Oil & Energy
NNPC Weekly Activities Highlight Energy Security
The weekly activities of the Nigerian National Petroleum Corporation (NNPC) started on a cheering note as the Federal Government assured the Corporation of maximum security as it returns to the Chad Basin for exploratory activities.
President Muhammadu Buhari gave the assurance during his recent visit to Borno State, following the improvement of security in the area.
The president tasked the NNPC to expedite action towards the delivery of 50 megawatts power plant in the state to ensure the prompt restoration of electricity to Maiduguri and its environs.
Still on a cheering note, the House of Representatives Committee on Upstream commended the National Petroleum Investment Management Services (NAPIMS), a corporate Service Unit of the NNPC for efficient management of the nation’s Joint Venture Operating Agreements with the International Oil Companies in Nigeria.
Rep Musa Adar, Chairman of the Committee, who gave the commendation during a recent oversight visit by the committee in Lagos noted that NAPIMS had demonstrated capacity and efficiency in the management of the nation’s hydrocarbon resources.
Speaking earlier, Group General Manager, NAPIMS, Mr Bala Wunti, urged the National Assembly to pass the Petroleum Industry Bill (PIB) to create a competitive oil and gas industry for the country.
Also in the week under review, NNPC struck a partnership deal with the Economic and Financial Crimes Commission (EFCC), Department of State Services (DSS), Nigeria Police Force (NPF), Nigeria Customs Service (NCS), and the Nigeria Security and Civil Defence Corps (NSCDC).
The deal with was struck with other relevant downstream and upstream stakeholders in the petroleum industry was to curb smuggling and crude oil theft which had negatively impacted the nation’s economy.
The Group Managing Director of the NNPC, Malam Mele Kyari, said the move was at the instance of President Muhammadu Buhari who had ordered a stop to crude oil theft and illicit truck-out of petroleum products to other countries.
Kyari said the president had urged the Corporation of every stakeholder to ensure that the daily national petroleum products consumption which shot up to 102million litres in May was brought down to realistic levels of around 60million litres.
“We will all agree that smuggling is not a business that should be condoned because even for deregulated petroleum products it brings extra cost burden on this country both in terms of safety and security of supply and in securing of foreign exchange.
“It even constitutes more burden to this country when the product involved is a regulated product like Premium Motor Spirit (PMS).
“We all know that our daily consumption is not up to 60million litres. We all know that, and that is why we have to pull it down. We will pull it down by every means necessary,” Kyari said.
He said NNPC would commence Advanced Cargo Declaration in line with global best practices to tackle the menace.
EFCC Chairman, Abdulrasheed Bawa, said the Commission would work with NNPC to ensure perpetrators of the act were brought to justice.
The Major Marketers Association of Nigeria (MOMAN), Depot and Petroleum Products Marketers Association of Nigeria (DAPPMA) and the Independent Petroleum Marketers Association of Nigeria (IPMAN), assured NNPC of total support towards the fight.
The Nigerian Association of Road Transport Owners (NARTO), Petroleum Tanker Drivers (PTD) and all the other stakeholders also pledged their support to fight smuggling.
The NNPC Gas and Power Investment Company (NGPIC), a wholly owned subsidiary of the NNPC, launched an initiative tagged “Hazard Hunt Awareness” aimed at curbing harmful incidents in and around the workplace.
NGPIC is a subsidiary of the NNPC with the responsibility to promote domestic gas utilisation and maximise value from investments across the LNG and power value chains as well as the gas-based industries.
The event which was held at the NNPC Towers Abuja saw the Chief Operating Officer, Gas and Power, Yusuf Usman, saying that the initiative was in line with NNPC Top Management’s drive towards becoming a company of global excellence.
“Safety is an aspect that we in the oil and gas industry should pay serious attention to for sustainable operations.
“The Hazard Hunt Initiative which we are launching today, is an awareness programme to help us to promptly identify unsafe acts and conditions so that we can curtail incidences and accidents in our operations,” Usman said.
Earlier in his remarks, the Managing Director of NGPIC, Mr Salihu Jamari, who was represented by the General Manager, Commercial, Mr Justin Ezeala, said that the initiative was a result of research and consultations with stakeholders.
Jamari stated that the programme would assist the NGPIC Management to deliver on its key performance indicators (KPIs) for 2021, pointing out that a company that operates safely would always have motivated staff strength driven towards profitability.
On his part, the General Manager, Group Safety, Health, Environment and Quality (GHSEQ), Mr Hussaini Ali, tasked every staff to be involved in identifying potential hazards and flagging them for prompt action in the interest of the organisation.
Still in the week under review, the NNPC through its Advanced Leadership Programme (ALP) class 095 donated a block of renovated three (3) classrooms, two (2) staff rooms and a borehole to Chachi community, in Tafa Local Government area of Niger state.
The donation was part of the Corporate Social Responsibility project of ALP Class 095.
The General Manager, Talent Management Department, Fatima Yakubu, represented by Mr John Ogbe, commended class 095 for supporting the community’s educational and water needs and encouraged members of the community to take proper care of the facilities for their good.
President of the class, Mr Ogunlolu Olumuyiwa, said Class 095 CSR focused on the renovation of the classrooms and staff rooms because of the dire need to encourage education in the country.
Olumuyiwa added that the borehole would also meet the water need of the community.
The Chairman of the CSR committee of the class, Mr Okeme Aliu, noted that the project was in consonance with the strategic directions of NNPC in ensuring CSR in its host communities.
The Dagachin Chachi, Alhaji Musa Abubakar, spoke in Hausa, and expressed gratitude to the NNPC and the class for supporting the growth and development of the community.
The NNPC also in the week explained the importance of Oil Mining Lease (OML) 118 which was discovered in 1996.
The Corporation while signing a partnership deal for another 20 years said the OML 118 covered approximately 60 sq km in an average water depth of 1,000 metres.
The deal was between NNPC and its Production Sharing Contract (PSC) partners including Shell Nigeria Exploration and Production Company (SNEPCo), and Total Exploration and Production Nigeria Limited (TEPNG).
Others were Esso Exploration and Production Nigeria Limited (EEPNL) and the Nigerian Agip Exploration (NAE).
The five agreements signed include, Dispute Settlement Agreement, Settlement Agreement, Historical Gas Agreement, Escrow Agreement and Renewed PSC Agreement.
NNPC GMD Kyari said over 10 billion dollars of investment would be unlocked as a result of the agreements which signaled the end of the long-standing disputes over the interpretation of the fiscal terms of the Production Sharing Contracts (PSC).
He disclosed that the deal would yield over 780 million dollars in immediate revenues to the Federal Government while it would also free the parties from over 9 billion dollars in contingent liabilities.
“This is an indication of a renewed confidence between NNPC and her partners; between the Government and the investing communities which include NNPC.
“It produces value for all of us by providing a clear line of sight for investment in the Bonga bloc of around 10 billion dollars.
“Ultimately, these agreements will engender growth in our country where investment will come in for other assets, not just in the deep-water, but even for new investors. It is an opportunity for them to see that this country is ready for business,” Kyari said.
NNPC partners applauded the Corporation for the unprecedented progress in the oil and gas industry that necessitated the deal.
On the global scene, Oil prices rose after industry data showed United States crude inventories fell more than expected, reinforcing views of a tightening supply-demand balance with road and air travel picking up in Europe and North America.
Brent crude futures jumped 42 cents or 0.6 per cent to 75.23 dollars per barrel, after giving up 9 cents.
United States West Texas Intermediate (WTI) crude futures jumped 33 cents or 0.5 per cent to 73.18 dollars per barrel, after falling 60 cents.
The American Petroleum Institute industry group reported crude stocks fell by 7.2 million barrels for the week ended June 18, according to two market sources.
Meanwhile, the Market Intelligence Department of NNPC’s London Office reported that Officials from several Organisations of the Petroleum Exporting Countries (OPEC)-plus countries are holding informal consultations.
The consultations include discussing the possibility of a further increase in the alliance’s oil production.
OPEC-plus is due to hold its next ministerial meeting on July 1 and scenarios prepared for the meeting by the OPEC secretariat pointed to growing demand for oil in the second half of this year.
That could support the case for a further gradual increase in the alliance’s production ceilings, the delegates said.
Oil Prices Back at Pre-Pandemic Levels as Brent crude oil futures have rallied since last fall and touched 75 dollars per barrel amid expectations that demand would continue to recover in the second half of this year.
The Federal Government has expressed optimism in attracting more investments by International Oil Companies (IOCs) into Nigeria to foster growth and sustainability in the energy sector.
This is as some IOCs, particularly Shell and TotalEnergies, had announced plans to divest some of their assets from the country.
Recall that Shell in January, 2024 had said it would sell the Shell Petroleum Development Company of Nigeria Limited (SPDC) to Renaissance.
According to the Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, increasing investments by IOCs as well as boosting crude production to enhancing Nigeria’s position as a leading player in the global energy market, are the key objectives of the Government.
Lokpobiri emphasized the Ministry’s willingness to collaborate with State Governments, particularly Bayelsa State, in advancing energy sector transformation efforts.
The Minister, who stressed the importance of cooperation in achieving shared goals said, “we are open to partnerships with Bayelsa State Government for mutual progress”.
In response to Governor Douye Diri’s appeal for Ministry intervention in restoring the Atala Oil Field belonging to Bayelsa State, the Minister assured prompt attention to the matter.
He said, “We will look into the issue promptly and ensure fairness and equity in addressing state concerns”.
Lokpobiri explained that the Bayelsa State Governor, Douyi Diri’s visit reaffirmed the commitment of both the Federal and State Government’s readiness to work together towards a sustainable, inclusive, and prosperous energy future for Nigeria.
While speaking, Governor Diri commended the Minister for his remarkable performance in revitalisng the nation’s energy sector.
The Federal Government has assured investors in the nation’s gas sector of the security and safety of their investments.
Minister of State for Petroleum Resources (Gas), Ekperikpe Ekpo, gave the assurance while hosting top officials of Shanghai Huayi Energy Chemical Company Group of China (HUAYI) and China Road and Bridge Corporation, who are strategic investors in Brass Methanol and Gas Hub Project in Bayelsa State.
The Minister in a statement stressed that Nigeria was open for investments and investors, insisting that present and prospective foreign investors have no need to entertain fear on the safety of their investment.
Describing the Brass project as one critical project of the President Bola Tinubu-led administration, Ekpo said.
“The Federal Government is committed to developing Nigeria’s gas reserves through projects such as the Brass Methanol project, which presents an opportunity for the diversification of Nigeria’s economy.
“It is for this and other reasons that the project has been accorded the significant concessions (or support) that it enjoys from the government.
“Let me, therefore, assure you of the strong commitment of our government to the security and safety of yours and other investments as we have continually done for similar Chinese investments in Nigeria through the years”, he added.
Ekpo further tasked investors and contractors working on the project to double their efforts, saying, “I want to see this project running for the good of Nigeria and its investors”.
Earlier in his speech, Leader of the Chinese delegation, Mr Zheng Bi Jun, said the visit to the country was to carry out feasibility studies for investments in methanol projects.
On his part, the Managing Director of Brass Fertiliser and Petrochemical Ltd, Mr Ben Okoye, expressed optimism in partnering with genuine investors on the project.
Crude oil prices recently logged their second monthly gain in a row as OPEC+ extended their supply curb deal until the end of Q2 2024.
The gains have been considerable, with WTI adding about $7 per barrel over the month of February.
Yet a lot of analysts remain bearish about the commodity’s prospects. In fact, they believe that there is enough oil supply globally to keep Brent around $81 this year and WTI at some $76.50, according to a Reuters poll.
Yet, like last year in U.S. shale showed, there is always the possibility of a major surprise.
According to the respondents in that poll, what’s keeping prices tame is, first, the fact that the Red Sea crisis has not yet affected oil shipments in the region, thanks to alternative routes.
The second reason cited by the analysts is OPEC+ spare capacity, which has increased, thanks to the cuts.
“Spare capacity has reached a multi-year high, which will keep overall market sentiment under pressure over the coming months”, senior analyst, Florian Grunberger, told Reuters.
The perception of ample spare capacity is definitely one factor keeping traders and analysts bearish as they assume this capacity would be put into operation as soon as the market needs it. This may well be an incorrect assumption.
Saudi Arabia and OPEC have given multiple signs that they would only release more production if prices are to their liking, and if cuts are getting extended, then current prices are not to OPEC’s liking yet.
There is more, too. The Saudis, which are cutting the most and have the greatest spare capacity at around 3 million barrels daily right now, are acutely aware that the moment they release additional supply, prices will plunge.
Therefore, the chance of Saudi cuts being reversed anytime soon is pretty slim.
Then there is the U.S. oil production factor. Last year, analysts expected modest output additions from the shale patch because the rig count remained consistently lower than what it was during the strongest shale boom years.
That assumption proved wrong as drillers made substantial gains in well productivity that pushed total production to yet another record.
Perhaps a bit oddly, analysts are once again making a bold assumption for this year: that the productivity gains will continue at the same rate this year as well.
The Energy Information Administration disagrees. In its latest Short-Term Energy Outlook, the authority estimated that U.S. oil output had reached a record high of 13.3 million barrels daily that in January fell to 12.6 million bpd due to harsh winter weather.
For the rest of the year, however, the EIA has forecast a production level remaining around the December record, which will only be broken in February 2025.
Oil demand, meanwhile, will be growing. Wood Mackenzie recently predicted 2024 demand growth at 1.9 million barrels daily.
OPEC sees this year’s demand growth at 2.25 million barrels daily. The IEA is, as usual, the most modest in its expectations, seeing 2024 demand for oil grow by 1.2 million bpd.
With OPEC+ keeping a lid on production and U.S. production remaining largely flat on 2023, if the EIA is correct, a tightening of the supply situation is only a matter of time. Indeed, some are predicting that already.
Natural resource-focused investors Goehring and Rozencwajg recently released their latest market outlook, in which they warned that the oil market may already be in a structural deficit, to manifest later this year.
They also noted a change in the methodology that the EIA uses to estimate oil production, which may well have led to a serious overestimation of production growth.
The discrepancy between actual and reported production, Goehring and Rozencwajg said, could be so significant that the EIA may be estimating growth where there’s a production decline.
So, on the one hand, some pretty important assumptions are being made about demand, namely, that it will grow more slowly this year than it did last year.
This assumption is based on another one, by the way, and this is the assumption that EV sales will rise as strongly as they did last year, when they failed to make a dent in oil demand growth, and kill some oil demand.
On the other hand, there is the assumption that U.S. drillers will keep drilling like they did last year. What would motivate such a development is unclear, besides the expectation that Europe will take in even more U.S. crude this year than it already is.
This is a much safer assumption than the one about demand, by the way. And yet, there are indications from the U.S. oil industry that there will be no pumping at will this year. There will be more production discipline.
Predicting oil prices accurately, even over the shortest of periods, is as safe as flipping a coin. With the number of variables at play at any moment, accurate predictions are usually little more than a fluke, especially when perceptions play such an outsized role in price movements.
One thing is for sure, though. There may be surprises this year in oil.
lrina Slav
Slav writes for Oilprice.com.