Market Report: Aker Energy Postpones Development Offshore Ghana Amidst the COVID-19 Pandemic
The Nigerian National Petroleum Corporation (NNPC), International Oil Companies and Independent Oil Companies in the Upstream and Downstream Sectors have contributed a total of ₦11 billion to the Nigeria Centre for Disease Control as part of its support to combat the Coronavirus pandemic in the county.
The Group Managing Director of NNPC, Alhaji Mele Kyari stated that in recognition of the impact of the Coronavirus (COVID-19) pandemic on the Nigerian Population and the economy, the Nigerian Oil and Gas industry embarked on an industry-wide collaborative initiative to support the effort to combat the disease and its impact.
Furthermore, NNPC has tasked professionals in the Nigerian petroleum sector to come up with innovative solutions to tackle the current challenges being faced. Alhaji Kyari listed over-supply and outbreak of COVID-19 as challenges facing the industry and the economy.
On their part, he stated that NNPC has repositioned the Research and Development business into an innovation center to provide needed solutions and services for technological development in the petroleum industry. He urged that other stakeholders in the industry take on similar projects to bring forth innovative ideas to counter current challenges. The Federal Government also announced a price reduction of Premium Motor Spirit from ₦125 per liter to ₦123.50 per liter to last through April.
The Management of the Transmission Company of Nigeria (TCN) announced that it has recorded significant improvement in gas supply for power generation. NNPC carried out maintenance of gas pipelines, allowing for Azura, Sapele and Olorunsogo to be reconnected to the National Grid.
TCN had previously reported gas shortages hampering power generation but with the intervention, gas is being made more available to thermal power plants which have boosted power generation nationwide significantly, activating more than 1,000MW which was idle in March. Power plants previously experiencing gas supply shortage have started generating power to the Grid and will help to adequately serve distribution companies and Point load consumers of electricity.
The General Manager, Public Affairs, Ndid Mbah expressed his appreciation to the management of NNPC, Generation Companies, Distribution companies and TCN staff on duty posts in trying to sustain the Grid during these unprecedented times.
Aker Energy announced the postponement of the development of its Pecan field, located offshore Ghana until further notice amidst the COVID-19 pandemic. As a result, Aker Energy terminated its agreement with Yinson for the provision of a Floating Production Storage and Offloading (FPSO) vessel for the project. Aker Energy planned to develop the Pecan field with a purpose-built FPSO connected to a subsea production system at 2,400 meters below sea level. In February, Aker Energy entered into a Letter of Intent with Yinson to award a bareboat charter and an operations and maintenance contract for an FPSO vessel at the Pecan field, which is located in the Deepwater Tano Cape Three Points block offshore Ghana. The contracts would have been for a firm duration of ten years followed by five-yearly extension options exercisable by Aker Energy as the operator on behalf of the license partners Lukoil, Fueltrade, and Ghana National Petroleum Corporation.
On Thursday, 2 April, oil markets surged amid hopes that the price war between Russia and Saudi Arabia, which has flooded the market with extra supply, may be coming to an end. The U.S. West Texas Intermediate (WTI) crude futures were up 4.6% or 94 cents, at $21.25 at 04:18 GMT, while Brent crude futures rose 5.9%, or $1.46, to $26.20. The U. S. Energy Information Administration in its weekly report showed that crude inventories rose by 13.8 million barrels in the week ending March 27. Gasoline stocks rose 7.5 million barrels.
Despite the huge gains, oil prices have still lost more than half their value so far this year. WTI had lost 66% in the first quarter and Brent 61%. Global oil prices have fallen by roughly two-thirds as the coronavirus has slammed global economies at the same time as the world’s two largest exporters, Saudi Arabia and Russia, have started to pump extra supply into the market.
U.S. President Donald Trump said he had talked with the leaders of both countries and believed the two would make a deal to end their price war within a “few days”. He expects Saudi Arabia and Russia to cut oil output by as much as 10 million to 15 million barrels. Russian Energy Minister Alexander Novak said that Moscow was no longer planning to raise output and was ready to cooperate with OPEC and other producers to stabilize the market.
Saudi Arabia called for an emergency meeting of OPEC and non-OPEC oil producers, saying it aimed to reach a fair agreement to stabilize oil markets. Even if the two sides do agree, it would be very difficult to get the oil market back into balance given the extent of the demand destruction caused by the shutdowns to the various countries around the world.
To some degree, the participation of the U.S. in output cut would be essential for any deal that hoped to make a difference to market fundamentals. Major global producers have already scaled back production as fuel demand has dropped precipitously and storage is rapidly filling. Brazilian state-run oil producer Petrobras has already cut output by 200,000 barrels per day, about 6% of its output