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Tag: crude

  • NNPC, agency in talks on delivery of crude to refineries

    NNPC, agency in talks on delivery of crude to refineries

    The National Inland Waterways Authority ( NIWA) has initiated discussion with the Nigeria National Petroleum Corporation ( NNPC ) on how to deliver crude to the refineries through the waterways.

    The Acting Managing Director of NIWA, Mr Danaladi Ibrahim, told reporters in Lokoja yesterday that formal discussions with the management of the NNPC on the proposal would begin this week.

    Danaladi said NIWA was encouraged to initiate the proposal following the decision to stop the delivery of crude by trucks to the refineries in Port Harcourt, Kaduna and Warri.

    He said the NIWA could deliver crude through barges to the refineries, describing the option as cheaper, safe and environment-friendly.

    Ibrahim said NIWA also had the capacity to deliver refined products through inland waterways to all states, except Katsina and Kano.

    He said the organisation had procured enough tugboats to drive the barges, which were of varying capacities from 300 to 800 tonnes.

    The NIWA chief said the organisation had also procured 17 gunboats to guarantee the security of the facilities and personnel involved in the operation.

    Ibrahim hoped the proposal would be considered by the NNPC, saying the organisation had taken steps to protect the banks of River Niger.

    This is to prevent the dredged channel which was undertaken at a cost of N36 billion from being blocked.

    The NIWA chief said the country would reap the benefits of the dredging, saying more companies were ready to use barges to move their products.

    Ibrahim suggested the establishment of an inland waterways trust fund.

    He said the fund would make it compulsory for stakeholders in the maritime sector to pay a certain percentage of their earnings for the development of inland waterways infrastructure.

    Ibrahim said his vision was to unlock the potential of the sector in line with efforts of the government to diversify the economy.

    “Our prayer is that the Federal Government should muster the necessary political will to finance it while we provide adequate manpower,” he said.

    He also spoke of plans to maintain waterways and develop the waterfront in Lagos, Port Harcourt, Asaba and Warri through a public-private partnership arrangement.

  • NNPC cuts crude lifting firms to 16

    NNPC cuts crude lifting firms to 16

    • Invites Forte Oil, Mobil to bid for new OPA

    The Nigerian National Petroleum Corporation (NNPC) has cut down the number of companies that will handle the contract of lifting Nigeria’s crude from 43 to 16. The drastic reduction is part of the Corporation’s transformation agenda aimed at keeping its operation lean, efficient and transparent to reduce cost.

    Its spokesman, Ohi Alegbe said the decision is a novel move to instill transparency and probity in the award of the annual Crude Oil Term Contract for 2015/2016. He said: “NNPC yesterday mapped out measures to execute the 2015/2016 award of contract to companies for the evacuation of Nigeria’s crude oil equity from the various crude and condensate production arrangements.”

    In a statement, NNPC stated that it was part of measures to optimise the marketing of Nigeria’s crude oil and secure new market potentials. It said the number of off-takers for the proposed 2015/2016 term contract which would emerge after a planned rigorous competitive bid exercise has been pruned from 43 to 16.

    NNPC said: “In the days ahead, we shall place advertisement for the 2015/2016 Term Contracts and the publication will run for one month in major National and International print media to ensure effective message penetration. Later the guidelines for the selection of new off-takers would be published and subsequently a special bid evaluation committee would be constituted to conduct due diligence on successful applicants.”

    He also stated that apart from Oando, Sahara Energy, Calson, MRS, Duke Oil, BP/Nigermed and Total Trading that were earlier selected to bid for the new Offshore Processing Agreement (OPA),  invitation was also extended to Forte Oil and Mobil to bid for the OPA contract.

  • ‘880,000bpd of crude coming from offshore fields’

    •IOCs may divest from 12 oil blocks

    The Energy Research group of Ecobank Development Corporation (EDC) has projected additional production of 880,000 barrels of oil per day from Nigeria’s offshore fields over the next three years.

    The Head, Energy Research, Ecobank Development Corporation, Dolapo Oni gave the hint when he spoke with The Nation. He said there are about 15 major offshore oil fields, which if effectively implemented, would add about 880, 000 barrels per day over the next three years.

    The 880,000bpd, he said, doesn’t include production from divested assets, fields that will be re-entered, and output from marginal field operators and other indigenous companies.

    Oni, however, said the move by oil companies into the deepwater region will come with more costs; therefore, the industry will require a higher amount of capital and could potentially see its financing needs rise by over 40 per cent due to the higher cost of assets development.

    He told The Nation in Lagos that the upstream segment required massive investment in various oil and gas infrastructure including pipelines, flow stations, modular refineries, NLNG Train 7 and the Brass LNG. Also, the Trans Saharan Gas Pipeline, which according to him would create another exit for the Nigerian gas to Europe, will be very significant for the country in the long term.

    He said the country has about 5,000 kilometres of gas pipeline that needed to be funded adding that most of the new pipelines will be channeled towards liquefied natural gas (LNG). “The other major pipeline we have is the Escravos that will take gas from the Niger Delta to Lagos. It needs some major investment and this will manifest within the next two years,” he said.

    According to Oni, there is an indication that the International Oil Companies (IOCs) will divest at least 12 more oil blocks before the end of 2019. He said the divestment will come from onshore blocks that are in troubled areas and assets that lie close to some independents.

    Asset divestment by the IOCs, he said, will continue as there are still many oil blocks in troubled areas, adding that indigenous companies will have to play the exploration game at some point. “At the moment, indigenous companies only buy fields that already have certified reserves, and into production,” but indigenous firms have to play the exploration game,” he added.

    He said there are about 33 operational rigs, both onshore and offshore, that would bring massive change in the industry as the country starts to move into the deepwater, adding that there is need to get semi-salt terrains into the industry.

    On financing, Oni said Nigerian banks have increased their share of lending to the oil sector in line with growth in their tier 1 capital. He said though some banks are now able to provide up to $500 million to oil and gas transactions, but it is still small amount compared to the size of funding structures required in the industry. “Nigerian oil and gas companies urgently need equity. The dependence on debt is unsustainable. Debts can be used at any stage with companies that have very stable high volume production, but often through a borrowing base structure,” he added

     

  • OPEC crude price drops 10% in July

    OPEC crude price drops 10% in July

    The Organisation of Petroleum Exporting Countries (OPEC) has said the price of crude oil supplied by its members known as (OPEC Reference Basket) averaged $54.19 per barrel in July, representing a decline of more than 10 per cent from the previous month.

    The group in its August Monthly Oil Market Report said crude oil futures were also driven lower by various bearish factors, noting that global oil demand is expected to grow by 1.38 million barrels per day (mb/d) this year, which is about 90,000 barrels per day higher than last month’s projections with total oil demand anticipated to reach 92.70 mb/d. In 2016, world oil demand growth is expected at 1.34 mb/d with total world consumption hitting a record level of 94.04 mb/d.

    The report said after falling to multi-year lows earlier in the year, crude oil prices stabilised in April, remaining at around the $60 per barrel range until June. However, in July, a set of bearish factors pushed crude oil prices to their lowest levels in months, with Nymex WTI nearing $45 per barrel and Brent around $50 per barrel.

    This decline in oil prices came amid a sell-off in crude futures, triggered largely by continued oversupply at a time when incremental global demand has not followed suit. Financial concerns in Greece and China, as well as the outcome of the world powers’ talks on Iran’s nuclear programme, have all contributed to the current bearish market conditions, OPEC said.

    On the physical side, crude oil values for light sweet West African grades including Nigeria’s sweet crude have been pressured by several months of overhang cargoes. This is despite the recent easing of the oversupply as refiners increase utilisation to capitalise on lower crude oil prices amid a rebound in gasoline demand and better arbitrage economics to Asia. In the Middle East, spot crude cargoes are being squeezed by an inflow of Atlantic Basin crudes into the Asia-Pacific market on the back of relatively low light sweet crude prices compared with sour Middle East grades, the report added.

    On refining, the organisation said refining margins have been healthy in most regions. While margins have seen a slight weakening in Asia, they remain on the rise in the Atlantic Basin due to lower crude prices along with the excellent performance of the top of the barrel.

    During the driving season, US gasoline demand has reached as high as 9.5 mb/d over the last two months, a level not seen in years, supported primarily by lower gasoline prices.

  • Crude price rises by 12 per cent in Q2, says World Bank

    Crude price rises by 12 per cent in Q2, says World Bank

    The World Bank is nudging up its 2015 forecast for crude oil prices from $53 in April to $57 per barrel after oil prices rose 17 per cent in the April-June quarter, according to the Bank’s latest Commodity Markets Outlook, a quarterly update on the state of the international commodity markets.

    The Bank said energy prices rose 12 per cent in the quarter, with the surge in oil offset by declines in natural gas (down 13 percent) and coal prices (down four percent). However, the Bank said it expects energy prices to average 39 per cent below 2014 levels.

    It said natural gas prices are projected to decline across all three main markets—U.S., Europe, and Asia—and coal prices to fall 17 per cent.

    Excluding energy, the World Bank reported a two per cent decline in prices for the quarter, and forecasts that non-energy prices will average 12 percent below 2014 levels this year.

    “Demand for crude oil was higher than expected in the second quarter. Despite the marginal increase in the price forecast for 2015, large inventories and rising output from OPEC members suggest prices will likely remain weak in the medium-term,” said John Baffes, Senior Economist and lead author of Commodity Markets Outlook.

    Iran’s new nuclear agreement with the US and other leading governments, if ratified, will ease sanctions, including restrictions on oil exports from the Islamic Republic of Iran.

    Downside risks to the forecast include higher-than-expected non-OPEC production (supported by falling production costs) and continuing gains in OPEC output.

    The bank said possible upside pressures may come from closure of high-cost operations—the number of operational oil rigs in the US is down 60 percent since its November high, for example—and geopolitical tensions.

    In a special feature assessing the roles played by China and India in global commodity consumption, the Outlook finds that demand from China and, to a lesser extent, India, over the last two decades significantly raised global demand for metals and energy—especially coal—but less so for food commodities.

  • Another crude shocker

    •Report on America’s oil storage is a wake-up call to Nigeria to diversify its economy

    For corruption-ridden and spendthrift Nigeria, the report that the current glut in the United States oil market might further dampen the prices of crude oil and refined petroleum products, further pushing the price down to as low as $20 per barrel, must have come as a terrible blow. Yes, terrible blow because Nigeria has failed to save for the proverbial rainy day, and neglected the diversification of its economic base over the decades.

    According to the Associated Press, America is running out of storage for crude oil because, on the average, about one million barrels of oil per day has been flowing into the country through importation and local production. If this continues, it is only a matter of time for the storage tanks to reach their operational limits, probably by the middle of next month. The implication is that crude prices could tumble. “The fact of the matter is, we are running out of storage capacity in the US,” Ed Morse, the Head of Commodities Research at Citibank, said at a symposium at the Council on Foreign Relations in New York.

    The difference between Nigeria and the United States is leadership. That is the singular factor that accounts for the robust planning that has put the United States in a position to attain its highest point in crude supply in about 80 years.

    While the U.S. has been working assiduously over the years to ensure that America attains its present level, irrespective of the government in power, successive Nigerian governments have continued to pay lip service to the development of the oil sector. While the governments keep talking about diversification, they’ve done little or nothing to actualise it.

    The sad aspect of it is that since the discovery of crude oil in Oloibiri in 1956, we also neglected agriculture, which until the advent of oil was the country’s economic mainstay. Perhaps if we had even paid serious attention to the oil sector beyond waiting for the monthly handout from the Federal Government to sustain the states, things would not have been this bad today, despite the shocks in the global oil market. But successive governments’ complacency and irresponsibility degenerated to the point where we abandoned our four local refineries and we now import a huge percentage of the refined petroleum products that are consumed in the country.

    What we now reap is a lose-lose situation irrespective of what happens in the global crude market: when crude prices were high Nigerians paid more for the imported refined products and when they are down as they are now, we can hardly derive any benefit as a nation because some costs, i.e. landing cost, etc. are fixed, meaning they still have to be paid whatever the price of crude oil. Worse still, many of our governments mismanaged the proceeds from crude sales instead of investing in worthwhile ventures.

    It is even worse under the present administration where incompetence and large-scale looting have deprived the country of huge resources that could have been spent on regenerative projects. All these explain why the country is now in a mess where many public servants at both the federal and state levels are now being owed salaries for months.

    Unfortunately, we had the same experience with oil glut in the Second Republic, during the Alhaji Shehu Shagari era, which made the government to declare austerity measures. That singular experience was enough to wake us up from our slumber to the urgency of diversification.

    But it is better late than never. Our current cash crisis should open our eyes to the reality that oil-driven economy is dying. We need to return to agriculture and agro-allied industry, even as we must unlock the potentials in many states which some extant laws prevent the states from exploiting. The government must also be ready to tackle corruption headlong because so much money had been stolen that should have been used for developmental purposes.

  • Crude slump weighs on energy shares

    Crude slump weighs on energy shares

    United STATE stocks fell, after the Standard & Poor’s 500 Index posted its first back-to-back weekly retreat since October, as the continuing selloff in crude pulled down energy shares before the start of corporate earnings.

    Energy shares tumbled 2.8 percent, the most among 10 groups in the S&P 500, (SPX) as crude dropped 4 percent. Tiffany & Co. lost 14 percent after the jewelry retailer lowered its annual forecast after sales declined during the holiday. SanDisk Corp. fell the most in almost six years after reporting preliminary results below its own estimates.

    The S&P 500 slid 0.8 percent to 2,028.43 at 4 p.m. in New York. Losses accelerated after the market’s open as the benchmark gauge fell through its average price for the past 50 days. The Dow Jones Industrial Average lost 93.86 points, or 0.5 percent, to 17,643.51. The Nasdaq 100 Index slid 1 percent as technology shares retreated.

    “When you get the kind of 1 percent moves we’ve had in both directions, there’s definitely still uncertainty out there and that’s usually not the sign of a healthy market,” Matt Maley, an equity strategist at Miller Tabak & Co. in Newton, Massachusetts, said by phone. “With earnings kicking off the question is going to be how much of the decline in energy company earnings is already priced in.”

    The index lost 0.7 percent last week, following a 1.5 percent drop the prior week, amid concern over sliding oil prices, falling U.S. wages and that the European Central Bank’s bond-buying plan won’t be enough to combat deflation.

    Investors were whipsawed during the week as the S&P 500 had up and down swings of more than 1 percent on three separate days, with an average daily move of 1.3 percent for the full week. The volatility stands in contrast to 2014, when the gauge fluctuated 0.53 percent on average each day for the calmest year in U.S. stocks since 2006.

    The S&P 500 has fallen 3 percent since a record in December amid sliding oil prices. That’s prompted analysts to cut their profit forecasts for companies in the index, with reductions spread across nine of 10 industry groups and energy producers seeing the biggest cut.

    “Markets have been volatile because they still haven’t made up their mind whether lower oil prices are positive for consumers and the overall world economy or whether it means more financial stress,” Otto Waser, chief investment officer at R&A Research & Asset Management AG in Zurich, said by telephone. “This has been the tug of war between the two camps. We think it’ll be positive for consumption. We’re overweight in the U.S. this year.”

    Falling oil prices have kept damped inflation, leaving it below the Federal Reserve’s target even as the economy shows signs of accelerating.

    Fed Bank of San Francisco President John Williams, who will vote on policy this year, said raising interest rates in June would be a close call amid “strong momentum” in the labor market and weaker wage gains.

    Fed Chair Janet Yellen told reporters last month not to expect the central bank to raise rates before the end of April, leaving expectations intact for a move around mid-year.

    Profit at companies in the benchmark gauge probably climbed 2 percent in the final quarter of 2014, and 2.8 percent this period, analysts forecast. That’s down from October estimates of 8.1 percent and 9.2 percent, respectively.

    Alcoa Inc. will post fourth-quarter earnings after the market closes today, unofficially kicking off the reporting season. Later this week, investors will weigh reports for clues on the health of the world’s largest economy, including retail sales, manufacturing in the New York region and industrial production.

    Schlumberger Ltd., which posts earnings this week, fell 3.9 percent. The world’s largest oilfield-services provider was cut to neutral, the equivalent of a hold, from buy at Goldman Sachs Group Inc.

    Other energy stocks also retreated after Goldman reduced its forecasts for global benchmark crude prices, predicting inventories will increase over the first half of this year. Oil needs to trade near $40 a barrel in the first half of this year to curb shale investments, the bank said.

    “Many people are fearful that this is a sign of deflation coming,” Rob Lutts, chief investment officer at Salem, Massachusetts-based Cabot Wealth Management Inc., said via phone. “There’s a little bit more fear in the air and it revolves around things we can’t control, including overseas economies and concern over how fast they’re growing.”

    Exxon Mobil Corp. and Chevron Corp. plunged at least 1.8 percent today to lead declines in the Dow. Forty-two of the 43 members in the S&P 500 Energy Index retreated, as the gauge slumped 2.8 percent. Transocean Ltd. lost 3.7 percent for a 10th straight drop and the lowest level since 1995.

     

    In Europe, oil-and-gas producers tumbled 1.3 percent for the second-biggest drop in the Stoxx Europe 600, while an index of developing-nation energy companies slid 1.9 percent to pace losses in the MSCI Emerging Markets Index.

    Technology companies in the S&P 500 declined 1.2 percent as SanDisk lost 14 percent. The maker of data-storage chips for mobile devices reported preliminary quarterly revenue that trailed its own forecast on lower sales of retail and flash-technology products.

     

  • Crude fuels spike in port revenues

    Crude oil continues to sail through the Port of Corpus Christi at a record pace, but at least one economist believes the area’s fortunes can get even better once America’s 40-year ban on crude exports is lifted.

    A total of 63.3 million tons of petroleum and chemicals made their way through the port in the first nine months of the year, according to a recently released audit report. That represents a 12.4 percent increase over last year’s third-quarter haul, which totaled 56.3 million tons.

    Much of those materials likely came from Eagle Ford Shale, the energy play that spans 3,000 square miles and has created massive economic growth for South Texas.

    Operating revenues: The port received $59.7 million, compared with $58.1 million for the same period in 2013, a 2.8 per cent increase. It budgeted $56.4 million.

    Strong investments: As of September 30, the port had $145.5 million invested in local government investment pools, money market accounts, agencies, certificates of deposit and securities.

    More bulk: Total cargo tonnage moving through the port so far in 2014 has been 72.9 million tons, up 11.3 per cent from 65.5 million for the same period in 2013.

    The audit, written by Dennis J. DeVries, the port’s director of finance, covers the nine months of the year that ended September 30. The port commission’s audit committee discussed at the weekend.

    Wharfage and dockage fees also are strong revenue streams for the port. Together, they generated $42 million from January to September, compared with the $40.9 million budgeted for the same period and the $34.5 million actually collected during those months in 2013.

    Jim Lee, the chief economist at Texas A&M University-Corpus Christi, said the prospect of eventually exporting oil and natural gas to other countries widens the port’s potential.

    Recent downward trends in oil and gasoline prices is a reflection of Congress’ oil export ban that went into effect after the Arab oil embargo of the 1970s. With the Nov. 4 elections now over, many analysts have speculated Washington may consider relaxing the restrictions this year or next.

    One company, BHP Billiton, a mining and energy company with its headquarters in London and Melbourne, Australia, has gone so far as to announce last week it plans to sell Eagle Ford Shale to foreign buyers without getting permission from the U.S. government.

    “If that … ban is lifted, then U.S. oil and gasoline prices will rise modestly as oil producers will be able to ship the excess supplies to countries at higher prices,” Lee said.

  • Stolen crude, deferred production hit 250,000bpd

    Stolen crude, deferred production hit 250,000bpd

    Oil firms have continued to cry out over the impact of insecurity and oil theft. They say stolen oil and deferred production have reached an estimated 250,000 barrels per day (bpd). Deferred gas production runs into hundreds of millions of cubic feet per day.

    The Managing Director, Shell Nigeria Exploration and Production Company (SNEPCO), Mr. Chike Onyejekwe, said non-payment of counterpart funding by the government in oil and gas joint venture operations, among others, is another challenge facing operators.

    He said the impact of the loss of oil production alone translates into about $9 billion revenue loss yearly, and that this has significantly reduced the funds available for distribution to the various tiers of government through the federation account.

    “The result of this is missed opportunities to develop essential services that positively impact the lives of Nigerians. Additionally, when one considers the huge oil revenue loss and its knock-on effects, coupled with impact of gas losses and associated power shortages, the overall impact is enormous.

    “This state of affairs, if allowed to continue, will not only stifle growth in the oil and gas sector but will also undoubtedly thwart Nigeria’s efforts to achieve its 20:2020 vision,” he said.

    On funding of oil and gas joint venture operations, Onyejekwe said the perennial joint venture funding challenges, and the financing challenges faced by indigenous operators and service companies, is another important industry specific issue that needs to be addressed for sustainable development of the oil and gas sector.

    He said: “Due to competing national needs, it has become difficult for the government to meet its required funding for joint venture operations.

    “Although the industry has typically used alternative mechanisms to address this problem, these are short term in nature, costly and time consuming to negotiate and therefore, not sustainable. These funding constraints should be addressed so that the industry can achieve its full potential.”

    He explained that financing is not only a problem faced by the joint ventures, but also a major challenge for indigenous operators and service companies. He noted that the limited access to finance restricts their ability to achieve the aspiration to increase indigenous participation in Nigeria’s oil and gas industry.

    He said some international oil companies (IOCs) have initiated contractor financing schemes to help promote the growth of indigenous service providers and increase their ability to support the industry. While this is a commendable initiative, a more holistic strategy is urgently required to energise full participation of all categories of indigenous companies, he added.

    Onyejekwe spoke on behalf of the Oil Producers Trade Section (OPTS), an arm of the Lagos Chamber of Commerce and Industry (LCCI), which has about 24 oil firm-member including the IOCs and indigenous operators.

    He noted that all over the world, governments seeking to attract investment need to ensure that adequate security measures are in place for safe and stable operations, adding that Nigeria faces security challenges, including kidnappings, piracy in the Gulf of Guinea, and chronic vandalism of oil and gas facilities. The consequence of these can be seen in high cost of doing business, decline in oil production and exports and inadequate supply of gas to meet Nigeria’s power needs.

    He also drew government’s attention to the need for efficient and effective regulatory institutions, stable policies and implementation plan.

     

  • Crude output: local operators account for 10 %

    Indigenous oil firms account for 10 per cent of the nation’s total oil production, the Chairman, Seplat Petroleum Development Company, A.B.C. Orjiako, has said.

    Orjiako, who spoke during an oil & gas leadership conference in Accra, Ghana, at the weekend, said indigenous firms contribute would rise to 20 per cent of the nation’s oil output, and 40 per cent of domestic gas supply in the next five years, adding that the local companies are likely to be responsible for 100 per cent supply of domestic refining by the year, 2020.

    Orjiako spoke alongside the Managing Director of Shell Petroleum Production Company, Mutiu Sunmonu, former Chief Executive of Nigeria Liquefied Natural Gas (NLNG), Chima Ibeneche, as well as the Executive Secretary, Nigerian Local Content Monitoring Board, Ernest Nwapa. He said 25 local firms are producing 250,000 barrels-per-day of the nation’s 2.5million barrels daily production, adding that the figures not only point to the significance of the indigenous oil players, but also, their rising profile in the industry.

    He said the government has since 2003 been pursuing a policy that is geared towards preferential access ing the bid for new acreage.

    “Since 2003, the government has favoured the allocation of acreage to indigenous companies during the bid rounds. The Nigerian Content Act (2010) also specifies that Nigerian independent operators be given first consideration in the award of oil blocks.”

    Another critical factor in the emergence of independent oil and gas operators, according to Orjiako, was the “Marginal Field Development Programme which ensured that fields left fallow by the International Oil Companies (IOCs), are farmed out to indigenous Exploration & Production companies, which are then granted preferential fiscal incentives.”

    Orjiako said 24 “marginal” licences were awarded in 2002 , adding that many of them have begun production.

    “Local companies / local company led-consortiums are expected to continue being the beneficiaries of divestitures of onshore/shallow offshore oil blocks by the International Oil Companies that favour deep-water acreage because of their natural advantage in terms of technology, experience and financial capacity, ” he said.

    Orjiako noted that aside NPDC, which is a government owned operator, “Seplat is the highest with 52,800 bopd from three fields while Conoil is second with 25,000 from two fields and Midwestern with 13,000bopd , according to a publication of Africa oil and gas report.”