Market Report: Aker Energy to Launch the Phased Development of Ghana’s Pecan Field
Aker Energy announced that it remains on course to find a way to launch the phased development of the Pecan field offshore Ghana. In early April, Aker cancelled its floating production, storage and offloading (FPSO) vessel charter for the Pecan project with Yinson Holdings Berhad. The company had revealed the preceding month that the final investment decision for the West Africa development was on hold. The company said it is executing conceptual studies to confirm the feasibility of a phased Pecan field development. The original field development concept for Pecan hinged on a centralized FPSO supporting the development of the entire field and tie-ins of other area resources.
Focusing instead on a phased development approach will allow Aker – through its Aker Energy Ghana Ltd. subsidiary – to start with one FPSO for Pecan in the south and expand to a second FPSO in the north after a few years, tying in discoveries. Aker pointed out the first FPSO will be deployed approximately 115 kilometers offshore Ghana over a subsea production system installed in waters whose depths range from 2,400 to 2,700 meters. It contends that phased development and the use of a redeployed FPSO will lower capital expenditures and the breakeven cost. The firm, which noted that several FPSO candidates are being assessed for redeployment, added that such an approach will boost the possibility of reaching a commercially feasible project that will allow for an investment decision.
The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC) Alhaji Mele Kyari said Nigeria will reach full OPEC+ compliance by mid-July. This came after a revelation that Nigeria had exceeded its set quotas on output by under 100,000 barrels per day (bpd) in May. Nigeria is set to make additional cuts of between 40,000 – 45,000 bpd to compensate for over-production and will be fully compliant by mid-July.
Alhaji Kyari expressed that there had been technical challenges to reining in the country’s output but remained committed to compliance with cuts set by the Organization of the Petroleum Exporting Countries and allies, including Russia, (OPEC+). He also mentioned that NNPC will end oil sales discounts in July as oil prices rebound. He noted that discounts will go away within the shortest period as discounts offered in the last two months are likely to be no longer necessary as prices rebound. The Managing Director and Chief Executive Officer of the Nigerian Liquified Natural Gas, Tony Attah has assured business operators in the state that the Train 7 project will stimulate huge business opportunities and create a positive turn around for the state’s economy.
Attah listed several benefits from the Train 7 projects to include employment and economic opportunities, construction personnel and labor, stressing that at the peak of construction, over 12,000 jobs will be available on Bonny Island for Rivers State Indigenes and other Nigerians. Fabrication yards, construction companies, equipment suppliers all located in Rivers are also expected to be engaged in the construction process, which will generate significant returns for tax authorities. He further stated that the multiplier effect of Train 7 will stimulate the local economy as individual purchases in shops and markets will go up as more will have purchasing power. Finally, Attah informed the Governor that the University of Port Harcourt will be the Centre of LNG Excellence which will enable students to receive the required training on LNG production technologies, which will be monitored by Nigerian Content Development and Monitoring Board.
On Thursday 11 June, oil prices slumped amid fears of a second wave of the COVID-19 pandemic impacting demand, while U.S. crude stockpiles hit an all-time high. The U.S. West Texas Intermediate crude futures traded 6.9% lower at $36.88 a barrel at 8:40 AM ET (12:40 GMT), while Brent contract fell 5.8% at $39.30.
The U.S. Energy Information Administration crude oil inventories grew by 5.72 million to 538 million barrels in the week ending Jun 5, confounding analysts forecast for an average decline of 3.2 million barrels. In previous weeks, oil prices have rallied on the back of supply curtailments that have brought global crude inventories under control, but prices are once again under pressure as concerns over the pace of the demand recovery intensified.
Global production cuts and the easing of lockdowns in some countries had pushed prices higher after the historic drop below zero in April. But there are concerns U.S. producers may pump more with crude above $30 a barrel, adding to a glut. A weaker recovery from the pandemic can damage demand for crude oil and its by-products as the industry struggles with concerns about the efficacy of measures to limit oil output. Traders are also concerned about signs that COVID-19 cases in the U.S. are continuing to rise and topped the 2 million mark just as businesses are resuming activity. Hence, risk assets, including crude oil and equities are under pressure. The potential for a second wave of infections from the COVID-19 virus spooked investors into thinking that economic recovery from the pandemic could take much longer than thought.