Oil & Energy
Nigeria Faces Crude Production Decline As Oil Price Rises
The international oil benchmark, Brent crude, rose slightly on Thursday on the back of improving trade relations between the United States and China as well as rising tensions in the Middle East.
Brent, against which Nigeria’s oil is priced, gained 30 cents to trade at $66.30 per barrel as of 5.40pm Nigeria’s time.
“We expect oil prices to remain above $60 per barrel, owing to the decision during the OPEC meeting to cut the supply of oil further by 500,000 barrels per day which would take effect from January 2020,” analysts at Lagos-based Financial Derivatives Company Limited said in its latest update.
According to them, oil production is expected to decline in the coming months as the agreement on deeper production cuts kick in.
The FDC analysts, led by Mr Bismarck Rewane, said, “It is unclear whether Nigeria would be included in the deeper cuts. If this happens, and Nigeria is forced to comply, the country’s oil output levels may fall towards 1.7 million bpd.
“Nigeria is more sensitive to production than price. A lower oil output would affect the actualisation of budgeted revenue projections as oil revenue accounts for 31.35 per cent of the total revenue projected.”
The US military carried out air strikes against Iran-backed Katib Hezbollah militia group over the weekend. Angry at the air strikes, protesters stormed the US Embassy in Baghdad on Wednesday, although they withdrew after the United States deployed extra troops.
“We do not see a threat to Iraq’s crude supply at the moment, other than a small wind down over the first few months of 2020 in line with its OPEC cut agreements,” a consultancy, JBC Energy said.
“Nevertheless, heightened tensions in the region involving Iranian-backed forces may introduce a certain geopolitical risk,” they added.
Oil was also boosted by optimism that trade talks between the world’s two largest economies would support demand.
US President Donald Trump said on Tuesday that the US-China Phase 1 trade deal would be signed on January 15 at the White House.
“We may need to see that economic optimism turn into better data before we see more substantial gains,” analysts at OANDA said.
OPEC and its partners, including Russia, agreed to cut output by a further 500,000 bpd from January 1, on top of their previous cut of 1.2 million bpd.
The cuts come as Russia reported record high 2019 oil and gas condensate production of 11.25 million bpd, beating the previous record of 11.16 million bpd set a year earlier, Energy Ministry data showed.
A fall in the US crude inventories last week also supported prices. The US crude stocks fell 7.8 million barrels in the week ended December 27, compared with analysts’ expectations for a decrease of 3.2 million barrels, data from the American Petroleum Institute showed on Tuesday.
Official data from the Energy Information Administration is due on Friday having been delayed for two days by the New Year’s holiday.
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Oil & Energy
Delta Targets 120MW Power Boost, Moves To Cut Reliance On National Grid
The State Commissioner for Works (Rural Roads) and Public Information, Charles Aniagwu, disclosed this at a press conference in Asaba, weekend, noting that the initiative was part of wider reforms aimed at opening up the power sector to private investors.
Aniagwu, who was accompanied by the Executive Assistant to the Governor on New Media, Felix Ofou, said the state was exploring alternative sources of electricity to support businesses, households and communities while reducing pressure on the national grid.
He said the government was particularly interested in exploiting Delta’s abundant natural gas resources for power generation, pointing to the Kwale Free Trade Zone, which is part of the state’s special economic zone, as a major opportunity for investors.
According to him, prospective investors were taken to the zone during the state’s recent economic summit to enable them to assess the availability of gas as a key raw material for electricity generation. ComparePower Rates
The commissioner explained that generating more electricity locally would not only increase supply in Delta but also free up power on the national grid for use by other consumers.
Aniagwu cited the 8.5MW Independent Power Plant located behind the state secretariat in Asaba as an example of what could be achieved through alternative power sources.
He said the facility had enabled the secretariat complex to operate independently of the national grid, thereby making the electricity that would otherwise have been consumed there available to other users.
He added that the planned 120MW partnership with Supply Power would further strengthen the state’s electricity supply capacity and provide a more reliable power base for small and medium-sized enterprises.
Aniagwu said the state government was also intervening in areas traditionally regarded as the responsibility of electricity distribution companies because inadequate power supply could no longer be allowed to constrain economic development. LearnQuantum Physics
He identified the extension of the electricity grid from Abraka towards the Ndokwa axis as one of the interventions being undertaken to connect more communities to electricity.
The commissioner, however, raised concerns over the burden placed on communities that are often required to provide transformers and other electricity infrastructure, only for distribution companies to take over the facilities and subsequently collect electricity bills without adequately accounting for the investments made by the communities.
He said the state would continue to support efforts aimed at energising communities, noting that improved electricity supply would stimulate businesses, create jobs and help tackle social problems associated with unemployment and idleness.
On regulation, Aniagwu said the government was working with the Ministry of Energy and a committee set up to develop an appropriate regulatory framework for the state’s emerging power sector. SwitchEnergy Plans
He said the proposed energy commission would be responsible for regulating new electricity producers, determining appropriate tariffs and overseeing distribution networks.
The commissioner stressed that liberalising the sector required effective regulation to protect consumers and investors, adding that decisions on power distribution infrastructure, including the use of overhead or underground lines, must take into account the peculiarities and safety requirements of each location.
He warned that power expansion without adequate regulation could expose residents to electrocution and other hazards, stressing the need to protect electricity infrastructure while ensuring consumers were not subjected to unfair pricing.
Aniagwu said the state government’s broader objective was to build an efficient and sustainable electricity market driven by private investment and capable of powering businesses, households and communities across Delta State.
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