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Now is the Time to Invest in Angolan Oil and Gas

Over the past three decades, Angola has established itself as the premier destination for large-scale oil and gas investment.

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Over the past three decades, Angola has established itself as the premier destination for large-scale oil and gas investment.

However, the country’s rich acreage represents only one of the reasons foreign investors and project developers are attracted to the country, with high returns on investment associated with Angolan oil and gas incentivizing global participation in the market.

Energy Capital & Power, in partnership with the Angolan Ministry of Mineral Resources and Petroleum, will host the Angola Oil & Gas 2023 conference┬áthis September to showcase investment opportunities within the country’s burgeoning energy industry.

Having recently been anointed sub-Saharan Africa’s largest oil producer and boasting confirmed reserves of 9 billion barrels of oil and 11 trillion cubic feet of natural gas, the southern African country hosts some of the world’s foremost oil and gas companies, including supermajors TotalEnergies, Chevron, ExxonMobil, bp and Eni. Angola’s current output is approximately 1.37 million barrels of oil per day (bpd) and 17,904.5 million cubic feet of natural gas.

As such, the country’s resource potential is high, and the country’s Government has sought to develop an enabling environment for its oil and gas industry while incentivizing investment into the sector through a robust series of regulatory reforms, infrastructure developments, and exploration strategies.

The Government’s National Development Plan 2018-2022 and its updated Hydrocarbon Exploration Strategy 2020-2025 showcase the immense potential within the country’s geologically appraised concessions and sedimentary basins, with underexplored prospects such as the Kwanza Basin and offshore deepwater Namibe Basin serving as some of the world’s leading frontiers for hydrocarbon exploration and production.

Angola also boasts well-established infrastructure to support its oil and gas industry, thus enabling potential investors and project developers to reduce costs and time required to develop new projects while expanding their footprint in one of the world’s fastest growing economies. The country’s 60,000 bpd Luanda Refinery, its 5.2 million ton per annum Angola Liquefied Natural Gas plant, and domestic pipelines connecting oilfields to processing facilities serve to support and grow the entire energy value chain while positioning the country as a regional hub for energy development.

In addition to the Luanda refinery, the Government has sought to expand the country’s refining capacity through the development of three additional refineries, which include the Cabinda, Lobito, and Soyo Refineries, which will boast a total combined capacity of 360,000 bpd upon completion. As part of the Government’s stated priorities of diversifying the country’s economy, once completed, these additional refineries are expected to significantly reduce its fuel import costs, saving an estimated $2.7 billion per year.

Meanwhile, as a result of the global energy transition, natural gas is poised to serve as an essential intermediary in the world’s push towards decarbonization. As a result, Angola is well-positioned to play a significant role in the energy revolution while leveraging its natural resources to promote wealth creation and socioeconomic development.

With a long history of participating international oil companies and service providers in Angola, the country’s oil and gas industry offers significant opportunities for partnerships and collaboration. Potential investors have the opportunity to connect with experienced industry players with a deep understanding of the market, including experience in reserves, infrastructure, and regulations.

On the upstream front, an increased Government focus on the development of crude oil and natural gas assets are expected to result in an annual growth rate of over 1.5% between 2022 and 2027. Furthermore, a recent announcement by Angola’s Ministry of Economy and Planning indicated that the country forecasts economic growth of approximately 3% in 2023, thereafter increasing annually by over 3.6% between 2023 and 2027. This market growth will be driven primarily by Angola’s oil sector, which has yet to tap into untapped oil reserves in the Congo and Kwanza Basins in the coming years.

Angola’s economic outlook, oil demand and supply trends, ongoing diversification efforts, and investment opportunities will be unpacked during this year’s edition of the Angola Oil & Gas (AOG) 2023┬áconference and exhibition, taking place in Luanda from 13-14 September. AOG 2023 will feature high-level panel discussions, exhibitions, and exclusive networking forums showcasing investment and partnership opportunities within the country’s oil and gas sector.

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Crude Oil

Oil Prices Surge as China’s Holiday Demand and Tight US Supply Drive 2% Weekly Gain

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Oil prices to close the week with about a 2% gain as robust holiday demand from China and constrained U.S. fundamentals overshadowed concerns about potential supply increases from Saudi Arabia.

Brent crude oil, against which Nigerian oil is priced, gained 5 cents to $95.43 per barrel at about 6:00 a.m. Nigerian time on Friday while the U.S. West Texas Intermediate crude (WTI) rose by 16 cents to $91.87 per barrel.

The market’s resilience became evident as it rebounded from a slight 1% dip in the previous session when profit-taking followed a surge in prices to 10-month highs.

China, the world’s largest oil importer, played a pivotal role in driving prices higher. Strong fuel demand coincided with China’s week-long Golden Week holiday, with increased international and domestic travel significantly boosting Chinese oil consumption.

Analysts at ANZ noted that this holiday season’s surge in travel was underpinned by the fact that the average daily flights booked were a fifth higher than during Golden Week in 2019, pre-dating the COVID-19 pandemic.

Also, improving macroeconomic data from China and the steady growth of its factory activity further supported the bullish sentiment.

The U.S. economy’s robust growth and indications of accelerated activity in the current quarter also bolstered expectations of sustained fuel demand.

Also, tight supplies in the U.S., evidenced by dwindling storage levels at Cushing, Oklahoma, provided additional support to oil prices. As rig counts fell, U.S. oil production was expected to slow down, potentially pushing the market into a deficit of more than 2 million barrels per day in the last quarter.

Investors are now eagerly awaiting the upcoming meeting of the Organization of the Petroleum Exporting Countries and allies (OPEC+), scheduled for October 4th.

The meeting will be a crucial indicator of whether Saudi Arabia will consider stepping up its supply in response to the nearly 30% surge in oil prices this quarter.

Analysts, however, caution that the market may be entering overbought territory, leading to possible hesitancy among participants and concerns that OPEC+ could ease production cuts earlier than planned if prices continue to rise.

The outcome of next week’s OPEC meeting will undoubtedly hold significant implications for the oil market’s future trajectory.

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Oil Prices Soar to a Year High as Crude Reserves Plummet

Crude stocks at a pivotal storage hub in Cushing, Oklahoma, hit their lowest levels since July last year, sparking concerns about future supply stability.

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Oil prices surged to their highest level in over a year during Asian trading hours, following a significant drop in crude stocks at a key storage hub.

Crude inventories in Cushing, Oklahoma, plummeted to a mere 22 million barrels in the fourth week of September, close to operational minimums, according to data from the U.S. Energy Information Administration (EIA).

This translates to 943,000 barrels compared to the prior week.

The U.S. West Texas Intermediate (WTI) rose to $95.03 per barrel during Asian trading hours, a peak not seen since August 2022 before settling at $94.61 per barrel.

Meanwhile, Brent crude oil, the international benchmark for Nigerian oil, rose by 1.05% to $97.56 per barrel.

Experts have attributed this rapid price escalation to the precarious situation in Cushing, with Bart Melek, Managing Director of TD Securities, stating, “Today’s price action seems to be Cushing driven, as it reaches a 22 million bbl low, the lowest level since July 2022.”

Melek expressed concerns about the challenges of getting crude oil into the market if inventories continue to dip below these critical levels.

Predicting the future trajectory of oil prices, Melek suggested that prices could remain at elevated levels for the remainder of the year, especially if the global oil cartel, OPEC+, continues to enforce supply restrictions.

He noted that the global oil market is facing a “pretty robust deficit” on top of an already significant shortfall for this quarter due to OPEC’s production cuts.

Saudi Arabia, a key player in OPEC+, has extended its voluntary crude oil production cut of 1 million barrels per day until the year’s end, bringing its crude output to nearly 9 million barrels per day.

Russia has also pledged to continue its 300,000 barrels per day export reduction until December.

However, Melek added that, “We do think that prices could keep up near these levels for quite some time. But I don’t think it’s too permanent. And we might have seen the end of this rally.”

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Nigerian Pump Prices May Increase as Crude Oil Hits $93.55 Per Barrel

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Amidst growing concerns over the surging price of crude oil on the international market, Nigerian citizens are bracing themselves for a possible increase in pump prices.

Crude oil, the lifeblood of Nigeria’s economy rose to $92.42 per barrel on Monday, casting a shadow of uncertainty over the already volatile fuel market.

This surge in crude oil prices comes in tandem with the persistent depreciation of the Naira in foreign exchange markets, where it traded at N980 to $1 on the parallel market. For many Nigerians, these simultaneous developments trigger memories of the recent fuel price hikes that followed the removal of fuel subsidies earlier this year.

In June, the government removed the subsidy, leading to a sharp 210% increase in the pump price from N175 per liter to N546.83 per liter. In a further blow to consumers, less than a month later, the price surged again, reaching N617 per liter.

However, since then, there have been no additional fuel increments, despite fluctuations in the Naira’s exchange rate. President Bola Ahmed Tinubu, along with key government officials and industry leaders, has reiterated their commitment to stabilizing petrol prices in the country.

According to Ajuri Ngelale, Special Adviser to the President on Media and Publicity, “The President affirms that there will be no increase in the price of petroleum motor spirit.”

Mele Kyari, Group Chief Executive of the Nigerian National Petroleum Corporation Limited (NNPC), echoed this sentiment, emphasizing that NNPC is the sole supplier of petrol nationwide and has not proposed any price hikes.

Industry experts like Chinedu Okonkwo, President of the Independent Marketers Association of Nigeria (IPMAN), have urged the government to expedite efforts in implementing Compressed Natural Gas (CNG) as a viable alternative to traditional fuels, providing a long-term solution to the country’s energy needs.

While the global crude oil price surge is a cause for concern, Nigerians are holding onto the government’s commitment to price stability and the potential for CNG to provide a sustainable energy alternative in the future.

In a market with unique dynamics, where NNPC remains the sole supplier and importer of fuel, the hope is that prices will remain stable for the benefit of all Nigerians.

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