After months of stalling because of Covid restrictions and OPEC cuts, as well as significant international criticism over misplaced funds, Nigeria appears to be optimistic about the future of its faltering oil industry in a time when few others are.
The Nigerian government announced this week that it expects the country to produce 1.88 million barrels per day of crude oil in 2022, assuming a benchmark price of $57 per barrel. In the 2022-2024 Medium-Term Expenditure Framework (MTEF), just approved by the senate, the government also predicted GDP growth of 4.2 percent and inflation of 13 percent in 2022. Inflation in Nigeria decreased to 17.01 percent in August, in a country that has continued to struggle with a double-digit inflation rate since 2016.
This is a highly optimistic plan seeing as Nigeria, Africa’s largest economy, was hit particularly hard by the Covid-19 pandemic, from which it is still recovering. The Nigerian economy contracted 1.92 percent in 2020, after a growth of 2.92 percent in 2019. However, the contraction was lower than the World bank estimate of a 4 percent contraction or the IMF estimate of 3.2 percent.
The hopeful budget approval follows President Muhammadu Buhari’s signing of the Petroleum Industry Bill into law in August. This comes after two long decades of delays in approving the PIB, at a time when much of the rest of the world is moving away from fossil fuel strategies towards green policies with a focus on renewable energy. Plans to stop the sale of diesel and petroleum vehicles as well as targets for net zero-carbon emissions by 2050, across Europe and North America, make the new Petroleum Industry Act (PIA) appear somewhat outdated.
However, advocates for the Bill believe that the African continent will continue to rely on oil production for fuel well into the next decade. Related: U.S. Oil Rig CThe President stated in August at the inauguration of the Steering Committee and PIA Implementation Group that Nigeria may have lost as much as $50 billion worth of investment because of years of delays in enacting the PIA, as investors were uncertain of Nigeria’s oil and gas outlook.
There has been significant criticism over Nigeria’s failure to establish a better regulatory environment for its oil and gas industry until now, which would have increased investor interest in the region. This is particularly pertinent at a time when other African states are beginning to develop their oil industries, and further competition comes from new emerging markets such as Guyana and Suriname.
Critics also point towards the $14 billion in funds provided to develop the Niger Delta region, the heart of the Nigerian oil industry, that was ill spent between 2001 and 2019. The funds were expected to support projects to “offer a lasting solution to the socio-economic difficulties of the Niger Delta Region and to facilitate the rapid and sustainable development of the Niger Delta into a region that is economically prosperous, socially stable, ecologically regenerative and politically peaceful.”
The inability to establish an adequate regulatory environment for foreign oil and gas investors for so long, as well as government’s failure to use funds to develop its oil-rich Delta Niger region, have put the country at the bottom of the list for many investors now attracted to up-and-coming oil regions without such a difficult past in the sector.
Not to forget, Nigeria is not out of the woods, still battling with reduced OPEC+ oil quotas and the lack of investment that came alongside them. Angola, Nigeria, and Kazakhstan have failed to increase their oil production in line with the OPEC+ easing of cuts this August, primarily due to years of underinvestment in the oil-rich nations’ energy industries.
In addition, concerns around Covid-19 restrictions continue to plague Nigeria’s oil industry, as the Delta region faces yet another lockdown if cases continue to rise. The challenges of 2020 could be seen all over again should Rivers State go into lockdown, with oil firms facing difficulties in transporting personnel to and from oil fields, as well as restrictions affecting pipeline and facilities maintenance, as was the case last year.
But the Nigerian government and those left in Nigeria’s oil industry are hopeful that ongoing demand from the African continent and increasing demand from Asia for oil and gas could help boost the country’s appeal following the enactment of the PIA. With 37 billion barrels of proven oil reserves, ranking 10th in the world, Nigeria has always had significant potential to become oil superstar but has until now lacked the regulatory framework to make this dream a reality until now.
So, the question is whether the “landmark” PIA will really be as ground-breaking for Nigeria’s oil industry as once hoped. The Nigerian government holds out hope for the new Act attracting greater foreign investment in the oil-rich nation, but time is yet to tell whether oil majors are willing to take a gamble on the African state so late in the game.
Other companies that look to capitalize on higher on prices this year:
Transocean (NYSE:RIG) After having missed on earnings for a number of quarters in a row, this offshore rig giant is seeing opportunities left and right as oil majors are once again betting big on offshore oil & gas production. The increasing market for offshore operations couldn’t come at a better time for Transocean, which remains one of the more speculative plays in its sector.
At the moment, the company is looking to expand its footprint in the Gulf of Mexico. Earlier this month, it landed a $252 million firm contract for its new, ultra-deepwater drillship, the Deepwater Atlas. Transocean’s client, BOE Exploration & Production LLC looks to commence operations at the Shenandoah project in the 3rd quarter of 2022.
Suncor Energy (NYSE:SU; TSE:SU): Suncor has been in the news this week as it decided to shut down some of its oil sands production due to a mechanical disruption. Syncrude, majority owned by Suncor, produces some 275,000 bpd of crude oil from bitumen at its upgrader in Alberta, according to the latest data, which was for January to May. Despite the disruption, Suncor remains one of the most attractive oil plays in Canada, which some see as the best contrarian oil bets out there.
Suncor’s relatively low extraction costs per barrel, coupled with strict ESG standards and long lasting reserves make the company interesting for long-term oil investors.
And Suncor isn’t just focusing on its flagship Syncrude project. Two weeks ago, the company announced the plan to extend the life of the Terra Nova FPSO. Together with Murphy Oil and Cenovus, and with support from the local government, Suncor looks to extend the production life of the Terra Nova FPSO by around 10 years.
Royal Dutch Shell (NYSE:RDS.A) Shell has been the target of activist investors and environmentalists alike in 2021, and the Dutch court decision that forces Shell to reduce carbon intensity has accelerated the company’s plans to decarbonize.
This week, Royal Dutch Shell announced that it would sell off its Permian operations to ConocoPhillips for a total sum of $9.5 billion. Instead of reinvesting the entire sum in new energy projects, Shell decided to distribute $7 billion to shareholders. The Anglo-Dutch company is ramping up renewable investments around the planet in a bid to become carbon neutral by 2050. Shell’s latest investments. Its most recent bets on renewables include solar PV installations in Brazil and a major biofuel refinery in Rotterdam, the Netherlands.
By: Felicity Bradstock
Bradstock writes from Oilprice.com
Illegal Bunkering: NSCDC Returns Diverted 50,000 Litres PMS
The Nigeria Security and Civil Defence Corps (NCDC) says it has returned the 50,000 litres of premium motor spirits hitherto diverted to neighbouring Imo State, back to the original intended destination.
Recall that NSCDC in Rivers State last week announced the arrest of two suspects over attempted diversion of petroleum products to neighbouring states without appropriate licence.
Preliminary investigation, according to NSCDC, showed that the product’s waybill, which was loaded at Conoil Depot in Port Harcourt, stated that the product should be delivered at Omo Wealth in Ikwerre Local Government, but the suspects claimed the waybill was written in error, hence the diversion of the product to Imo State.
Speaking, Rivers State Commandant of NSCDC, Abu Abdu Tambuwal, said the Corps has returned the product to Omo Wealth Filling Station at Ikwerre Local Government Area of the State, as indicated in the waybill when the product was apprehended while being diverted.
Tambuwal stated that the overall cooperation of every stakeholder was very pertinent if illegal oil bunkering activities would be put to a stop.
“The diverted 50,000 litres of Premium Motor Spirit impounded by the anti-vandal border patrol team has been returned to Omo Wealth Filling Station, at Ikwerre Local Government Area of Rivers State as indicated on the Waybill at the point of arrest.
“The community dwellers expressed their joy as such pragmatic step taken would prevent long queue of vehicles at the filing stations as it is being experienced currently in some States of the Federation”, he said.
Tambuwal also stated that the Command’s anti-vandal squad has been further directed to increase its operational efficiency by arresting those dealing illegally in petroleum products on waterways, border areas and illegal refineries.
“The Anti-vandal Squad has been ordered to carry out massive arrests and dismantle oil bunkering dump sites across the State and this we will do without compromise or prejudice.
“Therefore, my candid advice is that all perpetrators of illegal dealings in petroleum products must engage themselves in legitimate businesses or risk being arrested and prosecuted according to the provisions of the laws of the federation”, he concluded.
Schneider Electric Plans Managed Power Services
Schneider Electric has identified Managed Power Services as the next big thing in the power sector.
This is coming at a time when the leader in energy management automation encouraged its partners, professionals and end users to take advantage of the next wave of growth opportunity in the power sector.
Speaking at a recent media parley, Oluwaseun Oloyede, Secure Power Leader for Anglophone West Africa, APC by Schneider Electric, emphasised the need for its partners and IT professionals to be well positioned in order to take advantage of this growth opportunity.
He added that it was normal to see innovations in the sector because “if a business isn’t growing, its likely on its way to extinction”, he said, adding that IT solution providers require continuous investment in new technology and service opportunities to stay on a growth path.
“Moreso, research has shown that edge computing delivers a robust opportunity for IT solution providers with projected spending to reach $250.6 billion by 2024.
“With IT professionals looking for help on monitoring and management of these sites, there are only 27% of Managed Service Providers (MSPs) who offer managed power services today. As such, now is the time for solution providers to expand their portfolio,” Oluwaseun stated.
He added that seasoned MSPs know that adding a new service practice requires thoughtful planning, execution, and reliable vendor partnerships. Between implementing platforms and tools, training staff, and identifying clients for the services, building a new practice takes as many as 3,500 non-revenue-generating staff hours.
MPS represent a new opportunity for service providers and partners to address asset management of UPS’s and physical infrastructure, such as monitoring of alarms and resolving potential faults increases reliability across the asset’s life cycle.
“Based on our calculations, the addition of Managed Power Services adds 1.5-times additional revenue over the lifecycle of the asset compared to traditional hardware.
Firm Targets Take Over Of Moribund NNPC Pipelines
An indigenous Engineering Procurement and Contract (EPC) company, Oilserv Limited, says it plans to bid for all moribund Nigerian National Petroleum Company (NNPC) Limited pipeline distribution systems to ease products distribution chain.
Group Chairman, Oilserv Limited, Mr Emeka Okwuosa told newsmen on the sidelines of the just concluded Offshore Technology Conference (OTC) in Houston, Texas, United States.
He said that Frazimex Engineering Ltd., a subsidiary of Oilserv, had submitted a tender to NNPC in this regard.
Oilserv Group is the company handling the $2.8 billion Ajaokuta-Kaduna-Kano gas pipeline project.
“As we speak today, one of our companies is working closely with NNPC.
“There is a tender going on how to correct the moribund distribution systems for petroleum products distribution. We see them all over Nigeria. They are not functional.
“But we want to buy them over, rebuild them and make energy available, instead of having people transport petrol and diesel from Port Harcourt to Makurdi, for example. Does it make any sense?
“There is a pipeline built many years ago but, really, it is not there anymore because it has been damaged and not maintained. We are also addressing that. We’ve also gone into renewables,” he said.
Okwuosa said that the company was working to build gas networks, built locally, and then operate.
“That means that we are already trying to address the issue of energy availability within our group,” he said.
On agriculture, Okwuosa, said that one of the Oilserv subsidiaries, Ekcel Farms Ltd. was involved in agriculture and products processing.
He said: “We have our primary feeds – cassava and tomato. We are trying to develop cassava at the moment.
“Part of the reasons for this is not to only provide for the teeming population of Nigeria but also provide products or feeds that can be used in pharmaceuticals, in the other food industries.
“What that means is that it helps us to balance our footprints in the energy industry because one of the aspects of our foray into agriculture is to be able to generate power that we use from agriculture by using biomass and biogas, taking the waste and then converting it to energy.
“That again helps us to address our carbon footprints as a country.
“Having said that, if you look at the energy sector around the world, particularly oil and gas, you will see a lot of discussions going on,” he said.
On energy transition strategy, the Oilserv boss said the company has a clear energy transition strategy.
“Apart from developing it, we sensitise people about it and review it regularly.
“We’ve also gone into renewables. We are not, at this point, developed in renewables. But we have a partnership with a German company to address the renewables, solar or whatever.
“We are more concerned about how we can utilise the principle of both green and blue hydrogen.
“We want to be able to generate power without having to damage the environment. So, we are already moving into that sector.
“But going into the new phase of energy delivery takes a lot of time to plan, a lot of investments. And like I said, if you look at Nigeria, we also have some issues,” he said.
Okwuosa said most of the countries in the world that have developed and still developing have frameworks to encourage these developments.
“By way of tax rebate, addressing price issues to make sure that entry points, in terms of costs for these alternatives, will not be too high.
“Unfortunately, we don’t see any articulated situation like that in Nigeria. What that means is that there is really no encouragement for any investor to come into that as a business because he cannot compete today in terms of pricing with fossil fuels.
“But we cannot give up, it’s about engaging the government, it’s about pushing because we have no choice. If we don’t, the train will keep moving and we’ll get to a point where our oil is there but we cannot produce.
“It is our duty as a country to make sure we can refine the crude oil we use. We can do that. Nigeria’s utilisation is high enough to actually absorb about a third of our production “ he said.
Bridging infrastructure deficit, Okwuosa, said that the Federal Government had done quite a lot of things for which it has not been given credit.
“When President Muhammadu Buhari came into power, the AKK pipeline was already under discussion since 2009, it was never moved anywhere.
“But within three months of coming into power, Buhari brought the issue up and said it must be done.
“Buhari government gives us the support to navigate that process, especially the funding. The government has been determined to ensure the Nigeria Gas Master Plan is fully executed because of its impact.
“That is why we are talking about the pipeline to Ajaokuta, which is the last interlink. So, I give them credit for that.
“There are quite a number of programmes the NNPC has initiated, like the seven gas programmes we have. The Train 7 NLNG is ongoing as we speak.
“A lot has happened. That is why I keep saying that gas is the mainstay of our transition. If we get gas right, it would be easier for us to transition into renewables.
“The Nigerian government has done a lot. But, as a developing country, you know we are struggling with so many things for now.
“It is about focusing on what matters the most. The government has done a lot, but there is room for more. It needs to make it possible that there is an enabling environment for investors who are interested in the renewables,” he said.
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