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Failed Project: British Firm Drags FG Before US Court

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  • Failed Project: British Firm Drags FG Before US Court

An engineering and project management firm based in the British Virgin Islands, Process and Industrial Developments Limited, has approached the United States District Court of Columbia, seeking to enforce a $8.9bn arbitral award against the Federal Government.

According to the papers filed by the British firm before the US court, a copy of which our correspondent obtained on Sunday, the arbitral award against the Federal Government followed a failed power project for which the Federal Government signed a 20-year agreement with the foreign firm in 2010.

The British firm explained that in 2010 it signed a contract with the Ministry of Petroleum Resources to “help Nigeria harness its abundant natural gas reserves to solve the growing electricity crisis” in the country.

It said it was agreed that it (the British firm) would build necessary facilities to help refine Nigeria’s associated natural gas or wet gas into non-associated natural gas or lean, which would then be used to power the national electric grid in the country.

It said that in refining the wet gas into lean gas, it was to strip the wet gas of heavy hydrocarbons known as Natural Gas Liquids, which makes wet gas unsuitable for electricity generation.

P&ID said the agreement was that after refining the wet gas into lean gas, it would be permitted to retain the stripped NGLs as its compensation, which it would sell to get its own income from the project.

According to P&ID, it was agreed that while it built the necessary facilities, Nigeria would supply it with 400 million standard cubic feet of wet gas per day over a period of 20 years.

The British firm said with the contract, it had hoped to make a substantial profit from the sale of millions of metric tons of NGLs over the 20-year term.

It explained that though NGLs – which include ethane, propane and butane – render wet gas unsuitable for electricity generation, they could be marketed independently and profitably.

It said as part of the agreement, the Nigerian government was to “ensure that all necessary pipelines and associated infrastructure were installed and all requisite arrangements with agencies and/or third parties were in place to ensure the supply and delivery of wet gas in accordance with the scope of work set forth in the agreement, so as to facilitate the timely implementation of gas processing as provided for in this agreement.”

P&ID said the electricity project, however, hit the rock as Nigeria not only failed to supply it with the agreed daily quantity of wet gas but also failed to complete the construction of necessary infrastructure to transport the wet gas to P&ID’s operation site in Calabar.

“In particular, Nigeria never completed the Adanga Pipeline, which was intended to carry wet gas to the Calabar site where P&ID was to build the gas processing facilities.

“Nigeria’s failures to comply with these obligations caused the collapse of the project contemplated by the agreement.

“Nigeria abandoned the Adanga Pipeline, ceased its efforts to secure a suitable source of wet gas, and eventually stopped responding to P&ID’s correspondence. Nigeria’s breach ensured that no wet gas was ever delivered to the Calabar site,” P&ID said.

It said it was as a result of the breach that it dragged the Federal Government and the Ministry of Petroleum Resources (then under the watch of Mrs Diezani Alison-Madueke) to an arbitration court in London, as provided for in the contract agreement.

It said the arbitration panel, which comprised a former UK Supreme Court Justice, Leonard, Lord Hoffmann; a former Justice of the Court of Appeal of England and Wales, Sir Anthony Evans, Q.C.; and Nigeria’s former Attorney General of the Federation, Chief Bayo Ojo, on January 31, 2017, entered judgement against Nigeria.

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.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Crude oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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