Nigeria's Crude Exports Expected To Reach 15 Months High In June

Nigeria issued its first Forcados oil loading plan since 2016, putting the nation’s June oil exports on track to hit thier highest level in at least 15 months.

The plan, if realised, would return loadings by Nigeria, normally West Africa’s biggest oil exporter, to levels not seen since militant attacks in the oil-rich Niger Delta first shut down Forcados exports in early 2016.

It is also likely to put more downward pressure on oil prices, which are already trading more than 16 percent below the highs reached in January on the back of a persistent global excess.

Last week the Organization of the Petroleum Exporting Countries along with several other oil producing nations agreed to extend output cuts of 1.8 million bpd, but it gave Nigeria, along with Libya, another exemption.

The Forcados loading schedule includes seven cargoes, for a total of 197,000 barrels per day (bpd). That would bring total June exports to 1.75 million bpd aboard 58 cargoes.

According to the Reuters OPEC survey, production in Nigeria last reached 1.76 million bpd in March 2016. Nigeria refines a small amount of its own oil, but this was limited to around 65,000 bpd in 2016.

Forcados has been closed for all but a few weeks following militant attacks on the main Trans Forcados export pipeline in February 2016. Loading plans for October and November 2016 were issued after pipeline repairs, but fresh attacks quickly shut it down again, scuppering those plans.

Three tankers loaded at the terminal since it resumed operations late last month, according to traders, but operator Royal Dutch Shell said on Friday that the grade remains under force majeure.

(REUTERS)

Nigeria's Oil Production Might Hit 2.2mb By The End Of June – Oando

The worst disruptions in Nigeria's oil-producing Delta region are over, and production could reach 2.2 million barrels per day (bpd) by the end of June, the chief executive of Nigeria's Oando said on Wednesday.

Oando chief Pade Durotoye told the Africa Independents Forum in London the long-closed Forcados oilfield could be back to capacity by the end of June, enabling a return to nearly full production from what is typically Africa's largest oil exporter.

"We think that the worst is behind us," Durotoye said. "Before the end of June, we will have Forcados back, which would take us comfortably back to 2.2 million bpd."

Attacks in the Niger Delta had pushed production to just over 1 million bpd at certain points last year, the lowest in decades, but attacks have abated since the start of the year.

The first Foracdos cargo from the main Trans Forcados export line loaded last week, though operator Royal Dutch Shell has said force majeure remains in place.

Durotoye said "bold actions" by the government to address security in the area had helped, and that if it continued, Oando could boost output from 50,000 bpd to 150,000 bpd within 12-18 months.

Still, Durotoye said concerns over more violence was leading investors to view the region with a lot of caution.

"Capital is still going to be constrained," he said.

Durotoye also said Nigeria's long-delayed Petroleum Industry Bill (PIB), which governs everything from the operations of state oil company NNPC to fiscal terms on oil exploration projects, was moving at a more assured pace.

"We expect approval sometime in the second half of the year," Durotoye said.

Uncertainty over fiscal terms has held back upstream investment, especially in capital-intensive deepwater offshore. Durotoye said that PIB approval would "put some (investor) concerns to bed."

(REUTERS)

NNPC Finalizes Deal for $6bn Crude Swap Deal

The Nigerian National Petroleum Corporation (NNPC) is in the last stages of signing deals with ten companies to exchange around 300,000 barrels per day (b/d) of crude for imported petrol and diesel.

The deal which is under a new import scheme called Direct Sale and Direct Purchase (DSDP) was introduced in 2016 and was carried out through direct sales of crude oil to refiners or consultants, who in turn supply NNPC with equivalent worth of petroleum products.

This year’s DSDP contract which was expected to have kicked off April 1 and last for one year, will overall consume around 300,000 b/d of crude oil worth $6 billion should oil price remain within $44/45 per barrel.

No fewer than 128 local and international oil and gas companies had in February submitted bids to participate in the programme, but industry sources told Daily Trust that only ten have been chosen.

Each contract, trading sources said, is going to be signed with a foreign company and a local partner. A source listed the successful companies’ pairings as: Vitol-Varo Energy, Cepsa-Oando, Petrocam Trading-Rainoil Ltd., Trafigura-A.A. Rano Nigeria and Totsa-Total Nigeria.

Socar Trading was said to have signed its contract with Hyde Energy as local partner; Mocoh-Heyden Petroleum, Mercuria-Matrix Energy and MRS Oil/Gas-Litasco while Ivory Coast’s SIR refinery was paired with Sahara Energy Resource Ltd.

It was also learnt that four of the 10 groups have signed contracts with the NNPC, while the rest are expected to sign today.

“Apparently arguments over sulphur levels have held up some signings. NNPC is asking for maximum of 50 parts per million (ppm) sulphur for gasoline, when the term sheet said 150 and the old contracts allowed up to 1000. Apparently the 50ppm opening offer led some of the companies to demand exorbitant price premiums, which they then did not want to back down from,” a source familiar with the deal told Daily Trust.

“NNPC might compromise and allow higher sulphur levels for gasoline, but I don’t know what that means (150 versus 50, something higher than 150),” the source added. 

Old oil swap under new name?

NNPC is normally allocated 445,000 barrels per day crude for the local refineries but the refineries utilise less than that. The rest of the crude is then traded off in swap deals and exports. 

The corporation had in 2016 replaced the offshore processing arrangement (OPA) and crude oil swap - deals which NNPC uses to trade crude oil for refined products - with the DSDP arrangement.

It cancelled them after years heavy criticism trailed the contracts whose terms short-changed Nigeria.

The Nigeria Extractive Industries Transparency Initiative (NEITI) in 2015 estimated that Nigeria lost $966 million to crude oil swap deal between 2009 and 2012 and billions of naira in subsequent years until the NNPC headed to its call for the discontinuation of the OPA in April 2016.

Group managing director (GMD) of the NNPC Maikanti Baru had while declaring bids open for the DSDP in February said the new scheme had in the last one year saved the country over half a billion dollars and that the DSDP now guarantees that products are received by it in full and with extra margins, unlike it was with the OPA.

Some industry experts who have been trying to draw comparison between the DSDP and old swap or OPA system, concluded that even though there was no difference between them, terms of the contracts not only differed but that the DSDP has better level of transparency.

“It looks like the same thing under a new name because the underlinings of the transactions remain the same,” Head of Investor Relations at United Bank for Africa (UBA) Abiola Razaq said adding that “It may look in the surface to be the same thing; the terms of the contract are different.”

“I think we should also give some level of credit to the NNPC and government for their ability to be able to sustain product supply in the market for the last five months despite the volatility in the FX market and other challenges we have had in the market,” Razaq said.

Director of the Centre for Petroleum, Energy Economics and Law, University of Ibadan Prof Adeola Adenikinju also agreed that the new arrangement with previous swap were the same in principle except that the terms of deferred.

“I think there should be more disclosure around the deals. For example is it 445,000 b/d or less? More importantly is for us to get our domestic refineries to produce and refine our crude,” Professor Adenikinju added.

By Daniel Adugbo

Nigeria Records Decline In Crude Production, At 1.2m bpd

The nation’s crude oil production has fallen from two million barrels per day to as low as 1.27 million bpd amid the shutdown of two major export grades.

The country produced 1.269 million bpd last month, according to direct communication with the Organisation of Petroleum Exporting Countries.

The 13-member oil cartel, in its newly released monthly oil market report for April, said Nigeria recorded the biggest decline of 157,000 bpd in March.

Few days after Italy’s Eni lifted force majeure on Brass River crude oil exports from Nigeria in February, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, said crude oil production had risen to two million bpd.

But early last month, Shell Nigeria Exploration and Production Company Limited shut down the Bonga field to enable it to commence turnaround maintenance on it, a development that has reduced oil production and exports.

According to SNEPCo, production from the field is expected to resume at the conclusion of the exercise this month.

The Bonga Floating, Production, Storage and Offloading vessel has the capacity to produce 225,000 barrels of oil and 150 million standard cubic feet of gas per day.

The shutdown of the Bonga field came a year after Shell declared force majeure on Forcados oil exports after the terminal was shut. It has yet to be lifted as of the time of filing this report.

The force majeure, a legal clause that allows a company to stop shipments without breaching contracts, was declared on February 21 after the Forcados export line was attacked by militants in the Niger Delta a week before.

According to the Nigerian National Petroleum Corporation, at the Forcados terminal alone, about 300,000 bpd to 330,000 bpd were shut in since February 2016 following the force majeure declared by the SPDC.

In October last year, Shell resumed export of crude oil from the Forcados terminal following repairs, but the production wells were shut-in again due to the shutdown of the Trans Forcados Pipeline on November 9, 2016 as a result of sabotage on the 48-inch crude export line.

While Nigeria had consistently been Africa’s largest oil exporter, its loadings have fallen below those of Angola several times over the past year as it dealt with militant attacks on oil infrastructure in the Niger Delta.

The NNPC said in its latest monthly report that the Federal Government’s engagement with the Niger Delta militants had continued to enhance production.

The corporation said, “Areas much affected by the militant activities are the onshore and shallow water assets, where government’s share is high. Hence, sustained security of onshore and shallow water locations remains a priority to restore production to peak levels.”

Kachikwu, who disclosed the increase in oil output to two million bpd in February to the House of Representatives Committee on Petroleum Resources (Upstream), also spoke on the Forcados Oil Terminal.

He informed lawmakers that repair works on the facility were nearing completion, saying it could be reopened in a matter of weeks.

“In some weeks, we will be able to progress to 2.2 million bpd, which is the target of the (2017) budget,” he said.

By Femi Asu