Market Report: BP and Kosmos Near Approval on Offshore Project
On Tuesday 13th February, Dr. Ibe Kachikwu, the Minister of State for Petroleum Resources said Nigeria lost a lot of money to Production Sharing Contracts (PSCs) entered into with oil companies in the past. Kachikwu said going forward the terms of the contracts would change to enable the Federal Government to get more from oil production in the country. Kachikwu also said crude oil may no longer hit $100 per barrel in the international market and will likely remain depressed at $60-$70 unless there is a huge calamity in the producing regions. Therefore, the Federal Government will only approve oil and gas projects with huge net value to the Federation’s Account. Kachikwu stated that international oil companies will no longer need to develop multibillion-dollar projects that will not attract royalty to the government.
Dr. Maikanti Baru, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC) revealed that high-level preparations for the exploration of the five oil wells in Alkaleri Local Government Area of Bauchi state will soon commence. Baru said the NNPC is deploying advanced technology for exploration of oil in prospective sites in the state, as directed by the presidency and that the arrangements have reached advanced stages.
On Monday 12th February, BP and Kosmos Energy moved closer to approving the development of the Tortue natural gas field offshore Mauritania and Senegal after both countries agreed to split production from the cross-border field. Kosmos said it’s expected to make a Final Investment Decision (FID) on the project in 2018, with first gas expected in 2021. BP had previously indicated it’s expectation to reach FID on the project towards the end of 2018. The Greater Tortue Complex which straddles the maritime boundaries of the two countries is estimated to hold more than 25 trillion cubic feet of gas. The production is expected to be exported via a Liquefied Natural Gas facility.
Macky Sall, Senegal’s President, during a state visit signed an inter-governmental cooperation accord with his counterpart in Mauritania, Mohamed Ould Abdel Aziz. BP’s head of oil and gas production, Bernard Looney said: “This is an important milestone for this innovative gas project which reflects the strong, cooperative partnership between Mauritania and Senegal”. Kosmos said the agreement provides for the development of Tortue through cross-border unitization, with a 50-50 initial split of resources and revenues, and a mechanism for future equity redeterminations based on actual production and other technical data.
On Thursday 15th February, oil prices settled lower as concerns surrounding rising U.S. output levels overshadowed optimism sparked by global efforts to limit production. The U.S. West Texas Intermediate crude for March contract was down 44 cents at $60.17 a barrel at 9:45 a.m. ET (13:45 GMT), while the ICE Futures Exchange in London Brent oil for April delivery was down 68 cents at $63.67 a barrel. The U.S Energy Information Administration weekly report for Wednesday 14th February showed a rise in crude oil inventories by 1.841 million barrels in the week ending February 9, below expectations for a rise of 2.825 million barrels. The report also showed that U.S. crude oil production rose to a fresh record of 10.27 million barrels per day more than top exporter Saudi Arabia and not far from the biggest world producer, Russia.
Prices were initially boosted after Saudi Energy Minister Khalid Al-Falih said his country will be “sticking” with its policy to withhold production throughout 2018 and would prefer tighter markets rather than end supply cuts too early. OPEC along with some non-OPEC members led by Russia agreed in December to extend oil output cuts until the end of 2018. However, fears that rising U.S. output could dampen OPEC’s efforts to rid the market of excess supplies resurfaced, sending prices lower.