Saturday, January 11, 2025
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War In Ukraine: Putin Calls For Ceasefire, Starting Today

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Russian strongman, Vladimir Putin has ordered a temporary ceasefire in his country’s military aggression in Ukraine. In what Ukraine leaders said smacks ‘hypocrisy,’ the move is viewed as evidence that the bite from the EU sanctions is really getting into Kremlin. 

A report yesterday said the decision to call for the cease fire however followed a request by Russia’s spiritual leader, Patriach Kirill, on the eve of Orthodox Christmas. Many Orthodox Christians in Russia and Ukraine celebrate Christmas on January 6-7

The 36-hour ceasefire will begin at noon on January 6, the Kremlin said.
“Taking into account the appeal of His Holiness Patriarch Kirill, I instruct the defence minister of the Russian Federation to introduce from 12.00 (0900 GMT) on January 6, 2023, until 24.00 (2100 GMT) on January 7, 2023, a ceasefire along the entire line of contact between the sides in Ukraine,” the Russian leader said in a statement released by the Kremlin.

Also Read: Chevron Boss Denies Biden’s Claims Of Oil Firms ‘Profiteering’ From Ukraine Invasion

“Proceeding from the fact that a large number of citizens professing Orthodoxy live in the areas of hostilities, we call on the Ukrainian side to declare a ceasefire and allow them to attend services on Christmas Eve, as well as on Christmas Day,” Mr. Putin said in Thursday’s order.

Ukrainian and Russian forces are facing off over 1,500km of front line, with fighting intensity ranging from almost constant — such as the battle of Bakhmut in eastern Ukraine — to sporadic and almost quiet in some areas — such as the front line near Kherson in the south.

Patriarch Kirill of Moscow, the head of the Russian Orthodox Church, called on Thursday for both sides of the war in Ukraine to observe a Christmas truce.

Meanwhile, Ukraine has described Russia’s declaration of a ceasefire over the Orthodox Christmas as “hypocrisy”. Russia “must leave the occupied territories — only then will it have a ‘temporary truce’. Keep hypocrisy to yourself,”

Also Read: China’s Oil Imports From Russia Surges By $27bn Since Ukraine Invasion

Ukrainian presidential adviser Mykhailo Podolyak wrote on Twitter in reaction to the Kremlin announcement. Ukrainian President Volodymyr Zelenskyy had proposed a Russian troop withdrawal earlier, before December 25, but Russia rejected it.

Earlier on Thursday, the Kremlin said that Mr. Putin had told Turkish President Recep Tayyip Erdogan during a phone call that he was open to dialogue with Ukraine if Kyiv accepted territories occupied by Moscow as Russian.

Mr. Putin again confirmed Russia’s openness to serious dialogue on the condition that Kyiv authorities recognise the “new territorial realities”, the Kremlin said in a statement.

Mr. Erdogan called for peace talks during his conversation with Mr. Putin, his office said earlier.

Nigeria Has Been Borrowing To Fund Fuel Subsidy — Finance Minister

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…Subsidy to remain until mid 2023.

Nigeria’s minister of finance, Budget and national planning, Mrs. Zainab Ahmed, has confessed that, all the while, the country has been borrowing in other to meet petroleum subsidy needs, until now that the regime is no longer sustainable

At a forum in Abuja yesterday where she presented details of the 2023 national budget, Ahmed, said: “Fuel subsidy cost was a very high one; “We have been funding it from borrowing.”

According to her, petrol subsidy will “remain up to mid-2023 based on the 18-month extension announced early 2022. In this regard, only N3.36 trillion has been provided for the PMS subsidy.”
President Muhammadu Buhari’s administration had announced plans to end subsidy from July 2022 but changed its position when faced with threats of nationwide protests by labour.

Also Read: Tinubu Condemns Nigeria’s Oil-Linked Budget, Promises To Increase Output, End Fuel Subsidy

Party members and some officials of the administration were said to have convinced President Buhari that the decision will negatively affect his public rating and that of the ruling party and this forced the government to later announce an extension of the subsidy regime to lapse in June this year, one month after leaving office.

The minister also said the reconciliation between the ministry and the Nigerian National Petroleum Company Limited, NNPCL, is still ongoing to determine crude oil revenues and what should accrue to the federation account.

On the controversial securitisation of the N22.7 trillion borrowing from the Central Bank of Nigeria [CBN], by Ways & Means, she said her team would engage the National Assembly (NASS) on the lingering disagreement between the two arms of government on the issues.

Debt securitization is the process of packaging debt(s) from a source or number of sources into a single security to be sold to investors.

Also Read: Sanusi Calls For Scrapping Of NNPC, Says Fuel Subsidy Is Fraud

The minister said the decision to securitize the debt was to reduce the burden on the federal government, as interest on the Ways & Means could hit N2 trillion this year, from N1.2 trillion, if nothing was done.
“If successfully securitized, rather than the current interest rate of MPR+3per cent (19.5%), interest on the Ways & Means, it would reduce to about nine per cent,” she said.

On the macro-economy, she said the economy had been fully diversified, with oil revenue projected to contribute only N2.29 trillion (22% of revenue) to the budget in the current fiscal year.

She said: “In aggregate, 22% of projected revenues is expected from oil-related sources, while 78% is to be earned from non-oil sources. This shows that we have achieved a fully diversified economy in this country.”

FG Sets Up Oil Theft Special Court

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…Calls For End Of Crude Oil Theft By May 29

Nigeria has finally set up a special court to expedite the trials of criminal elements involved in oil theft and pipeline vandalism. This follows widespread calls by Nigerians asking that issues around crude oil should not be treated like ordinary criminal cases

The group chief executive officer, NNPC Limited, Mallam Mele Kyari, who dropped the hint in his address to the troops of the Joint Task Force Operation Delta Safe, in Effurun, Delta state and Port Harcourt, Rivers state, confirmed that the federation government has set up a special court to expedite the trials of criminal elements involved in oil theft.

Kyari, who also expressed gratitude to the troops for the excellent work they were doing to restore confidence in the pipelines said he was sure that full confidence will be restored in crude oil production in the shortest possible time.

Also Read: Auditor-General Says NNPC Exported $1bn Crude Oil Without Records, NNPC Denies

He also expressed confidence in the collaboration between security agencies and the private security company contracted by the NNPC Limited in the campaign to restore full confidence in the sector.
In his own address, the minister of petroleum resources, Mr. Timipre Sylva, hinted that President Muhammadu Buhari has ordered security agencies deployed to the Niger Delta region of the country to end the menace before he leaves office on May 29, 2023.

Sylvia who represented the substantive oil minister, President Muhammadu Buhari, said the administration said his administration can no longer tolerate the criminality.

Sylva quoted Mr. President, saying he “has mandated us to eradicate crude oil theft. He has directed that no liter of crude oil should be stolen in the country again especially in the South South.

“He wants crude oil thieves completely eliminated by May 29, 2023 as one of the legacies of his government. This is the message from Mr. President. We are not where we want to be but we are happy at what we are seeing”, he said.

Also Read: Tax Credit: NNPC’s N1.6trn Quest to Fix Nigerian Roads

He noted that prior to the renewed efforts of the government in tackling the menace of crude oil thieves, the nation’s daily crude oil production was about 900,000 barrels per day but the scaled up security efforts of the government has helped to shore up production to about 1.5 million barrels per day.

“I am happy to hear that morale is high here. We were here a few months ago to hand over the mandate of Mr. President to you and that is to ensure that there is zero tolerance for crude oil theft in the region. We want to thank you for what you have done so far but there is still more to be done for us to achieve 100%,” Sylva said.

He noted that “Nigerians have noticed what you are doing, the managers in the oil industry have noticed what you are doing and indeed the international community have noticed what you are doing. We are happy at the improvement we are seeing in the oil and gas sector.

Also Read: Nigeria: Oil Theft Degraded, Output Rises to 1.6mpbd – NNPC

“We have seen the significant improvement and that’s why we are here on the mandate of the president to thank you for what you are doing. He has said there should be no reason why we (Nigeria) should be losing an essential commodity that is the life wire of the country”.

By Bosco Agba

Auditor-General Says NNPC Exported $1bn Crude Oil Without Records, NNPC Denies

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Office of Nigeria’s Auditor General has accused the state oil company, the Nigerian National Petroleum Company (NNPC) Limited of exporting 17.877 million barrels of crude oil in four years without proper documentation.

But the oil firm, through its spokesman,  Garba Deen Muhammed, said in a counter statement yesterday, said the Auditor General of the Federation [AuGF] of Nigeria lied.   

In a report published on its last Tuesday night, the AuGF revealed that the product valued at $1,020,969,281.12 was exported by NNPC between 2016 and 2020. The AuGF also faulted the NNPC for appointing two Pre-Shipment Agents (PIAs) and one Monitoring and Evaluation Agent (MEA) in 2017 knowing fully well that President Muhammadu Buhari had canceled the appointments of all service providers two years earlier. The Office of the Accountant-General of the Federation was also indicted for making payments of N73 billion to PIAs and MEAs for inspection and monitoring of oil and gas exports.
AuGF noted that the payments were without budgetary provision and violated Section 80(4) of the 1999 Constitution.

Also Read: Nigeria: Oil Theft Degraded, Output Rises to 1.6mpbd – NNPC

But in a swift response yesterday, the NNPC spokesman, Mr. Mohammed did mention 32 oil marketing companies involved in the non-completion of the NXP forms

He said there was no wrong doing anywhere. “It does not in any way mean that the proceeds from the sale of the said crude were not repatriated into the coffers of NNPC Limited and consequently into the Federation Accounts for Federation related barrels.”

He said the auditor general lied in his assertion about the appointment of inspection agents.
“It should also be noted that NNPC Limited does not appoint Inspection Agents as alleged, but rather, it is the sole responsibility of the Federal Ministry of Finance.

Mohammed called on the general public to jettison the report from the office of the Auditor General of the Federation and disregard the content of the report.

Oil Prices Will Jump 28% In 2023 – Global Research Group

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…Also that another energy crunch would push prices higher

The political research and consultancy firm, Eurasia Group, has forecasted that oil prices will spring back above $100 a barrel in 2023 as tight supply meets growing demand.

In its list of top risks this year released yesterday, the group said that would represent a 28% increase in the price of international benchmark Brent crude, which traded around $77.90 a barrel on Wednesday.

Calculating for West Texas Intermediate crude, the increase would be 37% from $72.80 a barrel. The group stated further that the oil market is poised to experience shocks this year on the back of a faster-than-expected economic recovery in China after the country’s sudden exit from zero-COVID policies along with a shallow recession in the US that won’t sink demand.

Also Read: EU Focuses On Getting Members Accept The $60pb Cap For Russian Oil Prices

In the report authored by Ian Bremmer, president and founder of Eurasia Group, and Cliff Kupchan, the firm’s chairman and head of global macro coverage, the group stressed that those two factors would bolster demand growth for crude oil and expose an acute lack of new supply.

“Contributing to the problem are Russian production declines amid continued sanctions, low levels of OPEC+ spare capacity, reduced capital investment in non-OPEC production, and the absence of an Iran nuclear deal,” said the firm, noting that the lack of such a nuclear agreement is also on its list of risks. 

Tensions are likely to rise between OPEC+ and global consumers — led by the US — as the oil cartel wants to protect a price floor of about $90 per barrel for Brent, which is at odds with the lower prices for oil that consumers want.   

Also Read: Oil Prices Rebound As Investors Still Weigh Against Potential OPEC+ Supply Cut

“Higher prices will prompt the US to intervene directly in markets and punish moves by oil-producing states it sees as (at least partially) politically motivated,” Eurasia Group projected.

Meanwhile, US natural gas prices will go up and “feel the strain” from the European Union’s need to rebuild gas storage from the second quarter of this year in the absence of cheap Russian supplies.
China’s economic recovery and increased global demand for liquefied natural gas will likely drive US natural gas prices closer to $8 per million British thermal units or more.

Last year, natural gas topped $8 as European demand fed US price gains. They have since tumbled amid unseasonably warm weather and traded around $4.056 on Wednesday.

By Bosco Agba, with agency report

China, India Buying Up Russia’s Arctic Oil Crude Grades

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China and India have taken up positions and are now buying Russia’s crude grades from the Arctic, which used to be sold in Europe before the EU embargo.

The two countries became the two biggest buyers of Russian oil since the invasion of Ukraine by Russia last February.

Quoting trade data and sources, Reuters said this morning that Russia’s grades from the Arctic – Arco, Arco/Novy Port, and Varandey – have been selling at deep discounts in China and India as the EU embargo and the G7 price cap have further pushed more Russian crude to customers in Asia that have not joined the Price Cap Coalition.

Also Read: Russia Projects 7.5% Oil Exports Growth By 2022

“All these Arctic crudes usually go to the EU but now they have to go elsewhere,” a Singapore-based trader told Reuters. 

India imported at the end of 2022 its first cargo of Varandey crude from the Timan-Pechora oilfields operated by Lukoil, per sources and vessel-tracking data from Refinitiv.

The report noted that before the Russian invasion of Ukraine, India was a small marginal buyer of Russian crude oil. After Western buyers started shunning crude from Russia, India became a top destination for Russian oil exports alongside China.

Russia overtook Iraq to become the single-largest oil supplier to India in November, as Indian refiners raced to stock up on Russian oil ahead of the December 5 price cap and associated bans on transportation services for Russia’s crude.

Also Read: Russia Looks To Cut Its Dependence On The US Dollar

In China, independent refiners have seen their refining margins jump in recent weeks as they have been able to negotiate steeper discounts for their preferred Russian crude grade, ESPO, even if they buy it above the G7 price cap.

On the other hand, while China hasn’t joined the Price Cap Coalition, the fact that a price cap now exists gives the world’s top crude oil importer, as well as other buyers of Russian crude such as India, more bargaining power to negotiate steep discounts for the Russian crude even outside the price cap mechanism, analysts say.

Chevron Boss Denies Biden’s Claims Of Oil Firms ‘Profiteering’ From Ukraine Invasion

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Chevron’s chief executive officer, Mike Wirth, has pushed back on the persistent accusations by America’s Joe Biden that oil companies are profiteering from the surge in prices after the Russian invasion of Ukraine.

 Wirth told Bloomberg Television that the oil industry generates around 10% returns on capital employed through the cycle. “Through the cycle, it’s an industry that generates 10%-ish returns on capital employed, which is I think, by the standards of many other industries, a pretty modest return,” he said.

The Chevron boss also denied the allegation that oil firms are gouging consumers with gasoline prices, after the national average price of gasoline hit a record high in June.

Also Read: Chevron To Ship First Venezuelan Oil To The U.S. By Year-End

The oil market sets the price of oil and gasoline, not producers, Wirth said, adding, “I disagree with that characterization,” when commenting on the accusations of price gouging.

 Last October, Biden had threatened that if oil firms don’t invest in increasing production and refining capacity, “they’re going to pay a higher tax on their excess profits and face other restrictions.”

 With the decline in U.S. gasoline prices in recent weeks, the rhetoric of blaming the oil industry has subsided at the expense of the Administration taking credit for the falling prices at the pump.

Wirth stated that a windfall tax on oil companies would not be beneficial for either lowering U.S. gasoline prices or encouraging more supply.

Also Read: U.S. Signals Chevron To Pump Oil In Venezuela Again

“It’s not likely to reduce prices; in fact, it could do quite the opposite. So normally, if you want less of something, you tend to put more taxes on it. If we want more energy production, we want more supply to bring prices down, putting taxes on energy production’s probably not a good idea.”

Chevron believes that it needs to have a balanced approach to energy, focusing on affordability and reliability, alongside protecting the environment, Wirth said.

Oil Market: Prices Rebound After 2 Days Of Losses

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Oil prices rebounded yesterday following two straight days of heavy losses amid rising Covid-19 cases in top crude importer China and growing concerns of a global economic slowdown, Bloomberg reported
Brent, the benchmark for two thirds of the world’s oil, stood 2.4% higher at $79.72 a barrel at 2.18pm UAE time, while West Texas Intermediate, the gauge that tracks US crude, was up 2.47 per cent at $74.64 a barrel.

The report said both benchmarks fell more than 5% as at Wednesday after exceeding 4% declines the day before.

US pipeline operator Colonial Pipeline reportedly said its Line 3 had been shut for unscheduled maintenance, with a restart expected on January 7.

The Colonial pipeline, the world’s largest oil pipeline system, moves gasoline, diesel, and jet fuel from the US Gulf Coast to the US East Coast market. The Line 3 transports 885,000 barrels per day of crude products.

Also Read: EU Focuses On Getting Members Accept The $60pb Cap For Russian Oil Prices

World’s second largest economy, China, is reported to be grappling with its first national Covid wave, after the easing of its zero-tolerance approach last month.

“Near-term anxiety over the scale of Covid-19 infections in China is weighing against an otherwise bullish market outlook,” Edward Bell, a senior economist at Emirates NBD said in a research note yesterday
Futures have seen a sharp decline since the start of 2023, as investors continue to worry about China and the growing possibility of a recession. Based on current prices, Brent has lost about 9% of its value since December 30.

“We believe that China’s oil demand catch-up potential should not be overestimated because the recent setbacks were limited, the property market faces structural headwinds, and road fuel demand is exposed to a rapid electrification shift,” Norbert Rücker, head economics and next generation research, Julius Baer, said.

Also Read: Oil Prices Rebound As Investors Still Weigh Against Potential OPEC+ Supply Cut

The US dollar was reported weaker yesterday making oil cheaper for holders of other currencies. The US Dollar Index, a measure of the value of the greenback against a weighted basket of major currencies, was down 0.05% at 104.19.

It will be recalled that earlier this week, the International Monetary Fund’s managing director warned that a third of the world’s economies may slide into a recession this year.

US crude oil stocks rose by 3.3 million barrels last week, while gasoline stocks jumped 1.2 million barrels, according to market sources citing data from the American Petroleum Institute.

The indicator, which shows the level of oil and product stored, gives an overview of US petroleum demand. If the increase in crude inventories is more than expected, it implies weaker demand and is bearish for crude prices.

Minutes from the Federal Open Market Committee’s December meeting showed that the US Federal Reserve would continue to fight inflation and warned that “an unwarranted easing in financial conditions … would complicate the committee’s effort to restore price stability”.

Also Read: Beijing Protests: Oil Stocks Plunge As Divergence With Oil Prices Ends

Officials also acknowledged that they had made “significant progress” in moving towards a “sufficiently restrictive” stance of monetary policy, according to a statement on the central bank’s website.

Last month, the Fed raised its interest rates by 50 basis points to curb inflation that hit a four-decade high in June 2022 and indicated that more increases are planned this year. The Fed raised interest rates seven times in 2022.

“One thing which is pretty much crystal from the event last night is that it will be wrong to think that the Fed will begin the process of interest rate cuts this year,” Naeem Islam, chief market analyst at AvaTrade, said.

“More importantly, the risk of a policy mistake taking place is once again sky-high.”
The next FOMC meeting will take place on January 31 and February 1, with markets expecting an increase of 25 basis points. On Wednesday, Swiss bank UBS said it expects Brent to trade at $110 a barrel in mid-2023, while WTI is estimated to average $107 a barrel.

China’s reopening may result in oil demand hitting a “record high” in the second half of this year, the Swiss lender said in a research note.

Also Read: Oil Prices Rise As China Relaxes Covid Restriction

“Meanwhile, Russian oil production should fall in 2023 due to the European Union’s embargo on Russian crude and refined products,” UBS strategists said.

An increase in production outside the OPEC+ group of countries is expected to be modest, given years of underinvestment in new oil and gas projects, they said.

In its December oil market report, the International Energy Agency increased its global oil demand growth estimate for 2023 based on rising crude consumption in India, China and the Middle East. The agency expects oil demand to grow by 1.7 million barrels per day in 2023, up from its previous estimate of 1.6 million.

By Bosco Agba 

Electrical Engineer at Willers Solutions

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Nigeria Ranks 11th Of 20 Countries With Largest Oil Reserve

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Nigeria has ranked 11th position on a top-20 list of countries with largest proven oil reserves, a publication by Insider Monkey has shown.

Despite the impressive attainment on the list, Nigeria’s crude oil reserve has remained stagnant at 37 billion barrels for the past 10 years due to low exploration for new discoveries

According to the report, data from the Energy Information Administration (EIA) and other sources were used to sift out the largest countries with crude oil reserves as of 2021.

Nigeria’s crude oil is one of the most preferred due to its low sulfuric content, and low corrosiveness to refinery infrastructure. It also has a lower environmental impact of its byproducts during the refinery process, putting its grade, Bonny Light as one of the most expensively priced and sold at the international market.

This according to experts would require urgent reforms and political willingness to implement key fiscal reforms and reassurances of return on investment by overhauling present security architecture.
Their reaction follows a recent report which placed Nigeria on the 11th position after taking a look at the 20 countries with largest oil reserves in the world heading into 2023.
The report placed Nigeria after the Republic of Kazakhstan with oil reserves of 30 billion barrels as of 2021.

Nigeria has ranked 11th position on a top-20 list of countries with largest proven oil reserves, a publication by Insider Monkey has shown.

Despite the impressive attainment on the list, Nigeria’s crude oil reserve has remained stagnant at 37 billion barrels for the past 10 years due to low exploration for new discoveries

Also Read: NMDPRA Set To Revoke licenses Of Some Petrol Marketers

According to the report, data from the Energy Information Administration (EIA) and other sources were used to sift out the largest countries with crude oil reserves as of 2021
Nigeria’s crude oil is one of the most preferred due to its low sulfuric content, and low corrosiveness to refinery infrastructure. It also has a lower environmental impact of its byproducts during the refinery process, putting its grade, Bonny Light as one of the most expensively priced and sold at the international market.

Key operators in the oil and gas sector have projected that Nigeria is well positioned not only to sustain its position as top oil producer in Africa but readjust upward its current status among 20 countries with largest oil reserves.

This according to experts would require urgent reforms and political willingness to implement key fiscal reforms and reassurances of return on investment by overhauling present security architecture.
Their reaction follows a recent report which placed Nigeria on the 11th position after taking a look at the 20 countries with largest oil reserves in the world heading into 2023.
The report placed Nigeria after the Republic of Kazakhstan with oil reserves of 30 billion barrels as of 2021.

The country supplied 1.68 million barrels of oil in 2022, and its government owned oil company KazMunaiGaz (KMG) listed its shares on the stock market for the first time in December 2022.
Nigeria’s reserves was put at 36.89 billion barrels in 2021 and reportedly produced 1.13 million barrels of oil in November 2022.

The United States of America, queued behind Nigeria with reserves of about 47.10 billion barrels of oil as of 2020, while the state of Libya boosts of 48.36 billion barrels in 2021.
In her opinion Mrs. Tunbosun Afolayan, executive director ProAlly Energy and energy sustainability expert says Nigeria is well positioned to surpass its present reserves if right fiscal policies are put in place.
Afolayan, told LEADERSHIP that if Nigeria is willing to reduce cost of production by incentivizing operators through rebates, infrastructure development, tax holiday as obtains in other climes, investment inflows into the industry will create opportunities for more discoveries.

According to her, Nigeria has not fully tapped potentials in the sector and growing insecurity is further creating investor apathy which has recently led to production decline.
Recall that Angola produced more crude oil than Nigeria for the third consecutive month, after Nigeria lost 74,000 barrels per day in July compared with the previous month of June.In May and June, Angola produced more crude oil than Nigeria, despite an increase in the country’s output.

The Organization of Petroleum Exporting Countries, OPEC’s monthly report for July showed that Nigeria’s oil production declined by 74,000 barrels per day (bpd) to 1.08 million bpd in July from 1.26 million in June, based on direct communication.

Also Read: NCDMB Commissions Quality Control Laboratories

On its part, Angola’s oil production rose to 1.18 million bpd in July, up from 1.17 million bpd in June.OPEC uses secondary sources to monitor its oil output, but also publishes a table of figures submitted by its member countries.Nigeria recorded the second greatest decline in production among its OPEC peers in July, even though Angola’s also reduced, it still overtook Nigeria in terms of barrels drilled.

On his part, Dr. Muda Yusuf, Chief Executive Officer, CEO, of the Center For The Promotion Of Private Enterprise, CPPE, expressed similar confidence that Nigeria has the potential to overtake key oil producing nations listed in the report.

He posited that the enactment of the Petroleum Industry Act [PIA] was a major step towards the reform of the oil gas sector which promises to transform the sector through the creation of a legal and regulatory framework that would inspire much higher levels of investors’ confidence.

He said Nigerians would want to see greater commitment to the implementation of the PIA, adding that, “The deregulation of the petroleum downstream sector is a major economic reform imperative.
This is inevitable if we must unlock investment in the sector and put an end to the perennial fuel scarcity and the monopolistic structure of the sector.”

Meanwhile, Chief Timipre Silva, Minister of Petroleum Resources, says one of the key mandates of the ministry is to grow oil reserves from the current 37 billion barrels to 40 billion barrels by 2025.
This is evident following the official ground-breaking of the Oil Prospecting Licenses (OPLs) 809 and 810 at the Kolmani River II well located at a border community between Bauchi and Gombe states by President Muhammadu Buhari.

Speaking at the event, the Minister said, “This is a testimony of the fact that the hydrocarbons sector still holds the promise of returns on investment, highlighting the role that this resource will continue to play in the global energy mix,”.

He recalled that in 2019 when the Nigerian National Petroleum Company Limited, NNPCL, announced that it had encountered oil in ‘commercial quantities’ at the Kolmani River well II, the nation celebrated the news as a fitting outcome for years of geological investigations.

“In spite of the enormity of challenges that NNPCL, was confronted with, the day has come when we can collectively witness and celebrate drilling for hydrocarbons in the North of our dear country,”.
He said the ministry was committed to finding and developing ways to end energy poverty, create shared prosperity and enthrone sustainable development.

Sylva said the Petroleum Industry Act (PIA) provided regulatory support and framework for achieving this mandate by providing Frontier Exploration Fund which the NNPC could utilise to deploy world-class cutting-edge technologies to de-risk exploration in frontier basins.

“The commencement of drilling of Kolmani fields which could hold as much as one billion barrels crude oil reserve will significantly contribute in boosting our oil reserves and ensuring our continuous energy sufficiency,” he said.

Meanwhile, Nigeria’s crude oil production is recovering, climbing right back to about 1.6 million barrels as at December.

Chief Upstream Investment Officer, NNPCL, Upstream Investment Management Services, Bala Wunti, said this at the 11th Practical Nigerian Content forum in Uyo, Akwa-Ibom.
According to him, Nigeria’s oil production was 1. 6 million barrels per day, from 937, 000 barrels per day reported in September.

Wunti maintained that the output increase was a result of the government’s rectangular approach to the fight against crude oil theft.
“Crude theft affects all architecture that funds the country. When the oil theft reached its peak, everything including gas production was affected,” he said.

Also Read: Nigeria Underproduced 2022 Crude Oil Projection By 263mb In 11 Months

He said, “One, we have security agencies in which the Navy, the police, and everyone within that space was involved. The second is the regulators angle. At this stage, all regulators are made to fully be part of the efforts. Third is the operators’ angle. And, of course, all operators were involved.
The fourth angle is the community angle in which all impacted communities have to be brought under the umbrella of a structured arrangement in the collective effort against crude oil theft.

In all, these efforts were able to do three things; Detect, deter and respond appropriately.
“As at today, oil production is at 1.59 million barrels per day,” he said.
Nigeria has been unable to meet OPEC production quota in the last one year.
At the September Federation Account Allocation Committee, a Nigerian National Petroleum Company Limited presentation said Nigeria lost as much as 8.14 million barrels in August.

Available data shows that contribution of the oil sector to the Gross Domestic Product of the country fell to 5.7 per cent in the third quarter of this year.
The National Bureau of Statistics, NBS, in its GDP Sector Report, had said that the oil sector’s contribution of 5.7 per cent in Q3, 2022, was a decline when compared to a 6.3 per cent real GDP contribution recorded in Q2-2022.

The report stated that Nigeria’s average crude oil production in Q3-2022 was 1.2 million barrels per day (including condensates), lower than Q3-2021’s 1.6 million barrels per day, a 23.6 per cent decline.
The Ministry of Finance, Budget and National Planning said the excess crude account crashed by 89 per cent in the last eight years, moving from $4.1bn in November 2014 to $472,513 in the same period of 2022.The balance as of November 23, 2022, stood at $472,513.64.

The account has depleted in the last eight years as a result of lack of inflows, oil market vagaries and the country’s revenue crunch, according to reports.

Leadership

Why It Could Get Worse For Nigeria’s Oil And Gas Sector In 2023

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Nigeria’s oil and gas sector failed to maximize opportunities provided by higher oil and gas prices in 2022 due to various challenges, one of which was crude oil theft.

In October 2022, Nigeria’s Minister of State for Petroleum Resources, Timipre Sylva, said crude oil theft was impacting the country’s foreign exchange inflows. At the time, he stated: 
“Oil theft has denied the country an estimated 700,000 barrels of crude oil per day. The adverse effect of this is the drop in the production of crude oil and decline in the national income.” 

Multilevel losses: The earnings for companies in the oil and gas industry have declined 30% per year over the last three years for both downstream and upstream companies. Daily crude oil production fell below 1 million barrels per day (bpd) and significantly reduced export earnings and foreign exchange reserves to an all-time low. 

Failure to cash out: Oil and gas analyst, Etulan Adu, told Nairametrics that international oil companies (IOCs) have pushed for divestments of marginal onshore assets and Nigeria has seen an increase in indigenous participation in the industry. But the gains of higher oil and gas prices eluded the country in revenues amounting to over $15 billion based on some estimates.

According to Adu, Nigeria’s oil and gas sector struggled for survival right from Q1/2022, despite surging crude oil prices and major oil-producing countries raking in profits. Nigeria lost its top oil producer position in Africa to Angola and regained it in Q4/2022. He said:“The challenge of oil theft, pipeline vandalism and under-investment in upstream activities brought Nigeria’s oil production to a 30-year low mark. We saw the government and the Nigerian National Petroleum Company (NNPC) engage stakeholders to bring an end to crude oil theft by engaging private security firms which have helped significantly the return of oil production to over 1.2 million barrels per day (bpd).”
Can we be optimistic? Etu

lan Adu tried not to be over-optimistic for 2023 as the country is set to experience a change in government administration. Although several deals on new floating liquefied natural gas (FLNG), gas export pipelines to Europe and a lot of projects were announced in 2022, energy analysts fear that some of these projects will not come to reality amidst challenges like a lack of finance and political willpower. Adu said:

Also Read: Nigeria Underproduced 2022 Crude Oil Projection By 263mb in 11 Months

“2022 brought gas and power generation conversation as a solution for economic development, diversification and job creation to the forefront and the Nigeria Liquefied Natural Gas (NLNG) Limited Train 7 project is kicking on fine. Offshore blocks are being issued for bids; revenues have also declined 13% per year. This means overall sales from these companies are declining and profits are subsequently falling as well. 

“Despite 2022 challenges, investors are optimistic about the Nigerian oil and gas industry and appear confident in long-term growth rates.

“However, in 2023, we expect that the prices of liquefied petroleum gas (LPG) also known as cooking gas will still be high for the common Nigerian, petrol prices will still be high, there will be increased oil production as the government keeps fighting the crude oil theft problem. There will also be further investment in natural gas.”

Rollercoaster year: Oil and gas analyst, Kayode Oluwadare says that it has been a rollercoaster affair in terms of production and pricing for the Nigerian oil and gas industry. He highlighted the fact that the Russia-Ukraine war has had a significant impact on oil pricing since Q1/2022. He said:

“It is quite unfortunate that Nigeria was not able to maximize or take advantage of the price increase which went up to $100 per barrel at some point. We lost some ground, unlike Saudi Arabia, Qatar and even the United States were posting high profits from crude oil sales.

“Looking at the oil industry performance of 2022, we saw how Nigeria’s crude production hit an all-time low, at a point we recorded just a little over 900,000 barrels per day. Although some concerted efforts have been made through the joint task force spearheaded by former Niger Delta militant, Tompolo, checking around the Niger Deta region for illegal pipelines and other installations which have helped to forestall the crude oil theft which has been going on for decades.”

Some positive projections: The good news, however, is that the oil market projections are good and reflected in the new $75 benchmark pegged in the 2023 budget.

Oluwadare says that in the year 2023, the following factors will likely push oil prices high:  Russia has decided to stop exporting its oil to countries with a price cap, so, the implication is that Russian production will drop, even though it is expected that some of those products will be diverted to countries like China, India and Pakistan. But generally, the production will drop.

There will be some form of price increase in Europe, which is a net oil and gas importer. If prices go up in Europe, as a result of the price cap, it opens up opportunities for Nigeria to participate more in the European market. When production drops in the global scheme of things, prices will go up, that is basic Economics. 

From January 2023, China will cut down some stringent Covid-19 rules for travellers, so China will open up more in the coming months. This is big business for the oil and gas industry as demand increases, this will also lead to an upward trend in oil pricing, which Nigeria can take advantage of in 2023. 

Natural gas has always followed the crude oil trend, although there has been some disentanglement between both markets because of the increased volumes of piped gas, and liquefied natural gas in the markets. However, some gas markets are still indexed to crude oil, especially in Asia which is the biggest LNG market in the world. 

The Nigeria Liquefied Natural Gas (NLNG) Limited has had a good 2022 by taking advantage of the global increase in LNG price, although at some point, production dropped when the company was operating at 60% capacity due to feed-gas challenges, and crude oil theft.

Also Read: NMDPRA Set To Revoke licenses Of Some Petrol Marketers

The outlook for 2023 is good for Nigeria’s gas market because the NLNG is efficiently run. The price cap for Russian oil also affects Russian gas, so, the drop in Russian gas production also provides an opportunity for Nigeria to take advantage and increase its gas production and increase its profit margin. 
A good ending: Production Engineer, James Akwaji told Nairametrics that Nigeria’s oil and gas sector has faced challenges for many years but the NNPC and security agencies have made remarkable strides in halting crude oil theft and other nefarious activities in the south-south region of Nigeria where oil and gas companies are located.

According to Akwaji, data from the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) and other international agencies show that the country’s oil and gas earnings moved up between September and November 2022. This shows that the oil and gas sector in Nigeria is going to end strong in 2022, despite all the challenges it has been through.

One thing the earlier and later parts of 2022 had in common is the rude shocks. Events previously considered unlikely did happen. For instance, very few people predicted that Russia would drop missiles in Kyiv in February, even though it was a known fact that the two countries had a fraught relationship for years. But that happened.

Investors and speculators knew that the invasion could have a ripple effect on most assets. So, many of them quickly shoved all predictions of economic rebound under the carpet. After all, it doesn’t take an economics degree to know that wartimes are bad for the economy.

But just when investors (especially those in the crypto market) thought the winter was over, FTX happened. The crypto exchange once thought to be too big to fail, collapsed much to the surprise of everyone.

For lack of better words, 2022 “swallowed” the enormous gains we saw in 2021. The 26.6% gain in the S&P in 2021 was quickly erased by a sharp 18.54% drop. Bitcoin’s 59.64% gains have since been overshadowed by a massive 62.27% drop. 

Most economies scrambled to stay afloat. Meanwhile, currencies like the naira, the British pound sterling and the cedi all hit lows that haven’t been seen in decades.

A dramatic year for investors: If 2022 taught us anything, it is the fact that the old methods might fail sometimes. In the last five years, investors have made good returns by betting on big-cap American stocks like Amazon, Tesla and Meta(Facebook). In 2022, these stocks shed double digits in their share prices.

For some, their only wrongdoing was stacking naira-based assets. This year saw the Naira plummet close to N900/$ in the parallel market.

As it turns out, some people did not consider this a problem, at least in the short term. Those who remit money to loved ones from overseas suddenly became more loved by family members here in Nigeria as the same dollar equivalent just some months ago fortuitously swelled when converted to naira.
Another group of people who found these times exciting were dealers in imported merchandise. Every hike in prices was blamed on the falling naira. 

How did your investments perform? Did you get burnt by any of the crazy events that happened this year? 
Did you foresee the huge drop across several assets? If you did how did you prepare for it?
Did you sell off your digital assets or do you still want to hold them?
Did the skyrocketing inflation affect your purchasing power? How did you adapt?
Did you invest in yourself? A new certification or education that boosted your career and employability chances?
 Did you earn money while you were sleeping or did your investments not allow you to sleep?
Did you diversify your investment into Dollar based assets or did your assets devalue?
Did you eventually convert your Naira to Dollar at its peak because everyone was screaming “1000/$ before January”?

Also Read: NCDMB Commissions Quality Control Laboratories

Everyone is an investing superstar when assets are making a good run. But the real challenge is when they are bleeding. Hedge funds that naturally thrive in volatile markets made a killing this year.

In 2022 for example, throwing your investments across various assets still wouldn’t have saved you as the dip was across asset classes. For the 5th time since 1928, the S&P 500 and the 10 YR US Treasuries had negative returns.

So this is not necessarily because your investment strategies are wrong or you have made poor decisions, it’s simply because the general economic climate has been harsh.

So this isn’t a time to beat yourself up as you look at how badly some of your assets have performed this year. Even the legendary stock speculator George Soros still has a few losing streaks under his belt.   
Expectation versus reality: One problem investors face is expecting the same level of returns in different economic conditions. In 2022, several warning signs emerged that foretold a slow year.

Most smart investors began to lower their expectations and reduce exposure to risky assets. We also saw many banks, including the CBN, hike interest rates to figures never before seen. These and several other reasons are why we have seen increased interest in traditional “safe” assets like treasury bills and bonds.   
On the plus side, this may be the best opportunity to pick up that asset that you believe would perform in the long run. Smart investors buy at low prices and sell at a higher prices. As Warren Buffett said “Be fearful when others are greedy, and greedy when others are fearful”

While you may not have met your targets in terms of returns for the year, or you lost some money as these assets plummeted, remember that the game of investing is a marathon and not a sprint. The goal is to arrive at good returns at the end of the day, the losses are part of the game. You may take two steps forward and a step backwards, but the most important thing is that progress is being made.

Nairametrics  

Nigeria Welcomes First HIPPS Facility

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Nigeria has welcomed its first fully equipped facility for the full overhaul, maintenance, and recertification cycle of the High Integrity Pressure Protection System (HIPPS).

During the commissioning at the company, PE Energy at the weekend, the managing director, Mr. Daere Akobo, said the idea of the company supports Nigeria’s zero energy transition plan on gas flaring by 2035.

Part the compoanthe nation’s increasing efforts to improve local participation in the oil and gas value chain.

Speaking during the testing event at its centre of excellence facility in Port Harcourt, the group managing director of PE Energy, Mr. Daere Akobo, said, “We are proud to have achieved this significant milestone as the first in-country facility that can carry out the HIPPS recertification program.

Also Read: NCDMB Commissions Quality Control Laboratories

“As the country makes incremental progress in the Energy Transition Plan, PE Energy is consistently identifying products and services that will aid the achievement of the net-zero flaring objective as well as core development of local capacity to support the industry.

“This is one more avenue to retain revenue in the country as organisations can now recertify their HIPPS in Nigeria thereby providing work that will boost local revenue generation,” he said

The High Integrity Pressure Protection System (HIPPS) is a type of safety instrumented system that is applied to prevent over-pressurisation by shutting-off the source of the high pressure.

In traditional systems, over-pressure is handled by relief valves that vent to the atmosphere. These systems have obvious disadvantages such as release of flammable and toxic process fluids in the environment as well as flares that involve a large carbon footprint at installation.

Also Read: Experts Advise Marginal Field Winners On Financing

With global attention on climate change and environmental protection, the oil and gas industry continues to explore more options to eliminate emissions while reducing impact on the environment.
In Nigeria, over 80 HIPPS valves are currently installed with a combined value of investment being protected at an estimated $10B.

“Majority of these valves are due for recertification,” Akobo stated following the testing exercise conducted with its partner, Mokveld Valves BV.

“Upon recertification, the valves will be restored for continuous safe duty while their probability of failure on demand (PFD) will be restored to its original value.

“With our facility, respective regulatory authorities in Nigeria are now aware and assured that HIPPS in use across the country can be kept healthy throughout their life cycle.

“This will protect workers, improve local capacity, as well as cost savings in millions of USD as process and pipeline equipment can now be designed in a lower pressure class.”

The testing event, attended by the NCDMB Port Harcourt zonal coordinator, Madam Bethar Alaribe, and Mr. Lawrence Osakwe, Engineering Division Manager, Nigerian Agip Oil Company, also had in attendance Engr Afolabi Awe – Principal PACO Engineer SPDC, Engr Mike Dawodu – Discipline Lead Mechanical Engineering, SPDC, and Engr Cassidy Yayock – Lead Instrument, Control & Automation – Dover Engineering Limited.

Also Read: Nigeria Underproduced 2022 Crude Oil Projection By 263mb in 11 Months

PE Energy is a wholly owned Nigerian company focused on EPiiMtce (Engineering, Procurement, Integration, Installation and Maintenance) in Automation, Valves and Actuation, Measurement Solutions, Process, Water and Power Solution & Supply Chain Solutions.  Operating from its Centre of Excellence facility at the Trans Amadi Industrial Layout in Port Harcourt, Rivers State for over a decade, the company has served notable multinational and local organisations in the oil and gas, manufacturing, and maritime sectors including Shell, TotalEnergies, Nigeria Agip Oil Company (NAOC), Chevron, Seplat and Nigeria LNG, amongst others.

PE Energy maintains strategic partnerships with leading global original equipment manufacturers such as Mokveld Valves BV,  Rotork, Valmet, Neway, Kitsnet and others  in its valves and actuation solutions business.

By Bosco Agba

NMDPRA Set To Revoke licenses Of Some Petrol Marketers

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…Commence shutting down of erring filling stations

The Nigerian Midstream and Downstream Regulatory Authority (NMDPRA) has threatened to revoke the licenses of some corrupt petrol marketers, even as it commences shutting down of stations engaging in unscrupulous practices with sales of petroleum products.

The chief executive officer of NMDPRA, Mr. Farouk Ahmed, who issued the threat in Abuja, said with the information at its disposal, action is being taking.

“The first action we took a couple of days ago was to shut down some of the depots where they have products. A lot of them have breached that trust or regulatory requirement, but we’ll have to start from somewhere. So we shut down about seven depots in Lagos and other parts.”

According to him, some unscrupulous elements among oil marketers have capitalized on the current precarious situation in the downstream sector to tinker with their meters and engage in all kinds of corruption in and out of the depots.

According to him, as at last weekend, Nigeria still had at least 30-day sufficiency, pointing out that the global crisis caused by the Russian and Ukrainian war in addition to the fluctuation in the value of the naira had affected business in the sector.

Also Read: Nigeria’s Domestic Gas Supply Grew By 14% in 12 Months, Says NMDPRA

The NMDPRA boss noted that several meetings had been held with petrol marketing companies, independent marketers, transporters, the suppliers-the Nigerian National Petroleum Company Limited (NNPC) as well as other stakeholders to see how the situation can be addressed.

“Now, the market is not deregulated. So, we are still in a regulated environment as far as petrol is concerned,” Ahmed added.

He informed that President Muhammadu Buhari had approved an additional N10  for transporters to cover the transportation costs as a result of the high costs of diesel which he said is the main source of transporting other products within the country.

He explained further that one of the constraints within the distribution system had been the increase in the bunkers’ freight rate from between $16,000 to $19,000 per day to about $35,000 to $40,000 per day within Lagos and even more to Calabar.

“We sat down with the marketing companies and agreed to give them some palliatives through the NNPC, as well as through our regulatory control areas. But the market has continued to increase the cost of ex-depot prices.

Also Read: Nigeria: FG Says No Plan For Fuel Price Increase, Marketers Say Landing Costs Overbearing

“It has gone beyond expectation and reason. And Nigerians have been suffering due to that because when you talk to a retail outlet owner, he will say this is how much he bought it from the depot owner. But NNPC Limited is the sole importer. And they sell these products to the marketing companies within acceptable import parity pricing benchmarks.

“So, even with the additional cost of transportation, by trucking or by sea,  the acceleration or the increase in the ex-depot price was completely outrageous,” Ahmed explained.

He stressed that as a responsive regulator, NMDPRA is concerned about the yearnings and sufferings of Nigerians who have no voices and had therefore decided to take action, not necessarily to destabilize the market but to strengthen it.

“We had intelligence from other relevant law enforcement agents, in addition to the intelligence information we had within our own system, so we corroborated all the information that we gathered,” he said 

Experts Advise Marginal Field Winners On Financing

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Price Waterhouse and Coopers [PwC], a leading advisor in Nigeria’s oil and gas industry, has asked the new group of marginal oilfield licence winners to seek innovative financing structures s in order to address the country’s low crude oil production.

The submission was made at PwC’s stakeholders forum, ‘Marginal Oilfield Licence: After Winning, What Next?’ in Lagos recently.

The partner, Energy, Utilities and Resources and Africa oil and gas leader, Pedro Omontuemhen, said he believes that many new marginal oilfield license winners are thinking of moving ahead quickly in the journey to First oil, than developing a marginal oil field that capital-intensive.

The chief executive officer of the Nigerian Upstream Petroleum Regulatory Commission, Mr. Gbenga Komolafe, emphasised that the Petroleum Industry Act was phasing out the marginal field regime with the objective of equalising all oil and gas producers in Nigeria.

Also Read: Nigeria Underproduced 2022 Crude Oil Projection By 263mb in 11 Months

“The NUPRC is willing to support any innovative financing arrangements that the INDUSTRY is evaluating and mediate any disputes among licence holders,” he said

Sharing his experience as an established operator, Executive Vice Chairman, ND Western Limited, Dr Layi Fatona, advised new marginal oilfield awardees to manage their cost profile and focus on long-term success.

He explained that partnerships are vital to achieving first-oil production in a timely manner, advising marginal operators to prioritize human capital development and strategic partnerships.
Head Client Relations, Anglophone West Africa, AfreximBank, Peter Olowononi, noted that based on clearly defined risk management policies and procedures, the standard practice is to finance projects that are producing oil and gas.

He, however, said Afrexim Bank recently adopted a different approach by working with some marginal field operators on a guarantee-backed facility based on technical expertise provided by competent oil service companies along with the equity contributed by the awardees.

Also Read: Banks Looking At Cutting Billions In Oil Financing Following Windfall Tax in UK’s North Sea

On her part, the Managing Director and Co-founder of Subdrill Services Limited, Aysha Abba, highlighted the need for marginal field licence holders to demonstrate the commercial viability of their crude reserves in order to attract finance.

“Going the extra mile by working with reserve evaluators to generate a Competent Person’s Report can make a huge difference when seeking finance or strategic partnerships”, she said.
She recommended that the marginal field awardees should engage industry-recognised experts to prepare field development plans, and evaluate financing options.

Punch

NCDMB Commissions Quality Control Laboratories

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As part of efforts by the Nigerian Content Development and Monitoring Board, (NCDMB) to increase indigenous capacities, capabilities and competencies in the oil and gas industry, the Executive Secretary, Mr. Simbo Wabote has commissioned a block of quality control and assurance laboratories.
Christened, Nigerian Content Laboratories the laboratories were constructed by Laser Engineering and Resources Consultants Limited.

At the commissioning ceremony, Wabote commended the company for being an indigenous company of repute, rendering premium services to the oil and gas industry in the areas of reservoir management, pressure-volume-temperature, (PVT) and environmental services, well intervention services (Slickline), and research & development services in a manner that ensures customers and stakeholders’ satisfaction through compliance with best practices for continual improvement.

Also Read: NCDMB Urges Media To Support, Promote Nigeria’s Decade Of Gas

He specifically stated that Laser Engineering has made an indelible mark of becoming an enduring organization that utilizes available resources in solving intellectual problems in the oil and gas industry.
The complex houses the content laboratory complex housing calibration, molecular & micro-biology,
instrumentation and chemistry laboratories.

Other Laboratories at the complex include research, development & incubation, crude assay, PVT laboratories, well intervention workshop, reservoir office and a library.

In his welcome speech, managing director, Laser Engineering and Resources Consultants Limited, Mr. Mike Onyekaonwu maintained that the analytical science laboratories were established to stem the tide of over-dependency on foreign laboratories.

He disclosed that the research centre initiated a hydrate loop to engender enhanced recovery of crude oil in exploration & production operations. The laboratories are also established for students in tertiary institutions to run basic experiments to enhance practical experience of their course of study.

Also Read: NCDMB Concludes ‘Entrepreneurship Skills Development, Access To Finance’

Prof Onyekaonwu indicated that the fabrication of most of the laboratory equipment is done in-country to reduce costs on institutions of higher learning as he is the sole funder of the initiative.
He harped on the need for the establishment of other laboratory facilities in the country, which would handle the nation’s peculiarities through innovation, research and development rather than the hurry for materialism.

The academic encouraged industrialists to create their own technology that can be deployed for problem-solving, noting that over-dependency on the NCDMB can be a problem. He disclosed that investment in research grows any economy and Nigerians need to be resilient to create indigenous technology.

Banks Looking At Cutting Billions In Oil Financing Following Windfall Tax in UK’s North Sea

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The windfall tax introduced to help pay for the UK’s energy crisis, may have brought banks to look consider cutting billions of Pounds in financing for oil and gas projects in the UK’s North Sea, a trade group says.

The thinking is that the Energy Price Levy, which slaps a 35% rate on profits from North Sea producers, risks drying up investment in a sector that’s key to the country’s energy security even as the oil and gas industry transitions away from fossil fuels to achieve climate goals.

World Oil quotes industry lobby Offshore Energies UK, saying companies are demanding from government to include a price floor so the measure would recede or disappear as oil and gas prices decline.

“Without some changes, there’s a risk that banks pull back on a type of financing based on the value of fossil fuel reserves,” the group said

Also Read: Shell Considers Windfall Tax, Reviews £25bn British Projects

The government introduced the measure earlier this year and then expanded it in November as it sought to fill a vacuum in the budget caused by subsidizing natural gas bills that have soared since Russian supplies ran into trouble with Europe.

The Energy Profits Levy strikes a balance between funding the cost-of-living support, while also encouraging investment to bolster the UK’s energy security, a spokesperson for the Treasury said in a statement.

The measure includes an investment allowance that allows firms to use spending on production to offset their tax burden. The levy already prompted some producers to rethink their local spending.
Shell Plc’s UK head said last month the company would reevaluate £25 billion ($30.17 billion) of planned investments — despite making record profits this year and not paying any windfall taxes due to investments.

France’s TotalEnergies SE said it will cut investment in the UK North Sea by 25% next year in response to the expanded tax. The largest British producer, Harbour Energy Plc, said it’s reviewing investment and won’t take part in an upcoming leasing round for new exploration sites.

Also Read: Oil: Putin Bans Sales To Countries Complying With G7 Oil Price Cap

“The scale of the tax and lack of a clear price mechanism for removal of the levy as prices begin to normalize are key issues,” said Michael Tholen, the group’s sustainability and policy director.
“Unless these are addressed, some companies will face an up-to 50% cut in their reserves-based lending capacity as facilities are reviewed over time by banks.”

World Oil noted since the tax was increased in November, Brent crude oil has fallen about 8% and natural gas is down more than 25%.

Nigeria Underproduced 2022 Crude Oil Projection By 263mb in 11 Months

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Data show country barely drilled 60% of 1.88 million bpd budget benchmark
-$30bn Brass, Olokola LNG projects suffer 19 years delay despite lucrative gas market -IOCs spent over $1bn on projects without FID, says NCDMB

With a projected 1.88 million barrels per day crude oil production in the 2022 federal budget, Nigeria under-produced to the tune of 263 million barrels of the commodity between January and November, a THISDAY analysis of industry data has shown.

Also, Nigeria’s inability to deliver two major Liquefied Natural Gas (LNG) projects -the $20 billion and $9.8 billion Brass and Olokola LNG projects, respectively, after about 19 years of their initiation has resulted to the country now counting its losses from the failed projects despite gas becoming increasingly lucrative at the moment.

In the last quarter of 2021, the Senate and House of Representatives agreed to fix the country’s expected daily output for 2022 at 1.88 million barrels per day, pegging it at a price of $57 per barrel.

However, while the total expected production in the first eleven months of the year was about 641 million barrels, a computation derived from the figures released by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) showed that only 378 million barrels were realized during the period under review.
In essence, this meant that the country was unable to produce as much as a whopping 263 million barrels of crude oil during the period spanning between January and November this year.

It further indicated that Nigeria was barely able to produce 60 per cent of the total production forecast, losing roughly 40 per cent to oil theft and sabotage, leading to incessant shut-in of planned output for the period.

Also Read: NCDMB Concludes ‘Entrepreneurship Skills Development, Access To Finance’ Training for Indigenous Contractors.

While the planned production for each of the months in 2022 was 58.2 million barrels, going by the budgeted data, Nigeria only managed to drill 43.3 million barrels in January, turning out to be the highest output for the year so far; 35.2 million barrels in February; 38.3 million barrels in March and 36.5 million barrels in April.

It deteriorated to 31.7 million barrels in May; rose marginally to 34.7 million barrels in June, before falling to 33.6 million barrels in July this year.

August saw the production of 30.1 million barrels, against the 58.2 million projection; followed by September in which Nigeria’s output fell to a multi-decade low of 28.1 million barrels while in October and November, the country drilled 31.4 million barrels and 35.5 million barrels respectively.
The figures exclude condensates which are not included in the Organisation of Petroleum Exporting Countries (OPEC) calculation.

A further analysis of the NUPRC data, revealed that while the Bonny terminal produced 3.8 million barrels in January, that figure declined to 1.5 million barrels in November.

Similarly, Brass’ output of 1.36 million barrels in January fell to 404,726 barrels last month, even as Qua Iboe which yielded 5.3 million barrels in January, produced 4.4 million barrels last month.
Whereas the newly repaired Forcados’ output was 7.5 million in January, as of November it produced 6.2 million barrels while Escravos blazed the trail, increasing production from 3.7 million barrels in the first month of this year, to 4.6 million barrels in the eleventh month.

In the meantime, with a modest improvement in its November OPEC production performance, the country has returned to the top as Africa’s highest oil producer.
This is a relief from previous months when Angola, Algeria and Libya pushed Nigeria to the fourth position as the country struggled with sundry issues which have hobbled its capacity to meet the OPEC oil quota.

While in October, Algeria drilled 1.060 million barrels per day, Angola produced 1.051 million bpd, Libya’s output was 1.163 million barrels per day while Nigeria’s oil production stood at 1.024 million bpd.
Although Nigeria added 77,000 in that month, it wasn’t enough to return the country to the top of the table as Africa’s biggest producer, even though Algeria gained a paltry 2,000 bpd, Angola lost 40,000 bpd and Libya gained 6,000bpd, according to OPEC’s secondary sources.

Production in Angola saw the second-steepest drop in OPEC producers in October, but it wasn’t the result of a conscious reduction since the African producer has been lagging behind its quota for many months.
The OPEC figures released in its latest Monthly Oil Market Report (MOMR), indicated that Nigeria’s roughly 1 million bpd was also a far cry from its average of 1.493 million bpd in 2020, a covid year, and 1.323 million bpd in 2021.

But with the recent concerted effort to end oil theft in the country, this month, OPEC which released its data for November activities in the sector, stating that Nigeria came tops with 1.158 million barrels per day in November, followed by Libya with 1.133 million bpd and Angola with 1.102 million bpd.

Earlier this month, the Minister of State, Petroleum Resources, Chief Timipre Sylva, said Nigeria was working towards meeting its OPEC crude oil production quota of 1.8 million bpd by the end of May 2023.
Consequently, the minister explained that the federal government would continue to improve security along the tracks of the major crude oil pipelines and block every leakage through which crude oil is stolen by oil thieves and pipeline vandals.

Sylva added that the inability of Nigeria to meet the current OPEC quota was not due to lack of production capacity on the part of crude oil producers, but because a lot of producers decided not to inject into the pipelines because they were losing a lot of their production when they inject crude.
Although Nigeria was likely to surpass its November production of 1.158 million bpd since a number of terminals are now back on stream, it’s still unclear by how much since there are currently conflicting figures from the Nigerian National Petroleum Company Limited (NNPC) and the NUPRC.

While the NNPC put December production data at 1.59 million barrels per day so far, the NUPRC pegged it at 1.4 million bpd. Traditionally, OPEC and NUPRC release the production information every month.
Nigeria Counts Losses as $30bn Brass, Olokola LNG Projects Suffer 19 Years Delay Despite Current Lucrative Gas Market

Meanwhile, Nigeria’s inability to deliver two major Liquefied Natural Gas (LNG) projects -the $20 billion and $9.8 billion Brass and Olokola LNG projects, respectively, after about 19 years of their initiation has resulted to the country now counting its losses from the failed projects despite gas becoming increasingly lucrative at the moment.

Some of the economic losses arising from the stalled projects, according to industry sources and data ranged from massive revenue and job losses, flight of Foreign Direct Investment (FDIs) to other neighbouring countries, delayed industrialization as well as persistent energy poverty in the country.
However, the Nigerian Content Development and Monitoring Board (NCDMB) said the international oil companies (IOCs) involved in the projects have lost over $1 billion without getting to Final Investment Decision (FID).

Also Read: Crude Oil Price Falls Below $85, IMF Sends Warning To Nigeria

Globally, gas is now a much-sought-after energy source, driven by the double whammy of the Russia-Ukraine War and the world’s acceptance of gas as the transition fuel owing to the current pressure to ditch fossil fuel and enthrone cleaner and sustainable energy. Consequently, countries that have sizeable number of LNG plants that push huge volumes of gas to both the domestic and export markets are currently smiling to the banks with huge revenues being raked in.

With only the Nigeria LNG Limited operating in the country with its 22 million metric tonnes per annum (mtpa) Bonny Island plant, which is even operating under capacity at the moment, the failure to execute the Brass and Olokola LNG projects has kept Nigeria out of the nations now cashing out from their LNG revenues.

According to the General Manager, Corporate Communications and Zonal Coordination, NCDMB, Dr. Ginah O Ginah, the opportunities lost in the failed two LNG projects were enormous.
The Brass LNG sited in Brass, Bayelsa State and the Olokola LNG located in Ondo State were initiated in 2003 and 2005, respectively, by the administration of the former President Olusegun Obasanjo to help the country monetize part of its vast natural gas reserves and meet the growing global demand for clean energy.

The Brass LNG estimated to cost about $20 billion was incorporated in 2003 with shareholders that included, the then Nigerian National Petroleum Corporation (NNPC) (49 per cent), Eni International (17 per), ConocoPhillips) (17 per cent) and then Total (17 per cent).

The company was formed to construct and operate a LNG plant to be sited on Brass Island, in Bayelsa State. The Front End Engineering Design (FEED) was for two LNG trains of five million metric tons per year each and the facility was targeted to be in operation by 2011.

But the withdrawal of the IOCs from the project, beginning with Conoco Phillips and later, others, led to the abandoning of the Brass LNG project.

On the other hand, the $9.8 billion Olokola LNG was expected to have a total capacity of 12.6 mtpa, with start-up originally scheduled for 2011.

Its shareholders included NNPC, 49.5 per cent, Shell and Chevron each had 18.5 per cent and the UK’s BG Group, which Shell later bought in 2016 had 13.5 per cent.

However, in 2009, BG Group also pulled out of the project, and in August 2013, Shell and Chevron followed suit, leaving the NNPC as the sole shareholder

The IOCs had attributed their withdrawal from the two projects to perceived Nigeria’s unfavorable business climate and sundry conditions.

Ginah, who spoke in Lagos during a recent capability building workshop for media stakeholders organised by the NCDMB, said lack of political will by successive administrations contributed to the failure to take projects further.

He lamented that at a time gas nations were benefitting from the current global demand for gas and the attendant opportunities for revenue growth, Nigeria was missing out because it could not deliver those two important LNG projects that would enable it pump more gas to the expert market.
With a gas reserves of 208 trillion cubic feet (tcf), Nigeria ranks as the ninth most gas rich country in the world and the number one in Africa.

“Nigeria has missed a lot of opportunities in the gas sector when we should be reaping the benefits of our huge gas resources. We had two major LNG projects: the Brass and Olokola LNG projects that we would use to grow our economy but we couldn’t progress with them and now we’re losing in those projects.

Also Read: Youths Urged To Get Involved In Oil And Gas Industry

“IOCs have spent over $1 billion in the Brass, Olokola LNG projects without getting to FID and they pulled out due to some issues they were not comfortable with. So the opportunities we lost in Brass LNG and Olokola LNG are enormous”, Ginah said.

He noted that the government was now trying to see how it could ramp up gas production as quickly as possible, adding, “I think, in that light, I’m aware that the Minister of State for Petroleum is taking initiatives to see how investors can come together to revive this Brass LNG and Olokola LNG.

“So what I cannot tell you is exactly where that initiative has reached as at this point. But I know that efforts are being made because gas is going to be there for a very long time and this projects will help a lot.”

According to him, NLNG’s production was not enough as the market was much bigger than the company’s production capacity because the whole world has accepted gas as transition fuel.

“So that means the shortage is much bigger than what NLNG is producing. So there is going to be a huge market that can take from Brass LNG and Olokola LNG. In realization of that, the Minister of State for Petroleum Resources, Timipre Sylva is making moves to bring together investors for the realization of those LNG facilities”, he stated.

The NCDMB official, who decried the waning investments in the Nigerian oil and gas industry over the past decade, pointed out that about $20 billion worth of investments in oil and gas industry used to come to Nigeria annually but that that has dropped.

He attributed this to the unfavourable and rough business environment in the country, adding that a lot of the investments have gone to other African countries.

Ginah further said, “So why is it that smaller countries like Ghana will be having more foreign investments in the oil and gas industry?

“The population of Lagos alone is about 15 million. If you add the next two most populous cities in Africa -Egypt and one other city, it’s not up to the population of Lagos. That’s how huge the internal market is. So this is where the foreign investments should be coming to because of the internal market alone.

“Why is foreign investment running away from Nigeria and what can we do about it? If you (the media) can sensitize the public for us, and of course, including the critical stakeholders, I think we will begin to see some changes that will happen that will enable us to change the narrative about this foreign investment leaving the country”.

ThisDay

Pollution: Shell Accepts To Pay €15m Compensation To Nigerian Communities

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Shell has agreed to pay 15 million euros ($15.9 million) to host communities in the Niger Delta that were affected by multiple oil pipeline leaks.

The compensation payment followed a Dutch court pronouncement in a case brought against by the division of Friends of the Earth, in which Shell’s Nigerian subsidiary last year was found to be responsible for the oil spills and was ordered to pay for damages to farmers.

In 2016 President Muhammadu Buhari launched an ambitious clean-up operation in Ogoniland. The work is ongoing but residents say little progress has been made. Continued oil spills from the activities of multinationals have also cast doubt on the impact of the clean-up exercise.

Also Read: Nigeria: Oil Output Rises In November Following Resumption At Shell’s Forcados Terminal

“Things are getting worse by the day,” Celestine Akpobari, an environmental activist from Ogoni, told the BBC. The region provides most of Nigeria’s government revenues but the communities say successive governments have neglected them.

Mr Akpobari says people can no longer fish or farm because of the devastation. “People are dying, there are strange diseases and women are having miscarriages” from the pollution, he says.

But the communities and campaigners say the recent court victory gives them hope they will see justice. In February last year, the UK Supreme Court ruled that oil-polluted Nigerian communities can sue Shell in English courts. The decision was seen as a victory for the communities after a five-year battle, and overturns a Court of Appeal ruling.

Also Read: Shell Considers Windfall Tax, Reviews £25bn British Projects

The Niger Delta communities of more than 40,000 people say decades of pollution have severely affected their lives, health and local environment.

The oil giant had argued it was only a holding company for a firm that should be judged under Nigerian law. Shell described the legal ruling as disappointing.

Leadership

Crude Oil Price Falls Below $85, IMF Sends Warning To Nigeria

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The global crude oil price has continued to hover around $75 to $84 per barrel in the last few weeks and experts believe it could drop below $50 in the coming months.

Brent, the global benchmark for crude on the early hours of Tuesday traded at $84.80 a barrel, while U.S. West Texas Intermediate crude was at $80.44.

This is the highest level, the two benchmarks touched since Dec. 5 indicating a change in global oil prices.
This means that Nigeria has ultimately missed its chance in earning huge oil revenue when the price was above $100 per barrel.

When oil prices hit $100 per barrel or more, Nigeria struggled to produce enough oil to sell and fell farther down the list of Africa’s major oil producers.

Also Read: Tax Credit: NNPC’s N1.6trn Quest To Fix Nigerian Roads

It was only recently that the Nigerian National Petroleum Company Limited announced that oil production had picked up.

However, IMF sent a warning that Nigeria and other oil-producing countries in Sub-Saharan Africa should expect dwindling oil revenues in the coming years as the world transitions from fossil fuels to cleaner energy.

In a new report titled “Savings from Oil Revenues Could Help Africa’s Producers Manage Price Swings,” the fund said oil exporters in sub-Saharan Africa should target buffers of around 5 to 10 per cent of gross domestic product to manage large swings in oil prices.

It means Nigeria would need to maintain annual fiscal surpluses of at least one per cent per annum over a 10-year period.

IMF’s latest Regional Economic Outlook showed that oil prices have fluctuated from lows of $23 per barrel to a peak of $120 in the last two years, resulting in highly uncertain revenues in oil-dependent economies.
According to the report, most oil exporters in the region have not accumulated enough savings to insure against unpredictable oil price changes.

Also Read: Chief Of Naval Staff Confesses: Personnel Actively Involved In Crude Oil Theft In…

It added that sovereign wealth funds in sub-Saharan Africa hold assets of just 1.8 per cent of gross domestic product, compared to 72 per cent in the Middle East and North Africa, forcing countries to borrow or draw down financial assets whenever oil prices fall.

The report read in part, “As a result, in the decade through 2020, the region’s oil producers have grown over two percentage points slower per year than non-resource intensive countries. Debt service costs have also been almost twice as high as in other sub-Saharan African countries.

“Moreover, as countries transition to low-carbon energy sources, oil revenues could sharply decline. By 2030, oil revenues in the region could fall by as much as a quarter and by 2050, by half. Building buffers now would help the region’s oil exporters navigate the transition toward clean energy while managing oil price fluctuations.”

RipplesNigeria 

Youths Urged To Get Involved In Oil And Gas Industry

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The Nigerian Content Development and Monitoring Board, (NCDMB) has urged Nigerian youths to actively get involved in the oil and gas industry through human capacity development as provided in the Nigerian Oil and Gas Industry Content Development, (NOGICD) (2010) Act.

Speaking at a sensitization/enlightenment workshop on community content guideline, the NCDMB general manager, corporate communication and zonal coordination of the Board, Mr. Ginah O. Ginah, described the Community Content Guidelines (CCG) as a policy thrust designed by the Board to bring critical infrastructure to host communities and usher development, empowerment and generate employment.

According to him, the CCG gives community contractors the leverage to partake in projects, partnerships and initiatives of the Board in the Niger Delta region through direct and indirect access to increase entrepreneurial skills, competencies and capacities in the oil and gas industry and retain in-country spend as part of the strategy to increase Nigerian Content to 70 percent by 2027.

Also Read: NCDMB Concludes ‘Entrepreneurship Skills Development, Access To Finance’…

Such opportunities, he explained, have already generated employment for members of host communities and trained young people in the area to take up vocations as the Board has achieved a lot in the area of human capacity development.

Fielding questions from participants during the workshop, the GM gave insight into the Nigerian Content Policy which is about domiciliation of work and development of local capacity with associated benefits.
He charged participants to avail themselves of the Board’s NOGICJQS database and upload their bio data onto the portal in line with the human capacity development initiative.

In a presentation, a manager in the capacity building division of the board, Mrs. Angela Okoro, enlightened participants on direct intervention and project-based trainings and how they can avail themselves of the opportunities through signing up on the NOGICJQS portal for their competencies to be accessed.

Mrs. Okoro reiterated that under the Nigerian Content Human Capacity Development Framework, thousands of young Nigerians have been trained and attached to various projects in the oil and gas sector to gain requisite industry experience and ultimately permanent employment.

Also Read: Teen Moms In Bayelsa Shower Encomium On NCDMB After Skill Acquisition

She disclosed success stories and testimonials of beneficiaries who have either been gainfully employed within Nigeria as well as other parts of the world, and those who are employers of labour through entrepreneurship.

In a vote of thanks, the supervisor, stakeholder management/government relations in the corporate communication division of the Board, Mr. Nyoki Ita enjoined participants to apply what they learnt at the workshop.

Mr. Ita encouraged participants to keep abreast of what is required of them if they are to properly function in oil and gas operations in their communities.

By Bosco Agba