Market Report: Oil and Gas industry under the spotlight
The Minister of State for Petroleum Resources, H.E. Chief Timpre Sylva, said the Federal Government has pledged to deepen implementation and compliance, with local content to reduce the cost of crude oil production.
Nigeria is one of the countries with a high production cost per barrel of crude in the world. Sylva said giving more opportunities to local contractors, who tend to be cheaper than expatriates and international contractors will reduce the cost of doing business in the oil and gas industry in Nigeria.
Nigerian Content Development and Monitoring Board Executive Secretary, Simbi Kesiye Wabote, confirmed that local content implementation lowers the cost of crude oil production, particularly in the long run. He listed other key elements that contribute to high crude oil production cost in Nigeria to include security and infrastructural challenges as well as protracted contracting cycle.
Wabote explained that local content serves as an opportunity cost for the Federal Government to empower its citizens, get them involved in oil and gas activities and guarantee the security of supply in the industry.
The Chief Operating Officer, Upstream, Mr. Roland Ewubare of the Nigerian National Petroleum Corporation stated that Nigeria is producing 1.6 -1.7 million barrels per day (bpd) of crude oil, adding that the country would continue to follow the Organization of the Petroleum Exporting Countries (OPEC) output cuts. Mr. Ewubare said that Nigeria’s output of crude and condensate is at 2 million bpd.
OPEC had granted Nigeria a higher output target under an OPEC-led deal to limit supply. Nigeria started participating in the deal in 2019, after exemption from previous OPEC cuts due to militant attacks that reduced the country’s output.
Equatorial Guinea (EG) revealed plans to build a 70km subsea gas pipeline that will link the Alen platform with the Punta Europa petrochemical hub. Saipem received a $100m contract to build the gas processing unit serving the Alen field. The Ministry has also approved the proposed petrochemical complex in Punta Europa “within the framework of Equatorial Guinea’s gas monetization project.”
The 24-inch pipeline will serve offshore gas fields and have a capacity for 950 million cubic feet of gas per day as Equatorial Guinea looks to extend the life of its liquefied natural gas (LNG) production assets. The gas will be transported from the existing Alen platform to facilities on Bioko Island.
The Minister of Mines and Hydrocarbons, H.E. Gabriel Obiang Lima, said that gas deliveries from the project operated by Noble Energy are to begin in early 2021 and that production will peak at 300 million cubic feet per day of gas. The project aims to tap more than 3 trillion cubic feet of gas that Noble has identified in Block O; which hosts Alen and Block I, although about 600 billion cubic feet will be exploited.
Gas from Alen will supplement declining supplies to the EG LNG plant from Marathon’s Alba field. The pipeline forms part of plans to link various offshore gas fields to onshore LNG facilities and turn the island of Bioko into a gas processing hub.
The intention of the government is for Alen to become a gas commercialization hub in the Rio Muni basin, taking production from fields in both Equatorial Guinea and Cameroon.
On Thursday 14th November, oil prices settled lower after U.S. oil inventories rose more than expected. The U.S. West Texas Intermediate crude futures slipped 35 cents at $56,77 per barrel, while Brent crude futures settled down 9 cents at $62,28 at 03:29 PM ET.
The U.S. Energy Information Administration in its weekly report showed a fall in crude oil inventories by 2.2 million barrels for the week ending November 8, compared with analysts’ expectations for a build of 1.65 million barrels. Oil prices dropped shortly after the data came out.
Oil prices gained support from comments made by Mohammad Barkindo, Secretary-General of OPEC, who said global economic fundamentals remained strong and is still confident the U.S. and China would reach a trade deal.
OPEC has shown signs that it won’t ask for more output cuts, yet, it’s too early to discuss the output policy before the December meeting.
Barkindo also added that there will likely be downward revisions of supply going into 2020 especially from the U.S. shale. OPEC and non-OPEC members, including Russia will meet on December 5-6, to discuss output policy and whether to extend production curbs of 1.2 million bpd that have been in place earlier in the year.