Market Report: CNOOC to Invest $30 million in Oil Exploration Activities in Gabon and Senegal

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The weekly Market Report is provided by Gladius Commodities of Lagos, Nigeria. Learn more about Gladius Commodities at www.gladiuscommodities.com.  

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GABON and SENEGAL  

China’s local subsidiary China National Offshore Oil Corporation (CNOOC), unveiled its ambition to invest $30 million in local oil exploration after taking over Shell’s last assets in Gabon in 2019. In an announcement published in the press on Tuesday 22 June, CNOOC International announced that it was looking for investors to drill oil wells in Gabon and Senegal. CNOOC International invited interested parties with technical, financial and operational capabilities to participate in its international public prequalification process for tenders for its integrated drilling services in support of exploration drilling in Gabon and Senegal, or both we learn from the announcement.  

Integrated drilling services include directional drilling, drilling fluids, cement, wireframe and mud trailing. All suppliers interested in participating in this prequalification process must notify CNOOC by written notification no later than June 28, 2021. In Gabon, CNOOC inherited the assets of the Anglo-Dutch company Shell two years ago, recalls Le Nouveau Gabon. On 26 November 2019, through its African subsidiary, CNOOC Africa Holding, the Chinese group and the Gabonese State initialed two amendments to the exploration and production sharing contracts that previously linked Shell and its partner CNOOC International to the Gabonese side. At that time, Chick Vitalis, the boss of CNOOC Africa Holding, announced that his company intended to invest at least $30 million in the field of hydrocarbon research in Gabon. 

NIGERIA 

The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Alhaji Kyari, attended the virtual Citizens Energy Congress, titled “Securing a Sustainable Future Energy System through Strategy, Collaboration and Innovation,” and spoke on the effect of rising oil prices. He disclosed that the Corporation now will pay higher subsidies monthly to keep the price of gasoline low in the country. Alhaji Kyari also stated that the corporation would be in favor of the restoration of around 5.8 million barrels a day that the Organization of Petroleum Exporting Countries (OPEC) still has offline since the COVID-19 pandemic, due to the curbs in production quota imposed by the organization. He further noted that he does not see the country having any difficulty in agreeing to add additional barrels of oil per day to cushion the effect of high oil prices.  

Nigeria is producing well below its capacity, according to Kyari, with the country producing up to 2.4 million barrels of oil per day for both oil and condensates before the curb in production. H.E. Chief Timipre Sylva, while discussing at a stakeholder meeting organized by the NNPC called on the Petroleum Equalization Fund, Petroleum Product Pricing Regulatory Agency and the Economic and Financial Crimes Commission to form synergies and tackle rising cases of cross border smuggling of Premium Motor Spirits (PMS).  

The Minister stated that the cross-border smuggling of PMS means that daily consumption being reported is much higher than it should be as volumes are being taken out of the country, which is causing a negative impact on the economy. He further noted that if the country is to implement deregulation, it would not be fruitful without knowing the actual consumption of PMS in the country. He however noted that with all the organizations working together, smuggling can be effectively curbed. 

GLOBAL 

On June 24, crude oil prices rose slightly as positive sentiment over an infrastructure deal announced by the Biden administration helped overcome concerns about additional supply being announced at next week’s meeting of top producers. The U.S. West Texas Intermediate crude futures rose as high as $74.25, a peak not seen since October 2018, while Brent crude futures finished the session at $75.56, up 37 cents, after scaling $76.02 in the previous session, also a peak since October 2018.  

The U.S. Energy Information Administration’s weekly report showed a drop in crude stockpiles of 7.6 million barrels for the week ended June 18, the fifth consecutive week that stocks have fallen, the longest run since January 2021. Earlier on June 24, oil was weighed down by expectations that the Organization of Petroleum Exporting Countries and allies (OPEC+), was considering increasing supply at its meeting next week to curb the rapid rise in crude prices.  

Saudi Energy Minister, H.E. Prince Abdulaziz bin Salman, the de facto leader of the group, was reported Thursday saying that “we have a role in taming and containing inflation, by making sure that this market doesn’t get out of hand.” This follows reports out of Russia earlier this week suggesting it, one of the most influential members of the group, was considering proposing an increase in oil output at next week’s meeting.  

Oil markets have soared this year, with both benchmarks more than 40% higher year-to-date, on hopes of a quick return to peak demand as COVID-19 passes as well as OPEC+’s cautious husbandry of global supply. OPEC+ is scheduled to meet toward the end of next week to discuss production quotas for August, and possibly beyond. OPEC+ has been steadily increasing output as the global economy recovers from the ravages caused by the COVID-19 pandemic but is still withholding more than 5 million barrels a day of production from the market. On June 24, in annual talks with OPEC+, India’s oil minister called for affordable energy, warning about the impact of rising oil prices on consumers. India is the third largest consuming country in the world, and these comments will add pressure on the producers ahead of the meeting. 

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