The weekly Market Report is provided by Gladius Commodities of Lagos, Nigeria. Download the full report here. Learn more about Gladius Commodities at www.gladiuscommodities.com.
The Nigerian National Petroleum Corporation (NNPC) has announced that a 100 million standard cubic feet gas capacity facility at Oredo flow station Benin City, Edo State – which will deliver 260,000 metric tons of liquified petroleum gas (LPG) per day – will be commissioned in October 2020.
The facility will result in reduced importation of LPG as it will contribute to 40% of the domestic gas requirement. Alhaji Mele Kyari, Group Managing Director of NNPC the Oredo Integrated Gas Handling Facility project built by the Nigerian Petroleum Development Company (NPDC), has estimated product steam of 330 tons of LPG, 345 tons of industrial-grade propane and 2,600 barrels daily of condensate.
With the facility completed, Alhaji Kyari stated that the country will have sufficient domestic LPG within a short period. Kyari also congratulated the management of the NPDC for the completion of the project, adding that the company is 100% owned by Nigeria and wants to be the number one upstream company in the country, as it is on target to produce 500,000 barrels of petroleum products a day.
The Nigerian government has unveiled the Nigerian Content Development and Monitoring Board (NCDMB) gas hub that sits on a 10.6-hectare piece of land. The Minister of State for Petroleum Resources, H.E. Chief Timipre Sylva unveiled the facility and used the opportunity to carry out the groundbreaking ceremony of Rungas LPG composite cylinder manufacturing plant located inside the gas hub at Polaku community, Bayelsa state.
The Minister said that the project was in line with the efforts of the administration to diversify the Nigerian economy by developing its huge gas resources. According to H.E., achieving LPG penetration across Nigeria will require targeted interventions directed at both the demand and supply end of the LPG value chain. Simbi Wabote, Executive Secretary of NCDMB noted that the board created a 10-year strategic roadmap in 2017 and commenced the implementation in January 2018, to achieve 70% Nigerian content level by 2027.
Australian oil and gas company Woodside blocked Cairn Energy’s stake sale in the $4.2 billion Sangomar development off Senegal to Lukoil, by exercising its pre-emption rights. Lukoil had in July signed an agreement with Cairn Energy to acquire a 40% interest in the Rufisque, Sangomar and Sangomar Deep (RSSD) project offshore Senegal for $300 million in cash. The agreement also provides for potential bonus payments to Cairn Energy Plc of up to $100 million after the start of production from the blocks. In the agreement, Cairn was supposed to exit the project entirely, subject to required joint venture (JV) partner and government of Senegal consents. However, Woodside, the operator of the project, said it had given notice exercising its right to pre-empt the sale by Cairn to Lukoil. Woodside will pay $300 million, plus working capital adjustments, including the reimbursement of Cairn’s development capital expenditure incurred since 1 January, 2020.
Woodside’s acquisition remains subject to the government of Senegal’s approval, Cairn Energy Plc shareholder approval and other customary conditions precedent. The acquisition will be funded from Woodside’s current cash reserves. Woodside’s equity interest in the RSSD JV after completion of the acquisition will increase to approximately 68% and will remain the operator. The $4.2 billion final investment decision on the Sangomar offshore oil field was taken at the start of 2020; the field development has kicked off and is planned to be brought online in 2023 through a Modec-supplied Floating production storage and offloading unit. The recoverable hydrocarbon reserves of the Sangomar field total approximately 500 million barrels of oil equivalent.
On Thursday, 20 August, crude oil prices were lower after an unexpected increase in weekly U.S. jobless claims that suggested continued pressure on local oil demand. The U.S. West Texas Intermediate crude oil futures were down 2.2% at $42.16 a barrel, while Brent was down 0.9% at $44.51 a barrel at 9:15 AM ET (13:15 GMT). The Energy Information Administration’s (EIA) weekly report for Wednesday, 19 August, showed that crude oil inventories declined by 1.6 million barrels for the week ending August 14, against a forecast for a decline of 2.6 million barrels. The EIA’s weekly report on oil stocks on Wednesday had reinforced the impression that U.S. product consumption has stalled, with levels of gasoline and diesel consumption still more than 10% below year-earlier levels and supplies of jet fuel down nearly 50%.
Meanwhile, a Reuters report indicated that the risk of oversupply on the global market is still alive. It cited a document from the Organization of the Petroleum Exporting Countries (OPEC), showing that countries who had signed up to the OPEC+ pact on cutting output had oversupplied by an average of 2.3 million barrels per day (bpd) between May and July. Iraq was the biggest culprit, but Russia and Kazakhstan together overproduced by nearly half a million bpd. Saudi Arabia’s Minister of Energy, H.E. Abdulaziz bin Salman Al Saud, urged partners to comply with a deal to cut output and said global oil demand should recover to pre-pandemic levels as soon as the fourth quarter. He spoke at a meeting of the OPEC+ alliance Joint Ministerial Monitoring Committee to review the compliance with the production cuts pact. However, they concluded that no change from the current schedule on output was necessary.