Energy
Nigeria rate cut on the horizon as global monetary easing cycle gains momentum
BY: Lukman Otunuga, Senior Research Analyst at FXTM
Unfavorable macroeconomic conditions across the globe have prompted major central banks to embark on a monetary easing cycle to counter a global slowdown.
There is widespread speculation that the US Federal Reserve intends to trim interest rates in order to prevent an economic deceleration in the world’s largest economy.
The global financial markets have reacted positively to the idea, which theoretically makes access to funding for business activities easier, boosting investor sentiment and economic growth.
The US central bank’s caution is influencing other central banks like the European Central Bank, Bank of England and Reserve Bank of Australia among many others. In Africa, the South African Reserve Bank has already cut interest rates while the Central Bank of Nigeria (CBN) is turning dovish amid deteriorating economic conditions in the wake of trade disputes.
However, in its July meeting, the CBN decided to keep its Monetary Policy Rate (MPR) unchanged at 13.5 percent to allow time for the full impact of other measures. So far, these include a firm bank directive from July requiring 60 percent of deposits to be available for lending to the real economy instead of buying government securities.
These securities are high yield because of the current 13.5 percent MPR and understandably attractive to the banking sector seeking stable investments of their own. Making sure money is in circulation instead of being tied up in government bonds sounds like a rational way to keep the economy on the road to recovery.
After surprising markets with an unexpected rate cut in March, the central bank could cut interest rates again during the second half of 2019. However, reducing the MPR when the inflation rate is already at 11.22 percent risks further overheating prices. Like many other emerging economies, Nigeria may be exposed to the impacts of a global slowdown but its economy is very different to the US’ which is currently experiencing anemic price inflation.
This may be why the CBN decided to prioritize reducing inflation to single digits and said it is in no hurry to reduce its key rate. In other effects, foreign investment in Nigeria is likely to see benefits from the CBN’s decision to hold rates at 13.5 percent.
This is based on the argument that international investors may be looking for higher-yield securities than those in the mature markets, especially in the light of declining or negative interest rate environments in Europe and the US.
The global monetary easing bandwagon has affected the oil markets differently from global equities. Instead of being heartened by the prospect of better lending rates, investors are focusing on the weaker global outlook for growth and Oil demand. The fact that OPEC decided to maintain its supply cuts until 2020 on the basis of weaker demand for Oil only reinforces the impression that it would take a dramatic event to reignite supply-shortage fears.
In addition, the US Oil industry is pumping output at record levels, meaning that OPEC supply cuts are effectively neutralized in terms of boosting Oil prices. These circumstances have pressured Oil price benchmarks, West Texas Intermediary (WTI) and Brent Crude. Oil prices depreciated during the course of July, pulled back by a reverse tide of lower growth expectations.
The third quarter holds the potential for the Central Bank of Nigeria to cut interest rates.
A fragile economic recovery coupled with external risks in the form of trade tensions and Oil price volatility should encourage the CBN to re-join the global monetary easing bandwagon.
Although a rate cut is in the pipeline, the level of inflation will determine how many times the CBN pulls the trigger on rate cuts. Signs of easing inflationary pressures during the third and fourth quarter of 2019 could offer enough breathing room for the CBN to cut rates to 13% by year end.
Energy
AVEVA is providing data management support for renewable natural gas projects
Reporter: Godwin Ezeh
Key Highlights
● AVEVA’s industrial information infrastructure has been selected by Archaea Energy to provide key data management support
● AVEVA’s industrial software to optimize performance across Archaea’s RNG plants
AVEVA, a global leader in industrial software driving digital transformation and sustainability, has been selected by Archaea Energy, the largest renewable natural gas (RNG) producer in the US, to build a comprehensive operations data management infrastructure.
Using AVEVA’s software, Archaea Energy can collect, enrich and visualize its real-time operations data, enabling performance analysis across its growing network of plants.
Using AVEVA PI Data Infrastructure, a hybrid solution with cloud data services, the plants will be able to share data to highlight operational opportunities and optimize efficiency.
Caspar Herzberg, CEO, AVEVA, stated,
“Through this collaboration and the use of AVEVA PI Data Infrastructure, Archaea’s growing network of plants will have streamlined operations with accurate performance analysis throughout the expansion. AVEVA’s CONNECT software platform leverages industrial intelligence from a central location, making it easier to deploy additional digital solutions in the future.”
“As the largest RNG producer in the United States, we are dedicated to delivering reliable, clean energy,” said Starlee Sykes, chief executive officer of Archaea Energy. “This relationship will allow us to optimize operations and offer detailed performance analysis as we continue to expand across the country.”
…OML 13 Asset Eyes 80,000 bpd by End of 2025
In a major boost for Nigeria’s crude oil production, revenue generation and economic growth efforts, the NNPC Ltd has officially unveiled its latest crude oil grade, the Utapate crude oil blend, before the international crude oil market.
It would be recalled that in July, 2024, NNPC Ltd and its partner, the Sterling Oil Exploration & Energy Production Company (SEEPCO) Ltd introduced the Utapate crude oil blend, following the lifting of first cargo of 950,000 barrels which headed for Spain.
During a ceremony held at the Argus European Crude Conference taking place in London, United Kingdom, on Wednesday, the Managing Director, NNPC E & P Limited (NEPL), Mr. Nicholas Foucart described the introduction of the Utapate crude oil blend into the market as a significant milestone for Nigeria’s crude oil export to the global energy market.
“Since we started producing the Utapate Field in May 2024, we have rapidly ramped up production to 40,000 barrels per day (bpd) with minimum downtime. So far, we have exported five cargoes, largely to Spain and the East Coast of the United States; while two more additional cargoes have been secured for November and December 2024, representing a significant boost to Nigeria’s crude oil export to the global market,” Foucart told a packed audience of European crude oil marketers.
He added that since its introduction into the global market, the Utapate crude oil blend has enjoyed a positive response from the international crude oil market, due to its highly attractive qualities.
Foucart said the Oil Mining Lease (OML) 13, fully operated by NEPL and Natural Oilfield Services Ltd (NOSL), a subsidiary of SEEPCO Ltd, boasts a huge reserves of 330million barrels of crude oil reserves, 45 million barrels of condensate and 3.5 tcf of gas.
“We have a number of ongoing projects to increase our production from the current 40,000bopd to 50,000bopd by January 2025 and 60,000bopd to 65,000bopd by June 2025. Essentially, we are targeting opportunities to increase production to 80,000bopd by the end of 2025,” Foucart added.
He said the Utapate crude oil terminal is sustainable, affordable and fully compliant with the rigorous environmental regulations and sustainability principles especially those aimed at reducing carbon emissions and other ecological effects.
Also speaking, the Managing Director of NNPC Trading Ltd (NTL), Mr. Lawal Sade said the pricing structure of the Utapate crude oil blend is similar to that of Amenam crude as it is a light sweet crude which is highly sought after by refiners across the world due to its low sulphur content, efficient yield of high-value products, API gravity and other similarities.
He said in bringing the new crude oil blend to the global market, NNPC Ltd wanted to optimise value for both its producers and counterparties across the globe.
He added to ensure predictability and sustainability of supply, the NNPC Trading intends to run a term contract on the Utapate crude oil blend cargoes, principally targeting off-takers from the European and the US East Coast refineries.
Produced from the Utapate field in OML 13 in Akwa Ibom State in Nigeria, the Utapate crude oil blend is similar to the Nembe crude oil grade. It has a low sulphur content of 0.0655% and low carbon footprint due to flare gas elimination, fitting perfectly into the required specification of major buyers in Europe.
The NNPC E&P Ltd and NOSL partnership is also committed to operating in a manner that is safe, environmentally responsible, and beneficial to the local communities.
The Utapate field development plan, executed between 2013-2019 and approved in October, included converting wells and facilities from swamp/marine to land-based operations.
The plan involved a multi-rig drilling campaign for 40 wells and the development of significant infrastructure such as production facilities, storage tank, a subsea pipeline and an offshore loading platform to facilitate crude oil evacuation and loading.
The entry of the Utapate crude oil blend into the market is coming barely a year after the NNPC Ltd announced the launch of Nembe crude oil, produced by the NNPC/Aiteo operated Oil Mining Lease (OML) 29 Joint Venture (JV).
This remarkable achievement signals the commitment of the NNPC Ltd to increasing Nigeria’s crude oil production and growing its reserves through the development of new assets.
Energy
NNPC Ltd Set to Supply 100mmscf/d Gas to Dangote Refinery
…10-year Deal to Boost Local Production, Revamp Industrial Growth, reports Ikenna Oluka
The NNPC Gas Marketing Limited (NGML), a subsidiary of the Nigerian National Petroleum Company (NNPC) Limited, has successfully executed a Gas Sale and Purchase Agreement (GSPA) with Dangote Petroleum Refinery and Petrochemicals FZE.
The agreement, signed by the Managing Director, NGML, Barr. Justin Ezeala and the President/CEO of the Dangote Group, Aliko Dangote on Tuesday at the Corporate Head Office of Dangote in Falomo, Lagos State, outlines the supply of natural gas for power generation and feedstock at the Dangote Refinery, in Ibeju-Lekki, Lagos State.
This major milestone is in line with President Bola Ahmed Tinubu’s policy of utilizing Nigeria’s abundant gas resources towards revamping the nation’s industrial growth and kickstarting its economic prosperity.
This development, which sees a huge investment of this nature penned with zero capital expenditure (CAPEX) outlay, has been described by many as unprecedented in the history of NGML or any gas Local Distribution Company (LDC) in the country.
Under the terms of the agreement, NGML will supply 100 million standard cubic feet per day (MMSCF/D), 50MMSCF/D being firm supply and the rest 50MMSCF/D interruptible natural gas supply to the refinery for an initial period of 10 years, with options for renewal and growth.
This collaboration is a significant step toward ensuring the operational success of the Dangote Refinery and enhancing Nigeria’s domestic gas utilization.
NNPC Ltd, through NGML, its gas marketing subsidiary, continues to lead efforts in promoting the use of domestic gas to support industries and businesses nationwide.
The agreement represents a milestone for both NNPC Ltd and Dangote Refinery, aligning with their shared commitment to boosting local production and providing vital products for the benefit of all Nigerians.
It is also a further proof of NGML’s unwavering commitment to business excellence and fulfilling NNPC Ltd’s core mandate of ensuring Nigeria’s energy security through the execution of strategic gas projects across the country.
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