The weekly Market Report is provided by Gladius Commodities of Lagos, Nigeria.
Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC), Alhaji Mele Kyari has reiterated his commitment to sustaining the strategic energy partnership between Nigeria and Spain. The GMD disclosed this while addressing Nigerian and Spanish business leaders on investment opportunities in the Nigerian Oil and Gas Industry, in Madrid. Nigerian President H.E. Muhammadu Buhari had earlier met with Spanish President, H.E. Pedro Sanchez and King of Spain, His Majesty, King Filipe VI at the headquarters of the World Tourism Organization, in Madrid.
President Buhari said Nigeria looked forward to increasing bilateral relations with Spain, even as he signed bilateral agreements and Memorandums of Understandings (MoUs) with the Spanish leader. President Muhammadu Buhari urged investors from Spain to take advantage of the huge potential in Nigeria by investing in the country’s energy economy. Alhaji Kyari described the partnership between Nigeria and Spain as an important one for the NNPC saying “…26% of all LNG produced in Nigeria ends up in Spain and 14% of all crude oil produced in Nigeria ends up in this country. Clearly for us as a business, it is an important market for my company.”
The Minister of State for Petroleum Resources, Chief Timipre Sylva said the Federal Executive Council (FEC) has approved the NNPC to enter into an agreement with ECOWAS for the construction of the Nigeria-Morocco Gas Pipeline. Chief Sylva said that the project was still at the point of the Front-End Engineering Design stage after which cost would be determined. The pipeline would traverse 15 West African countries to Morocco and Spain. The Minister said that the council also approved the construction of a switchgear room and installation of power distribution cables and equipment for the Nigeria oil and gas park in Ogbia, Bayelsa, for the sum of N3.8 billion. He said that the park was to support local manufacturing of components for the oil and gas industry.
Chief Sylva also said that FEC approved various contracts for the construction of an access road with bridges to the Brass Petroleum Product Depot in Inibomoyekiri in Brass Local Government in the sum of N11 billion plus 7.5% VAT. The Nigeria-Morocco Gas Pipeline was proposed in a December 2016 agreement between NNPC and the Moroccan Office National des Hydrocarbures et des Mines (National Board of Hydrocarbons and Mines) (ONHYM). The pipeline would connect Nigerian gas to every coastal country in West Africa (Benin, Togo, Ghana, Cote d’Ivoire, Liberia, Sierra Leone, Guinea, GuineaBissau, Gambia, Senegal, and Mauritania), ending at Tangiers, Morocco, and Cádiz, Spain.
Guinea-Conakry announced the construction of a $300 million phased Liquefied Natural Gas (LNG) provision and a distribution network, which includes a full-service LNG receiving terminal, a liquefaction plant and an export terminal. The mega-project, known as the Guinea LNG Project, will be located at the Port of Kamsar on the northern coast and is being rolled out by the West Africa LNG Group – a purpose-built corporate entity by a development firm, AfricaGlobal Schaffer (AfGS).
The move comes in response to fresh government-led incentives to nationalize mineral-processing value chains so that the fiscus can capitalize on domestic mineral commodities before export. Guinea-Conakry is yet to enter the hydrocarbons exploration and production area, but is ready to reap the rewards of the gas rush at the other end of the supply chain, importing regionally produced LNG as the first major trade development between MSGBC countries. The Guinea LNG Project started in September 2019 after receiving a grant from the US Trade and Development Agency for feasibility studies on the LNG receiving terminal and other phases. The results were commercially viable. The study found that power from imported LNG is up to 25% cheaper than diesel or heavy fuel oils for the country, with far less adverse environmental impacts. With this green light, development is underway, slated to be operational by mid-2023, importing and extracting power from LNG and scalability to meet demand.
GLOBAL ENERGY MARKET
On Thursday June 2, oil rose more than 1% after U.S. crude inventories fell more than expected amid high demand for fuel, shrugging off OPEC+’s agreement to boost crude output to compensate for a drop in Russian production. The U.S. West Texas Intermediate (WTI) crude futures rose $1.61, or 1.4%, to $116.87, while the Brent futures settled $1.32, or 1.1%, higher at $117.61 a barrel. The U.S. Energy Information Administration weekly report showed crude oil inventories fell by 5.068 million barrels for the week ending May 27, compared with analysts’ expectations for a draw of 1.35 million barrels.
U.S. crude oil and fuel stockpiles fell last week, as demand continued to outstrip supply, with commercial crude inventories drawing down even as more strategic reserves entered the market, government data showed Oil prices were supported by the European Union’s sixth package of sanctions against Russia, including an immediate ban on new insurance contracts for ships carrying Russian oil and a six-month phase-out on existing contracts.
The Organization of the Petroleum Exporting Countries and allies including Russia, known as OPEC+, agreed to raise output by about 650,000 barrels per day (bpd) in the next two months rather than the current 432,000 bpd. The market has also seen support from China’s gradual emergence from strict COVID-19 lockdowns. Russian production has fallen by around 1 million bpd following sanctions. The Kremlin says it can reroute oil exports to minimize losses from EU sanctions, but analysts remain skeptical. Oil has mostly marched higher for several weeks as Russian exports have been squeezed by U.S. and EU sanctions against Moscow over its Feb. 24 invasion of Ukraine.