Markets

Kachikwu Directs NNPC, Shell to Start $10bn Bonga South West Project Tuesday

Published

6 years ago

June 19, 2018

Kachikwu Directs NNPC, Shell to Start $10bn Bonga South West Project Tuesday

The Minister of State for Petroleum, Dr. Ibe Kachikwu, has directed the Nigerian National Petroleum Corporation (NNPC) and Shell Nigeria Exploration and Production Company (SNEPCo) to commence the tendering process for the execution of the $10 billion Bonga South West/Aparo (BSWA) deepwater project Tuesday, investigation has revealed.

This is coming as Nigeria’s Bonny light crude oil blend maintained an average spot price of $54.55 per barrels in 2017 to become the second most valued crude oil blend in the oil price reference basket of the Organisation of Petroleum Exporting Countries (OPEC), according to the cartel’s 2018 Annual Statistical Bulletin (ASB).

Kachikwu’s directive followed the April 17, 2018 meeting between President Muhammadu Buhari and a delegation from Royal Dutch Shell Plc., led by the Chief Executive Officer, Bern Van Beurden, in London, where a decision was reached that the oil giant and the NNPC would begin the implementation of projects that have been on the drawing board for several years.

The London meeting, which was facilitated by Kachikwu, also had in attendance the Group Managing Director of the NNPC, Dr. Maikanti Baru.

The meeting was said to have presented an opportunity to open investment talks of up to $15 billion to be invested by Shell in Nigeria.

Estimated to cost about $10 billion, the Bonga South West/Aparo project, which has been on the drawing board for several years, is being executed by SNEPCo under a Production Sharing Contract (PSC) arrangement with the NNPC.

First oil from the project, which is expected to add 225,000 barrels per day of crude oil to Nigeria’s daily production, is expected in 2021 or 2022.

Other key projects that have also suffered delays in Nigeria’s oil and gas industry include: the 120,000bpd Shell and Eni’s Zabazaba/Etan project in the disputed Oil Prospecting Lease (OPL) 245, ExxonMobil’s 140,000bpd Bosi project, ExxonMobil’s 110,000bpd Uge project and Chevron’s 100,000bpd Nsiko deepwater project.

The delays in the execution of these projects, which are estimated to cost about $23 billion, are largely caused by the lack of clarity of terms as a result of the non-passage of the 18-year-old Petroleum Industry Bill (PIB), and inadequate funding.

However, following the meeting between the president and the Shell executives, Kachikwu directed the NNPC to conclude all the processes leading to the execution of the Bonga South West project latest by Monday, June 18.

In a letter obtained exclusively by THISDAY with reference number HMS/MPR/027/Vol.1/096, dated May 9, 2018 and addressed to Baru, the petroleum minister stated that his directive was in furtherance to the meeting held between the president and the Shell executives in London.

“Please recall the meeting held between His Excellency, Mr. President and Royal Dutch Shell on April 17, 2018 in London, on important matters, including the Bonga South West project. In furtherance to the meeting, NNPC is required to urgently conclude all processes leading to the execution of the Bonga South West project by June 18, 2018,” Kachikwu said in the letter.

Following Kachikwu’s directives, the NNPC, through its investment arm, the National Petroleum Investment Management Services (NAPIMS), has also approved the Invitation to Tender (ITT) documents prepared by SNEPCo for the six packages in the project.

Granting the approval through a letter dated June 6, 2018 with reference number NAP/GGM/02.13 and signed on behalf of the NNPC by the Group General Manager (GGM) in charge of NAPIMS, Mr. Roland Ewubare, the corporation also informed SNEPCo, “All necessary updates to ITT documents through the tendering stage will require NAPIMS’ approval.”

Buhari and the Shell executives were said to have discussed the Bonga offshore oil field development and the expansion of liquefied natural gas projects.

Shell had confirmed the meeting, saying: “Both projects are subject to a future final investment decision and we continue to work with our partners and the government towards that in each case.”

The BSWA project includes the construction of a new Floating Production, Storage and Offloading (FPSO) facility with an expected peak production of 225,000 barrels of oil per day.

Checks revealed that the BSWA field straddles Oil Mining Leases (OMLs) 118, 132 and 140.

However, the bulk of BSWA resources are located in OML 118 but it also extends into OMLs 132 and 140, operated by Chevron, where it is called Aparo.

SNEPCo is the operator of the BSWA project in line with the agreement between the NNPC, Esso Exploration & Production Nigeria (Deepwater) Ltd., Total E&P Nigeria Ltd., Nigerian Agip Exploration Ltd., Texaco Nigeria Outer Shelf Ltd., Star Ultra Deep Petroleum Ltd., Sasol Exploration and Production Nigeria Ltd. and Oil and Gas Nigeria Ltd.

In another development, Nigeria’s Bonny light crude oil blend maintained an average spot price of $54.55 per barrels in 2017 to become the second most valued crude oil blend in the oil price reference basket of OPEC, according to the cartel’s 2018 Annual Statistical Bulletin (ASB).

Obtained in Abuja, the 53rd edition of the OPEC’s ASB provided key statistical data for all of OPEC’s 14 member countries, Algeria, Angola, Ecuador, Equatorial Guinea, Gabon, Islamic Republic of Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates (UAE) and Venezuela.

According to the data, only the UAE’s Murban blend traded higher than the Bonny Light at $54.82 per barrel within OPEC’s reference basket.

It also explained that within other corresponding crude oil spot prices, Bonny Light maintained a good posture in 2017, trading below Malaysia’s Miri and Tapis blends, which were sold at $56.93 and $56.29 per barrel respectively, with Mexico’s Isthmus blend trading at $54.60/b; and Norway’s Oseberg blend at $55.04/b.

OPEC explained the ASB has been a product of numerous months of hard and labour-intensive work involving analysts, researchers and statisticians, both at its secretariat and that of its 14-member countries.

Based on its reference basket and corresponding spot prices, OPEC’s ASB noted that Nigeria’s Bonny Light crude oil sold at an average price of $111.36 per barrel in 2013; $100.85 in 2014; $52.95 in 2015; $44.02 in 2016; and $54.55 in 2017.

It said on oil production that between 2013 and 2017, Nigeria produced 1.753 million barrels per day (mbd); 1.807mbd; 1.748mbd; 1.427mbd; and 1.535mbd respectively, noting that an average of 1.535mbd of oil was produced in 2017 as against 2.048mbd and 2.053mbd it produced in 2010 and 2000 respectively.

It added that Nigeria’s closest rival in Africa, Angola, which once overtook her during the heydays of militancy in the oil-bearing Niger Delta region, produced an average of 1.632mbd.

The OPEC’s report, however, indicated that Nigeria did not significantly increase her crude oil reserves within these periods.

OPEC said the country’s oil reserves stood at 37.071 billion barrels (bbls) in 2013; 37.448bbls in 2014; 37.062bbls in 2015; 37.453bbls in 2016; and 37.453bbls in 2017

It said the number of active oil rigs in Nigeria were 59 in 2013; 46 in 2014; 29 in 2015; 9 in 2016 and 13 in 2017, while the number of producing wells in 2013 were 1,951; in 2014 – 2,010; in 2015 – 1,947; in 2016 – 1,668; and 1,777 in 2017.

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Samed Olukoya

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Crude Oil

Oil Prices Gain Amid U.S. Production Woes and Rate Cut Expectations

Published

1 day ago

September 17, 2024

Samed Olukoya

Crude gained on Tuesday following Hurricane Francine disruption in the U.S. and the possibility of an interest rate cut in the U.S.

These two factors have boosted traders’ sentiment in the oil market despite concerns about global demand and slowing growth in China.

Brent crude oil, against which Nigerian oil is priced, rose by 36 cents, or 0.5% to $73.11 per barrel while the U.S. crude oil gained 53 cents, or 0.8% to settle $70.62 per barrel.

Both closed higher in the previous trading session as the market reacted to the impact of Hurricane Francine on U.S. Gulf Coast production.

More than 12% of crude oil production and 16% of natural gas output in the Gulf of Mexico remained offline as of Monday, according to the U.S.

According to the Bureau of Safety and Environmental Enforcement (BSEE), the disruption has raised concerns over short-term supply shortages and contribution to the upward momentum in prices.

Yeap Jun Rong, a market strategist at IG said “while the market is seeing near-term stabilization, the fragile state of China’s economy and anticipation of the U.S. Federal Reserve’s interest rate decision could limit further gains.”

The Federal Open Market Committee (FOMC) is expected to announce a rate cut later this week, with futures markets pricing in a 69% chance of a 50-basis-point reduction.

Lower interest rates are favourable for oil prices as they reduce borrowing costs and encourage economic growth.

“Growing expectations of an aggressive rate cut are lifting sentiment across the commodities sector”, stated ANZ analysts.

The market, however, remains cautious due to lower-than-expected demand from China, the world’s largest importer of the commodity.

Chinese data released over the weekend showed that China’s oil refinery output dropped for the fifth consecutive month in August. This signals weaker domestic demand and declining export margins.

Crude Oil

New Petrol Prices to Range Between N857 and N865 Following NNPC-Dangote Deal

Published

3 days ago

September 15, 2024

Temitayo Olukoya

Hopes for cheaper Premium Motor Spirit (PM), otherwise known as petrol, rose, last night, as indications emerged that the product may sell for between N857 and N865 per litre after the Nigerian National Petroleum Corporation Limited (NNPCL) starts lifting the product from Dangote Refinery today.

It was learnt that the NNPCL, as the sole off-taker of petrol from the refinery, is projected to lift the product at N960/N980 per litre and sell to marketers at N840/N850 to enable Nigerians to get it at between N857 and N865 at the pump at filling stations.

However, whether uniform product prices would apply at filling stations nationwide was unclear.

As of yesterday, petrol sold at N855 per litre at NNPCL retail stations in Lagos and it was the cheapest anyone could buy the product while major marketers sold around N920.

At independent marketers’ outlets, the price was over N1,000. Elsewhere across the country, PMS sold for more than N1,200 per litre.

Sources said the new arrangement from the NNPCL and Dangote Refinery negotiations, spanning more than one week, would allow Nigerians to get petrol at between N857 and N865 per litre and represents an average under-recovery of about N130 to NNPCL.

President Bola Tinubu, Sunday Vanguard was made to understand by a Presidency source, made it clear to the negotiating parties that “the price at which petrol would be sold to Nigerians should not be such that would place heavy financial burden on them while dealing with the new reality of the prevailing price”.

The Minister of Finance and Coordinating Minister of the Economy, Mr Wale Edun, has, meanwhile, expressed optimism that the deal would reduce the pressure on foreign exchange (FX) demands and shore up the value of the Naira – presently, between 30% and 40% of FX demands go into the importation of PMS.

Chief Corporate Communications Officer, NNPC Ltd., Olufemi Soneye, who confirmed the readiness of the company to start lifting petrol today, told Sunday Vanguard, yesterday: “NNPC Ltd has started deploying our trucks and vessels to the Dangote Refinery to lift PMS in preparation for the scheduled lifting date of September 15th, as set by the refinery.

“Our trucks and personnel are already on-site, ready to begin lifting. We expect more trucks, and the deployment will continue throughout the weekend so we can start loading as soon as the refinery begins operations on September 15, 2024.”

Soneye hinted that at least 100 trucks had already arrived at the refinery for the petrol lifting, adding that the number of trucks could increase to 300 by Saturday evening.

On his part, Executive Secretary, of Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), Olufemi Adewole, said: “We have been lifting diesel (AGO) and aviation fuel (jet fuel) and we look forward to lifting petrol (PMS).”

On pricing, he said: “We await clarity in respect of the pricing mode, and once that is clarified, we’ll do the needful towards meeting the energy needs of Nigerians.”

Yesterday, Edun, the Minister of Finance and Coordinating Minister of the Economy said the structuring of the NNPCL, Dangote Refinery deal in Naira would assist in reducing pressure on the local currency.

Crude Oil

Oil Prices Surge as Hurricane Francine Disrupts U.S. Gulf Production, Brent and WTI See Gains

Published

5 days ago

September 13, 2024

Investors King

Oil prices rose on Friday, extending a rally sparked by output disruptions in the U.S. Gulf of Mexico, where Hurricane Francine forced producers to evacuate platforms before it hit the coast of Louisiana.

Brent crude oil, against which Nigerian crude oil is priced, rose by 34 cents, or 0.5%, to $72.31 per barrel while U.S. West Texas Intermediate crude futures rose by 38 cents, or 0.6%, to $69.35 a barrel.

If those gains hold, both benchmarks will break a streak of weekly declines, despite a rough start that saw Brent crude dip below $70 a barrel on Tuesday for the first time since late 2021. At current levels, Brent is set for a weekly increase of about 1.7%, and WTI is set to gain over 2%.

Oil producers assessed damages and conducted safety checks on Thursday as they prepared to resume operations in the U.S. Gulf of Mexico, as estimates emerged of the loss of supply from Francine.

UBS analysts forecast output in the region in September will fall by 50,000 barrels-per-day (bpd) month-over-month, while FGE analysts estimated a 60,000 bpd drop to 1.69 million bpd.

The supply shock helped oil prices recover from a sharp selloff earlier in the week, with demand concerns dragging benchmarks to multi-year lows.

Both the Organization of Petroleum Exporting Countries and the International Energy Agency this week lowered their demand growth forecasts, citing economic struggles in China, the world’s largest oil importer.

A shift towards lower-carbon fuels is also weighing on China’s oil demand, speakers at the APPEC conference said this week.

Official data showed nearly 42% of the region’s oil output was shut-in as of Thursday.

China’s crude oil imports averaged 3.1% lower this year from January through August compared to the same period last year, customs data showed on Tuesday.

“Flagging domestic oil demand in China has become a hot topic and was further underlined by disappointing August trade data,” FGE analysts said in a note to clients.

Demand concerns have grown in the United States as well. U.S. gasoline and distillate futures traded at multi-year lows this week, as analysts highlighted weaker-than-expected demand in the top petroleum consuming country.