Oil & Energy

2011And Nigeria’s Oil Industry

Published

13 years ago

January 9, 2012

The year 2011 witnessed a very stormy weather that is yet to be cleared in the oil/gas and energy sector. Although the year came with great hopes and benefits as the President Goodluck Jonathan –led administration ensured that petroleum products and power supply were available for the people.

However, the controversial issue of removal of fuel subsidy beclouded scenario which is yet to be resolved or settled as Nigerians are not yet convinced as to how the funds saved from the subsidy will be used.

More than 50 years ago, Nigeria began to witness oil exploration and exploitation, which is being sustained till date. As the years roll by one is moved to reflect on the development of the oil and energy sector of the nation’s economy.

The uncommon fast movement or shift from agriculture to petroleum has enveloped the country and the gamble of the adventure is now paying off. The country is eventually achieving the great success of its life in the oil and energy sector. The satisfaction and fulfillment the nation is enjoying are mainly derived from oil and gas her God-given resources.

It is, however, one’s waning regrets that the sector is experiencing a seeming down shift due to managerial ineptitude. It was the oil and gas as well as energy success that made the country a cynosure of the world. The relative peace in the Niger Delta in 2011 created a suitable environment for oil companies to increase their outputs of crude oil production.

The year 2011 recorded some paradigm shifts from what obtained in the past. The Federal Government took measures toward the implementation of reforms in the oil-gas and power industries during the year.

In partnership with joint venture oil companies, there were renewed efforts at creating improved and sustainable community relations with host communities of oil-producing Niger Delta region to enhance oil production after the amnesty programme was put in place for former militants that terrorised the region.

For the first time, the government mustered courage and the will to privatise the power sector by handing over two power generation plants to private investors. It also went into some collaboration to explore development of the gas sector in a manner that would retain substantial value in the country. Although the impact of some of the decisions government took currently may not have been felt, operators are of the opinion that such steps were bold enough to bring a change in the oil/gas and energy sector.

Upstream

The inability of the National Assembly to pass the Petroleum Industry Bill (PIB) into law was a major setback in implementation of the reform in the upstream sector of the petroleum industry. Despite efforts of the executive arm of the government to persuade the National Assembly to pass the bill into law before the last general elections, the legislators sat on it and unit now, its passage is not in sight.

Most of the reforms expected in the upstream sector and their implementation processes are tied to the bill, hence further investments in the sector seemed to be at a standstill. Exploration activities last year were almost at zero level as international oil companies (IOCs) were skeptical over embarking on exploration as the PIB on passage into law might be very unfavourable since inputs in the bill became contentious, especially the fiscal regime and the issues on acreage development, which after several meetings between government and the IOCs, remained unresolved. The IOCs claim that the fiscal aspects of the bill, if passed into law in the current state, would make exploration and production business very unprofitable.

However, oil production improved last year on the heels of sustained amnesty programme of the government, rising to 2.4 million barrels per day, though the country was depending on importation of petrol. The development brought back Nigeria to its position as number one producer in Africa.

In 2011, Shell Petroleum Development Company (SPDC) embarked on routine maintenance of the Bonga Floating, Production, Storage and Offloading (FPSO) vessel, which is used to produce oil from shell’s biggest oil field, Bonga field in Oil Mining License (OML) 118 with daily oil production in excess of 200,000 barrels. The Bonga FPSO was shut down in compliance with the requirement for maintenance. Also last year, Shell Nigeria Exploration and Production Company Limited (SNEPCo) found the source of oil leak from its Bonga asset offshore Nigeria.

Shell successfully sold its asset in Oil Mining License (OML.40) out of four blocks, which have been put on sale since 2010. Elcrest, a consortium of two firms comprising Eland and Starcrest emerged the preferred bidder for the oil blocks. Sale of Blocks 30, 34 and 42 is still being discussed with potential buyers.

Last year, the Nigeria National Petroleum Corporation (NNPC) and its joint venture partners, Shell, Nigeria Agip Oil company (NAOC), Total and ConocoPhillips, agreed to resume the execution of Bisemi – Samnabri Utilisation and unit Operating Agreement (UUOA), which was originally signed 19 years ago. The MOU would serve as a boost to the Gas Revolution Agenda. This agreement represents a significant step in the drive to support federal government’s (gas based) economic development aspiration as well as gas supply plan to facilitate investment decision on Brass LNG. The handover of operatorship of Egbema, Egbema-West and Ugada fields to the Nigerian Petroleum Development Company (NPDC), a subsidiary of NNPC, was completed also last year. The move was designed to further build up capacity of NPDC as a national upsetream company.

Downstream

The downstream operation, particularly the products marketing sector was substantially stable as the government and other operators of the sector were able to sustain supply and check scarcity. Besides insignificant scarcity occurrence in the first quarter of last year, which did not last a day, the market was flooded with petroleum products, although almost 100 percent of the supply was import – dependent.

The independent Petroleum Marketers Association of Nigeria (IPMAN), a major stakeholder in the downstrcan operation, early last year, had a problem within itself and got factionalised. One group pulled out from the company, NIPCO, where it has equity stakes and chose capital oil and gas limited as its base for receipt of products and conduct of other transactions.

Contrary to reports that politically –induced violence and anticipated resumption of militant attacks might adversely affect oil production last year, NNPC ensured that oil and gas industry operations and oil output were stable and improved upon, shooting production up to 2.3 million barrels per day (bpd) after dropping to a low of 1.7 million bpd in mid – 2009.

A British High Court last year in London ordered the Shell Petroleum Development Company to pay compensation of more than $250 million ($410 million) to Bodo community in Rivers State after the company admitted liability for two oil spills in the community. Shell acknowledged that the two spills in 2008, were caused by operational failure.

In 2011, the statistician –General of the Federation said last year’s third quarter Gross Domestic Product (GDP) declined from 7.86 per cent in 2010 to 7.40 per cent and attributed the 0.46 per cent decline in growth to a fall in oil production by 0.34 percent in the third quarter as opposed to 5.08 percent in 2010.

Crude oil production with its associated gas component, for example, fell from 2.49 million barrels per day (mbpd) on average in the second quarter of 2011 to 2.36 mbpd on average in the third quarter. The drop in crude oil production in 2011 was as a result of operational constraints experienced by some of the major oil producers during the period under review.

In the third quarter of 2011, the organisation of Petroleum Exporting Countries (OPEC) agreed that first new production limit in three years in a deal that settled a six-month-old argument over output levels in Saudi Arabua’s favour. OPEC agreed a new supply target of 30 million barrels per day, which is roughly in line with current production.

The agreement caps output for all 12 OPEC members for the first half of the year, keeping supply near three-year highs, which is enough to build lean global inventories. When OPEC met in June last year, it failed to reach all agreement on higher supplies, leaving Saudi Arabia free to open the taps to compensate for lost Libyan supply.

Midstream

The Federal Government had in 2010 through NNPC agreed to partner with China State Construction Engineering Corporation (CSCEC), state governments of Lagos, Kogi and Bayelsa for the construction and operation of Greenfield Refinery in the three States. The refineries were designed to have a combined refining capacity of about 750,000 barrels per day, employ about 7,000 workers and planned to be jointly financed by NNPC, the state governments where they would be sited and the Chinese firms.

The government aggressively spearheaded moves for the take-off of the project in first quarter of last year but throughout the year, nothing was heard of the project until in October when the president in his Independence anniversary broadcast reiterated the federal government determination to build three new refineries. Considering the seriousness given to the project in 2010, which involved signing of MOUs and some milestones marked to be achieved within 2011, industry stakeholders and Nigerians were surprised that virtually nothing was done.

The existing refineries have been working, if at all, below 20 percent of installed capacities, although government sources said the four refineries work at 30 percent installed capacity. The private refineries including the Rivers State Treasure Oil Resources and the Amakpe refinery in Akwa Ibom State which were billed to come on stream last year had been in the cooler throughout the year.

Shedie Okpara

Oil & Energy

Hedge Funds Turn Bearish On Oil, Bullish On Natural Gas

Published

2 months ago

March 17, 2025

The Tide

Traders have not been this bearish on oil in months or so bullish on United States natural gas in years.
The latest data on money managers’ positioning in the WTI and Brent crude and U.S. natural gas futures showed two contrasting trends—speculators are betting that oil prices would remain low or go even lower while increasing the bets that natural gas prices would continue marching higher.
So far this year, geopolitical and supply and demand factors have been increasingly bearish for the oil price outlook and increasingly bullish for natural gas prices.
In the oil market, hedge funds and other portfolio managers have been slashing their bullish bets since the end of January, when the U.S. sanctions on Russia’s oil trade were the primary bullish driver of managed money to bet on a tightening market.
With U.S. President, Donald Trump, now in office, the sentiment has quickly soured amid the president’s insistence on lower oil prices, his efforts to broker an end to the war in Ukraine, and – most of all – the enormous uncertainty about on-and-off tariffs and tariff threats and their potential impact on the American economy.
As a result, market participants are preparing for lower oil prices, even amid expectations of declining oil supply from Iran and Venezuela due to President Trump’s hawkish policy toward these OPEC producers.
Speaking of OPEC, the wider OPEC+ group has just said it would begin increasing supply as of April, adding further downward pressure on prices.
Faced with all these bearish drivers, money managers have been reducing their bullish bets on crude oil futures, with the U.S. WTI Crude hitting the lowest net long position – the difference between bullish and bearish bets – in 15 years at the end of February.
In the week to March 4, the latest reporting week with data released on March 7, speculators bought WTI amid a major selloff in all other commodities except for U.S. natural gas.
The net long in WTI rebounded from the 15-year low, but it wasn’t because the market suddenly started betting on higher prices going forward. The rise in WTI buying and the net long was the result of short covering in the U.S. crude futures contract.
In Brent, hedge funds cut their bullish-only bets in the week to March 4 for the biggest decline in longs since July 2024.
Unlike in crude oil, money managers have become increasingly bullish on U.S. natural gas after inventories dipped this winter to below the five-year average as demand surged in the coldest winter for six years.
The net long in natural gas further swelled in the week to March 4, as the number of new bullish bets was four times higher than the new short positions.
“Natural gas continues to benefit from rising demand, both domestically in the US and towards exports via LNG,” Ole Hansen, Head of Commodity Strategy at Saxo Bank, said, commenting on the latest Commitment of Traders report.
At the start of the winter heating season in November, U.S. natural gas inventories were higher than average for the time of the year as America entered the season with stocks at their highest level since 2016.
These stocks, however, were quickly depleted during the coldest winter for six years, with demand for space heating and power generation soaring. A month before the end of the winter heating season, U.S. natural gas inventories have now slumped to below the five-year average and well below the levels from the same time in 2024, at the end of a mild winter.
The lower inventories and the higher demand – both for domestic consumption and LNG exports – have pushed prices higher, encouraging producers to boost gas output this year. Traders bet that prices will go even higher as demand from LNG plants is set to accelerate with the ramp-up of new U.S. export plants.
Paraskova writes for Oilprice.com.

By: Tsvetana Paraskova

Oil & Energy

Renaissance Finalises Acquisition Of SPDC

Published

2 months ago

March 17, 2025

The Tide

Renaissance Africa Energy Holdings says it has successfully completed the acquisition of 100 percent equity holding in the Shell Petroleum Development Company of Nigeria (SPDC).
Spokesperson of the company, Tony Okonedo, who disclosed this in a Press Release, Last Thursday, said Renaissance has completed all processes for the full transfer of ownership of SPDC to the consortium, adding that it will now operate as Renaissance Africa Energy Company Limited.
“Renaissance Africa Energy Holdings today announced that it has successfully completed the landmark transaction between itself and Shell for the acquisition of the entire (100%) equity holding in the Shell Petroleum Development Company of Nigeria (SPDC).
“This follows the signing of a sale and purchase agreement with Shell in January 2024 and obtaining all regulatory approvals required for the transaction. Going forward, SPDC will be renamed as ‘Renaissance Africa Energy Company Limited.
“Going forward, SPDC will be renamed as ‘Renaissance Africa Energy Company Limited’.
“Renaissance Africa Energy Holdings is a consortium consisting of four successful Nigerian independent oil and gas companies: ND Western Limited, Aradel Holdings Plc. FIRST Exploration and Petroleum Development Company Limited and the Waltersmith Group, each with considerable operations experience in the Niger Delta, and Petrolin, an international energy company with global trading experience and a pan African outlook”, the statement reads.
Speaking on the acquisition, the Managing Director/CEO, Renaissance Africa Energy Holding,Tony Attah, said Renaissance Africa Energy Company Limited has a vision to be the leading oil and gas producer in Africa and to help the continent achieve energy security.
Attah expressed gratitude to the Federal Government for its support and pledged the company’s commitment to the Petroleum Industry Act.
“We are extremely proud to have completed this strategic acquisition. The Renaissance vision is to be ‘Africa’s leading oil and gas company, enabling energy security and industrialization in a sustainable manner’.
“We and our shareholder companies are therefore pleased that the Federal Government has given the green light for this milestone acquisition in line with the provisions of the Petroleum Industry Act”, he said.
The CEO acknowledged the contributions of Nigeria’s Minister of Petroleum Resources, the Nigeria Upstream Petroleum Regulatory Commission (NUPRC), and the Nigerian National Petroleum Company Limited (NNPCL) in facilitating the deal.
He said, “we extend our appreciation to the Honourable Minister of Petroleum Resources, the CEO of the Nigeria Upstream Petroleum Regulatory Commission (NUPRC), and the CEO of Nigeria National Petroleum Company Limited (NNPCL) for their foresight and belief, paving the way for the rapid development of Nigeria’s vast oil and gas resources as strategic accelerator for the country’s industrial development”.
The Statement further revealed that Renaissance partner companies collectively have an asset base of more than $3 billion and currently safely produce approximately 100,000 barrels of oil per day (bpd) from 12 oil mining leases and operate two functioning modular refineries in Nigeria’s Niger Delta.

Oil & Energy

Oil-Rich Communities Must End Infighting To Access Dev Funds – FG

Published

2 months ago

March 17, 2025

The Tide

The Federal Government has cautioned oil-rich communities against infighting and disruption of oil production, saying it could hinder their access to the Host Community Development Fund.
Minister of State for Petroleum (Oil), Heineken Lokpobiri, made the appeal while speaking at the KEFFESO Stakeholders Forum, in Yenagoa, Bayelsa State.
Lokpobiri noted that the Petroleum Industry Act (PIA) was enacted to bring stability to the oil sector and address longstanding grievances about underdevelopment in host communities.
He lamented, however, that internal disputes among stakeholders have made it difficult for these communities to access and utilize the funds meant for their development.
Lokpobiri insisted that host communities must overcome internal conflicts that hinder their access to the funds.
“This KEFFESO Stakeholders Forum is to see how host communities can maximize the benefits from the Host Communities Trust Funds as prescribed by the PIA.
“If oil production is disrupted, everyone loses — the Federal Government, oil companies, and the host communities themselves. That is why host communities must collaborate with the government and oil companies to ensure smooth operations” Lokpobiri stated.
The Minister called on Host Community Development Trusts (HCDTs) in the Niger Delta to effectively utilize the 3% operational funds allocated to them under the PIA 2021 to drive sustainable development.
He further called that oil-producing communities should take ownership of the oil and gas facilities within their domains and work with relevant stakeholders to ensure sustainable benefits.
“As stakeholders who have their respective stakes in oil and gas operations in the country, we should work together to ensure that we maximize the benefits of oil and gas.”
The minister also emphasized the global push for cleaner energy, warning that the relevance of fossil fuels depends on their extraction and marketability.
“Don’t forget there is a global campaign against the continuation of production of fossil fuel.
“Fossil fuel will never go away. Fossil fuel will not have any value unless you bring it out of the ground or from the sea to the market, that is why we need this collaboration,” he said.
In his remarks, the Executive Secretary, Nigerian Content Development and Monitoring Board (NCDMB), Engr. Omotsola Ogbe, reaffirmed the board’s commitment to leveraging the provisions of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act.
Represented by the Board’s Director of Legal Services, Naboth Onyesoh, Ogbe noted that the NCDMB’s Community Content Guidelines were designed to ensure sustained community engagement as local content is prioritized throughout the oil and gas value chain.
Ogbe praised the KEFFESO Host Community Development Trust for its efforts in ensuring that oil revenues benefit local communities.
Also speaking, the Managing Director and Chief Executive Officer, First E & P, Ademola Adeyemi-Bero, described the KEFFESO Stakeholders Forum as a crucial platform for discussing and strategizing solutions to the challenges facing marginalized communities in the Niger Delta.
He reiterated the company’s commitment to fostering meaningful and sustainable development in the region.
The forum, themed “Envisioning Sustainable Community Development in Niger Delta Host Communities: Identifying Challenges and Actualising The PIA Paradigm Shift,” brought together key stakeholders to discuss strategies for maximising the benefits of the Petroleum Industry Act(PIA).