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The Federal Government has rolled out its National Gas Expansion Program (NGEP), which involves the conversion of fuel-powered cars and generators from petrol to gas. Aimed at deepening domestic usage of natural gas in its various forms, the program aligns with the Federal Government’s plan to make gas the first-choice source for cheaper and cleaner energy, and is expected to deliver at least one million vehicle conversions by the end of 2021.
Minister of State for Petroleum Resources H.E. Timipre Sylva oversaw the physical launch of the program, as H.E. President Muhammadu Buhari virtually conducted the rollout. Other dignitaries at the event included Managing Director of the Nigerian National Petroleum Corporation (NNPC) Alhaji Mele Kyari.
The NGEP seeks to deepen the penetration of gas as a cheaper alternative to petrol for powering automobiles. Minister Sylva stated that the induction of gas to power automobiles and other engines represented a step in the right direction, as the NGEP is set to create two million jobs annually for the country. He further stated that under the directives of the President, Nigeria will continue to strengthen the gas value chain, as a vital tool for transforming the economy.
Gas products to be widely pushed for adoption include Compressed Natural Gas (CNG), Liquefied Petroleum Gas (LPG) and Liquefied Natural Gas (LNG). Alhaji Mele Kyari stated that to support the effort of the NGEP, the Corporation will establish designated NNPC retail filling stations offering free petrol-to-gas conversion services for “some cars” to enable vehicles to run on LPG or CNG. There are currently 80 locations in the country capable of fueling the vehicles, and the price of CNG is expected to cost N97 per liter.
Woodside Energy announced a further increase in its stake in a project located offshore Senegal, following its decision to pre-empt another project stake sale from Australia’s FAR to India’s ONGC. Woodside said it has given notice exercising its right to pre-empt the sale by FAR to ONGC Videsh of FAR’s entire participating interest in the Rufisque, Sangomar and Sangomar Deep (RSSD) joint venture. FAR holds a 13.67% interest in the Sangomar exploitation area and a 15% interest in the remaining RSSD evaluation area.
Woodside entered into a Sale and Purchase Agreement with India’s ONGC for its entire interest in the production sharing contract for the RSSD offshore blocks in Senegal in November. Woodside stated that the terms of its acquisition will reflect those of the FAR/ONGC transaction, including payment to FAR of $45 million and reimbursement of FAR’s share of working capital, including any cash calls, from January 2020 to completion.
The terms will also include the entitlement to certain contingent payments capped at $55 million. The acquisition remains subject to approval from the Government of Senegal, FAR shareholders and other customary conditions. The acquisition will be funded from current cash reserves. Woodside CEO Peter Coleman said the acquisition of FAR’s participating interest makes the value proposition for Sangomar even more compelling.
Woodside’s participating interest in the RSSD joint venture will increase to 82% for the Sangomar exploitation area and 90% for the remaining RSSD evaluation area following completion of this acquisition and the Cairn acquisition announced on August 17, assuming no other joint venture participant pre-empts. Woodside will remain the operator.
On December 3, oil futures ended higher, even though major producers agreed to a gradual increase in crude production starting in January, defying earlier expectations for an extension of current output cuts. The U.S. West Texas Intermediate crude futures were down 0.4% at $45.12 a barrel, while Brent crude futures were down 0.2% at $48.14 a barrel.
The U.S. Energy Information Administration’s (EIA) weekly report for December 2 showed a 679,000-barrel draw in U.S. crude oil supplies for the week ending November 27, against a forecast for a 2.36-million-barrel draw. Crude has held on to almost all of its gains, despite short-term headwinds from two slightly bearish reports on U.S. inventory levels this week. Increased barrels in February would also likely weigh on prices, coinciding with the seasonal low point in fuel demand. However, prices rocketed higher since early November, when Pfizer and Moderna confirmed the efficacy and safety of their vaccines for preventing COVID-19, which traders expect to result in a smart rebound in 2021 demand.
The Organization of Petroleum Exporting Countries and allies (OPEC+) agreed to ease production cuts by 500,000 barrels per day (bpd) from January 2021. The increase sees OPEC+ production reduced to 7.2 million bpd, or seven percent of global demand, from January onwards, compared to the current 7.7 million bpd cuts. However, OPEC failed to set a policy for the remaining 11 months of the year, disappointing expectations that OPEC would continue the existing output cuts until at least March. However, the current compromise is an improvement from earlier calls within the organization to raise output by two million barrels per day. OPEC+ will now meet once a month to review, but monthly increases will not exceed 500,000 bpd.