Market Report: Nigeria Plans to Increase its Gas Reserves to 600 trillion Cubic Feet

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NIGERIA

The Minister of State for Petroleum Resources of Nigeria, H.E. Chief Timipre Sylva announced that the Federal Government of Nigeria plans to increase its gas reserves to 600 trillion cubic feet from its current 206 trillion cubic feet of gas reserves. Minister Sylva stated that achieving this will solidify the country’s potential of becoming a predominantly gas nation. He noted that the country has a lot of gas including the current reserves discovered while looking for oil, so a targeted discovery for gas is bound to yield gas discoveries of over 600 trillion cubic feet of gas. He further noted that the future of the oil and gas industry in Nigeria is still very bright in terms of the energy transition, noting that oil will account for less percentage in the global energy mix, but the demand for it will remain. With the decade of gas, the commodity will remain relevant in the global energy mix and Nigeria is set to benefit from it and a pathway to net-zero carbon emissions which presents investment opportunities given the gas reserves can be commercialized

The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Alhaji Mele Kyari addressed journalists at the launch of the World Bank’s Nigeria Development Update bi-annual report, where he discussed the Corporation’s fuel subsidy intervention. He noted that NNPC averagely spend approximately $587 million (N243 billion) from its total income every month, and this poses a challenge in its ability to fulfil other financial obligations and begs for some reform.

Alhaji Kyari said while a subsidy was introduced to bring cost control and reduce the burden on citizens in nations across the world, it has become a major financial burden. The World Bank Lead Economist in Nigeria, Marco Antonio Hernandez, also urged the Federal Government to remove the fuel subsidy soon. The latest report from NNPC shows $2.4 billion (N1.027 trillion) had been deducted from monies accruing to the three tiers of government in the country between February and October as subsidy payments. A breakdown of the various deductions revealed that payments had increased progressively from $58 million (N24.3 billion) to $147 million (N61.9 billion) between February and April this year. A total sum of $483 million (N200 billion) had been earmarked as subsidy payment for this month, with Kyari stressing that this was not sustainable over the coming years and changes will have to be made.

THE GAMBIA

Australian oil and gas company FAR announced that it had begun drilling at the Bambo-1 exploratory well in Block A2 off the coast of The Gambia. The Bambo-1 well sits around 85km offshore The Gambia, in 930 meters of water depth. FAR said the well had encountered oil traces but would have to be plugged and side-tracked after drilling was halted temporarily due to significant fluid losses. FAR advised that the Bambo-1 well be drilled at 3216m measured depth below the rotary table of a total planned depth of 3450m MDBRT. Oil indications were detected in rock cuttings and hydrocarbons have been interpreted across several intervals in the well from logging whilst drilling data.

Furthermore, wireline logging needs to be completed to confirm the finding. Before side-tracking and provided hole conditions remain stable, FAR is undertaking a wireline logging program in the current wellbore. FAR estimates that the cost to complete the well will increase from a total of $51.4 million to $61.27 million, an increase of $9.87M or $4.935M net to FAR. FAR is the operator of the offshore block with a 50% working interest in the A2 and A5 permits with its joint venture partner, PC Gambia Ltd, a subsidiary of Malaysia’s Petronas, holding the remaining 50%. FAR had said that, if successful, a discovery could result in a standalone development which would be The Gambia’s first oil production.

GLOBAL

On December 9, oil prices fell by handing back some strong gains, with a degree of caution returning as governments undertake measures to slow the spread of the Omicron COVID variant planned to roll out in January. The U.S. West Texas Intermediate crude futures traded 0.7% lower at $71.83 a barrel, while Brent crude futures fell 0.7% to $75.27. at 9:25 AM ET (14:25 GMT). The U.S. Energy Information Administration’s weekly report for December 8 showed a draw of 240,000 barrels for the week ending December 3 against analysts’ forecasts of a 1.705-million-barrel draw.

Oil gains were capped as some governments reimposed restrictive measures to curb omicron’s spread. Additionally, many countries in Europe have already placed mobility constraints on their populations, while in Asia, South Korea has registered record infections while cases remain elevated in Singapore and Australia. The latest U.S. inventory data also weighed on prices. Both crude benchmarks remain almost 8% higher, rebounding after a 16% slump in Brent prices from November 25 to December 1, as reports have indicated that Omicron cases have only shown mild symptoms and drug makers have expressed confidence in their vaccines if boosters are included.

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