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Shell’s Sizeable Oil Discovery in Namibia Means Huge Opportunity For Economic Growth

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The National Petroleum Corporation of Namibia (NAMCOR) – alongside partners Shell Namibia Upstream B.V. and Qatar Energy – have announced the discovery of sizeable quantities of light oil in both primary and secondary targets at the Graff-1 well offshore Namibia, ushering in a new era of hydrocarbon exploration and production for the country. This discovery, coupled with the country’s favorable regulatory environment, is set to create an influx in new investment, while further positioning Namibia as a highly competitive and increasingly lucrative upstream destination.

Representing one of Africa’s final frontiers for oil and gas exploration, potentially rich basins across Namibia have spurred the appetite of regional and international oil companies (IOC) alike, leading to a succession of exploration campaigns in recent years. The most notable include an ongoing drilling campaign by Reconnaissance Energy Africa – which has already indicated that Namibia’s 6.3 million-acre Kavango Basin may hold billions of barrels of oil – as well as Shell’s 2022 discovery. Located in the Orange Basin offshore Namibia, 270km from the town of Oranjemund, drilling operations on the Graff-1 well commenced in December 2021 and were completed in February 2022. Owned by Shell (45%) – as the operator – Qatar Petroleum (45%) and NAMCOR (10%), the discovery will play a significant part in the country’s overall energy and economic transformation.

So what will this discovery mean for Namibia and its people? Firstly, regarding the country’s energy future, the discovery is set to usher in a wave of new investment across the entire energy value chain. With Namibia’s energy sector considerably undeveloped, capital injections in key industries such as infrastructure, power generation and distribution and production will soon follow as investors turn an eye to this highly potential market. Secondly, once developed, this discovery will significantly improve energy security in a nation that relies heavily on petroleum imports and intermittent hydropower. The development of a consistent domestic energy supply will prove critical for the country’s economy, while reducing imports from neighboring countries.

What’s more, the discovery will serve as a catalyst for enhanced economic growth in the southern African nation. Notably, the creation of a domestic petroleum market will create thousands of jobs for the local population across every industry in the value chain while motivating the creation and establishment of various domestic companies. In developing a petroleum market, the country will require numerous service companies, thus, creating newfound opportunities for the population. Additionally, the discovery will initiate growth across various sub-sectors of the economy, including but not limited to transportation, education – through technical training and skills transfer – infrastructure and industrialization. This will be critical for the country as it pursues an economic recovery in a post-COVID-19 landscape.

“Credit is due to Shell and partners for sticking with their drilling campaign in an environment where frontier exploration drilling fell to the lowest level ever recorded in Africa. Many majors have not had a long term approach rather they have instead focused on quicker return. Shell has shown resilience and commitment to Namibia which is a good thing,” states NJ Ayuk, Executive Chairman of the African Energy Chamber.

“The resource is large, the unit cost for producing in Namibia should not be too high, and I am confident Shell has the skill set and technology to operate this field in a low-carbon environment,” Continues Ayuk.

“H.E. Tom Alweendo, the Minister of Mines and Energy, Petroleum Commission, Namcor and other Namibian authorities have been very pragmatic in their approach with energy companies, and it is commendable. They have learned a lot from the mistakes of others, and we are confident they will get it right, especially on fast tracking field development decisions, pragmatic local content and ensuring that the resources improve the living conditions of their citizens. They’re up against a lot, but they have a lot of partners who are going to support them. I believe Namibia and many African countries will see more drilling of high-impact oil and gas prospects which is very good as these resources are needed to make energy poverty history,” concludes Ayuk.

Meanwhile, as Namibia pursues exploration and production of the discovery, it is critical that the country develops an oil and gas bill to ensure effective regulation, certainty, and overall beneficiation of the find. The establishment and implementation of market-driven policies through an oil and gas bill will have a number of benefits, both for explorers and producers and the country itself. Firstly, the bill will improve certainty and transparency across the industry, providing IOCs and domestic companies clarity with regards to industry procedures and policies. This will ensure productivity while reducing time taken to get projects off the ground. Secondly, the bill will enable the regulation of the industry, providing clarity on tax, risk, ownership and safety, as well as environmental and local content policies. This way, the government can ensure the country fully maximizes the benefits brought about by the find.

In developing a progressive oil and gas Bill, taking into consideration the environmental impacts associated with these types of developments, Namibia will need to put in place strict environmental policies to ensure impacts are minimal. With global pressures mounting to transition to clean sources of fuel, many international stakeholders are calling for the end of fossil fuel utilization. Therefore, it is critical, now more than ever, to ensure oil and gas exploration and production is achieved with minimal emissions.

Namibia has already made a strong play for investment at continental energy conferences such as African Energy Week (AEW) 2021. Now, backed by this exciting discovery, the country is well positioned to drive new investment and development across its energy landscape.

At the second edition of AEW in Cape Town on the 18th-21st of October 2022, Namibia will take a leading role in hydrocarbon dialogue, promoting the country’s rich resources, upstream potential, and competitive edge. AEW 2022 remains focused on alleviating energy poverty, recognizing the role oil and gas will play in achieving this objective. As international hydrocarbon explorers and producers make their way towards lucrative frontier markets such as Namibia, AEW 2022 will be the platform to sign deals, form partnerships, and network and engage with a number of global and African stakeholders.

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Nembe Creek Oil Field Halted After Leak, Impacting 150,000 bpd

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Nigeria’s oil output has taken a significant hit following the shutdown of the Nembe Creek oil field due to a major oil leak.

The Nembe Creek oil field, responsible for producing approximately 150,000 barrels of crude oil per day (bpd), was forced to cease operations on June 17, 2024.

The leak occurred on the Nembe Creek Trunk Line (NCTL), a critical pipeline that transports oil from the Nembe Creek oil field to the Bonny Oil Export Terminal.

The operator of the pipeline, Aiteo Eastern Exploration and Production Company, confirmed the leak and the subsequent shutdown in a statement released yesterday.

Aiteo reported that the leak was discovered during routine operations in the Nembe area of Bayelsa State, located in Nigeria’s oil-rich Delta region.

This region is notorious for environmental degradation due to decades of oil spills, which have severely impacted local agriculture and fishing industries.

Following the discovery of the leak, Aiteo activated its Oil Spill and Emergency Response Team and shut down all production from Oil Mining Lease (OML) 29 as a precautionary measure to prevent further environmental damage.

“While we regret the production losses and the potential environmental impact, our current priority is to expedite an efficient spill management process in line with regulatory standards and collaborate with all stakeholders to restore production and mitigate associated risks,” said Victor Okronkwo, Managing Director of Aiteo Eastern E&P.

The exact cause of the leak remains unknown. Aiteo emphasized that the shutdown was a precautionary step to contain the spill and minimize environmental harm.

The company has notified its joint venture partners and relevant regulatory bodies, including the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the National Oil Spill Detection and Response Agency (NOSDRA), about the incident.

This development comes as a setback for Nigeria, which holds Africa’s largest natural gas reserves and is a major oil producer.

The country’s oil sector has faced numerous challenges, including aging infrastructure, theft, and environmental issues, which have hindered its ability to maximize production and exports.

The Nembe Creek shutdown also highlights ongoing concerns about the safety and reliability of Nigeria’s oil infrastructure. The NCTL has been a frequent target of oil theft and sabotage, exacerbating the challenges of maintaining a steady oil output.

Energy analysts believe that the latest incident could impact Nigeria’s ability to meet its export commitments and exacerbate the country’s economic challenges.

The Nigerian government, under President Bola Tinubu, has been making efforts to attract investment into the energy sector to boost production and address infrastructure deficits.

“The government will hope this offers confidence not only in the quality of the Nigerian resource base, but also in the government’s pledge to improve ease of doing business,” said Clementine Wallop, director of sub-Saharan Africa at political risk consultancy Horizon Engage.

As Nigeria works to address the immediate spill and restore production, the broader implications for the country’s oil sector and its environmental impact remain to be seen.

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Brent Crude Nears Seven-Week Highs as Market Eyes US Inventory Report

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Brent oil, the international benchmark for Nigerian crude oil, remained steady on Thursday, hovering just below seven-week highs as the escalating conflict in the Middle East raised concerns over potential supply disruptions.

At the same time, the market eagerly awaits U.S. inventory data for further indications of demand trends.

August Brent crude rose 28 cents, or 0.3%, to $85.35 a barrel while the U.S West Texas Intermediate (WTI) oil gained 13 cents, or 0.2%, to $81.70 a barrel.

“There was no WTI settlement on Wednesday due to a U.S. public holiday, which kept trading subdued,” noted Ricardo Evangelista, an analyst at ActivTrades.

“However, oil prices are likely to remain supported around current levels due to a growing geopolitical risk premium driven by conflict in the Middle East.”

Israeli forces have intensified their operations in the Gaza Strip, targeting areas in the central region overnight while tanks advanced into Rafah in the south.

The escalating violence has heightened fears of a broader conflict that could impact oil supplies from the region.

“Expectations of an inventory build appear to be overshadowing fears of escalating geopolitical stress for now,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.

Investors are keenly awaiting the release of U.S. inventory data from the Energy Information Administration (EIA) later on Thursday, delayed by a day due to the Juneteenth holiday.

An industry report released on Tuesday by the American Petroleum Institute (API) indicated that U.S. crude stocks rose by 2.264 million barrels in the week ending June 14, while gasoline inventories fell, according to market sources.

The summer season typically sees an uptick in oil demand due to increased refinery runs and weather-related risks.

“Ongoing production cuts by the OPEC+ group, combined with seasonal demand, should tighten oil balances and lead to inventory draws during the summer months,” J.P. Morgan commodities analysts wrote.

Refining margins have also improved, with the ICE gasoil futures premium to Brent crude jumping to $20.63 a barrel on Wednesday, a two-month high.

“Firmer fuel refining margins provide a healthy dose of encouragement for those expecting improvements on the demand side,” commented Tamas Varga, an analyst at PVM.

In other economic news, the Bank of England’s decision to keep its main interest rate unchanged at a 16-year high of 5.25% ahead of the national election on July 4 has been noted by market observers.

Higher interest rates generally increase the cost of borrowing, which can slow economic activity and dampen oil demand.

As the market braces for the upcoming EIA inventory report, analysts and traders are closely watching for any signals that could influence oil prices in the near term.

The delicate balance between geopolitical tensions and supply-demand fundamentals continues to play a critical role in shaping the oil market landscape.

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Aradel Holdings Reports 36% Increase in Crude Oil Production in Q1 2024

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Aradel Holdings Plc, a prominent player in Nigeria’s energy sector, has announced a significant upswing in its crude oil production, a notable milestone in its operational performance for the first quarter of 2024.

During their 29th Annual General Meeting held in Lagos, Aradel Holdings unveiled that their crude oil production surged by 36% to 13,250 barrels per day compared to the average figures recorded in the previous fiscal year.

This increase underscores the company’s strategic efforts to enhance its production capabilities and optimize operational efficiencies.

Accompanying this impressive growth in crude oil output, Aradel Holdings also reported a substantial rise in gas production, reaching 36.8 million standard cubic feet per day, which reflects a parallel 36% increase from the previous year’s averages.

Despite a slight decrease of 1.6% in refined petroleum products, the overall operational metrics for the first quarter of 2024 showcased robust performance across key production segments.

Chairman of Aradel Holdings, Ladi Jadesimi, emphasized the pivotal role of strategic initiatives implemented in preceding years, which contributed to the company’s exceptional growth trajectory.

“We are pleased with the strides made in Q1 2024, driven by enhanced production volumes and improved operational efficiencies,” stated Jadesimi during the AGM.

He highlighted the successful implementation of the Alternative Crude Evacuation system introduced in 2022, which significantly minimized crude losses and bolstered overall production stability.

In financial terms, Aradel Holdings reported a remarkable 90% increase in revenues for Q1 2024 compared to the same period last year, signaling strong market demand and effective resource utilization strategies.

Moreover, the company achieved a commendable 62% growth in Profit Before Tax (PBT), reinforcing its position as a leading player in Nigeria’s energy landscape.

Commenting on the company’s outlook, CEO and Managing Director Adegbite Falade expressed optimism about Aradel Holdings’ future prospects.

“Our performance in Q1 2024 underscores our commitment to sustained growth and operational excellence,” Falade remarked. “We remain focused on leveraging our strategic advantages and advancing our capabilities to meet evolving market dynamics.”

Aradel Holdings’ stellar performance in Q1 2024 also propelled the company’s market capitalization to exceed N1 trillion, a significant milestone in its corporate history.

This achievement underscores investor confidence and reflects Aradel Holdings’ robust position in the Nigerian stock market.

Looking ahead, Aradel Holdings aims to build upon its Q1 success by further enhancing production capacities, exploring new growth opportunities, and maintaining a steadfast commitment to operational efficiency and sustainability.

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