Market Report: Nigeria Announces Shutdown of Refineries
On Wednesday 13th September, the Nigerian National Petroleum Corporation (NNPC) announced a brief shutdown of the nation’s three refineries (Warri, Kaduna and Port Harcourt) for an overhaul to achieve optimal performance. This was announced by the NNPC Group Managing Director, Dr Maikanti Baru, at the inaugural Nigerian Pipeline Security Conference and Exhibition organised by the Pipeline Association of Nigeria. Baru said the overhaul would return the refineries to almost pristine condition and ensure they work to their maximum refining capacity. The rehabilitation will be overseen daily by the 8 committees set up for the rehabilitation of the refineries, comprising of top officials (general managers and executive directors of the NNPC) and it will also aid Nigeria’s plan to stop the importation of petroleum products by 2019. Baru also said “We want to show everyone that we can fully run the refineries. We can fix the refineries but without the right people to operate them, they would go back to where they were or even worse”. The NNPC Group General Manager, Group Public Affairs Division, Mr Ndu Ughamadu said the corporation has received more than 28 Expressions of Interest from private funding sources for the refineries’ rehabilitation project and is expecting more by the end of the year.
The Minister of State for Petroleum Resources, Dr Ibe Kachikwu, said Nigeria would get more crude-cut exemption from the Organisation of Petroleum Exporting Countries (OPEC) and would resist any attempt to cut its oil outputs because it needs more recovery time to sustain production levels. Kachikwu also stated that Nigeria has liquidity and financing issues necessary for funding projects which would ensure stability. Such projects include the rehabilitation of the refineries and repairs of previously damaged pipelines. The panel tasked to supervise compliance with the cuts – the Joint OPEC-Non-OPEC Ministerial Monitoring Committee (JMMC) is meeting in Vienna on Friday 22nd September and has invited Nigeria and Libya to assess their future production plans. As at the end of August, recent figures from OPEC has shown that, Nigeria presently produces about 1.7 million barrels of crude oil per day and about 300,000 million barrels of condensate component, which puts no immediate pressure on Nigeria going into the monitoring committee meeting.
London based conglomerate, Herman Trading Limited, has announced the engagement of Palewater Advisory Group Inc (PAG), a US investment banking firm, to provide advisory services for the structuring, implementation and management of the Boffa Refinery Project in the Republic of Guinea, on behalf of Herman Trading Limited Guinea and the Republic of Guinea. The government had approved the plan by Herman Trading Limited in 2011 to build in Guinea’s western region of Boffa a 150,000 bpd capacity refinery at an estimated cost of $2 billion. The project was announced by the then Prime Minister of the Republic of Guinea, Mohamed Said Fofana in November 2011. With the assistance of Palewater Advisory Group, the project is expected to start producing at least 6,000 bpd from the second quarter of 2018 and will take approximately 36 to 48 months to be in full production of 150,000 bpd. Palewater is also responsible for funding the project. Mohamed Said Fofana, said, “he would like to assure Herman Trading and its partners that Guinea Government will give its full support for the realization of this project. We also believe that this project will create a lot of jobs, will help the growth of Guinea’s economy and eventually reduce the poverty of our population”.
On Thursday 14th September, oil prices remained on a multi-months high as news of a decline in global oil production continued to support the commodity. The U.S. West Texas Intermediate crude for October contract was up 62 cents at $49.92 a barrel at 09:00 a.m. ET (13:00 GMT), while the ICE Futures Exchange in London Brent oil for November delivery gained 45 cents at $55.60 a barrel. The U.S. Energy Information Administration (EIA) weekly report for Wednesday 13th September showed a rise in crude oil inventories by 3.2 million barrels and gasoline stockpile fell by 8.4 million barrel in the week ending September 8. This is the largest weekly drop of gasoline stockpiles on record in EIA data dating back to 1990. The build in crude inventories came after Hurricane Harvey caused the shutdown of production in some Gulf of Mexico fields and refineries in Texas, as some domestic producers reduced output to avoid a larger glut at storage. The International Energy Agency (IEA) reported a fall in global oil supplies for the first time in 4 months in August while OPEC nations’ oil production fell in August for the first time since March. OPEC on Tuesday 12th September reported that output declined by 79,000 bpd to 32.76 million in August, driven mainly by drops in Libya, Gabon, Venezuela and Iraq. Libya and Nigeria, the two OPEC members exempt from the current oil production cut deal, have been invited to participate in the producer group’s latest ministerial committee meeting taking place in Vienna on September 22. OPEC/non-OPEC producers extended a deal to cut 1.8 million barrels per day (bpd) in supply until March 2018.