Image: Premium Times
The Nigerian National Petroleum Corporation (NNPC) has signed a 6-month Direct Sale-Direct Purchase (DSDP) agreement with BP trading arm, BP Oil International, for the supply of Premium Motor Spirit (PMS) as part of measures to sustain the supply of petroleum products across the country. This agreement represents 20 percent of NNPC’s total PMS supply under the DSDP arrangement, which allows the corporation to exchange crude oil with international oil traders for imported petroleum products over a period of time.
Dr. Maikanti Baru, the Group Managing Director of NNPC explained that the corporation was committed to ensuring product availability by inviting new and old players to participate in the Nigerian oil sector. Dr. Baru also commended BP for choosing to partner with AYM Shafa, an indigenous oil company, which has been expanding its downstream footprints across the country. Introduced in 2016, the DSDP arrangement is a model carried out through direct sales of crude oil to refiners or consultants, who in turn supply NNPC with the equivalent worth of products. Since its inception, the DSDP model has saved NNPC millions of dollars that would have been paid through demurrage and has also proven to be a major component of the corporation’s petroleum products supply portfolio which ensures stability in product supply nationwide.
On Tuesday, Dr. Ibe Kachikwu, the Minister of State for Petroleum Resources in an interview with S&P Global Platts stated that production from Egina field will boost Nigeria’s oil production by 200,000 barrel per day (bpd). Production from the Egina field is reportedly due to start next month at around 150,000 bpd and could ramp up to 200,000 bpd after around 6 months. Dr. Kachikwu further noted that production could rise further to 400,000 bpd over the next few years. Dr. Kachikwu also revealed that the much-awaited Final Investment Decision (FID), on the deepwater Zabazaba development project would be finalised before the end of 2018.
The Zabazaba field development is being executed alongside Etan field, and the two are expected to grow Nigeria’s oil production by 150,000 bpd when the project comes on stream. The first production from the $13.5 billion integrated development project is expected in 2020. The Zabazaba and Etan fields are located in Oil Prospecting Lease, OPL 245 offshore Nigeria in water depths of 1,200m to 2,400m. The oil and gas fields are being jointly developed by Eni’s Nigerian subsidiary, Nigerian Agip Exploration (NAE) and Shell Nigeria Exploration and Production Company (SNEPCO). NAE is the project operator.
On Wednesday Gabon’s Oil Minister, Pascal Ambouroue stated that Gabon has launched a new offshore exploration licensing round for 34 oil and gas blocks and plans to soon enact new legislation that would scrap the 35 percent corporate tax on energy companies. According to the oil minister, Gabon’s new petroleum code will likely become law by the end of December 2018.
Ambouroue said, “Marginal field development by small independents sustains production now and production will decline below 150,000 barrels a day if nothing is done.” Gabon wants to attract more investors to its oil and gas industry and is currently overhauling its energy legislation to replace the 2014 petroleum code. According to OPEC, Gabon, a small crude oil producer, has averaged oil production circa 187,000 bpd so far in 2018. Gabon’s new law would set a minimum royalty rate of 7 percent for conventional offshore oil and of 4 percent for gas. For deep-water and ultra-deep waters, the royalty rates would be 5 percent for oil and 2 percent for gas. The Director General of Hydrocarbons, Bernardin Assoumou said: “The new hydrocarbon code is adopted for oil price fluctuations, gives flexibility to different plays and field sizes and the objective is to attract international oil companies.”
On Thursday, oil prices were mixed following reports that OPEC may consider cutting output in 2019 to prevent a return of global oversupply. The U. S. Crude oil West Texas Intermediate Futures for December delivery gained 0.08 percent at $61.72 per barrel at 9:29 PM ET (02:29 GMT), while Brent Oil Futures for January 2019 delivery edged down 0.06 percent at $72.03 a barrel. The U.S. Energy Information Administration (EIA) weekly report for the week ending Nov. 2 showed a rise in U.S. crude inventories by 5.8 million barrels. The EIA added that output is expected to break through 12 million bpd by mid-2019. U.S. output meanwhile reached a new record high of 11.6 million bpd and has now overtaken Russia as the world’s largest oil producer.
According to the Head of Commodity Strategy at Saxo Bank, Ole Hansen said: “OPEC and Russia may use cuts to support $70 per barrel. The introduction of U.S. sanctions earlier this week against Iran failed to lift the market given the announcement that eight countries, including three of the world’s biggest importers, would receive waivers to carry on buying Iranian crude for up to six months.” On Wednesday, U.S. President Donald Trump said at a news conference that a fragile oil market was a key reason he decided to grant waivers to eight nations, including China, India and Turkey, to allow them to continue buying Iranian oil. The waivers are expected to last 180 days, though they can be extended, according to reports earlier this week.