Market Report: Gunvor Named Preferred Buyer for Fortuna FLNG

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The weekly Market Report is provided by Gladius Commodities of Lagos, Nigeria. Download the full report here and learn more about Gladius Commodities at


On Tuesday 22nd August, the Minister of State for Petroleum Resources, Dr Ibe Kachikwu speaking at the conference of the National Association of Energy Correspondents of Nigeria (NAEC) held in Lagos, refuted the actual production cost of crude oil in Nigeria as stated by the Nigerian National Petroleum Corporation (NNPC). Kachikwu said the cost of producing a barrel of oil was $32, but the Group General Manager in charge of National Petroleum Investment Management Services (NAPIMS); a subsidiary of NNPC, Dafe Sejebor stated earlier that the cost of crude oil production was reduced from $78 per barrel (August 2015 price) to $23 per barrel. Kachikwu also said the government’s target cost of production is $15, not the $17-$19 stated by Sejebor. Kachikwu also stated that the high cost of production has made the cost of Foreign Direct Investment (FDI) very expensive. However, the Petroleum Industry Governance Bill (PIGB) is being structured to provide for a single regulator in Nigeria’s oil and gas sector. Kachikwu added that “a single regulator provides a one-stop shop for investors; it removes duplicate procedures and its associated costs and therefore, attracts foreign direct investments in the nation’s oil and gas sector“.  The Group Managing Director of the NNPC, Dr Maikanti Baru, made an announcement warning potential buyers of crude oil to beware of the activities of persons not affiliated with the NNPC issuing fraudulent crude oil allocation letters by using names of senior NNPC officials with the intent to defraud. Baru said these activities have created an unnecessary distraction for the staff of the Crude Oil Marketing Division (COMD) of the Corporation who had to deal with a large number of these scam mails regularly. The Group General Manager in charge of the COMD, Mallam Mele Kyari, said the perpetrators send out fake crude oil allocation letters to unsuspecting potential buyers using the names of senior NNPC officials and then request individuals to pay a huge sum of money as commission. Kyari said crude sales are done via electronic means and in real time, not on a piece of paper. Kyari also said in order to deal with this scam, the COMD has made available the email contacts of its top officials, therefore allowing members of the public access to verify such emails. Likewise, the COMD has embarked on the automation of the Direct-Sale-Direct-Purchase (DSDP) crude oil for product exchange scheme to ensure transparency of the process. Kyari said this is to “guarantee an end-to-end access to the DSDP programme online for relevant stakeholders to monitor the process from the point of crude oil allocation to conversion, return of products to the country and distribution by the Nigerian Products Marketing Company (NPMC) to the ultimate transfer of the Naira cash into the Federation Account”. 
On Wednesday 23rd of August, the Shell Petroleum Development Company (SPDC) of Nigeria Limited Joint Venture announced the commencement of production at Gbaran Ubie Phase 2 in Bayelsa State, a key project in the Niger Delta. This has enabled gas production in Nigeria to gain more momentum and would help to boost gas supply to the domestic market and maintain supply to the export market. Gbaran-Ubie Phase 2 is expected in 2019 with approximately 175,000 barrels of oil equivalent (kboe) per day. A breakdown of this peak period production is approximately 864 million standard cubic feet of gas per day (MMscf/d) and 26,000 barrels of condensate per day. SPDC is the operator of a joint venture (the SPDC JV) between the NNPC, SPDC, Total E&P Nigeria Ltd and ENI subsidiary Nigerian Agip Oil Company Limited.

Equatorial Guinea

On Monday 21st of August, the Ministry of Mines and Hydrocarbons for the Republic of Equatorial Guinea, Ophir Equatorial Guinea (Block R) Ltd, OneLNG SA and La Compania Nacional De Petroleos De Guinea Ecuatorial (GEPetrol) nominated Gunvor Group Ltd (Gunvor) as its preferred LNG Buyer for offtake from the Fortuna FLNG project. All parties have agreed on the principal commercial terms subject to finalising a Sale and Purchase Agreement (SPA) for the offtake ahead of the Final Investment Decision (FID) on the Fortuna FLNG project. Gunvor is committed to taking the full contract capacity of the Gandria FLNG vessel of 2.2 metric tonnes per annum (MMTPA), which will be purchased on a Brent-linked, Free on Board (FOB) basis for a 10-year term. The contract structure allows flexibility for up to 1.1 MMTPA of the Fortuna capacity to be marketed on an alternate basis. Therefore the agreement gives the Fortuna partners and the State of Equatorial Guinea, the potential to sell volumes to higher priced gas markets in Africa and beyond, whilst retaining a share in the profits. His Excellency, Gabriel Mbaga Obiang Lima, Minister of Mines and Hydrocarbons, stated that “The partnership with Gunvor also paves the way for the government’s objective to deliver important projects that monetize our gas, promotes local content and brings world-class petroleum technology to Equatorial Guinea.” To further Equatorial Guinea’s leadership position in Africa as an LNG exporter, the Fortuna project aims to become the first choice supplier of LNG for the LNG to Africa initiative. With the identification of a preferred LNG Buyer now achieved, the last significant milestone prior to the FID of the Fortuna FLNG project is the completion of the project funding, with FID remaining on track for 2017.


On Thursday 24th of August, oil prices crept lower, as rising U.S. crude production dampened some of the optimism that had accompanied eight straight weeks of declines in U.S. domestic stockpiles. The U.S. West Texas Intermediate crude for October contract was down 11 cents at $48.30 a barrel at 3:10 AM ET (07:10GMT), while the ICE Futures Exchange in London Brent oil for October delivery dipped 8 cents at $52.49 a barrel. The U.S. Energy Information Administration (EIA) weekly report for Wednesday 23rd August showed a fall in crude oil inventories by 3.3 million barrels in the week ending August 18, being the eighth weekly decline in a row.
Oil prices have been under pressure in recent weeks as concern over rising U.S. shale output continued. OPEC/non-OPEC producers extended a deal to cut 1.8 million barrels per day (bpd) in supply until March 2018. Thus far, the production cut agreement has had little impact on global inventory levels as U.S. shale output and supply from producers that are exempt from the OPEC deal (Libya and Nigeria) continues to increase.

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