision.

The IEA’s latest demand growth estimates diverge significantly from those of the Organization of the Petroleum Exporting Countries (OPEC). While the IEA projects modest growth, OPEC maintains its forecast of robust global oil demand growth of 2.2 million bpd for 2024, consistent with its previous assessment.

However, uncertainties loom over the global oil market, particularly due to geopolitical tensions and supply disruptions.

The IEA has highlighted the impact of drone attacks from Ukraine on Russian refineries, which could potentially disrupt fuel markets globally.

Up to 600,000 bpd of Russia’s refinery capacity could be offline in the second quarter due to these attacks, according to the IEA’s assessment.

Furthermore, unplanned outages in Europe and tepid Chinese activity have contributed to a lowered forecast of global refinery throughputs for 2024.

The IEA now anticipates refinery throughputs to rise by 1 million bpd to 83.3 million bpd, reflecting the challenges facing the refining sector.

The situation has raised concerns among policymakers, with the United States expressing worries over the impact of Ukrainian drone strikes on Russian oil refineries.

There are fears that these attacks could lead to retaliatory measures from Russia and result in higher international oil prices.

As the global oil market navigates through these challenges, stakeholders will closely monitor developments and adjust their strategies accordingly to adapt to the evolving landscape.

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