…As Iraq remains the ‘bad boy’ of the cartel

Organization of Petroleum Exporting Countries, (OPEC) has resolved to exercise critical compliance control on members after it came up with a resolution on Friday to deepen production cut by members. Nigeria is one of the countries accused of flouting decisions on oil production cuts  

Rising from its annual meeting in Vienna last week, OPEC said it was a bit satisfied with Nigeria’s compliance level, it expressed worry that the country has oftentimes reneged in its production cut agreement. “OPEC’s ‘whatever it takes’ strategy has so far meant that Saudi Arabia would make additional production cuts where non-complying members failed,” Oriental News reported yesterday.

The report said that some members are banking on OPEC employing that strategy again, and are using it as negotiating leverage. Aside Nigeria, there are other chronic non-compliant OPEC members including Congo, Ecuador and Gabon, which were tasked with cutting a collective 85,000 barrels a day, bpd from their reference range.

Nigeria was supposed to be cutting 53,000 bpd of that 85,000 bpd, failed to comply with the cuts all year, and despite promising on October 1 to finally rein in its production to 100% compliance, its October production was 1.811 million bpd, well above its target of 1.774 million bpd, according to the latest version of OPEC’s Monthly Oil Market Report.

Nigeria has, however, increased its compliance in the last few months, compared to August when Nigeria produced an average of 1.870 million bpd. The report said Nigeria has renewed its commitment to the OPEC deal, and the downward trend for its production over the last few months suggests that it just might be sincere, the report said

It also has stated that its November production was indeed at the proper levels according to S&P Global Platts. Official figures, however, from OPEC have not yet been released for November. “So, for Nigeria, OPEC may not have to do much, other than the nonspecific pressure it has already been putting on the nation to comply,” Oriental News said

Other non-OPEC signatories to the deal that have overproduced their targets are Malaysia, tasked with cutting 15,000 bpd; and Oman, tasked with trimming 25,000 bpd, according to Bloomberg. Of these, Malaysia’s overproduction is most concerning, overproducing by 77,000 bpd in October. Malaysia’s state-run oil company, Petronas, saw its Q3 profit fall by 50% in part due to a “lower sales volume” of crude oil, but also due to lower oil prices as global oil inventories remained high.

Further deals, such as the petrochemical joint venture between Saudi Arabia and Petronas in Pengerang, couldn’t hurt when it comes to prodding Malaysia to produce less. It is unlikely that OPEC will bring more members into the full-compliance fold, aside from perhaps Nigeria. Saudi Arabia, however, is still able to carry the brunt of the production cuts, and it is motivated no matter what it says to continue to do so, despite the cheating ways of its lesser motivated peers.

The new threat is that compliance will have to be real this time around from all members or the cuts won’t happen at all. How successful OPEC will be in getting its noncompliant members to step in line, and how it will go about doing that remains to be seen.

Iraq is alleged to be the key defaulter in the OPEC cartel. The country has consistently and significantly failed to adhere to the cuts, reports say. Despite this lack of follow through with the cuts, Iraq is in full support of deeper and longer cuts. The country produces more oil than any other OPEC member except for Saudi Arabia.

Iraqis production is said to have doubled over the last decade, according to the EIA, and it produces nearly 5% of the world’s oil. Aside from Saudi Arabia, no other OPEC member has as much production cut clout as Iraq.

By Chibisi Ohakah

Nigerian Senate has said that as a matter of urgency, it would prioritize the consideration of the Petroleum Industry Bill (PIB) alongside reforms of the Electoral Act when it returns from the Christmas break in January.

Senate President, Ahmed Lawan made this disclosure at a media briefing of editors, bureau chiefs and members of the Senate press corps on Monday in Abuja. The Petroleum Industry Bill was first introduced in the National Assembly in 2007 but is yet to be passed in its entirety.

“The National Assembly will this time around adopt a different approach to make the passage of the PIB a reality. We want to see a situation where the legislature and the executive work very closely to have a PIB that will attract investment into the oil and gas sector in Nigeria.

“We want to create an investment climate that will be competitive. We know some other countries have this product; therefore we have to be competitive. We have to create an environment where the businesses make profit.

“This is a journey that involves everyone. We want both government – and that includes the legislature and executive – on the one hand and other relevant stakeholders in the sector, particularly the international oil companies (IOCs) to work together to ensure that this environment we are trying to create is an environment that will work for all of us,” he said

“We want to pass the Bill well ahead of the next electoral cycle in 2023 and avoid the political heat and pitfalls that imperiled the efforts of the eighth National Assembly, which passed the same bill close to the last general elections.

“We are not oblivious of the interest and concerns some of these bills have generated from the public. But, we must not forget that lawmaking is a rigorous process that allows for all sides of the argument to be heard and the true will of the people established before a bill becomes law.”

“This Senate and indeed the ninth National Assembly will not pass any bill that is not in the national interest. Ours is and will remain a Senate that will always work for Nigerians,” Lawan said. The Senate President stated that in the last six months of his Presidency, the Senate recorded a feat with the passage of six critical bills needed to accelerate the Nigerian economy.

He added that the bills would complement the successful implementation of the 2020 budget which was recently passed by the National Assembly and return the country’s annual budget cycle to the Janaury-December timeline.

Among the critical bills passed are: The Deep Off-shore and Inland Basin Production Sharing Contract Act and the Finance bills. “The three other bills that we have passed are the Public Procurement Act 2007 (Amendment) Bills, 2019, which we did to sanitise the public procurement process and curtail the incidence and influence of corruption.

According Lawan, “Aside from the six bills that were passed, 185 Bills have also gone through first reading in the ninth Senate, while 32 other Bills have passed second reading and are now undergoing the necessary further legislative processes at the relevant Senate Committees.”

By Chibisi Ohakah

By Chibisi Ohakah

…To Generate $9bn for FG, 10,000 Direct Jobs

Group managing director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari has assured that the Train 7 Project of the Nigeria Liquefied Natural Gas (NLNG) project will take off this week. A critical step towards the realization of the project was taken last Friday in Abuja with the signing of a Gas Supply Agreement between the company and major gas producers.

Speaking on the significance of the execution of the agreement, Kyari disclosed that the project would boost the federal government’s revenue by $9 billion and generate about 10,000 direct jobs and 40,000 indirect jobs to ease the youth unemployment challenge in the country.

He thanked the management of the NLNG Limited and the major gas producing companies for their commitment to the development of the project.

Also speaking at the event, country chairman of Shell Group of Companies in Nigeria and managing director of Shell Petroleum Development Company (SPDC), Mr. Osagie Okunbor, appreciated the NNPC GMD for his purposeful leadership which saw the partners coming together to sign the gas supply agreement.

He, however, urged the partners to look beyond Train 7, adding that it was time to move into action. On his part, the managing director of Total Nigeria who was represented by Mr. Patrick Olima, pledged the company’s commitment to making gas available for the NLNG and executing other big projects in the country like the Egina Project.

The managing director of Nigerian Agip Oil Company (NAOC) who was represented by Mr. Massimiliano Bertona also thanked Mele Kyari for the skillful way he drove the process leading up to the signing of the gas supply agreement and pledged the commitment of the company to supplying gas to NLNG.

On his own part the managing director of the Nigerian Petroleum Development Company (NPDC), Engr. Mansur Sambo, said he was excited at the opportunity of the company joining the elite club of gas suppliers to NLNG and pledged the company’s commitment to meeting the terms of the agreement.

The chief executive officer of Oando Plc, Mr Wale Tinubu, on his part, expressed gratitude to the federal government for creating policies that encouraged indigenous companies like his to join the league of gas suppliers to NLNG and thank the NNPC GMD for his leadership and support.

Speaking on the buyer’s side of the transaction, the managing director of NLNG, Mr. Tony Attah, described the event as a great moment for Nigeria as the gas supply would help consolidate Nigeria’s position in the global NLNG market. He, however, requested that more needed to be done to get the country to “fly on the wing of gas” in the face of the changing global energy dynamics, adding that NLNG was ready to build more trains if the gas producing companies can supply the gas required.

The highpoint of the event was the signing of the gas supply agreement by all the parties and the signing of term sheet for the development of OML 144 by NNPC, SPDC, TEPNG, NAOC and Sunlink.

By Chibisi Ohakah

Last week, the African Energy Chamber (AEC) launched its first annual African Energy Outlook for 2020. The report, compiled to provide key insight on what sub-Saharan Africa’s oil and gas industry can expect to see next year, also doubles as an overview of the role the energy sector stands to play in developing competing economies.

Though the continent’s oil and gas sector was significantly impacted by the oil price crash, 2019 has proven to be a year of recovery for many African economies. With many continuing works on projects that were previously halted or cancelled, some developing new large-scale projects and others working to increase their exploration and production activities; the continent is undoubtedly poised to see accelerated growth in the years to come.

To this, in the AEC 2020, showcases key economies and projects that are set to transform the energy landscape, placing the sector at the center of economic growth. In outlining major projects and economies to look out for in 2020, the Outlook features highlights on announce oil projects in Angola, Ghana, Senegal and Nigeria as well as announced gas projects in Mauritania, Congo Republic, Ethiopia, South Africa and Cameroon.

In unlocking the next phase of transformation for the sector, the report insists the market access and intra-Africa cooperation will be critical, particularly in oil and gas pipeline and infrastructure projects.

“Market access is increasingly on the agenda of existing and upcoming African producers of oil and gas, with several cross-country oil and natural gas pipelines in the works to unlock billions of dollars,” it says. Noting that, “Lessons have to be learned on how to negotiate transnational infrastructure deals and 2020 will show if African nations have learned how to cooperate better for the benefit of all.”

“Next year, we need to see continued progress. We all understand what we have on our hands, now we must build environments that will not only attract investors but keep them for the long-term. That is going to be our main challenge, ensuring policy certainty, political stability, favourable environments and matching returns,” said NJ Ayuk, executive chairman of the African Energy chamber.

Africa’s energy sector is a catalyst for growth and development across the continent. Industry and investors need to stay abreast of the high-speed advances in the energy landscape.

By Chibisi Ohakah

Integrated Data Services Limited, IDSL, a subsidiary of the Nigerian National Petroleum Corporation (NNPC), has recorded steady increase in its revenue base, racking in N5.5billion in 2016, N7.6billion in 2017 to N19.033billion in 2018.

Speaking at the company’s 23rd annual general meeting in Abuja last week, chairman and chief operating officer (COO), upstream directorate of the NNPC, Mr. Roland Ewubare, described the performance of the company as very impressive. According to him, the subsidiary had become self-reliant and would not require any subvention from the corporate headquarters anymore.

“If anything, IDSL now contributes to the center; we will continue to give them the needed support to ensure that they sustain this growth trajectory”, the COO said. On his part, NNPC’s chief financial officer (CFO), Mr. Umar Ajiya, commended the company’s management on the performance streak, saying, “the only way we can grow is when businesses like this deliver positive results, to enable us collectively overcome our financial challenges’’.

He affirmed that NNPC management would give all necessary support to all its subsidiaries with capacity and prospect to deliver, including recapitalization where necessary and help them to secure businesses across the Industry value change to ensure that they grow their output.

Managing director of the company, Engr. Diepriye Tariah, attributed the impressive performance of the company to the reorientation of the staff who, he said, had become more commercially focused and efficient. Integrated Data Services Limited, IDSL is one of the Upstream subsidiaries of the NNPC.

Established in 1988, the company focuses on seismic data acquisition, processing and reservoir engineering. It also undertakes data storage and management services.

By Chibisi Ohakah

Ventures Africa has reported that Kenya is adopting measures to address challenges in its petroleum export industry which has led to the loss of up to 30 percent of market share to neighbouring Tanzania. Some of these issues, which has threatened Nairobi’s position as East Africa’s top petroleum exporter, are high pipeline tariffs, fuel adulteration and smuggling.

Last year, Kenya recorded 739.800 tonnes of petroleum exports, a drop from 842.400 tonnes in 2017, according to the Economic Survey 2019. And in the first half of this year, there was a 43 percent decline in the value of domestic exports which stood at $11.5 million, from $20.2 million in the same period in 2018.

While Nairobi grapples with falling volumes, Tanzania has seen a significant rise in imports. Available data shows that in the financial year ending June 2018, Dar recorded 2.6 million litres in the volume of transit products, a 35 percent rise from 2 million litres in 2017.

In a string of measures aimed at regaining the lost market share, Nairobi has slashed pipeline charges by 50 percent. The newly imposed tariffs require oil marketing companies to pay $30.89 per 1,000 litres, down from $60, to transport fuel using Kenya Pipeline Company facilities.

“Kenya had lost about 30 percent of its petroleum export market to Tanzania mainly due to the high tariffs charged for pipeline transport,” the Director-General of Kenya’s petroleum regulator, Pavel Oimeke, told The EastAfrican. The new rates will apply for the next three years and are to be further lowered to $30.65 in 2020 and $29.07 in 2021.

With the lowered tariffs, Kenya is also targeting increased usage of the Mombasa port by importers of petroleum and petroleum products. Reports say most of the importers prefer Tanzania’s ports due to the authority’s efforts to comply with laws and standards in the downstream sector.

In addition to the downward revision of the pipeline tariffs, Kenya has also intensified its crackdown on fuel adulteration and smuggling. The menace reportedly costs the government up to $340 million and the East African Community (EAC) more than $500 million in tax revenue annually.

Kenya’s revenue authority (KRA) has “enhanced vigilance at the country’s border points,” said Kevin Safari, KRA Commissioner for Customs and Border Control. This is part of the measures aimed at curbing the illicit trade of fuel and counterfeits.

According to reports, the agency stopped a consignment of 7,000 litres of diesel fuel smuggled from Ethiopia last week. The operation was carried out in collaboration with a multi-agency team set up to strengthen co-ordination among different agencies in curbing illicit trade.

Increased export volumes

Kenya’s efforts to recapture the petroleum export market from Tanzania appears to be yielding results. Within 10 days after the implementation of the revised pipeline tariffs, the petroleum regulator saw export volumes double according to Oimeke.

The EPRA DG added that the level of petroleum fuels adulteration in Kenya has significantly reduced since September 2018 when an anti-adulteration measure was introduced for Kerosene. While dumping has also significantly reduced after upgrades were made to the petroleum fuels marking and monitoring programme since January this year.

The improvements include increased frequency of monitoring and stiffer penalties for culprits, which has seen compliance levels for both dumping and adulteration hit 100 percent as at the end of last quarter.

“EPRA has increased surveillance and also enlisted the help of the National Police Service to ensure that the problem is dealt with,” Oimeke said, adding that EPRA is working with regional energy regulators under the auspices of the Energy Regulators Association of East Africa to improve compliance across the region.

By Chibisi Ohakah