Market Report: Ghana In Talks with Exxon
At the Overview of the 2018 Budget Proposal meeting held on Tuesday 14th of November, Dr. Ibe Kachikwu, the Minister of State for Petroleum Resources said exploration of oil in the North-eastern part of Nigeria is good for the nation. Kachikwu added that it is the obligation of not only the Nigerian National Petroleum Corporation (NNPC) but also private investors, to continue to explore parts of the country with visible signs of oil. Kachikwu said, “We discover oil every day and we explore it and if we calculate the overall oil revenue projection for 2018, it is almost 60 per cent, so we need to expand the frontiers of oil anywhere we find it in the country.” Kachikwu also said the federal government is coming up with policies and incentives that will open up operational frontiers and encourages the private sector to use their resources to explore oil.
On Wednesday 15th November, The Organisation of the Petroleum Exporting Countries (OPEC) disclosed in its November monthly oil report that Nigeria’s crude oil is under serious pressure at the international market, as Asian refiners (particularly China and India) are frequently opting for United States (U.S) crude oil. The report showed that the Asian refineries increased appetite for U.S crude oil could eventually lead to a surplus of Nigerian crude. OPEC disclosed trade was limited and some tenders that were expected to clear the glut in Nigeria’s crude oil loading program for November failed to do so. Nevertheless, the NNPC crude export destination data has shown that Nigerian crude cargoes are on their way to Portugal for the first time this year.
On Monday 13th November, Dr. Mohammed Amin Adam the Deputy Minister for energy said Ghana has opened talks with Exxon Mobil Corp to allow the U.S. oil firm to undertake deepwater exploration off its coast. Adam said the government had opted for direct negotiation with Exxon Mobil without open competitive tendering due to the peculiar nature of the field, and because Ghana has yet to pass regulations to back open competitive tendering. A new petroleum law requires that oil contracts should be awarded through open and competitive tender. It also allows direct negotiation when necessary and justifiable. Exxon Mobil signed a Memorandum of Understanding with Ghana in 2015 to assess its Deepwater Cape Three Point (DCTP) region, 150 km (100 miles) off the coast with water depth ranging between 2,000 and 4,000 metres (6,500 and 13,000 feet). The government said two firms had separately opted not to seek to explore the field because of its depth and high-risk levels. Adam said the government considered the ExxonMobil bid important, given the firm’s experience and capability in deepwater operations as the current technology is beyond their reach. The DCTP interest is the second attempt by Exxon Mobil to acquire oil assets in Ghana after the government blocked the 2009 bid to take over Kosmos’ stake in the flagship Jubilee field.
On Thursday 16th November, oil prices stabilized as expectations that OPEC will extend production limits balanced rising U.S. crude production and inventories. The U.S. West Texas Intermediate crude for December contract was down 35 cents at $54.98 a barrel at 09:50 AM ET (13:50 GMT), while the ICE Futures Exchange in London Brent oil for January delivery was down by 42 cents at $61.44 a barrel. The U.S Energy Information Administration weekly report for Wednesday 15th November showed an increase in crude oil inventories by 1.9 million barrels in the week ending November 10, whereas market analysts’ expected a decline of 2.2 million barrels. Oil prices have risen steadily over the last few months as the impact of supply cuts has drained inventories. Both crude benchmarks hit two-year highs at the week ending November 10. Prices have slipped back in recent days, partly due to evidence that supply from the United States is rising fast, hampering OPEC’s efforts to tighten the market. Originally, OPEC and non-OPEC countries led by Russia agreed to cut production by 1.8 million barrels per day for six months. The agreement was then extended in May 2017 for a period of nine more months until March 2018 in a bid to reduce global oil inventories and support oil prices. However, discussions are continuing in the run-up to the November 30th meeting in Vienna for which oil ministers from OPEC and the participating non-OPEC countries will attend.