Energy
{Opinion}What the recent oil disruption means for Nigeria
The unprecedented Oil disruption in Saudi Arabia in September shocked the markets and triggered multiple financial reactions for investors across the globe.
Oil prices exploded 20 percent higher on Monday September 16 after attacks on Saudi Oil fields caused disruptions of 5.7 million barrels per day, roughly five percent of global Oil supplies. Oil later gave back gains after Saudi Arabia pledged that Oil production would be up and running by the end of September.
However, there are doubts that the damage – which is thought to run into the hundreds of millions of Dollars – will be fixed so quickly.
Dynamic influencing Oil market swing back and forth
The uncertainty is also disrupting Oil prices, which spike intermittently before calming on data like the US Energy Information Administration’s (EIA) report about a 2.4 million barrel build in Crude oil inventories on September 25.
On top of that, geopolitical tensions in the Middle East add more concerns for the short-term future of Oil markets.
Going forward, Oil prices are expected to be more sensitive to negative supply shocks, at least in the short term. If the serious tensions between Iran and the US escalate, Oil prices may be supported with a degree of upside potential.
OPEC continues with its quest to stabilize markets
Another factor to consider is OPEC’s reaction and possible change of mind over its supply cut policy. As recently as September 12, OPEC persuaded Nigeria to join supply cuts to prevent a global glut from drastically undercutting prices and Oil revenues for Oil-producing countries. The supply-side circumstances have changed considerably since then.
Recent reports have revealed that OPEC’s oil output fell to an eight-year low in September, pumping 28.9 million barrels per day (bpd) which was down 750,000 bpd from August’s revised figure and lowest monthly total since 2011.
Should Saudi Arabia experience more attacks or take longer than expected to restore normal Oil production from the damaged facilities, OPEC may need to reconsider supply cuts and increase production so its members can meet global supply demand.
At the time of writing, Nigeria’s Light Sweet Crude Oil Kwa Ibo and Bonny Light are trading at their normal level of $3 above the Brent Crude benchmark because Saudi Arabia has pledged to be back to normal light Crude oil production levels by the end of September. In the meantime, Saudi Arabia has restored output to 11.3 million barrels per day but is relying on sales of heavy Crude oil. Should Saudi Arabia disappoint the market’s expectations, light sweet Crude oil prices may change in Nigeria’s favour.
Overall, given how Oil sales account for roughly 70 percent of government revenues and 90 percent of Nigeria’s foreign exchange earnings, if the recent disruption results in a net rise in Oil prices, it could offer short-term support to the nation.
Impact on Nigeria’s economic growth
As an emerging market energy exporter, the prospects of rising Oil prices should feed back into Nigeria’s economic growth. Higher Oil prices would boost the nation’s foreign exchange reserves, promote foreign exchange stability and boost government spending in economic infrastructure which in turn would be positive for growth.
On the other hand, Nigeria’s fiscal and monetary policy makers must always be on the lookout for inflationary pressures. In August, inflation in Nigeria fell to 11.02 percent, a 43-month low. But higher Oil prices may squeeze company and consumer transportation budgets, re-igniting inflation.
Higher Oil price could hit consumer spending
The flip side of higher Oil prices is the risk of rising inflation. This would likely drag on consumer spending and complicate central bank efforts to ease monetary policy, which may end up pressuring economic growth.
On a larger scale, the threat of a global recession lurks around the corner. Rising Oil prices could also threaten global growth with higher running costs.
While Nigeria and energy producers would welcome higher Oil prices, everyone will lose if unaffordable costs tip the global economy into recession.
Diversification remains the cure to Nigeria’s oil dependence
In September, the Central Bank of Nigeria (CBN) left interest rates unchanged at 13.5 percent. Movements in the Oil markets have a direct impact on CBN’s rate decisions, so I am closely watching developments in this area. Especially when considering how the CBN Governor wants inflation to slow to 9% or less before he considers cutting interest rates further.
Long term, for Nigeria to reduce exposure to Oil volatility, the quest for diversification needs to build momentum. Nigeria could source growth from non-Oil sectors like Agriculture and Services.
In conclusion, until diversification reduces Nigeria’s dependence on Oil revenues, the economy remains vulnerable to Oil price volatility and an uneven demand-supply equation.
FXTM Senior Research Analyst, Lukman Otunuga comments on what the recent oil disruption means for Nigeria
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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