Market Report: NNPC Reduces Cost of Oil Production
On Wednesday 16th of August, the Nigerian National Petroleum Corporation (NNPC) announced a 70.5% reduction in the cost of crude oil production from $78 (August 2015 price) to $23 per barrel, thus saving an estimate of about $3 billion per annum. This was disclosed by Dafe Sejebor the Group General Manager, National Petroleum Investment Management Services ((NAPIMS) a unit of the NNPC), at the inauguration of the anti-corruption committee of the unit. This figure was attained by NAPIMS by looking at the difference between the $78 and $23, which represents the old and new production cost relative to Nigeria’s current daily average production cost. Sejebor said the target was to bring the cost of production to $17 and $19 for onshore and offshore production respectively. Sejebor also commended the support rendered by the Federal Government to the NNPC in dealing with the challenges in the petroleum industry adding that the pending new Petroleum Industry Bill, when passed, will restore investors’ confidence in the industry. NAPIMS has also established an anticorruption committee; a directive given by the Group Managing Director, NNPC, Dr Maikanti Baru, mandating all the Strategic Business Units and Corporate Service Units of the NNPC to establish their own anti-corruption committees.
In the quest to make Nigeria become self-sufficient in petroleum refining, the Federal Government has disclosed plans to support modular refineries in obtaining pioneer status, secure various duty waivers, import facilitation of equipment and engineering review. The Minister of State for Petroleum Resources, Dr Ibe Kachikwu, said that 33 refinery licences had been given to private investors but a lack of financing had been one of their major challenges. However, the U.S. Trade and Development Agency (USTDA) has approved a grant of $797,343 (N243 million) for Eko Petrochem and Refining Company Limited, to assist in the construction of a 20,000 barrel per day (bpd) modular refinery in Lagos. This seed money is to be used to finance the feasibility study supporting technologies and development of an implementation plan for the modular refinery located on Tomaro Island in Lagos. Kachikwu promised to provide all the necessary support required by Eko Petrochem to make the refinery a reality.
Senegal and Mauritania
Oil and gas exploration company, Kosmos Energy Ltd. (KOS) announced its decision to start drilling three new wells offshore Senegal and Mauritania by the end of August 2017. KOS will start spudding of its three super-giant prospects with the Hippocampe well near Senegal. KOS has drilled six wells off the coast of West Africa, where it had found around 40 trillion cubic feet of gas equivalent (Tcfe). The company believes that along the Atlantic margin, the Mauritania Senegal offshore belt is the largest petroleum system found in last 15 years. Backed by the new seismic data gathered by KOS, the company believes that the resource base it has discovered will keep growing with more drilling.
On Thursday 17th of August, oil prices edged higher but remained close to their lowest level in three weeks as traders pondered over data showing the most fall of U.S. crude supplies in eleven-months. The U.S. West Texas Intermediate crude for September contract was up 9 cents at $46.87 a barrel at 3:35 AM ET (07:35 GMT), while the ICE Futures Exchange in London Brent oil for October delivery tacked on 18 cents at $50.45 a barrel. The U.S. Energy Information Administration (EIA) weekly report for Wednesday 16th August showed a fall in crude oil inventories by 8.9 million barrels in the week ending August 11. This is the seventh weekly decline in a row.
Oil prices have been under pressure in recent weeks as concern over rising U.S. shale output remains. Domestic production of US shale climbed to the highest level in over two years according to U.S. government data. OPEC/non-OPEC producers extended a deal to cut 1.8 million bpd in supply until March 2018. Thus far, the production cut agreement has had little impact on global inventory levels as U.S. shale output and supply from producers that are exempt from the OPEC deal (Libya and Nigeria) continues to increase.