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NIGERIA
Alhaji Mele Kyari, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), announced this week that the corporation is concluding it’s plans to award the engineering, procurement, and construction (EPC) contracts for the rehabilitation of the 110,000 barrels-a-day (bpd) Kaduna and 125,00 bpd Warri refinery. Kyari noted that the EPC contracts are set to be awarded before the end of July 2021. He further noted that these rehabilitations would not be financed using Federal Government funds, instead the NNPC will secure loans which would be repaid through the rehabilitated facilities cash flow. This same financing strategy is to be applied as the corporation moves to secure the purchase of a 20% stake in the 600,000 bpd Dangote refinery.
He also added that the NNPC is considering the construction of five condensate refineries to provide a cheaper alternative to produce light-end products and will reach the final investment decision on two of these refineries, with a combined 200,000 bpd of condensate refining capacity within the next three months.
Minister of State for Petroleum Resources H.E. Chief Timipre Sylva spoke on the Government’s decision to acquire a 20% stake in all private refineries, during the receipt of an award from “Corruption Reporter” stated that it was important to do so to guarantee energy security and stability in the country. Minister Sylva added that the strategic move was to get involved in the running of these important assets and not leave them completely in the hands of private individuals, which will benefit all Nigerians.
He added that in the absence of strategic security reserves to deploy in the case where a private individual decides not to supply fuel, the government having a stake in such important and high value assets will not allow that to happen. This would protect Nigerian citizens from man-made fuel scarcity which can trigger a nationwide crisis that can destabilize the country according to the Minister.
GABON
Africa-focused oil company VAALCO Energy has signed a contract with offshore drilling firm Borr Drilling for the drilling operations at the Etame block, offshore Gabon. As part of VAALCO’s 2021/2022 drilling campaign, Borr Jack-Up XIV, a Borr Drilling company, will drill two development wells and two appraisal wellbores with options to drill additional wells.
The contract states that the drilling rig can be on location as early as December of 2021, with the exact timing dependent on other commitments related to the rig. George Maxwell, Chief Executive Officer, said: “We continue to work with our joint owners at Etame on our shared goal of executing another successful drilling campaign that can significantly add production and reserves. Success on all four wells contained within the drilling campaign could result in an increase in production of 7,000 to 8,000 gross barrels of oil per day and significant reserve additions of up to 10.2 million barrels of oil for the two appraisal wellbores that would be converted from resources into 2P reserves at year-end 2022. We are excited to get our next drilling campaign underway later this year.”
Maxwell added: “With the benefit of our hedging program, our capital commitments over the next 12 months are expected to be fully funded through our cash flow and cash on hand. Additionally, we have several initiatives underway geared toward maximizing our netbacks. We remain firmly focused on maximizing shareholder returns while we continue to progress our refreshed strategic objectives to deliver accretive growth.”
GLOBAL
On July 1, oil prices rose roughly 2% on indications that Organization of the Petroleum Exporting Countries and its allies (OPEC+) producers could increase output more slowly than expected in coming months, while rising global fuel demand causes supply to tighten. The U.S. West Texas Intermediate crude futures settled at $75.23 a barrel, gaining $1.76, while Brent crude futures settled at $75.84 a barrel, up $1.22. During the session, both benchmarks climbed by more than $2 a barrel, reaching their highest since October 2018.
The U.S. Energy information Administration’s (EIA) weekly report for June 30, showed that crude oil inventories decreased by 6.7 million barrels to 452.3 million barrels for the week ended June 25. U.S. crude oil inventories are about 6% below the five-year average for this time of year.
Crude was lifted by expectations OPEC+ would agree to boost output by another 500,000 barrels or so beginning in August, an increase seen as likely to be easily absorbed by the market amid expectations for rising demand in coming months. However, news reports said a dispute between the United Arab Emirates and Saudi Arabia forced the delay of a meeting of the OPEC+. The delay comes after a meeting of the OPEC+ Joint Ministerial Monitoring Committee failed to conclude on recommendations. The United Arab Emirates blocked a deal at the last minute, causing the alliance to put off its decision on monthly production. The standstill could end with OPEC+ not increasing output at all, which means the alliance would fall back on previous terms that asked for production to remain unchanged until April 2022.
Before the disagreement, OPEC+ appeared to agree in principle to boost output by 400,000 barrels a day each month from August through December. The OPEC+ ministers will regroup on Friday as the current outcome leaves the market in limbo and tarnishes the alliance’s reputation, following last year’s Saudi Arabian-Russian price war.
If OPEC+ cannot resolve the conflict, the possibility of crude surging higher will add to growing inflationary pressures in the global economy. Oil just finished its best half since 2009 as the rebound in energy demand in major economies outpaced the supply response.
The UAE stated it would only give its support to a deal if the baseline for its own cuts was raised considerably, according to delegates. The country’s reductions are measured from a starting point in 2018, which set its maximum capacity at 3.168 million barrels a day. However, expansion projects have since raised that number to about 4 million barrels a day. Reflecting that new capacity in its baseline could allow it to pump hundreds of thousands of barrels a day of extra crude. Observers believe OPEC+ is likely to agree on Friday to restore more production.
