Market Report: NNPC signs agreement for upstream gas development projects
The Nigerian National Petroleum Corporation (NNPC) and Nigeria Liquefied Natural Gas (NLNG) have signed a $2.5 billion pre-payment agreement for upstream gas development projects to supply gas to NLNG Trains 1 to 7. Alhaji Mele Kyari, the Group Managing Director of NNPC, said the new deal would help resolve the issues around gas supply to the Trains and urged shareholders to accelerate the production capacity of the company beyond the upcoming Train 7 facility. He added that there was a need to fast-track action on the process of bringing more Trains on stream.
Alhaji Kyari said the pre-payment gas supply agreement was a milestone which aligned with the Federal Government’s aspirations of monetizing the nation’s enormous gas resources, protecting the Federation’s investment in NLNG, ensuring full capacity utilization (22mtpa LNG and 5mtpa NGLs) of Trains 1 to 6 plants, generating employment, and providing new vistas of growth opportunities in the nation’s LNG sector. The managing director of NLNG, Tony Attah said the signing of the gas supply pre-payment agreement was a significant step towards ensuring the company’s business sustainability and competitiveness. He called for support to ensure that the Final Investment Decision (FID) on the Train 7 Project be taken in 2019 without fail.
NNPC has discovered hydrocarbon deposits in the Kolmani River II Well on the Upper Benue Trough, Gongola Basin, in the North-Eastern part of the country. NNPC had acquired 435.54km2 of 3D Seismic Data over Kolmani Prospect in the Upper Benue Trough, Gongola Basin to evaluate Shell Nigeria Exploration and Production Company (SNEPCo) Kolmani River 1 Well Discovery of 33 BCF and explore deeper levels. The well was drilled with “IKENGA RIG 101” to a total depth of 13,701 feet encountering oil and gas on several levels. A Drill Stem Test (DST) is currently on-going to confirm the commercial viability and flow of the Kolmani River reservoirs.
Preliminary reports indicated that the discovery consists of gas, condensate and light sweet oil with API gravity ranging from 38 to 41 found in stacked siliciclastic Cretaceous reservoirs of Yolde, Bima Sandstone and Pre-Bima formations. The computation of hydrocarbon volume is ongoing and will be announced in due course. NNPC had also acquired an additional 1183km2 of 3D seismic data over highly prospective areas of Gongola Basin to evaluate the full hydrocarbon potential of the Basin. The discovery of oil and gas in commercial quantity in the Gongola Basin will attract foreign investment, generate employment and increase government revenues.
VAALCO Energy announced that the Etame 9P appraisal wellbore, targeting the sub cropping Dentale reservoir beneath the VAALCO-operated Etame field offshore Gabon, was successfully drilled to a total depth of 10,260 feet and encountered both Gamba and Dentale oil sands. Operations are underway to plug back to a shallower depth and drill the Etame 9H horizontal development well section in the Gamba reservoir.
VAALCO estimates gross recoverable oil resources of 2.5 to 10.5 million barrels of oil present in sub cropping Dentale reservoirs. VAALCO also identified an oil column which was thicker than expected in the Gamba reservoir which may result in higher ultimate oil recovery from the planned Etame 9H and Etame 11H wells than previously expected but did not encounter H2S in either the Gamba or Dentale reservoirs.
VAALCO holds a 31.1 percent working interest in the Etame Marin block, located offshore Gabon, which to date has produced over 110 million barrels of crude oil and of which the Company is the operator.
On Thursday 17th October, oil prices rose as traders looked beyond a jump in weekly U.S. crude inventories to focus on plummeting fuel stockpiles as the maintenance season for refineries caused an unusual deficit in oil products.
The U.S. West Texas Intermediate crude futures settled up 57 cents at $53.93 per barrel, while Brent crude closed up 49 cents at $59.91. The U.S. Energy Information Administration weekly report for Wednesday 16th October showed a rise in crude stockpiles by 9.3 million barrels in the week ending Oct.11, compared to analysts’ expectations for a rise of about 2.9 million barrels.
The decline in fuel stockpiles came after refinery runs fell to just over 83 percent in the previous week. Refiners typically wind down operations during the fall season to do plant repairs or upgrades. This year, many refineries are taking longer to return to ensure compatibility with new maritime fuel rules, dubbed IMO, taking effect in 2020.
Meanwhile, an easing of geopolitical tensions in the Middle East also didn’t keep crude oil prices down. Turkey had agreed to a five-day ceasefire in northeast Syria to allow for the withdrawal of Kurdish forces. However, concerns about softer growth in the demand for oil and doubts about OPEC’s ability to rebalance the market on the current production cut rate will be key drags on prices in the near term, analysts said.