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Developing African Petroleum Value Chains

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Despite the global shift towards cleaner sources of fuel, the African continent – representing the highest number of people without access to energy globally – still requires fossil fuel development, if it is to meet its developmental goals. Accordingly, oil and gas-producing nations across the continent are ramping up efforts to develop a sustainable, viable and high reward petroleum sector in Africa.

Speaking at an African energy producers’ forum at African Energy Week (AEW) 2021, African oil and gas ministers provided insight into Africa’s oil potential, strategies to expand the energy value chain and opportunities for regional and international cooperation.

Opening the African energy producers’ talk, Irene Etiobhio, Senior Petroleum Industry Analyst at the Organization of Petroleum Exporting Countries (OPEC), emphasized the role of oil in Africa’s energy future. Presenting OPEC’s World Oil Outlook 2021, launched earlier this year, Etiobhio offered key insights into both Africa’s and the world’s oil outlook.

“The OPEC outlook provides an in-depth view and analysis of global oil issues. It is important to restate that the outlook is not about projections, but should be viewed as a helpful and insightful guide. Our data is based on key assumptions,” stated Etiobhio.

Alongside the presentation, African energy ministers elaborated on the role of oil in Africa. Panel participants included H.E Gabriel Mbaga Obiang Lima, Minister of Mines and Hydrocarbons of Equatorial Guinea and Hon. Dr. Mohammed Amin Adam, Deputy Minister of Energy of Ghana.

Africa’s oil and gas industry is facing a dual challenge: to satisfy growing demand for petroleum products and to outpace the deployment of alternative, non-fossil sources of energy. Taking these two challenges into consideration, the panel participants provided insight into how the sector, and oil and gas companies in particular, plan to increase production while decarbonizing industry activities.

“Oil will play a significant role in the African energy mix and will take the highest share over all forms in the future mix. However, with the demand of over 600 million without access to electricity, Africa must do this in a modern way. We must not solve one problem while creating another. Africa needs to also take care of the environment,” continued Etiobhio. “We must have a clear mandate and one voice on how we are going to meet our emissions targets. China has said that by 2060, it will achieve carbon neutrality. Europe has set its target for 2025. Africa needs to do this, as well.”

Many African countries are looking to significantly enhance production, and are therefore looking to attract investment, as well capacity enhancement, across the entire energy sector value chain. During the panel, speakers discussed how Africa can fast-track the creation of an investor friendly environment, while still increasing local capacity.

“At this stage in Africa, we have come to the realization that someone has to be responsible, and for the first time, we have to take responsibility for the sector,” stated H.E. Minister Lima. “When the lockdown started, flights and movements stopped, and many expats could not fly or work. Could we actually continue operations with just national companies? The answer was yes, and for five months, Equatorial Guinea was operating almost 90% domestically. Our installations were operated by our own people, and so it was thanks to COVID-19 that we realized this.”

“Ghanaians took over the Liquefied Natural Gas processing facility. We have built reasonable local capacity to operate this facility. I am so hopeful that there is potential for Africa to develop, but we have to start doing it. If we make the effort to develop our capacity, then we will be able to do that,” added H.E. Deputy Minister Dr Adam.

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Energy

Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Nigeria’s Rig Count Surges by 23% in February 2024

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Oil

In February 2024, Nigeria’s oil and gas exploration activities surged with rig count increasing by 23% compared to the previous year.

The rig count, a crucial index measuring upstream activities, climbed to 16 rigs from the 11 rigs recorded during the same period in 2023.

This leap in exploration activities comes as a positive development for Nigeria’s oil and gas sector, indicating growing momentum and investor confidence in the industry.

Gbenga Komolafe, Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), attributed this sustained surge to the positive impact of the recently enacted Petroleum Industry Act (PIA).

The PIA, with its provisions for institutional governance, efficient administration, and attractive fiscal regimes, has created a conducive environment for investment and operations in the country’s oil and gas sector.

Despite the remarkable increase in exploration activities, Nigeria’s crude oil production for the month declined to 1.32 million barrels per day (mbpd), compared to January’s output of 1.46 mbpd.

This decrease highlights the challenges faced by the Nigerian oil industry, including infrastructure constraints, security issues in oil-producing regions, and operational disruptions.

To further enhance exploration efforts, Komolafe announced a strategic partnership with TGS-Petrodata to acquire approximately 56,000 square kilometers of 3D Seismic Gravity data, focusing on the Niger Delta deep and Ultra Deep Offshore regions.

This initiative aims to mitigate risks associated with exploration in challenging environments, with investors financing the project and resulting revenues to be shared between the government and TGS.

Looking ahead, Komolafe expressed optimism about sustained growth in oil exploration activities throughout 2024, with plans for an upcoming oil licensing round, a critical step in implementing the nation’s PIA and driving further advancements in the oil and gas sector.

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NNPC Faces Mounting Subsidy Burden as Oil Prices Skyrocket

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Petrol - Investors King

The Nigerian National Petroleum Corporation (NNPC) is facing an increasingly daunting subsidy burden as oil prices continue to surge.

Investigation has revealed that escalating crude oil prices pose a significant challenge to Africa’s largest oil producer, placing immense pressure on the government’s finances and the state-owned NNPC.

Brent, the benchmark for Nigeria’s crude oil, has skyrocketed from an average of $77 in January to as high as $86 per barrel.

While this surge in oil prices could potentially boost funding for Nigeria’s 2024 budget, which is anchored on a benchmark of $77.96 per barrel, the country’s inability to meet production quotas hampers its capacity to capitalize on the revenue influx from oil sales.

One of the primary consequences of soaring oil prices is the ballooning petrol subsidy burden borne by the NNPC.

Despite the government’s imposition of a cap on petrol retail prices, the widening gap between the landing cost and the pump price necessitates substantial subsidies to sustain consumer affordability.

Charles Akinbobola, a Lagos-based energy analyst, elucidated that the combination of a higher exchange rate, elevated oil prices, and static petrol retail prices compounds the subsidy dilemma for Nigeria.

With the country’s limited refining capacity mandating the importation of all petroleum products, the subsidy burden further intensifies, straining NNPC’s resources.

The opacity surrounding the subsidy program, coupled with reports of NNPC’s utilization of Nigeria LNG dividends to fund petrol subsidies, raises concerns about transparency and accountability.

Faith Akinnagbe, an energy lawyer, emphasizes the urgency of disclosing NNPC’s subsidy expenditures to ensure public accountability and oversight.

As Nigeria grapples with the repercussions of surging oil prices, the NNPC faces an uphill battle in managing its burgeoning subsidy obligations amidst fiscal constraints and economic uncertainties.

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