Oil & Energy

How Much Lower Could Oil Prices Fall?

Published

2 weeks ago

May 15, 2023

On Friday, April 7th, Brent crude closed at over $85 per barrel. That was a few days after OPEC+ had announced it would reduce its production by an additional 1.16 million barrels daily.
Fast forward a month, and Brent is almost $10 cheaper. Despite the promised supply cut, despite a production suspension in Kurdistan, and despite China’s demand growth, prices have fallen. And they may have further to fall. For a while, at least.
The big reason for the price drop we witnessed over the past four weeks was economic sentiment, especially economic sentiment in the United States.
Analysts loyal to the Federal Government are beginning to run out of euphemisms for “recession.” The media are getting bolder with their use of the word. No wonder oil prices are down.
There are plenty of causes for concern. Diesel demand is down after months of worry that the U.S. is facing a diesel shortage because demand is exceeding supply.
Well, that’s one thing people need not worry about anymore. Because diesel demand is down by a lot, and that spells bigger trouble: call it a slowdown, call it a correction, but what it comes down to is what one analyst called a recession.
“If you were looking at it in the closet, and not knowing what the wider economy was doing, you would say we’re seeing some sort of an industrial recession”, Tom Kloza from the Oil Price Information Service told the FT in comments on the diesel demand situation.
Inflation, meanwhile, is in decline but still a lot higher than the Fed’s comfort level at 5% for April, prompting yet another rate hike last week that did nothing for oil bulls.
That was because of the traditionally inverse relationship between interest rates and oil demand as the former boost the dollar, making oil more expensive in absolute terms.
At the same time, the manufacturing sector has been shrinking for six consecutive months, according to the Institute for Supply Management.
It shrank yet again in April, although S&P Global estimated an expansion in the sector for last month. It begins to become clear why it is so hard to call a recession in the U.S. for now.
Based on the latest oil price trends, there is definitely a recession, whatever the actual data says. The good thing is that this recession seems to be, at least partly, in the minds of oil traders rather than in the actual U.S. economy, where the service sector is growing despite manufacturing’s shrinking. Not all is lost until another bank collapses with a bang.
The banking sector tremors of recent weeks have also had a lot to do with oil prices: fears of a banking meltdown have rippled into fears of a broader meltdown, and that has translated into a fear of oil demand destruction and, consequently, a selloff. But here’s the thing. The supply situation may be about to change.
China’s oil demand topped 15 million barrels daily in March, breaking a record. U.S. crude oil inventories are now below the five-year average for this time of the year after a long streak of weekly declines.
And, according to Reuters’ John Kemp and historical patterns, U.S. oil and gas production growth may slow down significantly over the next months.
In a column earlier this month, Kemp noted the several months’ lag between price movements and drilling activity in the U.S., which means that it takes several months for drilling to expand in any noticeable way after a sustained rally in prices.
By the same token, Kemp noted, it takes several months between a sustained price decline and the consequent decline in drilling activity.
The thing is that U.S. production was already in decline in February, according to the latest official data. The total was nearly 1.2 million bpd higher than the average for February 2022, but it was also more than 80,000 bpd lower than the average for January 2023.
That’s not a whole lot when you’ve got a total of 12.5 million barrels daily, but it is a very different development from what the Energy Information Administration had predicted for February: another output rise to a record high. The EIA is now predicting that the record high will be hit in March.
If the EIA guesses right, prices could go further down, especially if demand for fuels remains subdued now that driving season is beginning. If it guesses wrong, however, oil will likely gather steam again unless another flare-up in recession worry occurs, of course.
“The selloff was far greater than what market balances are showing — namely lower inventories with the prospect of inventory draws as the northern hemisphere’s summer unfolds,” Citi’s commodity chief Edward Morse said, as quoted by Bloomberg, earlier this month.
In other words, price movements in oil are not in sync with oil’s fundamentals, and a correction may be only a matter of time.
However, as clearly shown by the price decline from the past month, expectations about fundamentals are at least as important, if not more important, than the fundamentals themselves. All it could take is one more bank domino piece falling.
Slav reports for Oilprice.com

Oil & Energy

NPDC, Belema Oil Worst Gas Flaring Offenders In Feb – NNPC

Published

1 week ago

May 22, 2023

The Tide

Indigenous company, Belema Oil, Seplat and Nigerian Petroleum Development Company, an arm of the Nigerian National Petroleum Company (NNPC) were the worst offenders in the oil and gas sector in gas flaring in February, 2023.
The three companies flared 100 per cent of their gas output, according to gas utilisation data released by the NNPC.
They were followed by Agip Energy and Natural Resources, which flared 95.93 per cent of its total gas output, and First Exploration and Production Limited, which flared 95 per cent of its total gas output.
The gas utilisation data showed that oil and gas companies operating in Nigeria produced 149.263 billion standard cubic feet (SCF) of gas in February, a 6.72 per cent drop, compared with 160.013 billion SCF produced in January.
A breakdown of the total gas output for February 2023 showed that associated gas stood at 107.702 billion SCF, while non-associated gas output stood at 41.561 billion SCF.
According to the NNPC, 93.52 per cent of the gas produced was utilised, while 6.48 per cent was flared.
Specifically, 139.589 billion SCF of gas was utilised in February 2023, dropping by 7.25 per cent when compared with 150.493 billion SCF of gas utilised in the previous month, while 9.674 billion SCF of gas was flared, up by 1.62 per cent, from 9.520 billion SCF flared in January 2023.
The NNPC stated that 9.084 billion SCF of gas was used as fuel gas; 45.977 billion SCF was allocated to the Nigerian Liquefied Natural Gas, NLNG; while 5.247 billion SCF was allocated to the Escravos Gas to Liquid, EGTL, plant.
In addition, 2.353 billion SCF of gas was used for Natural Gas Liquids/Liquefied Petroleum Gas, LPG; domestic gas sales by the Nigerian Gas Company and others gulped 23.222 billion SCF, while 53.705 billion SCF was used by gas re-injection and gas lift make-up.

In the Joint Venture segment, Mobil Nigeria recorded the highest gas output, with 25.668 billion SCF, followed by Shell with 24.203 billion SCF; TotalEnergies produced 23.481 billion SCF of gas; while Chevron recorded gas output of 20.683 billion SCF.

However, despite producing the highest quantity of gas in the month under review, Mobil flared 6.26 per cent of its total gas output; Shell flared 4.19 per cent of its total output; Total Energies flared 2.37 per cent of its total output, while Chevron flared 9.03 per cent of its gas output.

In the Production Sharing Contract (PSC) segment, Star Deepwater – Agbami Floating Production, Storage and Offloading (FPSO) produced 12.744 billion SCF of gas, out of which 1.06 per cent was flared; while TotalEnergies Upstream Nigeria’s Akpo FPSO produced 11.975 billion SCF of gas and flared 1.22 per cent of the total.

Oil & Energy

STRYDE To Deploy Seismic Receiver Nodes Onshore Nigeria

Published

1 week ago

May 22, 2023

The Tide

Seismic acquisition technology and solutions provider, STRYDE, has been awarded a contract worth over $1 million for the supply of 10,000 seismic receiver nodes and its “Nimble” node receiver system for an onshore oil and gas project in Nigeria.
STRYDE’s seismic sensor technology will be utilised on an upcoming 3D seismic survey conducted by Nigerian geoscience solutions provider, ATO Geophysical Limited, as part of an onshore oil and gas exploration project in Nigeria.
The seismic survey is due to begin in Q2 2023 and will be the first commercial deployment of STRYDE’s Nimble System in the country as it continues its international expansion within the energy sector.
STRYDE, who are the creators of the world’s smallest and lightest seismic node, will enable ATO to deliver high-density seismic data for the exploration of new reservoir locations in the grasslands and marshlands of Nigeria, for a local oil and gas operator.
Until recently, the country has typically relied on bulky, expensive, and complex cabled geophone receiver systems to acquire seismic data, which traditionally incurs significantly high CAPEX and OPEX costs, more exposure to HSE risk, higher technical downtime, and inefficiencies in the seismic acquisition programme.
With the introduction of cable-less receiver technology like STRYDE’s miniature sensor, geophysical providers and operators can now acquire high-quality data much more efficiently and with less cost, risk, and environmental footprint.
The supply of its node management solution will enable further efficiencies on the survey to be unlocked by allowing ATO to rotate up to 2,160 nodes per day, enabled by the system’s unique capability to simultaneously charge and harvest data from 360 nodes in under four hours.
This system is also equipped with STRYDE’s state-of-the-art software for efficient seismic survey field operations, data harvesting, and quality assurance, allowing ATO to produce processing-ready seismic data fast than ever before.
Head of Business Development, MENA, at STRYDE, Sam Moharir, commented on the transition to nodal technology: “ATO Geophysical Limited needed to have access to cost-effective technology that could also overcome challenges associated with the terrain they were due to operate in’’.

“With cabled systems traditionally being more physically challenging to deploy in remote, large, and complex terrain, STRYDE Nodes™ offer a more efficient and practical solution for improving seismic survey efficiencies through the elimination of restrictive and heavy cabled geophones”.

The Managing Director of ATO Geophysical Limited, Thomas Ajewole, said: “As a leading seismic data acquisition expert in Nigeria, we look forward to partnering on our first project with STRYDE and capitalizing on the benefits of its technology by providing our customers with a more efficient and cost-effective solution to onshore seismic data acquisition.

“As we continue to support the exploration of new oil and gas projects in the region, STRYDE Nodes present an exciting opportunity to acquire high-resolution seismic data required to image the subsurface and pinpoint new reservoir development opportunities for our customers”.

STRYDE’s CEO, Mike Popham, said: “STRYDE is excited to be enabling our first seismic surveys in Nigeria with ATO. This builds upon our successful history of seismic projects across Africa, including Zimbabwe, Namibia, and Kenya.

“We’re proud to see our nodes increasingly being utilized around the world for a range of industrial applications, replacing expensive, cumbersome, and impractical alternative systems with our dynamic technology”.

In addition to providing seismic solutions in the oil and gas market, STRYDE also supports new energy industries including Geothermal, CCUS, Hydrogen, and Mining, providing an affordable solution to a typically expensive phase of any exploration project.

Oil & Energy

NNPCL Clears $3.8bn JV Cash-Call Arrears Owed IOCs

Published

1 week ago

May 22, 2023

The Tide

The Nigerian National Petroleum Company Limited (NNPCL) says it has cleared the outstanding $3.8 billion joint venture cash-call debts owed to International Oil Companies (IOCs) operating in the country.
NNPCL’s Executive Vice President, Upstream, Adokiye Tombomieye, disclosed this as he lamented that inadequate JV cash call funds was stunting the growth of the oil and gas industry.
Tombomieye made the disclosure while speaking during a panel session on upstream opportunities at the fourth edition of the Nigerian Oil and Gas Opportunity Fair (NOGOF) 2023, organised by the Nigerian Content Development and Monitoring Board (NCDMB) in Yenagoa, Bayelsa State.
Represented by the Chief Upstream Investment Officer, NNPCL, Mr Bala Wunti, he disclosed that the country’s oil production has maintained significant increase following measures to tackle crude oil theft.
Tombomieye warned that the NNPCL would no longer deal with portfolio companies, and urged investors to avoid acting as middlemen.
He disclosed that the company had leveraged its financial autonomy derived from the Petroleum Industry Act (PIA) to work out and execute a payment plan for the cash call debt while balancing its energy security obligations to the nation.
“This, by no small means, re-energised the JVs to recalibrate their focus towards sustaining production and increasing their spending to procure the necessary services required to do so”, the NNPCL Chief said.
Also speaking on the panel, the Managing Director of TotalEnergies EP Nigeria Limited, Mr Mike Sangster, announced that the final investment decision on the company’s upcoming Ubeta gas project would be taken in the first quarter of 2024.
Sangster, represented by the Executive Director, JV Assets, TotalEnergies, Mr. Obi Imemba, said Ubeta was its last discovered but undeveloped well in the Oil Mining Lease, OML, 58.