Market Report: Eni SpA and Springfield E&P to Combine Oil and Gas Fields
The Minister of State for petroleum resources, Chief Timipre Sylva announced that 2020 marks a year of diversification towards gas for Nigeria to reduce the dependence on only oil. The Federal Government’s gas policy will take priority post-Covid-19. Nigeria is currently under-using her vast gas resources with 201 Trillion Cubic Feet (TCF) of proven gas reserves and LNG output of 22 million metric tonnes per annum.
It represents an inherent possibility of exploiting gas reserves for at least the next 100 years. To unlock the opportunities available, more public and private sector collaboration is required according to M. M Ibrahim, chairman, National Gas Expansion Program (NGEP) in the Ministry of Petroleum Resources) The Nigeria Liquefied Natural Gas Limited (NLNG) signed its Engineering, Procurement and Construction (EPC) contracts for the Train 7 project with SCD JV Consortium comprising affiliates of Saipem, Chiyoda & Daewoo. The EPC contracts are earmarked to be over $10 billion.
The Managing Director and Chief Executive Officer of NNLG, Mr. Tony Attah, commented that with the signing and concluding of awarding EPC contracts, another milestone in the journey to achieving NLNG’s vision to be a global LNG company is being realized. The Group Managing Director of the Nigeria National Petroleum Corporation (NNPC), Alhaji Mele Kyari commended the business model utilized by NLNG. Alhaji Kyari said that the President has instructed NNPC to support all the critical shareholders and NLNG’s Management to pursue the company’s ambition of adding a 7th train to its existing production capacity.
Ghana has directed Eni SpA and Springfield E&P to begin talks to combine their adjacent oil and gas fields. The Energy Minister John-Peter Amewu addressed both companies in a letter saying seismic data indicates that Eni’s Sankofa offshore field, which entered production in 2017, and Springfield’s recently discovered Afina field have “identical reservoir and fluid properties”.
Both companies have been instructed to begin within 30 days the process leading to the unitization, or joint operation, of the two fields to ensure efficient production and give them 120 days to provide the ministry a draft agreement. Spokespeople for Eni and Springfield confirmed they received the letter but declined further comment.
Amewu’s letter says Eni had previously argued it was premature to be talking about unitization since Springfield had not yet appraised and tested its discovery, but the ministry rejected that argument. Sankofa is part of Eni’s Offshore Cape Three Points project off Ghana’s Atlantic Coast, which it says has reserves of about 40 billion cubic meters of unassociated gas and 500 million barrels of oil. Springfield, a wholly owned Ghanaian company, said that it had discovered 1.5 billion barrels of oil and 0.7 trillion cubic feet of gas at its Afina field.
On Thursday 14th May, oil prices crept up supported by a surprise decline of U.S. crude inventories, but gains were capped by worries that a potential second wave of the coronavirus pandemic might trigger fresh lockdowns and reduce fuel demand once again. The U.S. West Texas Intermediate (WTI) crude futures traded 2.7% higher at $25.98 a barrel at 9:15 AM ET (13:15 GMT), while Brent crude contract rose 2.8% to $30.01.
The U.S. Energy Information Administration (EIA) in its weekly report showed a decrease in crude inventories by 745,000-million-barrel to 531.5 million barrels in the week ending May 8. Analyst forecasts expected an increase of 4.147 million barrels. The EIA report also said that it now expects world oil demand to fall by 8.1 million barrels per day (bpd) in 2020 to 92.6 million bpd, compared with a previous forecast for a drop of 5.2 million bpd.
Prices have risen in the past two weeks as some countries relaxed coronavirus restrictions and lockdowns, giving hope for a pickup in fuel demand. In Europe, demand for petrol and diesel has begun a slow recovery as governments eased coronavirus curbs and vehicle traffic increased in major cities. However, concerns over a possible second wave weighed on prices as new coronavirus cases have emerged in South Korea and China after they softened restrictions. Investors are still focused on the demand trajectory amid concern that a resurgence of coronavirus cases could derail an economic rebound.
The mood in the market has also been boosted by major oil producers’ commitments to curb output to help restore supply-demand balance. The Organization of Petroleum Exporting Countries (OPEC) and its allies including Russia agreed to cut production by 9.7 million bpd in May and June and looks to extend existing cuts until the end of the year. OPEC also slashed its world oil demand forecast in its monthly report.
The organization now expects demand to shrink by 9.07 million bpd in 2020, compared to its expected contraction of 6.85 million bpd in April. OPEC next meeting is scheduled for June 10 via videoconference, to determine further actions, as needed to balance the market.