Market Report: NNPC Discloses Monthly Financial and Operation Report

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) disclosed that the country exported crude oil and gas to the tune of $3.71 billion between August 2019 and August 2020. The NNPC further disclosed that in August 2020, Nigeria’s total crude oil and gas export sales increased month-on-month by 64.84% to $139.5 million, according to the NNPC August 2020 Monthly Financial and Operation Report.

The report also showed that the NNPC Group increased its trading surplus to N29.6 billion (approximately $77 million), from the previous N20.36 billion (approximately $53 million) surplus reported in July 2020. A total of 3.06 trillion cubic feet (tcf) of gas was produced, representing an average daily production of 7.77 billion cubic feet (bcf) per day during the period.

Alhaji Mele Kyari, Group Managing Director of the NNPC, shared insights on the role of gas and liquefied natural gas in Nigeria’s future energy mix at the virtual Abu Dhabi International Petroleum Exhibition & Conference. He stated that the country is blessed with abundant natural gas resources, with 203 tcf of proven reserves and over 600 tcf of potential reserves. Kyari stated that the NNPC is determined to increase domestic gas utilization to 4.5 bcf through investment in infrastructure, which will improve power generation and industrialization. He also pointed out the expansion of the Nigeria LNG plant via train 7 from 22 million metric tons per annum (mmtpa) to 30 mmtpa as an indication of such investments.

In a bid to augment the use of liquefied petroleum gas within the energy mix, Nigerian gas company NIPCO Plc. has announced plans to deploy skids and bottling plants across Nigeria. This will allow for easier access to the commodity, in turn driving its use. This was disclosed by Suresh Kumar, Managing Director of NIPCO, at the 16th Annual General Meeting held in Abuja. Kumar also commended the new drive of the Federal Ministry of Petroleum Resources to consider the use of compressed natural gas for powering automobiles, adding that this could bring a positive change to the gas value chain.

SENEGAL

ONGC Videsh announced its entry into Senegal’s offshore exploration area through a 13.67% participating interest in the Sangomar field and a 15% participating interest in remaining contract area of Rufisque, Sangomar Offshore and Sangomar Deep Offshore Block. The Sangomar Field is located in deep waters offshore Mauritania, Senegal, Gambia, Guinea-Bissau and Guinea-Conakry Basin, comprising an area of 772 km2 and scheduled to yield first production in 2023 under Phase 1 development. Woodside is the current operator of the field.

With total investment until first oil estimated at $600 million, the acquisition involves an upfront consideration of $45 million. According to the company’s press release, the deal also involves contingent payments due annually (capped at $55 million) based on the price of Brent Crude. The acquisition is subject to customary conditions, including the approval of the Senegalese regulatory authorities, the approval of FAR shareholders, the non-exercise/waiver by the joint venture partners of the pre-emption, and the termination of certain third-party agreements.

GLOBAL

On November 12, crude oil prices fell, weighed down by the surge in COVID-19 cases and hampering the global economy, along with an unexpected rise in U.S. crude stockpiles. The U.S. West Texas Intermediate (WTI) crude futures were up 0.27% to $41.56, while Brent crude futures edged up 0.18% to $43.88. Both Brent and WTI futures remained above the $40 mark. The U.S. Energy Information Administration’s weekly report for November 11 showed that crude oil inventories rose by 4.3 million barrels for the week ending November 6, against analysts’ expectation for a draw of 913,000 barrels.

Oil continues upwards on a combination of likely supply cuts and optimism over vaccines. Prices have risen more than 12% over the week to date, with prices well over $40 per barrel, even though the COVID-19 pandemic looks likely to rein back any growth in future demand. Markets were boosted by the Organization of Petroleum Exporting Countries and allies (OPEC+) looking likely to maintain current supply cuts into 2021, and possibly even deepening them. OPEC had been looking at reducing its present 7.7 million barrels per day (bpd) production cuts by two million bpd. Even with this development, oil demand remains shaky. The International Energy Agency said global oil demand was unlikely to rise significantly until well into 2021 if the vaccine is successful. Adding to the bullish sentiment for oil is the outlook for a COVID-19 vaccine, with Pfizer Inc. posting positive results from its Phase III trial earlier in the week.

The market is starting to look toward a time when COVID-19 no longer dictates global demand. Pfizer and BioNTech’s joint vaccine reported a 90% effectiveness rate. Ever-increasing numbers of COVID-19 cases in Europe, the U.S. and Latin America continue to put fuel demand under pressure, with OPEC acknowledging that demand will rebound more slowly in 2021 than previously estimated. OPEC+ will convene for a high-level ministerial meeting on November 17, followed by further meetings on November 30 and December 1.