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The Minister of State for Petroleum Resources H.E. Timipre Sylva performed the inauguration of the Federal Government’s National Gas Expansion Program in Ado-Ekiti, Ekiti as part of its efforts to make gas an alternative energy source for industrial, transportation and domestic use.
Minister Sylva described the program as an example of using the gas value chain as a catalyst for social and economic development in Nigeria. The program’s main objective is to reinforce and expand gas supply, as well as stimulate demand in Nigeria through effective and efficient mobilization of all available assets, resources and infrastructure in the country.
Minister Sylva further noted that the implementation will see 500,000 young technicians and engineers trained and empowered, ensuring that locally-produced fuels are available, accessible and affordable across the country. In the same vein, the Kaduna Refinery is due to resume its operations by the first quarter of 2023, according to the refinery rehabilitation program progress and timeline. This was disclosed by the Managing Director of the Kaduna Refining and Petrochemical Company Engr. Ezekiel Osarolube.
The refinery has a target to achieve 90% capacity utilization post-rehabilitation and to increase in-country refining capacity, reducing petroleum product importation by the country in the process.
On February 25, VAALCO Energy announced that it has completed the acquisition of Sasol’s stake in the Etame Marin block offshore Gabon. The acquisition of Sasol’s 27.8% working interest in the Etame Marin block has increased VAALCO’s working interest to 58.8% and nearly doubles VAALCO’s total net production and reserves.
VAALCO paid $29.6 million in cash to Sasol, taking into account the agreed-upon transaction price of $44 million, the deposit already paid and post effective date adjustments, with a future contingent payment of up to five million dollars. The companies first announced the agreement in November 2020.
Under the terms of the agreement, a contingent payment of five million dollars will be payable to Sasol by VAALCO, if Brent oil pricing averages greater than $60 per barrel for 90 consecutive days during the period from July 1, 2020, to June 30, 2022.
“We are extremely pleased to close this transformational and accretive transaction in a rising price environment. All cash payments were funded entirely by cash on hand. With the additional production from the acquisition, we are forecasting significant cash flow generation in 2021,” said Cary Bounds, CEO, VAALCO. “In addition, we believe the recently-acquired 3D seismic will improve our subsurface interpretation at Etame and lead to another successful drilling campaign, starting late this year or early next year, funded from cash on hand and cash from operations. Sustained operational and robust financial performance at Etame serves as the foundation for growing the company through future accretive acquisition opportunities in line with our strategy and operational expertise in West Africa.”
Last July, VAALCO, as the operator of the Etame Marin block, awarded a one-year contract extension for the lease of the FPSO Petróleo Nautipa, deployed at the Etame field. The FPSO will stay at the field until Q3 2022. The Petroleo Nautipa was delivered in 2002. The vessel is spread moored at the Etame location in a water depth of 75 meters.
On February 26, crude oil edged lower, pulling back from the 13-month highs that followed last week’s winter storm that disrupted production in Texas, the biggest energy-producing state in the U.S. The U.S. West Texas Intermediate (WTI) crude futures traded 0.3% lower at $63.03 a barrel, while Brent contract fell 0.3% to $65.97. Both contracts hit their highest since January 8, 2020, earlier in the session with Brent at $66.81 and WTI at $63.79.
The U.S. Energy Information Administration’s (EIA) weekly report for February 24 showed a build of 1.285 million barrels for the week ending Feb. 19, against analyst’s forecasts of a 5.190-million-barrel draw, while a 1.026-million-barrel draw was recorded for the previous week. The unprecedented cold snap in Texas caused U.S. crude production to drop by more than 10%, or one million barrels per day last week, the Energy Information Administration said on Wednesday. U.S. energy firms last week cut the number of oil rigs operating for the first time since November.
This prompted Barclays to raise its oil price forecasts for 2021, and the bank now sees Brent at $62 a barrel, up seven dollars, and WTI six dollars higher at $58 a barrel. Meanwhile, the Organization of the Petroleum Exporting Countries and their allies including Russia (OPEC+) is due to meet on March 4. The group is likely to discuss an easing of oil supply curbs from April given the recovery in prices, although this could provoke differences between the two leaders of the alliance, Saudi Arabia and Russia. Earlier this month, Russian Deputy Prime Minister H.E. Alexander Novak said that the global oil market was balanced and that the current price of oil fully reflected this market situation. However, this perceived balance has been created by Saudi Arabia undertaking extra voluntary cuts in February and March.