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 Dr Ibe Kachikwu the Nigerian Minister of State for Petroleum yesterday said in Jeddah, Saudi Arabia, that he hoped the crude oil supply cut agreement between the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC members would be extended until the end of 2019. OPEC+, agreed to cut production by 1.2 million barrels per day (bpd) on January 1, 2019, for an initial period of six months. Crude oil benchmarks have increased by over 40% since the decision was taken. OPEC, of which Saudi Arabia is the de facto leader finds itself in a difficult position. The Saudi energy Minister Falih has to find a delicate balance between keeping the oil market well supplied and prices high enough for Riyadh’s budget needs, which equate by sone estimates to over $80 a barrel. There is also the issue of keeping Moscow on board to ensure Russia remains in the OPEC+ pact. Then there is the conundrum of balancing US interests against those of a volatile and divided OPEC.

Falih has said “It is critical that we don’t make hasty decisions – given the conflicting data, the complexity involved, and the evolving situation,” he said, describing the outlook as “quite foggy” due in part to a trade dispute between the United States and China which seem increasingly likely to deteriorate demand for oil. On its part, Saudi Arabia sees no need to boost production quickly now, with oil at around $70 a barrel, as it fears a price crash and a build-up in inventories, Reuters quoted OPEC sources as saying. Suhail al-Mazrouei the Energy Minister of the United Arab Emirate, said oil producers were capable of filling any gap in the oil market and that relaxing supply cuts was not “the right decision”. Mazrouei said the UAE did not want to see a rise in inventories that could lead to a price collapse and that OPEC would act wisely to maintain sustainable market balance. US crude inventories rose unexpectedly last week to their highest since September 2017 There exists a general consensus which seems to be supported by the data that while there is concern about supply disruptions, inventories are rising and the market is adequate supplied with crude. Though Russian Energy Minister Alexander Novak also told reporters that different options were available for the output deal, including a rise in production in the second half of the year.

OPEC’s agreed share of the cuts is 800,000 bpd, but its actual reduction is far larger due to the production losses in Iran and Venezuela. Both are under U.S. sanctions and exempt from the voluntary reductions under the OPEC-led deal. Oil prices edged lower on Friday due to demand fears amid a standoff in Sino-United States trade talks, but both benchmarks ended the week higher on rising concerns over disruptions in Middle East shipments due to United States-Iran political tension.

Nigeria will propose a supplementary budget later this year to boost capital spending and fund a 67 percent increase in the minimum wage as government revenues improve. Additional spending plans will be funded from improved oil revenue as the price of crude has risen to above $70 a barrel compared with $60 that the 2019 budget was predicated. Nigeria will be keen to ensure that OPEC supply cuts remain and that geo-political tension creates a bull market where oil breaks through the $80 barrier. Nigeria have confirmed in the recent past that they stand firm in supporting the Saudis in creating price stability in the oil markets and have recently signed a Memorandum of Understanding with the government in Riyhad.

As Iran-backed Houthi rebels increasingly deploy drones in Yemen’s brutal civil war on attacks on Saudi oil infrastructure the prospect of conflict in the Persian gulf is inevitable. Saudi Arabia’s foreign minister said yesterday that the kingdom wants to avert war in the region but stands ready to respond with “all strength” following the attacks. “Although it has not affected our supplies, such acts of terrorism are deplorable,” Falih said without irony. “They threaten uninterrupted supplies of energy to the world and put a global economy that is already facing headwinds at further risk.” The attacks come as the United States and Iran increase belligerent exchanges which are now almost certainly going to end in conflict. It is improbable that OPEC survive such conflict.

 

 

Nigeria's  Minister of Finance, Zainab Ahmed, in a act of wanton financial abracadabra and using as justification the metric established in the Fiscal Responsibility Act has said that Nigeria’s debt which currently stands at about N24.3tn is sustainable. She said that the country’s debt, which is about 19% to Gross Domestic Product(GDP), is low if compared to the likes of Ghana, Brazil, South Africa, Egypt and Angola. Quite why she chose  this seemingly random group of countries to base her comparison is unclear.

She  went on to say, “In the borrowing, we are still at 19 per cent to GDP; our borrowing is still low. Fascinating that the Nigerian finance minister seeks to rely on the one metric that has the least relevance whilst choosing to ignore far more ominous signs of an impending debt trap. Nigeria’s total debt stock as of December 31, 2018, stood at N24.387tn. The figure swelled by 12.25 per cent  year on year. Nigeria’s 2019 budget, presented by President Muhammadu Buhari in December and yet to be approved by lawmakers, envisaged the government issuing about 1.65 trillion naira ($4.6 billion) of new debt, half of which would be in foreign currency. The debt in real terms rose by  N2.66tn from December 31, 2017, to December 31, 2018. 

Director General of the DMO, Patience Oniha, said the funds were borrowed to fund projects, to finance budget deficit and to refinance maturing obligations. Particularly, some foreign debt was used to refinance treasury bills because of the short tenor of the bills, adding that borrowing from abroad had also helped to stabilise the local currency in the last two years. 

Aiteo Group on announced a fresh closure of the Nembe Creek trunk line(NCTL). The NCTL is a 97-kilometre, 150,000 barrels of oil per day owned by Aiteo Group, purchased as part of the acquisition of oil bloc OML 29 bought from Shell Petroleum Development Company, (SPDC). It is one of Nigeria’s major oil transportation arteries used to evacuate crude from the Niger Delta to coastal export terminals. Nigeria will lose the capacity to export 150,000 barrels of crude oil per day until it is reopened. This has forced both Shell and Total to declare force majuerre on Bonny Light and Amenam crude grades respectively

Aiteo work closely with the host communities with most of the supply, logistics and security contracts going to local contractors in a concerted effort to avoid costly sabotage and militant attacks on their installations

Nigerian grades however were being offered at steady, relatively firm levels. Qua Iboe was being offered at a relatively high price at a premium of $2.50 to dated Brent. We have learnt that about half of the Nigerian cargoes for June loading remain available.

Nigeria should be well placed to benefit from the exit of Iranian crude from global oil markets and with the impending driving season providing support for Nigeria lighter sweet barrels that provide high yield gasoline cracks to Refiners

Reuters reported a VLCC chartered by Marathon was carrying Nigerian Bonga to the United States. European buyers also were heard to be showing strong interest in Nigerian oil, given the relatively high gasoline cracks and an unusually low North Sea export programme because of maintenance.

Wednesday, 08 May 2019 13:50

IRAN SANCTIONS THREATEN OPECs EXISTENCE

There can be no real dissent that the real special relationship is the one that exists between the US and Saudi Arabia and it is the one that poses an existential threat to OPEC. I am inclined to agree with Iran’s oil minister Bijan Namdar Zanganeh as he warns that OPEC is on the verge of collapse because some members are targeting their fellow producers. His remarks came after the Trump administration tightened sanctions on Iran’s oil exports on Thursday. The White House says Saudi Arabia and the UAE have agreed to offset the drop in supplies, even though OPEC has agreed to cap output through June. Saudi Arabia are yet to formally confirm this agreement stating only their   ongoing obligation to ensure that the market is adequately supplied with  crude and prices remain stable. Iran told the OPEC on Sunday that no member country should be allowed to take over another member's share of oil exports, this in direct response to Saudi Arabia's apparent offer to pump more oil thus increasing the efficiency of US sanctions on Iranian oil. Lest we forget despite OPEC’s nature being that of a cartel, its members are competitors for market share and in the case of Saudi Arabia and Iran pretty much everything else.

That regional rivals  Saudi Arabia and  Iranian have been able to co-exist within  OPEC during recent years of political tension and turbulence within the Middle East has always been a tenuous proposition .  Despite effectively  facing off in proxy wars in Syria, Yemen and Iraq, OPEC  has provided a refuge where their shared goal of obtaining the best price for their crude oil production has created an environment of collaboration albeit as a ‘marriage of convenience ’which up until recently has outweighed the political, religious and historical antipathy they share for each other.

Nigerian state oil company NNPC has announced that 132 companies have participated in the bid for the highly sort after and much prized right to crude oil for product swap tender. NNPC issued the tender for the contract in March after extending the previous contract to June 2019. The Direct Sales Direct Purchase contract
evolved from the various different original offshore processing agreements. These agreements were bought in after the import subsidy scandal which saw numerous
companies implicated in fraudalent practices such as round tripping and outright false declarations of cargoes. Because the Government regulate petrol prices at a
cap below the landing cost, importers were required to reconcile the difference between their actual cost of importing and the regulated price in accordance with
an approved template.

The subsidy scandal cost Nigeria an estimated $6.8bn which is far in excess of any amount needed to repair the nations run down and dilapidated Refineries. But the
real scandal must be that

Wednesday, 01 May 2019 13:10

NIGERIA TO DOUBLE OIL PRODUCTION BY 2025


Nigeria has announced ambitious plans to double its oil production by 2025, targetting 4 million bpd in six years’ . Maikanti Baru, Group Managing Director at the
Nigerian National Petroleum Corporation (NNPC), admits that the target is aggressive but appeared certain when he said last week that Nigeria is committed to
meeting it. The GMD has a penchant for making overly optimistic if not widly unreasonable predictions which only serve to undermine confidence in the National oil company.

Nigeria currently pumps around 2.2 million bpd in both crude oil and condensate. In March Nigeria’s crude oil production stood at 1.733 million bpd, up by 11,000 bpd
on the previous month. Over 10 years ago Nigeria commited to increase oil reserves to 40 billion barrels, that commitment never really looked plausible and has been kicked down the road until 2025 too. Nigeria has not had a bid round for over 10 years during which the passage of the Petroleum Industry Bill, the legislation created to provide certainty to investors has not been passed. It is hard to see how any investment can be made when the legislation that is meant to provide the fiscal and regulatory regime has not be passed.

Aiteo declares force majeure on Nembe Creek Trunk line (NCTL) after a fire incident. The company an indegenous E&P player produces 150,000 bpd of oilIn a statement released by the company they confirmed the fire outbreak was discovered by the company’s surveillance team on Sunday 21st of April. Aiteo explained that despite its urgent intervention and containment action, they were constrained to shut in injection as well as other related operations into the NCTL. I

The NCTL has recently enjoyed uninterrupted operation prior to this incident, raising the spectre that the fire may have been an act of sabotage by one of the many militant groups that operate in the Niger Delta.The company added that relevant investigations were continuing while further information about the remote and direct causes of the fire would be communicated as soon as these became available. Aiteo Group acquired block OML 29 from Royal Dutch Shell and has emerged as one of Nigeria’s leading oil and gas companies.

The fire has created further disruption as Nembe Creek T^runk Line is one of the two major evacuation pipelines for both Amenam and Bonny Light crude grades. Royal Dutch Shell along with Total have been forced to declare force majeure. Exports of Amenam are typically around 100,000 bpd with May and June loadings for Bonny Light about twice that amount.

The NCTL has been a target for the Niger Delta Avengers a militant group which boasts of broadbased support in the region and who have been involved in targetting oil and gas installations. It remains to be seen if this incident signals an upsurge in violence in the region. In any event a single simple and perhaps strategic fire has taken over 300,000 bpd production of sweet light crude off the market

Sunday, 28 April 2019 21:16

PICK UP THE PHONE OPEC, ITS DONALD

The gasoline prices are coming down. I called up OPEC. I said, ’You’ve got to bring them down. You’ve got to bring them down’, and gasoline’s coming down,” US President Donald Trump's call to OPEC has created much debate. It is now clear that no such call took place. We no longer need to attempt to divine the actions of a President that full in the knowledge that his mis-speak would be exposed, he seems powerless to overcome his impulsive behavior.

The significance is however not that no such call was made, but that Trump has created the narrative that OPEC are the villans, the cause of high gasoline prices and restricting OPEC is the solution to reducung high gasoline prices. Such a narrative effectively exempts US foreign policy from any culpability in the increase in gasoline pricing. Trump asserted erroneously that as a consequence of his call to OPEC, gasoline prices had began to fall. The simple fact is that schitozphrenic US foreign policy is the definitive reason for increase in global oil prices

Wednesday, 24 April 2019 18:05

KACHIKWU COMES CLEAN RECANTS ON REFINERIES

The Nigerian Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has not unpredictably stated that Nigeria’s continuous subsidy of petrol consumption means the Nigerian National Petroleum Corporation (NNPC) will remain unprofitable. He further reneged on his unrealistic committment to have the nation's refineries working at template capacity by the end of 2019. This effectively means that Nigeria will still face the burden of importing refined products despite the best efforts of the current Administration. The Minister speaking on – Hard Copy, a Nigerian take on BBC's 'Hard Talk' stated that with huge petrol under-recovery in the books of the NNPC, it would be difficult for the corporation to record any profit. According to the Minister, 'Under Recovery', the term employed to describe the difference between the actual cost of the fuel and its sale price which equates to a loss of about NGN40 per litre ($0.11/Ltr). The Minister openly admitted in what can only be described as a total and stark admission of failure when stating

“I think that if there is one area where I feel sad, it is certainly the refineries because there is a huge gulf between my expectations and the pronouncements that I had made in terms of where I’d like to be and what we have been able to achieve."

Monday, 22 April 2019 21:37

SHALE THE DOTCOM THAT WEARS ROBES

In the past decade, the shale-fracking revolution has made the U.S. the world’s largest oil-and-gas producer and reshaped markets. Despite this shale has been a dreadful impulse for most investors. For example Since 2007, shares in an index of U.S. producers have fallen 31%, while the S&P 500 rose 80%. Energy companies in that time have spent over $280 billion more than they have generated from operations on shale investments.

Recently the U.S. government has cut its oil production forecast for the first time in six months as drillers scale back in smaller shale plays in the U.S. , the Permian and the Gulf of Mexico. Whilst crude output is still anticipated to reach record levels, the Energy Information Administration (EIA) revised down its 2019 forecast to 12.3 million barrels a day -- 110,000 barrels-a-day lower than the previious forecast. In 2020, production is expected to reach 13.03 million barrels a day --

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