Market Report: H.E. Minister Mr. Timipre Sylva aims to cut production costs of oil from Nigeria
The Minister of State for Petroleum Resources, Mr. Timipre Sylva, said he aims to cut the production cost of a barrel of oil from Nigeria by at least 5%. Sylva said he would achieve this by enlisting the support of local vendors within the Nigerian Content framework.
Local vendors will have to deliver premium services and support to drive down the cost of crude oil production, increase the contribution of the oil sector to the country’s Gross Domestic Product (GDP) and guarantee the security of oil production.
Sylva listed other key priority areas the ministry will be pursuing to include: the eradication of smuggling of PMS (petrol) across Nigerian borders; the completion of gas flare commercialization program; increase of crude oil production to three million barrels per day (bpd); the passage of the Petroleum Industry Bill; increase of domestic refining capacity and implementation of the amended Deep Offshore and Inland Basin Production Sharing Contract Act.
Nigeria Liquefied Natural Gas Limited (NLNG) and Vitol SA have signed a 10-year LNG Sale and Purchase Agreement (SPA) for the supply of 500,000 tonnes of LNG per year from NLNG’s Trains 1, 2 and 3. The delivery is on an ex-ship basis which will start October 2021. This agreement indicates NLNG’s move in ramping up its long-term presence in the market.
The deal also helps NLNG re-market volumes from existing production lines at its Bonny Island plant with several contracts due to expire. NLNG’s contracts with Turkey’s Botas, Portugal’s Galp Energia, Spain’s Naturgy and France’s energy major Total for a total of 2.67 million tonnes per year will expire in 2020 and 2021. NLNG is an incorporated joint-venture owned by four shareholders: Nigerian National Petroleum Corp. (49%), Shell Gas B.V. (25.6%), Total Gaz Electricite Holdings France (15%), and Eni International N.A. N. V. S.àr.l (10.4%).
Springfield E&P has discovered 1.5 billion barrels of oil offshore Ghana. Springfield and its partners Ghana National Petroleum Corporation (GNPC) and GNPC EXPLORCO also found 700 billion cubic feet of gas in the West Cape Three Points (WCTP) Block 2. Springfield said, “The current undiscovered potential of the Block is estimated at over 3 billion barrels of oil and gas in multiple leads and prospects within various proven reservoir units.”
According to analysts, foreign partnerships would be needed to develop massive discovery in the form of investment and deep-water expertise. To boost investments into its oil industry, Ghana plans to give oil companies more choice on where to drill for oil and gas. Ghana currently produces around 200,000 bpd of oil, including from the Jubilee oilfield operated by Tullow Oil.
On Thursday 12th December, oil prices rose by more than 1% after the U.S. said it was very close to some sort of a deal with China and had reportedly offered China to roll back some existing tariffs and cancel a new round of tariffs set to take effect on December 15.
The U.S. West Texas Intermediate (WTI) crude prices settled up 67 cents at $59.18 per barrel. In post-settlement trading, it reached $59.39 by 3:35 PM ET (20:35 GMT), while Brent was up 75 cents at $64.47 in post-settlement trade. The U.S. Energy Information Administration weekly report for Wednesday 11th December showed a rise in crude inventories by 822,000 for the week ending December 6, compared with analysts’ expectation of a drawdown of 2.76 million.
Oil prices were trading lower earlier in the day after the International Energy Agency (IEA) said in its monthly report that: “Despite the additional curbs and a reduction in our forecast of 2020 non-OPEC supply growth to 2.1 million bpd, global oil inventories could build by 700,000 bpd in Q1 2020.”
Last week, OPEC and other producers including Russia agreed to rein in output by an extra 500,000 bpd in the first quarter of 2020 to balance the market and buoy prices but didn’t pledge action beyond March. But in its monthly report, it said it expected a small oil market deficit in 2020, suggesting that the market is tighter than before. U.S. shale output is expected to have the biggest reduction, where operators have been cutting spending under investor pressure to improve returns. The IEA estimates total U.S. oil production growth will slow to 1.1 million bpd in 2020 from 1.6 million bpd in 2019.