Market Report: NNPC Invites Bidders for Crude Oil Contracts for 2021

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NIGERIA

Nigeria’s state-owned hydrocarbon company Nigerian National Petroleum Corporation launched a tender for the purchase of Nigerian crude grades on Wednesday, 2 September. The Corporation has invited local and international companies to submit bids to lift Nigerian crude and condensates for the year 2021. Successful bidders will be awarded with contracts valid for one year, and the deadline for submission of bids is the 15 October 2020 at midday Nigerian time.

Refineries, companies forming part of a government-to-government arrangement, global crude oil traders, and Indigenous Nigerian companies engaged in Nigerian oil and gas downstream activities will be eligible to apply in different capacities.

According to the tender, the crude will continue to be sold on a Free On-Board basis, subject to the execution of a sales and purchase agreement with selected buyers. The current 2018-2020 crude term contracts held by over 60 recipients, which were expected to expire in mid-2020, will be rolled over until the end of the year.

GABON

Bermuda registered oil and gas company BW Energy provided an update on the operation and development of the operated Dussafu Marin license and the Tortue permits in Gabon. BW reported that Dussafu daily operations continued to perform in line with expectations with four wells (DTM-2H, DTM-3H, DTM-4H, and DTM-5H) producing at a current rate of approximately 18,000 barrels per day (bpd) gross of oil to the floating production storage and offloading unit, BW Adolo. Gross production from Tortue averaged 15,991 bpd for the second quarter of 2020 and total gross production was 1,455,230 barrels of oil.  

One lifting was completed by BW Energy in the quarter realizing an average price of about $41 per barrel. Production cost, excluding royalty, was $17 per barrel. The company sold 532,357 barrels of oil net in the second quarter of 2020 compared to 427,647 barrels net during the first quarter of 2020.

MAURITANIA

Total has hired marine seismic surveyor Shearwater GeoServices for a 3D survey project in Mauritania. The Norway-based seismic acquisition company said that the contract was for a large towed streamer 3D acquisition and Fast Track processing project. The exploration survey will cover 6,000Km2 in the C15 and C31 blocks using an ultra-wide tow Flexisource configuration, the largest triple source spread to date, together with Fast Track processing enabled by Shearwater’s proprietary Reveal software.

The two-and-a-half-month survey is scheduled to commence in the third quarter of 2020, adding to other recent activity in North West Africa for Shearwater, and will be carried out by the SW Empress vessel. Shearwater’s survey with Total in Mauritania is the second seismic deal for the West Africa region announced in as many days.

GLOBAL

On Thursday, 3 September, crude oil prices fell to their lowest in a month, amid signs that demand is plateauing well below pre-COVID-19 levels as the global recovery stalls in some key economies. The U.S. West Texas Intermediate crude futures were down 2.1% at $40.62 a barrel, while Brent crude futures fell 2.2% to $43.45 a barrel at 11:05 AM ET (15:05 GMT).

The U.S. Energy Information Administration’s weekly report for Wednesday, 2 September showed a 9.362 million-barrel draw in crude oil supply for the week ending August 28, much bigger than the predicted 1.887 million-barrel-draw. The data comes on the heels of the American Petroleum Institute’s report of a 6.360 million-barrel draw for the same period on Tuesday, 1 September.

Oil markets drew some support from Iraq’s denial of seeking exemption from the Organization of the Petroleum Exporting Countries and allies (OPEC+) oil cuts during the first quarter of 2021. OPEC+ is currently cutting output by 7.7 million bpd until December 2020 to support prices as the coronavirus crisis hammers demand. Oil production in the Gulf of Mexico region has seen a significant recovery since Hurricane Laura made landfall on August 27.

The Bureau of Safety and Environmental Enforcement estimated that 16.3% of current oil production in the Gulf of Mexico was shut-in, rebounding from about 84% around the time Hurricane Laura reached the Gulf Coast. However, analysts warn that the upcoming refinery maintenance and the end of the summer driving season would also limit crude demand. Due to shutdowns ahead of Hurricane Laura, U.S. refinery utilization rates fell by 5.3 percentage points to 76.7% of total capacity. Commonwealth Bank forecasts Brent will average $46 in the fourth quarter before rising to $55 by the end of 2021. “There is enough spare oil capacity and enough pressure on demand growth to justify only a gradual increase in oil prices over the next 12 months,” said Vivek Dhar, Analyst of CBA commodities.