Indonesia Eye More Crude Oil From Nigeria

Indonesia has shown desire to purchase more crude oil from Nigeria, the Nigerian National Petroleum Corporation announced on Wednesday.

According to the NNPC, the request was  made by the Head of Economic Affairs of the Indonesian Embassy, Mr. Dwiyatna Widinugraha.

Widinugraha led a team  from his country on a courtesy call on the corporation’s Group Managing Director, Maikanti Baru, at the oil firm’s headquarters in Abuja.

Speaking on the purpose of the visit, Widinugraha commended the NNPC for its support in crude oil supply, which had helped Indonesia to achieve energy sufficiency, adding that the country needed further assistance in the form of increased crude oil allocation.

He said Indonesia, with a population of more than 250 million people, needed about 1.6 million barrels of crude oil daily to meet its burgeoning energy needs as an emerging economy and would love to have a government-to-government arrangement with Nigeria in that regard.

Shedding more light on the mission, the Vice President of Pertamina, the Indonesian National Oil Company, Mr. Anizar Burlian, stated that members of the delegation were in Abuja to thank Nigeria for helping Indonesia to meet its local oil demand and to further explore better arrangements of buying the country’s very high grade crude oil.

“Over the years, we have bought huge amount of crude oil from Nigeria. We are extremely happy to buy more Nigerian crude oil, which is globally rated to be of very high grade and which is very suitable for our refineries,” Burlian was quoted as saying in a statement issued  by the NNPC’s spokesperson, Ndu Ughamadu.

Burlian said members of the delegation were also interested in investment opportunities in the upstream, midstream and downstream sectors of the Nigerian oil industry.

Responding, the Group General Manager, Crude Oil Marketing Division, NNPC, Mr. Mele Kyari, who was represented by Mr. Adokiye Tombomieye, said the corporation would continue to assist Indonesia in the area of crude oil supply, adding that the request for a government-to-government crude supply arrangement should be routed through the office of President Muhammadu Buhari.

On investment, the corporation advised the team to articulate its request in a proposal to enable the NNPC management review it and act accordingly.

Hope For 2018 As Price Of Crude Oil Rises

Hope seems to be in the horizon for Nigeria’s economy has a recent survey as seen the price of crude oil rise from $68 to $70 per barrel in the international market as a result of rising demand.

The price of Bonny Light, Nigeria’s premium oil grade, hit the roofs at $70, the highest in recent times this year, yesterday. This new improvement is sure to raise hope for the implementation of the nation’s N8.6 trillion 2018 budget.

Also, the prices of Brent and WTI rose to $69.81 and $64.53 per barrel respectively while the price of Organisation of Petroleum Exporting Countries, OPEC, basket of 14 crudes stood at $67.24 per barrel.

OPEC stated: “The price of OPEC basket of 14 crudes stood at $67.24 a barrel on Wednesday, compared with $66.39 the previous day, according to OPEC Secretariat calculations.”

The rise in price is said to constitute a good omen for the nation’s 2018 budget which was based on $45 per barrel and 2.3 million daily oil output.

Meanwhile, OPEC has predicted increased oil market stability in the coming months.

It stated: “The Joint OPEC-Non-OPEC Ministerial Monitoring Committee (JMMC) stated that, based on the Report of the Joint OPEC-Non-OPEC Technical Committee (JTC) for the Month of November 2017, OPEC and participating Non-OPEC producing countries have shown highest level of conformity with their respective adjustments in production.”

“The JMMC was established following OPEC’s 171st Ministerial Conference Decision of 30 November 2016, and the subsequent Declaration of Cooperation made at the joint OPEC-Non-OPEC Producing Countries’ Ministerial Meeting held on 10 December 2016 at which 11 (now 10) non-OPEC oil producing countries cooperated with the 13 (now 14) OPEC Member Countries in an effort to accelerate the stabilization of the global oil market through voluntary adjustments in total oil production of around 1.8 million barrels per day.

“The resulting framework, which came into effect on 1 January 2017, was for six months. The second joint OPEC-Non-OPEC Producing Countries’ Ministerial Meeting, held on 25 May 2017, decided to extend the voluntary production adjustments for another nine months commencing 1 July 2017. During its third meeting held in Vienna on 30 November 2017, the joint OPEC-Non-OPEC Producing Countries’ Ministers agreed to amend the Declaration of Cooperation so that it will last the entirety of 2018.”


Nigeria Gets Another Exemption From Oil Cut

The Organisation of Petroleum Exporting Countries (OPEC) and Non-OPEC countries have approved Nigeria’s exemption from oil production cuts.

A statement by the Director, Press Relations, Ministry of Petroleum Resources, Mr Idang Alibi, said the endorsement was given by at a meeting of OPEC’s Joint Ministerial Monitoring Committee on Friday in Vienna.

Nigeria was first granted production cuts at the November, 2016 Ministerial Conference and this was later extended in May at another Ministerial Conference, until the country stabilizes its crude oil production.

Minister of State for Petroleum Resources, Dr Ibe Kachikwu, said though Nigeria’s production recovery efforts had made some appreciable progress from October, 2016, it was not yet ”out of the woods”.

The statement quoted Kachikwu, who was at the Vienna meeting, as saying that though Nigeria hit 1.8 million barrels production per day in August, it was not enough justification for call by some countries for Nigeria “to be brought into the fold”.

”Nigeria as one of the older members of OPEC will continue to work for the good of the organisation and its member countries, respecting whatever agreements and resolutions are collectively made.

”Nigeria will be prepared to cap its crude production when it has stabilized at 1.8 million barrels per day,” he said.

The meeting noted that overall compliance by OPEC and Non-OPEC participating countries to the Agreement on oil production cut for August was 116 per cent, the highest since the agreement in January, 2017.

It said that the objectives of the accord were steadily being achieved with the gradual draw-down of inventories by nearly 50 per cent since the agreement came into effect.

Oil Price Rises to $50 per Barrel

Oil prices edged higher on a weaker dollar and diplomatic tensions in the Gulf on Friday.Benchmark Brent crude futures were up 24 cents at 49.54 dollars a barrel on Friday, while U.S.West Texas Intermediate (WTI) crude futures traded at 47.09 dollars a barrel, up 17 cents. Investors were also taking positions ahead of a meeting between OPEC and non-OPEC members in Russia on Monday at which they will discuss compliance with agreed production cuts .

They will examine progress towards rebalancing an oversupplied market.

“The weak dollar, the rising tension between Kuwait and Iran and the upcoming meeting in St. Petersburg should all contribute to some kind of short-covering today,” Tamas Varga, senior analyst at London brokerage PVM Oil Associates, said.

The dollar index fell to the lowest in more than a year on Friday, incensing the purchase of dollar-denominated commodities such as crude oil.

OPEC members Iran and Kuwait are embroiled in a diplomatic spat that saw Kuwait ordering the expulsion of the Iranian ambassador and other diplomats for alleged links to a “spy and terror” cell.


Oil price Sinks to Five-Month Low of $48

Global oil benchmark, Brent crude, struck a five-month low on Thursday as the United States’ crude inventories showed a lower-than-expected decline amid growing compliance with a deal to limit production by the Organisation of Petroleum Exporting Countries and other producers.

Brent, against which half of the world’s oil is priced, fell by $2.32 to $48.47 per barrel on Thursday as of 7:00pm Nigerian time, its lowest level since late November 2016.

The US West Texas Intermediate benchmark dipped below $46 per barrel for the first time since late November.

The concern over rising global supply and stubbornly high inventories effectively wiped out most of the gains made since OPEC announced its first supply cut in eight years.

OPEC on November 30, 2016 agreed on its first limit on oil output since 2008, a deal supported by some non-OPEC members, including Russia and Oman. They announced output cuts of 1.8 million barrels per day for the first six months of 2017.

The cuts in production resulted in a significant rally in oil prices, with Brent trading as high as $56 per barrel in February.

Data from the Energy Information Administration released on Wednesday showed that US crude output jumped to 9.29 million bpd, the highest since August 2015. But crude inventories fell by 930,000 bpd in the week to April 28, against analysts’ expectations for a decrease of 2.3 million barrels.

OPEC began production cuts on January 1 in a bid to reduce swollen global inventories and bolster the price of oil, which is still stuck at half its 2014 level. Total output, including Libya and Nigeria, remains 135,000 bpd above target, putting the group about 90 per cent of the way toward its goal.

Among the 10 members bound by the caps, compliance strengthened to 102 per cent from 89 per cent in March, a Bloomberg News survey of analysts, oil companies and ship-tracking data showed on Wednesday.

OPEC will meet again in Vienna, Austria, on May 25 to decide whether to extend its six-month production cut through the second half of the year.

Reuters on Thursday quoted three delegates as saying that OPEC and non-OPEC oil producers looked likely to extend their agreement to limit supplies beyond its June expiry to help clear a glut, downplaying the chance of additional steps such as a bigger cut.

The Punch

Oil Holds Near $53 as Record U.S. Crude Stockpiles Seen Falling

Oil traded near $53 a barrel after the longest winning streak since December before U.S. government data forecast to show record crude stockpiles declined.

Futures slid 0.4 percent in New York after rising 5.7 percent in the previous five sessions. Inventories probably dropped by 1.5 million barrels last week, according to a Bloomberg survey before an Energy Information Administration report on Wednesday. Libya declared force majeure at a key export terminal as its biggest field stopped producing just a week after it reopened.

Oil has rallied above $50 a barrel after some members of the Organization of Petroleum Exporting Countries voiced support for an extension of production cuts past June, offsetting rising U.S. output. The curbs have stabilized the market, according to Russia, which is among 11 other nations outside the group that have joined in the pact aimed at easing a global glut.

“There is potential for some good upside to the oil price provided that OPEC maintains compliance with cuts,” said David Lennox, a resource analyst at Fat Prophets in Sydney. “Investors will continue to watch what happens with U.S. production, which has been trending higher. The market has become accustomed to fluctuating Libyan supply.


Nigeria Be Warned: Russia Prepares for Oil at $40

Perhaps the Bank of Russia knows something the world doesn’t.

As the Organization of Petroleum Exporting Countries and its allies prepare to meet for a review of their production cuts this weekend, the central bank of the world’s biggest energy exporter is hunkering down for years of oil near $40 a barrel.

While analysts in a Bloomberg survey see the price of benchmark Brent crude — which trades at a small premium to Russia’s Urals export blend — rising 16 percent from current levels by the end of the year, oil’s 10 percent decline in March alone amid supply woes is making the market nervous. Russia, a key partner in the deal and a participant in the talks in Kuwait, might only add to those jitters.

Nigeria Could Triple Gas Reserves With NLNG Expansion-CEO

Nigeria Liquefied Natural Gas Company (NLNG) could unlock three times as much gas as the country’s proven reserves and create hundreds of thousands of jobs if it goes ahead with a proposed expansion plan, it said on Wednesday.

NLNG, often cited as a successful public private partnership, is a venture between state-owned Nigerian National Petroleum Corporation (NNPC), Royal Dutch Shell, Total and Eni to produce liquefied natural gas (LNG) for export.

It currently operates six trains — liquefaction and purification facilities – and CEO Tony Attah said the company was ready to add another two trains, although he did not say whether a final decision had been taken.

Building Trains 7 and 8 would require total investment of $25 billion, he said.

Nigeria has the world’s ninth largest proven gas reserves, at 187 trillion cubic feet (tcf), and Attah said NLNG estimated “scope for reserves of 600 tcf” if the company expands.

“The potential investment that will come in is about $25 billion if Train 7 and 8 happen, to unlock the 600 tcf gas with (the creation of) 800,000 jobs,” Attah told a press briefing.

NLNG was ready in principle to go ahead, he said.

“Technology is here, people are here and the partners are already lining up.”

However, Attah also warned that Train 7 needed assurances around supply because the six existing facilities were not full on an annual basis. “We need a billion dollars worth of investment upstream to keep trains 1 to 6 up,” he said.

NLNG, which has 23 LNG carriers, has generated $85 billion in 17 years with assets of more than $13 billion.

OPEC member Nigeria, is reeling from low oil prices and militant attacks on energy facilities in its Niger Delta energy hub, saw its economy shrink 1.5 percent in 2016 – its first full-year contraction in 25 years.


Nigeria to Cut Stake in Oil Assets Under Buhari’s Growth Map

Nigeria plans to sell portions of its oil assets to help fund President Muhammadu Buhari’s four-year program to lift the economy from its worst slump in a quarter century and create 15 million jobs.

Buhari proposes in a 2017-2020 economic blueprint to reduce the government’s stake in joint-venture oil assets and other holdings. Selling them will “optimize their efficiency and reduce fiscal burden on the government,” according to the proposal posted on the Ministry of Budget and National Planning’s website. Lenders including the World Bank are awaiting the plan to conclude funding facilities for Africa’s second-biggest oil producer.

The proposed plan targets growth of 7 percent and inflation under 10 percent by 2020 by increasing oil output, opening up new farmland and boosting investment in power, roads and ports to diversify revenue. The economy shrunk 1.5 percent in 2016, the first full-year contraction since 1991, mainly due to a drop in prices and output of oil, the nation’s biggest export, and the resulting foreign-exchange shortage. The naira weakened after the central bank removed a peg in June, increasing the prices of imports from fuel to food, contributing to the inflation rate rising to the highest in more than a decade.

Selling some oil assets “will help unlock needed resources, so it’s positive,” Razia Khan, head of Africa macro research at Standard Chartered Plc in London, said by email. “But we will have to look at the timeframe over which this is done. Should we expect a slew of quick privatizations, or will this be drawn out?”

Unlock Resources

Nigeria has an average 55 percent stake in joint ventures run by Royal Dutch Shell Plc, Exxon Mobil Corp., Chevron Corp., Total SA and Eni SpA, which produce about 90 percent of its crude. The government also owns 49 percent of Nigeria LNG Ltd, a multibillion-dollar company which operates Africa’s biggest liquefied natural-gas plant. The government has also hinted it may award concessions for airports.

The government aims to increase oil output to 2.5 million barrels a day by 2020 from a low of 1.6 barrels daily in the 2016 third quarter when militants bombed pipelines. This is forecast to boost government revenue by 800 billion naira ($2.53 billion) annually. Some of the additional funds will be used to revamp domestic refineries to raise capacity to a level where the country will turn into a net exporter of refined fuel.

‘Hidden’ Debt

The West African nation raised $1 billion in a Eurobond issuance last month and will probably tap the international bond market for a second time this quarter to raise $500 million. Nigeria will re-balance its debt portfolio to increase the proportion of foreign financing and “make arrangements to pay off hidden federal government debt,” according to the plan.

The government wants to issue bonds and debt certificates for 2 trillion naira to pay outstanding bills to contractors, ministries, departments and agencies, and state governments, Budget Ministry spokesman Akpandem James said by phone from Abuja, the capital. The plan refers to “hidden” debt because some of the liabilities have to be verified before they are paid, he said.

Nigeria will “sustain a market-determined exchange rate” and monetary policy will be “aligned with other aspects of the federal government’s macroeconomic program,” according to the plan.

The central bank has intervened since August to keep the naira at about 315 against the dollar, after abandoning the peg of 197-199 per dollar. The regulator has increased its key lending rate to a record 14 percent to fight inflation, despite calls from Finance Minister Kemi Adeosun to loosen policy to support the economy. The currency was 0.2 percent weaker at 315.5 by 6:18 a.m. in Lagos, the commercial capital.

Power Prices

The government will introduce cost-reflective power tariffs to encourage investment in a sector that’s heavily indebted and struggling with cash flow.

The Ministry of Power, Works and Housing said the government would, from January, guarantee 702 billion naira for state-controlled Nigeria Bulk Electricity Trading Plc to pay for electricity it receives from generating companies and sells to distributors. Nigerian power distributors paid only 27 percent owed to generators in 2017, according to data from the National Bureau of Statistics.

The plan proposes reforms including increasing value-added tax on luxury products to 15 percent in 2018 from 5 percent and improving compliance to add 350 billion naira to annual revenue collections.

At least 100,000 hectares of additional arable land will be irrigated, farmers will have better access to fertilizer, a staple crop-processing zones authority will be established, and the Bank of Agriculture will be recapitalized to increase loans. This is part of the nation’s strategy to boost production to meet domestic demand and export products including rice, cashew nuts, ground nuts, cassava and vegetable oil by 2020.

The plan “ticks a lot of the key boxes, and correctly identifies the problems that they have,” John Ashbourne, an economist at London-based Capital Economics Ltd. said by phone. “The real question is, will they follow through with this?”


Before Oil Majors Relocate to Niger Delta, By Obo Effanga

The news report over the weekend indicates that the Federal Government has “directed” oil companies operating in Nigeria to relocate their headquarters to the Niger Delta where their main exploration and production activities take place. This directive was ascribed to Acting President, Yemi Osinbajo, while speaking at a town hall meeting in Uyo, Akwa Ibom State, a potential beneficiary of such relocation.

The demand for the siting of the head offices of oil companies in the areas of petroleum exploration has been a major demand of oil producing states in Nigeria, over the years. This reported move would therefore be a most welcome one.

Although the reports talked about a “directive”, the reality is that the operationalisation of such a “directive” would certainly take a while in coming. In fact, reading between the lines, one notices that the Acting President urged the Minister of State for Petroleum Resources, Ibe Kachikwu, to start engaging the oil companies towards actualising the relocation and added that he thought “it is the right thing to do”. Truly, it sounds like one of those politically correct things to say at a gathering, and not necessarily a directive or government’s policy. But it is all the same a good starting point which would allow agitators to push government to show a will and commitment to such relocation.

The reason for the quest for the relocation of the headquarters of oil corporations to the Niger Delta area are various and compelling. The first reason is that conventionally, a company should have its main offices where its major production is. For instance, ExxonMobil has its international headquarters in Texas, where its main operation field is just as Chevron has its headquarters in California, where it also carries out major operations.

What this is likely to do for the corporations is that it creates a deeper connection between them and the areas of their operations in terms of community relations and environmental protection and responsibility. Much of the conflicts between oil production companies in Nigeria and their host communities have centred on environmental degradation. This is because it is all so easy for an oil company not on the ground to treat the environment with contempt. Apparently, that is what our oil producing areas have been going through. Their oil production communities therefore become mere conquered territories only useful for exploitation by the oil companies who become like pirates who simply loot and escape to enjoy the loot elsewhere. But if the oil companies have their headquarters in the location of the operations, they stand the chance of suffering the physical and environmental consequences of their operations and would be expected to act more responsibly.

The above may not however be the only reason for the call for relocation. After all, even the local communities, their chieftains and local and state governments are equally complicit in the environmental degradation of the Niger Delta and oil producing communities. Much of the acts of sabotage, poor quality illegal refining and illegal oil bunkering leading to more environmental degradation are committed with the active involvement and collusion of principal members of the local communities. In fact, many of the local chiefs, community leaders and “youths” have benefitted through several illegal and environmentally unfriendly activities that go on there.

The bigger reason for the demand for relocation is however pecuniary. Under our laws, company tax is often paid where a company has its head office. Thus, while the production and revenues of the oil corporations come from the oil producing states, the corporations pay their company taxes where their head offices are: mainly in Lagos and Abuja. And to the extent that many of the staff receive their salaries from the head office locations, it also follows that their personal income taxes are paid in those city centres (Lagos and Abuja) where the companies are headquartered.

What is therefore happening here locally is similar to what some of us have complained about many multinational corporations. Some of those companies carry out a majority of their revenue-earning activities in Nigeria and other poor countries of the global South. But they unscrupulously repatriate the profits to tax havens where they have set up their ‘international headquarters’ in one-room or post office box addresses. They thus deny Nigeria and similar countries the benefit of receiving appropriate revenue from the companies in taxes. This relocation move therefore makes good sense and is likely to lead to some form of social justice through resource reallocation and redistribution.

Apart from the direct tax benefits to the state governments in the Niger Delta region, the relocation of the headquarters of the oil companies to the production states will also boost the local economies as the staff and facilities to be moved in there would consume products from the local markets. And there are vast markets in terms of food, household items and services etc. to benefit from this, whenever the relocation eventually happens.

The relocation will not entail only the positive. There will certainly be some negative implications for this also. It may lead to inflation and high cost of goods and services in the region, with negative consequences for the poor and low income earners. The higher level of inequality between those in the oil industry and those outside is also likely to lead to more violent crimes like kidnapping. Residents in those areas and the relevant governments must therefore brace up to that possible reality and start planning how best to manage that situation, before it arrives.

While I support this move, there is also a converse responsibility we expect the government and peoples of the region to come to terms with. For the state and local governments, they would need to upgrade infrastructure and improve on their service delivery, commensurate with the pressure that would come with such relocation.

We must also work on the typical entitlement mentality of many people, especially the youths and ‘community leaders’ in the Niger Delta areas who would often look to the oil companies as under a duty to meet all their needs, regular and irrational, rather than look to their governments for service delivery and infrastructure provisions.

It is for this reason that I advocate that companies be made to pay all appropriate taxes due to the relevant governments and when that happens, they be freed from further unnecessary responsibilities and demands. Too often, members of communities try to not only pressure private companies to provide corporate social responsibilities (CSR) but even decide for them where to channel such efforts, demanding them as entitlements. A balance would need to be struck in that area to ensure harmony.

Nigeria’s Economy Contracted by 1.5 % in 2016

Nigeria’s gross domestic product fell by 1.5 percent in 2016 due to lower oil revenues, the National Bureau of Statistics said on Tuesday, for its first annual contraction in 25 years.

Africa’s largest economy slid into recession in the second quarter of 2016 as a slump in crude prices hammered the OPEC member’s public finances. Crude sales make up two-thirds of government revenue.

Fourth-quarter GDP shrank by 1.3 percent, the statistics office said. The oil sector declined by 12.38 percent year-on-year in the quarter.

“This contraction reflects a difficult year for Nigeria, which included weaker inflation-induced consumption demand, an increase in pipeline vandalism, significantly reduced foreign reserves and a concomitantly weaker currency,” the office said in a report.

Oil production – Nigeria’s economic mainstay – fell to 1.833 million barrels a day last year after 2.13 million bpd in 2015, it added, blaming militant attacks in the Niger Delta oil hub.

The non-oil sector fell only by 0.33 percent in the fourth quarter, the office said.

“The very shallow contraction in non-oil GDP growth in Q4 2016, raises hope of a more meaningful recovery in non-oil GDP in Q1 2017, buoyed both by improved budget spending and some improvement in FX availability,” said Razia Khan, Chief Economist Africa at Standard Chartered Bank.