Market Report: NNPC on companies to consider investing in the Nigerian oil & gas sector

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NIGERIA

Alhaji Mele Kyari, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC) said that Saudi Aramco and the Abu Dhabi National Oil Company (ADNOC) are considering investing in the Nigerian oil and gas sector (upstream, midstream and downstream). A meeting was scheduled for representatives of ADNOC and NNPC to discuss potential investments in Nigeria’s energy sector. Alhaji Kyari said both ADNOC and Aramco are looking at opportunities to invest in Nigeria and are prepared to invest in low-risk ventures, and is also considering using Nigeria as a platform to sell gasoline in West Africa. Although Aramco and ADNOC are not directly offering any products to Nigeria, NNPC prefers investments in the midstream sector (pipelines and refining). At an industry conference in Fujairah, UAE, Alhaji Kyari said that Nigeria hopes it could boost its oil production to around 3 million barrels of oil per day (bpd) within 2-3 years. According to the latest OPEC figures, Nigeria’s crude oil production averaged 1.866 million bpd in August, up by 86,000 bpd from July. Nigeria is also looking to OPEC’s largest producer Saudi Arabia to secure potential investments in its downstream sector.

SENEGAL/MAURITANIA

BP has announced that more gas has been found off Senegal in its Yakaar-2 appraisal well. BP’s partner, Kosmos Energy, reported that the well had found around 30 meters of net gas in high-quality Cenomanian reservoir, similar to the Yakaar-1 exploration well. Plans for the development of these gas finds include a Floating Liquefied Natural Gas (FLNG) export plan and supplies for domestic consumption. BP took the Final Investment Decision (FID) on the Mauritania-Senegal FLNG plan in December 2018. The Greater Tortue Ahmeyim LNG project will produce around 2.5 million tonnes per year, with first gas expected in 2022. There are expansion plans for a hub on Yakaar-Teranga and one on Birallah. The Orca well, which is expected to be spudded in October, would go to supporting the Birallah hub. The first phase will provide domestic gas and data for the producers. Senegal launched a development plan in 2014, with Kosmos saying gas from the offshore fields would go to supporting this. Senegal signed a deal with Penspen and MJMEnergy in early August on a gas-to-power study, with backing from the International Finance Corp. (IFC). Penspen is to assess the gas networks and provide a design for new infrastructure. MJMEnergy is to focus on the gas markets and business requirements for a new public-private gas network company. Kosmos has said it intends to sell down its stake in the project. It is seeking a carry for its development costs, to focus on its expertise in exploration.

GAMBIA

Oil and gas explorer FAR Ltd said it bought an additional 10 percent interest in two offshore blocks off the Gambia, giving the company a 50 percent working interest and operatorship of the project. The Gambian government has issued new licenses to the joint venture between the company’s unit FAR Gambia and PC Gambia, a unit of Malaysian state-run oil and gas major Petroliam Nasional Bhd. Under the new licenses, the joint venture partners will each get equal participating and paying interest. The key terms of the new licenses include a three-year initial exploration period along with two optional extension periods of two years each and signature bonuses of $4.5 million. In August, FAR, which holds a stake in licenses for oil drilling off the coast of West Africa’s Guinea-Bissau, said a unit of China National Offshore Oil Corp would take a majority stake in those projects.

GLOBAL

On Thursday 3rd October, oil prices remained low but hit by fears that the global economic slowdown will again leave the market awash in too much crude next year. The U.S. West Texas Intermediate was down 0.4 percent at $52.38 a barrel at 8:12 AM ET (12:12 GMT), while Brent crude futures were also down 0.4 percent at $57.45 a barrel. The U.S. Energy Information Administration’s weekly report for Wednesday 2nd October showed a rise in U.S. crude supplies for a third week in a row, by 3.1 million barrels for the week ending September 27, against analysts climb of 1.3 million barrels.

The impact of the Saudi attacks on physical supply has now unwound more or less completely. In a conference in Moscow, Saudi Oil Minister Prince Abdulaziz bin Salman said that the kingdom’s output had stabilized at 9.9 million bpd and that it now has another 1.4 million bpd of spare capacity. At the same conference, Russian Energy Minister Alexander Novak said there was no need for any immediate change to the OPEC agreement on output restraint that is currently keeping 1.2 million bpd of crude off world markets. That’s despite increasing signs of a slowdown in global demand growth. Novak said in an interview that he still expects global demand to grow by 1.4 million bpd, whereas the International Energy Agency expects 1.3 million bpd but warns that demand is “fragile”. OPEC and its allies including Russia are due to review its agreement in the first week of December, while the agreement itself is due to run through the end of March 2020.