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Oil Licensing: Nigeria Lags as Angola, Others Move Ahead

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  • Oil Licensing: Nigeria Lags as Angola, Others Move Ahead

Stakeholders in the nation’s oil and gas industry are still left guessing about when a major licensing round or at least a marginal fields bid round will be held amid a lull in exploration activities.

Nigeria has the second largest proven reserves in Africa, with an estimated 37.5 billion barrels of crude oil deposits at the end of 2017, representing 2.2 per cent of the global total, according to the BP Statistical Review of World Energy 2018.

The country has the largest proven gas reserves on the continent at 5.2 trillion cubic metres.

If current levels of production and reserves remain constant, the country is forecast to run out of oil in 51.6 years and natural gas in 110.2 years, according to BP data.

Over the past few years, industry stakeholders have stressed the need for the country to increase its oil and gas reserves.

The last major licensing round was held in 2007, while the most recent bidding round for marginal fields was in 2003.

The number of active oil rigs in Nigeria fell by 17.6 per cent to 28 in November from 34 in October, data obtained from Baker Hughes Incorporated and the Organisation of Petroleum Exporting Countries showed.

Rig count is largely a reflection of the level of exploration, development and production activities occurring in the oil and gas sector.

Angola, Africa’s second-biggest producer after Nigeria, is putting the finishing touches on its first oil licensing round in eight years, hoping to replace dwindling production at some maturing fields and seeing renewed investor appetite in its oil industry.

Its Minister of Mineral Resources and Petroleum, Diamantino Azevedo, was quoted by S&P Global Platts in an interview this month that the country was preparing a strategy for onshore and offshore oil and gas blocks licensing for the period 2019 through 2025.

Last week, Norway’s Ministry of Petroleum and Energy said it had awarded a record number of production licences (83) in the North Sea, the Norwegian Sea and the Barents Sea under the country’s latest Awards in Pre-defined Areas exploration round.

The APA 2018 licensing round comprises blocks in predefined areas and a total of 83 licenses were distributed over the North Sea (37), the Norwegian Sea (32) and the Barents Sea (14).

A total of 33 different oil companies, ranging from the large international majors to smaller domestic exploration companies, were awarded ownership interests in one or more production licences.

“This is the largest licensing award on the Norwegian continental shelf. 53 years after the first licensing round, this new record confirms the industry’s belief in continued value creation and activity in Norway,” the Minister of Petroleum and Energy, Mr Kjell-Børge Freiberg, said.

As part of efforts to reduce its reliance on oil imports, one of Nigeria’s biggest customers, India, has offered 14 blocks for oil and gas exploration in the latest auction round under which winning bidders can carve out areas for drilling.

The second round of the country’s Open Acreage Licensing Policy opened for bids on January 8 and will close on March 12. These blocks are expected to be awarded in May, according to S&P Global Platts.

It will be the second auction under the new Hydrocarbon Exploration and Licensing Policy approved by Prime Minister Narendra Modi’s government in March 2016. The first round was launched in January last year.

HELP forms part of a government strategy to double India’s oil and gas output by 2022-2023.

Reuters reported last month that 16 oil and gas firms had submitted applications for one or more of five Ghanaian offshore blocks in the West African country’s first exploration licensing round.

Ghana, which currently produces 200,000 barrels of oil per day, is keen to unlock more resources after it began pumping from its flagship offshore Jubilee field in 2010.

“Τhe high level of interest shown by major International Oil Companies in our first licensing round is a vote of confidence in the Ghanaian economy,” Deputy Minister for energy in charge of petroleum, Mohammed Amin Adam, was quoted as saying.

The Managing Director, Neconde Energy Limited, Mr Frank Edozie, told our correspondent that most operators in the Nigerian oil industry had slashed spending on exploration activities.

The delay in passing the Petroleum Industry Bill had brought about “significant amount of uncertainty” about the future of the industry.

He said, “What that has done is that people are hedging their bets; nobody is exposing themselves in terms of significant expenditure on exploration. Exploration is looking for production of the future. Because the future of the industry is not clear due to uncertainty around the bill that will become law to govern the industry, people are shying away from investing in exploration.

“That is one of the reasons it is critical for the industry that there is a bill that is passed into law. Clearly, our reserves are declining. We are eating the accumulated food from yesterday, so to say. In another two to three years, if things don’t change, we will begin to see the results of this in our ability to meet our production quota.”

The Chairman and Chief Executive Officer, Waltersmith Petroman Oil Limited, Mr Abdulrazaq Isa, told our correspondent that some indigenous operators had been waiting for licensing rounds in recent years.

He said, “Our game is all about reserve replacement. The longevity of your business is driven by the size of your reserves and the moment you begin to produce an asset, you are already draining it. So, you need to replace those you have produced.

“Some assets need to come into the market so we can bid for them and in order to extend the longevity of the nation’s reserves. Our members are waiting anxiously. So, I can tell you that there will be a lot of activity in that space once that (marginal bid round) happens.”

According to Isa, Waltersmith needs additional feedstock for the 5,000bpd modular refinery it is currently building.

“We are looking to expand it (the refinery) to about 30,000 bpd. So we are going to need additional oil feedstock for our expansion programme. We need access to these resources; so we are very keen to participate in any new licensing rounds.”

The Chairman/Chief Executive Officer, International Energy Services Limited, Dr Diran Fawibe, noted that the appetite for exploration had been very low in Nigeria since 2014 when the crisis in the global oil and gas industry started.

Lamenting the delay in the passage of PIB, Fawibe said “the unpredictability of the direction the government is going regarding the oil and gas industry” had affected investments.

“There is a need to finalise the PIB, remove the uncertainty and let foreign direct investment come into the country. But unfortunately, this has not caught the interest of our lawmakers to do justice to this,” he added.

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

Stop Maize, Soybean Export to Reduce Scarcity – NIAL

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Stop Maize, Soybean Export to Reduce Scarcity – NIAL

The Nigerian Institute of Animal Science on Tuesday called on the Federal Government to halt the continued export of maize and soybean to reduce the scarcity of the commodities as well curb their price hike in Nigeria.

Registrar and Chief Executive Officer, NIAL, Prof. Eustance Iyayi, told journalists in Abuja that the poultry sector was currently hit by the severe scarcity of maize and soybean.

This, he said, was due to the continued export of the commodities, the COVID-19 pandemic, which had disorganised the international supply chain, lingering insecurity in the North-East, farmers/herders conflict and flooding in some parts of the country.

“Maize and soybean are being exported and this has exacerbated the situation leading to local scarcity and price escalation of the commodities in poultry production,” Iyayi stated.

He added, “The increasing prices of the essential commodities has resulted in the increase in price of finished feeds by about 75 per cent.

“This has led to the closure of small and medium sized poultry farms thereby threatening about 10 million jobs as a result of this scarcity.

“To set the poultry industry from total collapse, the institute urges the government to immediately halt the exportation of soybean and maize and grant import permit to importers at the official foreign exchange rate.”

Iyayi said there was shortage of soybean in Nigeria and other countries, stressing that the little amount being produced across the country should not be exported.

He said the current maize yield of about one to two tonnes per hectare being produced in Nigeria would not be enough to sustain the country.

The NIAL helmsman stated that the country should be producing between seven and 10 tonnes per hectare in order to meet the requirements for humans and animals.

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Economy

Petrol Landing Cost Jumps to N186, Oil Hits $64

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Petrol Landing Cost Jumps to N186, Oil Hits $64

Against the backdrop of the rising price of oil prices, the landing cost of Premium Motor Spirit (petrol) imported into Nigeria has increased to N186.33 per litre.

Investors King had exclusively reported on February 9 that the landing cost of PMS rose to about N180 per litre on February 5 from N158.53 per litre on January 7.

Crude oil price accounts for a large chunk of the final cost of petrol, and the deregulation of petrol price by the Federal Government last year means that the pump price of the product will reflect changes in the international oil market.

Going by the petrol pricing template of the Petroleum Products Pricing Regulatory Agency, the landing cost of petrol rose to N186.33 per litre on February 16, with the pump price of the product expected to be N209.33 per litre.

The international oil benchmark, Brent crude, closed at $63.96 per barrel on February 16, up from $59.34 per barrel on February 5.

The rising price of crude oil pushed the cost of petrol quoted on Platts to $560.75 per metric tonne (N163.08 per litre, using N390/$1) on February 16 from $543.25 per metric tonne (N157.99 per litre) on February 5.

Other cost elements that make up the landing cost include freight (N10.29), lightering expenses (N4.57), insurance cost (N0.25), Nigerian Ports Authority charge (N2.38), Nigerian Maritime Administration and Safety Agency charge (N0.23), jetty throughput charge (N1.61), storage charge (N2.58), and financing (N1.33).

The freight cost increased to $35.41 per MT (N10.29 per litre) last Wednesday from $30.04 per MT (N8.74 per litre) on February 5.

The pump price is the sum of the landing cost, wholesale margin and the distribution margins. The wholesale margin is N4.03 while the distribution margins comprise transporters allowance (N3.89), retailer (N6.19), bridging fund (N7.51), marine transport average (N0.15), and admin charge (N1.23).

Apart from the changes in global crude oil prices, the exchange rate of naira to the dollar also affects the cost of imported petrol.

The cost of petrol would be higher if the 410/$1 rate at which the naira closed on Monday at the Investors’ and Exporters’ Foreign Exchange Window was used. The naira closed at 480/$1 at the parallel market.

The Nigerian National Petroleum Corporation, which has been the sole importer of petrol into the country in recent years, is still being relied upon by marketers for the supply of the product despite the deregulation of the downstream petroleum sector.

Oil marketers said recently that they were ready to resume importation of petrol if the foreign exchange was made available to them at a competitive rate.

“The discussion we should be having today is how best to maximise the benefits of the removal of price controls and subsidies while minimising the adverse effects of this action on our citizens,” the Chairman, Major Oil Marketers Association of Nigeria, Mr Adetunji Oyebanji, said at a virtual press briefing.

Brent crude, against which Nigeria’s oil is priced, rose by $1.67 to $64.58 per barrel as of 6:08pm Nigerian time on Monday.

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Economy

FG to Lift 100 Million People Out of Poverty With Gas Expansion Project

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Gas Plant

FG to Lift 100 Million People Out of Poverty With Gas Expansion Project

The Federal Government has said about 100 million Nigerians will be lifted out of poverty through the National Gas Expansion Programme (NGEP).

The Minister of State for Petroleum Resources, Chief Timipre Sylva, disclosed this on Monday during the inauguration of the NGEP in Ado Ekiti, Southwest.

Sylva said the project was “a practical demonstration of President Muhammadu Buhari’s commitment to lift 100 million Nigerians out of poverty by using gas value chain as catalyst for social and economic development in Nigeria”.

The minister said, “The programme has its main objective to reinforce and expand gas supply as well as stimulate demand in Nigeria through effective and efficient mobilisation and utilisation of all available assets, resources and infrastructure in the country.

“The programme is geared towards the implementation of Mr President June 12, 2019 promise to take hundred million Nigerians out of poverty within the current decade by ensuring that locally produced, available, accessible and affordable fuel is sufficiently supplied across the country”.

Sylva added that Nigeria was richly endowed with mineral resources, specifically, hydrocarbons, crude oil and natural gas with proven gas reserves of over 200 trillion cubic feet of natural gas, which he said had presented the country with opportunity to use gas as a catalyst for social economy renaissance.

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