Market Report: Nigeria’s AKK Pipeline Project to be Completed on Schedule

The weekly Market Report is provided by Gladius Commodities of Lagos, Nigeria. Download the full report here. Learn more about Gladius Commodities at www.gladiuscommodities.com.

NIGERIA

The Nigerian National Petroleum Corporation (NNPC) has assured all Ajaokuta-Kano-Kaduna (AKK) gas pipeline stakeholders that the $2.8 billion mega infrastructure project will be completed within the allocated 24-month period. Speaking during a web conference on Tuesday, 11 August, Seyi Omotowa, Managing Director of the Nigerian Gas Company, a subsidiary of NNPC, stated that all stakeholders involved in the project have put in place measures to ensure that the pipeline is completed on schedule.

According to Omotowa, factors that contributed towards the failure of such projects in the past included poor scope definition and optimistic scheduling, noting that poor contractor selection process were mitigated in the carrying out of the current project.

The AKK project will create a gas hub that formulates the domestic segment of the gas master plan. Alhaji Mele Kyari, the Group Managing Director of NNPC, spoke at the launch of the Nigerian Gas Transportation Network Code on Wednesday, 12 August, about the development of Nigeria’s gas sector and also committed to working with relevant partners and stakeholders in the oil and gas sector to boost delivery of gas to the domestic market.

The commitment made at the launch was to enhance the use of gas as a catalyst for national economic development. Kyari stressed that the NNPC is at the center of gas delivery to the domestic market, as it is involved in all available gas delivery infrastructure in the country either directly or through joint venture partnerships. He said that the inauguration of the Network Code provides an opportunity to enhance gas delivery and further utilize the government’s objective of transforming gas into a major component of Nigeria’s energy mix and revenue source.

GABON

In a production update issued by VAALCO Energy on its operations on the Etame Marin license offshore Gabon, the company stated that the South Tchibala 2H well has been out of service since mid-April due to a downhole mechanical failure.

At the time of shutdown, the well was producing around 830 barrels per day (bpd). VAALCO said it might not be possible to address the well failure until the next drilling campaign. Third quarter production from Etame Marin will fall slightly following a planned six-day full-field shut down for maintenance on the Floating Production Storage and Offloading unit Petróleo Nautipa and the South Tchibala 2H wells, together with the Organization of the Petroleum Exporting Countries and allies mandate to reduce production through September 2020. Gabon’s Minister of Hydrocarbons, H.E. Vincent de Paul Massassa, asked for a temporary cut to Etame production to comply with this request.

GLOBAL

On Thursday, 13 August, crude oil prices settled lower after the International Energy Agency (IEA) trimmed its forecast for global oil demand for 2020 and 2021 in its latest monthly report. U.S. West Texas Intermediate crude futures were down 0.5% at $42.48 a barrel, while Brent crude futures were down 0.6% at $45.17 a barrel at 10:40 AM ET (14:40 GMT). The U.S. Energy Information Administration’s (EIA) weekly report for Wednesday 12 August showed a fall in crude inventories by 4.5 million barrels in the week ending August 7, compared with analysts’ expectations in a Reuters poll for a 2.9 million-barrel drop.

OPEC released a rough monthly forecast that said global oil demand will fall by 9.06 million bpd in 2020, more than the 8.95 million bpd decline expected a month ago. The IEA’s monthly oil market report released on Thursday deepened its forecast for a contraction in global demand for 2020. The agency expects global demand to contract by 8.1 million bpd year on year, 140.000 barrels more than in last month’s report.

The IEA’s 2020 oil demand forecast currently stands at 91.9 million bpd. Prices had hit a five-month high on Wednesday after the EIA confirmed a bigger-than-expected fall in inventories of crude, gasoline and other distillates last week. This activity extended a trend of a gradual erosion of the huge stockpiles that had accumulated during the second quarter as lockdowns across the globe paralyzed demand. The IEA still expects the oil market to tighten over the rest of the year, albeit not by as much as first thought. The biggest reason for that is the failure of fuel demand from airlines to recover. The EIA estimated that U.S. gasoline demand is back at pre-pandemic levels. Overall, the IEA cut its demand estimates for the last two quarters of this year by 500.000 bpd, projecting consumption of 95.25 million bpd on average through year-end.

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