W. Africa Crude-New Egina crude hits the market, MRS issues sell tender

LONDON, Dec 27 (Reuters) – Spot activity was muted due to the Christmas holiday period but a new Nigerian grade has been added to the February loading programme, while Nigeria’s MRS issued a sell tender.
* The first cargoes from Total’s newly producing Nigerian offshore field, Egina, will load in February
* Total, China’s CNOOC and Nigeria’s NNPC will each have a cargo of Egina in February, traders said. No offers have yet been seen
* Angola’s state oil firm Sonangol was offering two cargoes of Dalia at dated Brent minus 30 cents a barrel loading Feb. 17-18 and Feb. 23-24
* Sonangol earlier sold its cargo of Saturno loading Feb. 7-8 to a Chinese refiner
* Nigerian oil marketing firm MRS issued a sell tender for a cargo of Forcados loading Feb. 14-15 and a cargo of Amenam loading Feb. 10-11. The tender closes on Jan. 31

RELATED NEWS

* Sixteen oil and gas firms have submitted applications for one or more of five Ghanaian offshore blocks in the West African country’s first exploration licensing round, its energy ministry said
* Sinopec has suspended two top officials at its trading arm Unipec and is evaluating details related to certain crude oil transactions that have incurred some losses, the Chinese state oil company said on Thursday

Nigeria’s oil sector realised $17.05bn in 2016; lowest in a decade

The total financial flows from Nigeria’s oil and gas sector in 2016 was the lowest in a decade and the fifth lowest since the return of democracy in 1999, the latest Nigeria Extractive Industries Transparency Initiative (NEITI) Oil & Gas Industry Audit report has revealed.
The report released on Friday in Abuja said aggregate earnings from the sector during the year dropped significantly by over 31 per cent from over $24.79 billion in 2015 to about $17.05 billion.
Compared to the peak earnings of $68.44 billion recorded in 2011, the NEITI report, which covers 1999 to 2016, showed the 2016 figures plunged by over 75 per cent.
“The plunge in revenue in 2016 resulted from the double whammy of low oil prices in the global market,” the NEITI Executive Secretary, Waziri Adio, is quoted to have said in a statement sent to PREMIUM TIMES by the transparency agency spokesperson, Ogbonnaya Orji.
Mr Adio said the reduction in Nigeria’s oil production, in turn, was caused by the disruption and vandalism of oil assets and a spike in crude oil theft in the Niger Delta region, among others.
Other key findings from the report were that the oil and gas sector contribution to the country’s gross domestic product (GDP) dropped from 9.5 per cent in 2015 to 8.3 per cent in 2016; total gas produced in 2016 was 3.05 trillion standard cubic feet (SCF), out of which 288.21 billion SCF, or 9.45 per cent, was flared.
Also, about 126 million barrels of oil valued at $5.48 billion, or about N1.37 trillion was allocated for domestic consumption during the year.
From the allocation, about 23 million barrels (18 per cent) was allocated for local refineries; 55.9 million barrels (45 per cent) for Direct Sale-Direct Purchase (DSDP) scheme; 36.6 million barrels (29 per cent) for the Pipelines and Products Marketing Company (PPMC) lifting, and 10.4 million barrels (8 per cent) for offshore processing arrangement.
From the money for domestic crude allocation (DCA), the NNPC deducted about N512 billion upfront for Joint Venture (JV) cash call, N126.5 billion for pipeline repairs and maintenance, N99 billion for under-recovery from petroleum products imports and N20 billion for crude losses.
Also, a total of 101 million barrels of crude oil valued at $4.4 billion was recorded as losses due to theft and sabotage, with SEPLAT Petroleum and Shell Petroleum Development Company (SPDC) alone accounting for over 81 million barrels of crude oil as losses due to sabotage. About 20 other entities reported 19.8 million barrels as losses due to theft.
The Nigeria LNG dividend, loan and interest repayment for 2016, the report said, stood at about $390.2 million, as against $1.07 billion of 2015, a decline of 63.5 per cent.
Again, out of about $8.2 billion budgeted for cash calls in 2016, about $5.5 billion was released, while about $4.9 billion was paid. Non-JV cash call expenses during the year came to about $874 million, representing 17.59 per cent of cash call expenditure.
“Yearly, the average price of crude oil per barrel was $43.73 in 2016 as against $52.5 in 2015,” he said.
“Total oil production in 2016 was 659 million barrels as against 776 million barrels produced in 2015, a fall of 15 percent.
“Losses due to crude oil theft and sabotage rose from 27million barrels in 2015 to 101million barrels in 2016, an increase of 274 percent. This was aside from losses due to production deferments by the oil companies put at 144 million barrels in 2016. The figure went up to 65 percent when compared to the 87.5 million barrels in 2015.”
The report identified the bombing of the under-water 48-inch Forcados Oil Loading/Export Pipeline in February 2016 as one of many major incidences the industry had to contend with during the year under review.
Following the incident, operations on the pipeline were disrupted for over seven months, with Shell Petroleum Development Company (SPDC) declaring force majeure on crude oil lifting from the facility.
Also, the report said other companies injecting into the Forcados Terminal, including SEPLAT, Panocean Oil, Midwestern Petroleum, Energia, Platform Oil & Gas, Pillar Energy, Waltersmith, and Excel were compelled to shut down production for over 147 days.
Besides, the SPDC also declared force majeure on the Bonny Terminal due to a leak in Nembe Creek Pipeline between May and July 2016, while the Nigeria Agip Oil Company (NAOC) equally declared force majeure on the Brass Terminal between July and August 2016.
According to the report, after surviving the slump in the global oil market in 2008 and 2009, Nigeria’s oil sector rebounded in 2010 with a 49 per cent increase in total financial flows to $44.94 billion, and a peak earning of $68.44 billion in 2011, with oil prices at the highest ever level above $140 per barrel.
Since then, financial flows from the sector have been trending downwards, with $62.94 billion in 2012; $58.08 billion in 2013; $54.56 billion in 2014, and $24.79 billion in 2015.
Similarly, oil production has been on steady decline, with about 866 million barrels produced in 2012; 800 million barrels in 2013; 798 million barrels in 2014; 776 million barrels in 2015 and 659 million barrels in 2016.
The NEITI audit reports also independently reconcile payments by companies against receipts by government agencies, and cover key financial flows, such as earnings from the sale of the Federation’s equity crude oil and gas.
The report also covers sector-specific taxes, fees and levies, including royalty, Petroleum Profit Tax (PPT), signature bonus, gas flared penalty, and other flows such as Niger Delta Development Commission (NDDC) contribution, Nigerian Content Development & Monitoring Board (NCDMB) levy, Nigerian Export Supervision Scheme (NESS) Fees, education tax and others.
Details of the payment show the major earnings for 2016 came from export and domestic sale of Federation equity crude oil and gas with $7.97 billion, PPT with $4.21 billion, and royalty with $1.57 billion.
A major highlight of the 2016 report was that for the first time in Nigeria’s history, crude oil produced from Production Sharing Contracts (PSCs) overtook output from the Joint Ventures (JVs).
In 2016, PSCs accounted for 324 million barrels, while the JVs accounted for 289.1 million barrels, as against the 320 million barrels for PSCs and 375.5 million barrels for JVs in 2015.
PSCs are production sharing contract arrangement introduced in 1993, which became the leading production arrangement in 2016.
The PSCs are mostly offshore, thus insulated from vandalism and sabotage, and are not constrained by adequacy/availability of equity funding by the Federation. This change in production structure pushes to the fore the need to renegotiate the terms of the PSCs as stipulated in the Deep Offshore and Inland Basin Production Sharing Contracts Act of 1993 so as to increase government’s take.
The NEITI report also reveals that the total lifting for 2016 stood at about 668.1 million barrels, as against the 780.4 million barrels lifted in 2015, a drop of about 14.35 percent.
Out of the total liftings for 2016, NNPC lifted about 244.6 million barrels (36.61 per cent) on behalf of the federation, while the companies lifted 423.5 million barrels (63.39 per cent).

OPEC cuts Nigeria’s oil production quota to 1.68 million bpd – PUNCH

Nigeria

Nigeria is expected to cut its crude oil production by 3.04 per cent to 1.685 million barrels per day for the first half of next year, as part of efforts by the Organisation of Petroleum Exporting Countries to reduce oversupply.
OPEC and 10 non-OPEC countries agreed earlier this month to cut oil production by 1.2 million bpd effective from January for an initial period of six months to shore up what many expect to be weakening market fundamentals ahead.
Nigeria, which was exempted from the previous cuts since January 2017, was asked to join the deal during the OPEC meeting on December 7 in Vienna.
With a reference level of 1.738 million bpd, Nigeria’s oil production is to be cut by 53,000 barrels to arrive at the new quota of 1.685 million bpd, according to a breakdown of member quotas under OPEC’s supply accord obtained by S&P Global Platts on Thursday.
OPEC kingpin, Saudi Arabia, has pledged to lower its crude oil output to 10.311 million bpd -a 322,000 bpd cut from its October level, the document prepared by OPEC’s secretariat showed.
The document showed that OPEC would shoulder 812,000 bpd of those cuts, while the non-OPEC participants would cut 383,000 bpd.
Iraq, OPEC’s second highest producer, will cut 141,000 bpd to reach an output level of 4.512 million bpd and the UAE will cut 96,000 bpd to average 3.072 million bpd.
Iran, Libya and Venezuela are exempted from the cuts.
The Minister of State for Petroleum Resources, Dr Ibe Kachikwu, said on December 7, that it was very difficult for Nigeria to reduce its crude oil production.
Kachikwu, who spoke on ‘Bloomberg Daybreak: Europe’ ahead of the OPEC meeting in Vienna, stated that there was a need for an extension of production cuts to stabilise the global oil market.
Asked if Nigeria would be able to reduce production, he said, “It is very difficult to do that but where we are now, everybody must be seen to contribute. Obviously, the smaller it is, the more amenable we are to participate; the larger it is, the more we will struggle to participate.
“We have got exemption three times understandably. This time round, I think there is a decision that everybody should be seen to chip in.”
The 2019 budget proposal presented on Wednesday to the National Assembly by President Muhammadu Buhari proposed an oil production of 2.3 million barrels per day.
“Production of 2.3 million bpd projection for 2019 may not be realistic owing to OPEC’s plan to cut production in order to shore up prices,” the Chairman, Petroleum and Technology Association of Nigeria, Mr Bank-Anthony Okoroafor, told our correspondent on Thursday.
According to him, the benchmark price of $60 per barrel used for the budget is not smart, based on all the uncertainties and volatility surrounding the price of oil.

Gas development: The Chevron Nigeria Limited’s success story

Jeffery Ewing, (Chevron )

THE development of Nigeria’s vast gas resources has been one of the major policy thrusts of successive governments in Nigeria. It is worthy of note that Nigeria is blessed with resources for growth and global competition in gas. The country ranks 9th in World’s gas proven reserves. The National Gas Master Plan focuses on reducing routine gas flaring, increasing domestic gas supply and utilisation, while diversifying Nigeria’s revenue. Jeffery Ewing, (Chevron ) In Nigeria, Chevron Nigeria Limited (CNL), operators of the joint venture between the Nigerian National Petroleum Corporation (NNPC) and CNL ranks high among some corporate bodies that play leading role in gas development in the country. In February 2018, at the Nigerian International Petroleum Summit (NIPS), in Abuja, Chevron received an award as the highest contributor of domestic gas in Nigeria.

At the summit, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, commended CNL’s efforts in supporting the Federal Government’s gas development objectives. Chairman/Managing Director of CNL, Mr. Jeff Ewing, explained that CNL has contributed immensely to the Nigerian government’s gas master plan through the various gas projects it has embarked on and that the company is the highest contributor of high quality gas to the domestic market in Nigeria. Also, according to the Department of Petroleum Resources (DPR), CNL supplies about 40per cent of Nigeria’s domestic gas consumption and has been the highest supplier of high quality domestic gas in Nigeria since 2015. Jeff noted that through investments in gathering and processing of associated gas, routine flaring has been reduced by over 90per cent from 2008 to 2017 in CNL’s operations. According to him, “amidst the growing global trend in gas production and utilisation, the expectations for the gas sector in Nigeria remain high and provide opportunities for investment in the sector. The opportunities include: (1) transitioning from an oil based economy to a more integrated oil and gas economy and end routine gas flaring, (2) deliberate exploration for non-associated gas to support the Nigeria Gas Master Plan, with a focus on high liquid yield non-associated gas resources to optimise the gas development project economics, and (3) the growth of new industries made possible from the abundant resources and competitively priced gas supply. CNL’s Chairman/Managing Director explained that the company’s gas story began with the implementation of different phases of the Escravos Gas Project (EGP), with four phases of development over the years. He stated that the EGP gas gathering and processing facilities placed CNL as one of the pioneers in creating a practical and economic solution for gas flaring in the Nigerian oil and gas industry. “The gas gathering, and processing projects involved stripping liquids from rich gas and creating a new revenue stream for the nation from the sale of the liquids”, he stated. The gas gathering and processing facilities strip liquids from rich gas, creating additional revenue stream for the nation from the sale of the liquids. According to him, the gas strategy adopted by CNL will end routine gas flaring and build a profitable gas business through a portfolio of domestic, regional and export supply projects that fulfil the NNPC/CNL Joint Venture’s Domestic Gas Supply Obligation and support the Nigerian Gas Master Plan. The strategy, said the Chairman/Managing Director, includes: ending routine gas flaring; boosting domestic supply diversifying and commercialising gas resources through Gas-Based Industries such as its Escravos Gas-to-Liquid (EGTL) Plant. CNL is optimistic about the future of oil and gas business in Nigeria as the opportunities are enormous. As Ewing emphasized: “Chevron has a long commitment to Nigeria. The company has been making significant investments in the country for over 50 years and it expects to do so for many more years to come. With the right policies, the enormous potential of Nigeria’s oil and gas sector can yield even greater benefits.”