Market report: Oil prices dropped

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NIGERIA

On 4 February, Dr. Maikanti Baru, the Group Managing Director, Nigerian National Petroleum Corporation (NNPC) disclosed that crude oil production by the Nigerian Petroleum Development Company (NPDC), the flagship subsidiary of NNPC, has increased by 57,000 barrels per day (bpd), hence NNPC is well on its way to meeting the 500,000 bpd target by 2020.

The NNPC also reported that crude production by the NPDC increased from 108,000 bpd in 2016 to 165,000 bpd in 2017.

The 57,000 bpd increase represents a 52.7 percent growth in crude production by the oil company. Dr. Baru stated that the NPDC had been a key contributor to the consistent year-to-year national crude oil production growth, which had seen a steady rise from an average of 1.2 million bpd in 2016 to 1.86 million bpd in 2017 and 2.06 million bpd in 2018.

Dr. Baru also noted that with the NPDC’s supply of over 700 million standard cubic feet of gas per day to the Escravos-Lagos Pipeline System, the company had become the largest gas supplier to the domestic market and that NPDC’s achievements were due to the introduction of some initiatives such as the Asset Management Team structure, strategic financing and autonomy among others.

CAF/WAF 

MAURITANIA & SENEGAL

British multinational oil and gas company BP announced that it expects the Grand Tortue Ahmeyim (GTA) liquefied natural gas (LNG) project, located in Mauritania and Senegal, to become increasingly cost-competitive as it moves into later expansion phases.

GTA, BP’s flagship project in the region is said to contain an estimated 15 trillion cubic feet (tcf) of gas. BP is developing the project alongside U.S. based Kosmos Energy, Senegal’s national oil company Société des Pétroles du Sénégal (Petrosen) and Mauritania’s Société Mauritanienne des Hydrocarbures et du Patrimoine Minier.

The official figures from BP stated that first gas will be produced at a rate of 2.5 million tons per annum (MPTA) during the first phase then quadruple to reach 10 MTPA during expansion phases.

Bernard Looney, CEO of Upstream, BP, stated that there are more potential discoveries in the area, with rough estimates at between 50 tcf to 100 tcf of gas across the region. BP has received very competitive responses to tenders for GTA as part of its strategy to continue to decrease costs. The company and its suppliers work hand in hand to collectively lower the cost base of the industry to remain in a competitive environment.

Looney stated that BP is seeing no sign of increased costs of LNG projects and predicts more investment decisions in early 2020 as the LNG markets tighten. Senegal/Mauritania’s GTA will be the continent’s fourth LNG unit, adding to Nigeria’s six-train as well as Equatorial Guinea and Angola’s facilities.

GTA was discovered in 2015 by Kosmos Energy who transferred the operatorship later on to BP. The joint-venture took a final investment decision in December 2018 and the first production is expected in 2022.

EQUATORIAL GUINEA

Mr. Gabriel Obiang Lima, the Minister of Mines and Hydrocarbons of Equatorial Guinea announced that offshore Block R with the related Fortuna gas development project will be offered up in the April licensing round after it was reclaimed from Ophir Energy Plc.

Block R will be one of up to 13 deepwater and ultra-deepwater blocks offered in the licensing round on April 1. Ophir was denied an extension to its licence in December 2018 for Block R and its plan for a floating LNG project. Obiang Lima stated: “This is going to be the first licence round that will have an exploration area (and) a developing area because it will be the Ophir area.”

He said the offer would include an ‘invitation for companies to have a joint venture for operating’ the block and the related gas development. Obiang Lima said the April licensing round would offer at least seven blocks, with the possibility of adding six blocks if more blocks were reclaimed from the concession holders before April.

GLOBAL

On 7 February, oil prices slipped after U.S. crude inventories rose and production held at record levels, but OPEC-led supply cuts and Washington’s sanctions against Venezuela supported markets. The U.S. West Texas Intermediate crude futures fell 81 cents at $54.21 a barrel at 10:15 AM ET (15:15 GMT), while Brent crude futures traded down 50 cents at $62.19.

The U.S. Energy Information Administration (EIA) weekly report showed a rise in crude inventories by 1.26 million barrels for the week ending February 1 showed that U.S. crude oil inventories rose by 1.26 million barrels, compared to forecasts for a stockpile build of 2.18 million barrels.

Crude oil has also been under pressure amid signs that global economic weakness would reduce demand, even as data from the EIA continues to produce oil at record levels, outstripping traditional sources such as Saudi Arabia or Russia.

However, Russia is taking its time in complying with the exports cuts it had committed to under the OPEC alliance. They intend to wait until May instead of the original March deadline to honour the reductions, therefore forestalling hopes that an agreement between OPEC and allies led by Russia would be sufficient to put the brakes on the global supply.