Market Report: Greater Tortue Ahmeyim Set to be Delayed to 2023
The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Alhaji Mele Kyari announced the removal of fuel subsidy in Nigeria. NNPC going forward is expected to play in the petroleum marketplace as just another marketer after spending around N700 billion subsidizing petroleum products in 2018.
Alhaji Kyari said that the Corporation will be there for the country to sustain the security of supply in the marketplace. However, his statements do not necessarily point to the deregulation of the petroleum sector as it seems NNPC will still fix prices with PPPRA.
Furthermore, Alhaji Kyari announced that NNPC will hand over Nigerian refineries to private firms to manage as soon as the refineries are fully rehabilitated by the Government. The Federal Government is set to shut down all its oil refineries as it looks to secure funding to upgrade them and begin a new model of operation.
He explained that the motive behind this is to allow for private sector investments in the refineries, stressing that a new model of management was necessary to ensure the desired performance outcomes of these refineries are realized.
The new model will see NNPC handing off running the refineries and offer Operation & Maintenance (O&M) contracts to private firms. This is in a bid to mirror the NLNG structure where world-class processes are always employed by its international partners tasked with running operations.
The start-up of the Greater Tortue Ahmeyim gas-condensate project offshore Mauritania and Senegal is set to be delayed until the first half of 2023. According to partner Kosmos Energy, operator BP’s present priority is maintaining the safety of its staff, contractors and the general public, and continued compliance with international and national restrictions to stop the spread of the coronavirus.
The combination of border closures, travel bans, social distancing restrictions, and office closures have impacted the project’s activities across worldwide locations, affecting time-critical tasks such as the construction of the breakwater for the LNG jetty during the 2020 weather window. As a result, the Phase 1 project timeline is expected to be delayed by around 12 months.
Currently, Phase 1 is more than 30% complete. Kosmos and BP are co-operating on a revised 2020 budget with the aims of maintaining the project economics and extending the carry of capital obligations through the end of this year.
French oil and gas major, TOTAL has divested from two West African nations, Liberia and Sierra Leone. The divestments announced include non-core assets in both Exploration-Production and Marketing & Services.
The assets comprise Total’s wholly owned subsidiary, Total E&P Deep Offshore Borneo BV, which holds an 86.95% interest in Block CA1, and Total’s Marketing and Services (M&S) businesses in Liberia and Sierra Leone. Total’s wholly owned subsidiary in Brunei is being sold to Shell and its M&S businesses in Liberia and Sierra Leone are being sold to Conex Oil & Gas Holdings Limited. Other assets for disposal by TOTAL include 63 service stations and petroleum products import and storage facilities.
TOTAL, which operated marketing and fuel distribution outlets in the two countries, signed agreements to sell the facilities to Conex Oil and Gas Holdings Ltd. TOTAL’s chief financial officer, Jean-Pierre Sbraire said the deal will help the company to shore up its finances in the current low oil prices. The sales projects are expected to be sealed before the end of the second quarter of 2020.
On Thursday 9th April, oil markets surged with investors becoming increasingly confident that the world’s main oil producers will agree to a hefty cut in output to try and balance a market suffering from a historic drop in demand following the coronavirus outbreak. The U.S. West Texas Intermediate crude futures traded 3.2% higher at $25.89 a barrel at 8:20 AM ET (12:20 GMT), while the Brent crude futures rose 2.1% to $33.53.
Both contracts are still around 50% lower than the levels seen at the start of 2020. The U.S. Energy Information Administration (EIA) in its weekly report for Wednesday 8th April showed crude stocks rose by 15.2 million barrels in the week ending April 3.
The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia (OPEC+) were set to convene a video conference meeting on Thursday, 9th April.
Hopes of an agreement to cut between 10-15 million barrels per day (bpd) rose after media reports suggested Russia was ready to reduce its output by 1.6 million bpd. Such a sizeable reduction would be far bigger than any production cut OPEC has ever agreed on before.
Russia has reportedly agreed to 2 million bpd of cuts, while Saudi Arabia has agreed to shave 4 million bpd. The rest of the members have not yet worked out who will cut what. Following the OPEC+ meeting, energy ministers from the Group of 20 major economies (G20) are set to meet to find ways to help ease the impact of the COVID-19 pandemic on global energy markets.
However, with oil prices having lost half their value since the start of 2020 and oil demand forecast to slide as much as 30%, analysts are sceptical about how effective an OPEC+ cut would be in shoring up prices. Given the rapidly rising oil inventories, the market is likely to be still awash with cheap oil even when demand recovers.