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Seplat Energy Excited On The passage of PIB, Foresee Opportunists For More Investment

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Nigeria’s biggest oil and gas exploration and production company, Seplat Energy Plc, said it hopes the passage of the country’s long-awaited Petroleum Industry Bill by lawmakers will spur investment into the country’s petroleum industry.

“The PIB in place gives everyone the visibility of what the new roles are, so we’re excited,” CEO Roger Brown said in an interview in Lagos. “People know what the rules are and can invest more.”

The bill, which took about two decades of deliberation, is expected to remove legal and regulatory uncertainty that’s held back the growth of the oil and gas sector once it gets signed into law by Nigeria’s President Muhammadu Buhari.

Although, some aspects of the bill are “negative” to the operations of Seplat, on a balance it’s positive to the company’s operations, according to Brown. The governors from the nation’s southern states have demanded a review of some provisions in the legislation including the share of oil revenue that will go to host communities.

As an indigenous oil and gas company, Seplat will continue to invest in Nigeria even without the new law, Rogers said. “What excites me most is that we’ll have stability, and the legislation as passed is key.”

The firm is looking for “onshore and shallow water’’ assets for acquisition, according to the CEO. It is targeting offers from the international oil companies divesting from the country as well as local firms selling their “quality” assets, he said.

Speaking on gas expansion saddled with the increasing uncertainty over future demand for oil and the shift to renewables globally, Seplat plans to focus on gas to drive future income and profitability.

As reported on Bloomberg, the company, listed in London and Lagos, changed its name last month to Seplat Energy from Seplat Petroleum to reflect a transition to a full energy solutions provider. It plans to increase gas investments to shore up its contribution to revenue to as much as 50 percent by the next five years from 30 percent and probably overtake oil at some point, according to the chief executive.

“Gas will be the baseload which will launch the springboard into renewable energy and renewable energy must be part of Nigeria’s future,” Brown said.

Africa’s biggest economy is trying to shift away from its reliance on crude oil by encouraging investments to develop its more than 200 trillion cubic feet of proven gas reserves to power manufacturing and electricity industries, even as it aims for net-zero emissions in the future. It pledged to cut carbon emissions by 20 percent by 2030 under the Paris Climate Agreement.

“In five years, oil will be relevant; in 30 years I think gas is going to be more relevant into the future,” Brown said. “Developing gas is very critical.”

Seplat is looking to deliver ANOH, a key gas-processing plant, with a daily capacity of 300 million standard cubic feet by the first half of next year, then plan an expansion of the project, Brown said.  He also affirmed that the company is in talks with governments in the country’s southeast, as well as Waltersmith, a private oil company, on ways to develop the gas market in the area.

“We firmly believe there’s big gas demand in the country but you have to make sure your market is there,” the CEO said. “We see ourselves as a company, among others, that will develop the domestic gas market.”

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Goldman Sachs Revised Down Brent Oil Forecast for Q3 2021

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Goldman Sachs Group, an American multinational investment bank and financial services company, has revised down its Brent oil price projection for the third quarter (Q3) of 2021 by $5 from $80 per barrel previously predicted to $75 a barrel following the surge in Delta variant COVID-19.

The investment bank predicted that the surge in Delta variant COVID-19 cases will weigh on Brent oil price in Q3 2021 even with the expected increase in demand.

However, the bank projected a stronger second half of 2021, saying OPEC+ adopted slower production ramp-up will offset 1 million barrel per day demand hit from Delta.

Goldman said, “Our oil balances are slightly tighter in 2H21 than previously, with an assumed two-month 1 mb/d demand hit from Delta more than offset by OPEC+ slower production ramp-up.”

The leading investment banks now projected a deficit of 1.5 million barrels per day in the third quarter, down from 1.9 million barrels per day previously predicted.

Therefore, Brent crude oil is expected to average $80 per barrel in the fourth quarter, a $5 increase from the $75 initially predicted and the bank sees 1.7 million barrels per day in the fourth quarter.

The oil market repricing to a higher equilibrium is far from over, with the bullish impulse shifting from the demand to the supply side,” the bank said.

Goldman added that even if vaccinations fail to curb hospitalisation rates, which could drive a longer slump to demand, the decline would be offset by lower OPEC+ and U.S. shale output given current prices.

Oil prices may continue to gyrate wildly in the coming weeks, given the uncertainties around Delta variant and the slow velocity of supply developments relative to the recent demand gains,” it said.

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Oil Extends Gains on Thursday on Expectations of Tighter Supplies

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Oil prices rose about $1.50 a barrel on Thursday, extending gains made in the previous three sessions on expectations of tighter supplies through 2021 as economies recover from the coronavirus crisis.

Brent crude settled at $73.79 a barrel, up $1.56, or 2.2%, while U.S. West Texas Intermediate (WTI) settled at $71.91 a barrel, rising $1.61, or 2.3%.

“The death of demand was greatly exaggerated,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. “Demand is not going away, so we’re back looking at a very tight market.”

Members of the Organization of the Petroleum Exporting Countries and other producers including Russia, collectively known as OPEC+, agreed this week on a deal to boost oil supply by 400,000 barrels per day from August to December to cool prices and meet growing demand.

But as demand was still set to outstrip supply in the second half of the year, Morgan Stanley forecast that global benchmark Brent will trade in the mid to high-$70s per barrel for the remainder of 2021.

“In the end, the global GDP (gross domestic product) recovery will likely remain on track, inventory data continues to be encouraging, our balances show tightness in H2 and we expect OPEC to remain cohesive,” it said.

Russia may start the process of banning gasoline exports next week if fuel prices on domestic exchanges stay at current levels, Energy Minister Nikolai Shulginov said, further signalling tighter oil supplies ahead.

Crude inventories in the United States, the world’s top oil consumer, rose unexpectedly by 2.1 million barrels last week to 439.7 million barrels, up for the first time since May, U.S. Energy Information Administration data showed.

Inventories at the Cushing, Oklahoma crude storage hub and delivery point for WTI, however, has plunged for six continuous weeks, and hit their lowest since January 2020 last week.

“Supplies fell further by 1.3 million barrels to the lowest level since early last year, theoretically offering support to the WTI curve,” said Jim Ritterbusch of Ritterbusch and Associates.

Gasoline and diesel demand, according to EIA figures, also jumped last week.

Barclays analysts also expected a faster-than-expected draw in global oil inventories to pre-pandemic levels, prompting the bank to raise its 2021 oil price forecast by $3 to $5 to average $69 a barrel.

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OPEC+ Increases Nigeria’s Crude Oil Production to 1.829mbpd

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The Organisation of Petroleum Exporting Countries and allies (OPEC+) on Sunday agreed to restore Nigeria’s oil production to 1.829 million barrels per day (mbpd) following a new agreement reached between members to ease the standoff between two oil-producing giants, Saudi Arabia and the United Arab Emirates.

Nigeria produced 1.48mbpd in June, down from 1.55 million bpd produced in the month of May. Suggesting that Africa’s largest oil producer has fundamental issues preventing it from meeting the old production quota.

The Organization of Petroleum Exporting Countries (OPEC) and its non-OPEC allies reached a deal Sunday to phase out 5.8 million barrels per day of oil production cuts by September 2022 as prices of the commodity hit their highest levels in more than two years.

Coordinated increases in oil supply from the group, known as OPEC+, will begin in August, OPEC announced in a statement.

Overall production will increase by 400,000 barrels per day on a monthly basis from that point onward. The International Energy Agency estimates a 1.5 million barrel per day shortfall for the second half of this year, indicating a tight market despite the gradual OPEC supply boost.

OPEC+ agreed in the spring of 2020 to cumulatively cut a historic nearly 10 million barrels per day of crude production as it faced a pandemic-induced crash in oil prices. The alliance gradually whittled down the cuts to about 5.8 million barrels per day.

The 19th OPEC and non-OPEC ministerial meeting noted that worldwide oil demand showed “clear signs of improvement and OECD stocks falling, as the economic recovery continued in most parts of the world” thanks to accelerating vaccination programs.

International benchmark Brent crude is up 43% year-to-date and up more than 60% from this time last year, with many forecasters expecting to see oil trading at $80 a barrel in the second half of 2021.

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