Power
January 25, 2022 No Comments

More FIDs in LNG projects amid rise in gas price

There are indications that about 79 million tonnes per annum (MMTPA) of additional Liquefied Natural Gas will see the final investment decision (FID) this year.

While Africa may not witness significant growth in LNG projects in the course of the year, projections by a global research body, Wood Mackenzie for the year 2022, noted that 33 MMTPA volume of FIDs is expected in North America, 16 MMTPA in Qatar, and 20 MMTPA in Russia.

Wood Mackenzie noted that LNG projects would continue seeing plenty of momentum as LNG prices are expected to be structurally higher and oil indexation on the rise.

The analyst expects 79 million tonnes per annum (MMTPA) of additional LNG to take the final investment decision (FID) over the next two years, including 33 MMTPA in North America, 16 MMTPA in Qatar, and 20 MMTPA in Russia.

According to the company’s projections, while oil indexation in long-term LNG contracts has been on a declining trend for the past 10 years, 2022 would be a turning point for LNG oil-indexed contracts, with the level of indexation firmly on the rise.

It noted that while Asian LNG spot prices are expected to average close to $15/mmbtu over the next five years, the current level of oil indexation (and oil prices) would result in a $7/mmbtu yearly average discount over spot LNG.

“Inevitably, demand for long-term contracts will increase, pushing oil indexation levels up,” WoodMac said.

According to the body, contracting requirements remain different across the next 10 years, adding that through to 2025, limited uncontracted supply availability is fuelling concerns regarding the security of supply, pushing oil-indexed levels up.

Beyond 2025, price upside would be kept in check by the increased availability of uncontracted supply from Qatar and Russia, uncertainties about long-term demand from legacy northeast Asia buyers, and competitive Henry Hub plus contracts, the body said.

Vice president at Wood Mackenzie, Valery Chow said: “2021 saw the return of contracting activity to its highest levels over the last five years. Asia accounted for 85% of global contracts signed, with China leading the pack.

“We expect LNG contracting activity to remain strong in 2022. Chinese buyers are again expected to lead the way and account for most of the new long-term contracts signed. On the other hand, we expect more muted activity from Japanese buyers. Despite high spot prices, long-term contracting for Japan is anticipated to continue softening in the face of energy transition uncertainties and greater confidence in the trading capabilities of the major buyers.

“Hybrid and Henry Hub-linked contracts are expected to remain in vogue in 2022 due to the price benefits of Henry Hub contracts and availability of new US supply. In contrast, we expect few long-term JKM-linked deals as buyers remain fearful of the associated price volatility.”

The body listed weather dynamics and the timing of Nord Stream 2 start-up as the key determinants of gas prices in 2022, noting that at current levels of Russian exports and considering normal weather conditions, European storage inventories would get below 15 billion cubic metres (bcm) by the end of March, a record low.

It stated further that prices would eventually come down as the winter is through, but requirements to refill storage facilities would be high, some 20-25 bcm more than last year.

Wood Mackenzie added that the commissioning of Nord Stream two might well be the only option to refill storage and avoid a repeat of last year’s winter crisis.

Vice president at the firm, Massimo Di Odoardo said: “But things could get a lot worse. A cold winter could add up to 10 bcm of additional gas demand, pushing storage inventories to zero before the end of March. And the commissioning of Nord Stream 2 could be stopped altogether if tensions between Russia and Ukraine escalate, as the German government has recently warned.

“Normal winter weather and visibility on Nord Stream 2 commissioning would push prices down, although demand for storage (and high carbon prices) will maintain prices above US$15 per metric million British thermal units (mmbtu). But a cold winter and continued uncertainty about commissioning of Nord Stream 2 could see prices doubling, again.”

Source: The Guardians 

Power
November 29, 2021 No Comments

Oil prices rebound as traders consider Omicron’s threat to demand

(Bloomberg) –Oil rebounded from one of its biggest ever daily drops as traders assessed the risks to global demand from the Omicron variant of Covid-19 and the potential response by OPEC and its allies.

Brent rallied as much as 5.2%, climbing along with West Texas Intermediate. The World Health Organization warned the new strain could have severe consequences, while South Africa has said it appears to be more infectious, but with mild symptoms.

OPEC and its allies have already moved technical meetings in order to give themselves time to review the rout on Friday. The group is scheduled to gather later this week and decide on its output plan for January, with a pause in supply hikes on the cards, according to Morgan Stanley.

While the fundamental driver of oil’s eye-watering selloff on Friday was the emergence of Omicron, by the end of the day everything from technical selling to options markets was contriving to push the market lower. Still, analysts from Goldman Sachs to Energy Aspects said that the move was overdone and traders are now waiting to see how severe the variant’s impact will be.

“Clearly there are fears that this could have a considerable impact on demand,” said Carsten Fritsch an analyst at Commerzbank AG. “That said, Friday’s price slide was excessive.”

The Organization of Petroleum Exporting Countries and its allies will discuss the market situation and any relevant necessary steps, Russia’s Deputy Prime Minister Alexander Novak said Monday. The group postponed a ministerial meeting to get more information about current events, including the new Covid strain, he said.

OPEC will likely take a cautious stance when it gathers this week, according to Vitol Group, the world’s biggest independent oil trader. There’s also set to be more flight cancellations this week as a result of the variant, Mike Muller, the company’s head of Asia said.

Prices:

  • Brent for January settlement rose 4.1% to $75.67 a barrel at 10:33 a.m. in London.
  • Earlier on Monday, prices rose as much as 5.2% in intraday trade after ending 11.6% lower on Friday.
  • WTI for January delivery climbed 4.6% to $71.28 a barrel.

As a result of Friday’s slump, oil market volatility has blown out. One gauge of price fluctuations climbed to its highest level since May 2020. That also accompanied a surge in trading volumes as prices retreated on Friday.

The selloff wasn’t just concentrated on the front end of the oil curve either. Brent for December 2022 shed almost $8 on Friday, and had clawed back about $2.70 of that loss on Monday. The level of backwardation — a bullish structure indicating tight supply — in the futures curve also fell sharply.

“The price move was dramatic throughout the whole curve,” said Keshav Lohiya, founder of Oilytics. “Scale buying deferred Bent structure is a good risk-reward trade here as we believe backwardation is here to stay.”

Source: World oil news 

News Power
October 5, 2021 No Comments

Operators advise government against imposing VAT on cooking gas

The Oil and Gas Service Providers Association of Nigeria, OGSPAN, has urged the Federal Government not to impose the Value Added Tax (VAT) on Liquefied Petroleum Gas (LPG), otherwise known as cooking gas.

According to OGSPAN, the planned imposition of VAT on LPG would stifle demand, utilisation, investment and growth of the sector in the country.

The National President, OGSPAN, Mazi Colman Obasi in a statement, stated: “As a stakeholder in the sector, we were delighted when the Federal Government, previously excluded operators in the LPG sector from paying the VAT.

“We were even more delighted when it declared January 1, 2021, to December 31, 2030, as ‘The Decade of Gas Development for Nigeria’ with emphasis on LPG.

“Specifically, the official launch of THE DECADE OF GAS was declared by the President of Nigeria, His Excellency Muhammadu Buhari GCFR, on Monday, 29th March 2021, also recognised 2021 as a Year of Gas.

“However, having taken these steps, we were shocked to learn that the Federal Government is currently considering imposing VAT, targeted at increasing its revenue.”

According to OGSPAN, a Presidential directive was issued July 11, 2005, to remove VAT on LPG. But the approved memo erroneously had the word “import” left on it, because at the time imports were the only source of gas.

He explained that this meant that the Federal Inland Revenue Service (FIRS) charged VAT on locally produced LPG but there was no output VAT, so the VAT cost was absorbed as a loss by industry players.

He noted that Industry operators fought for 14 years to reverse this situation and the Minister of Finance, finally removed the VAT on “domestically produced gas” under a gazette issued in 2019, thus stopping the FIRS from charging VAT on LPG under a loophole that was created in error.

“The FIRS itself under several subsequent letters advised companies that neither input nor output VAT was payable on LPG in line with other petroleum products. Industry operators and experts had warned at the time that insertion of the phrase “locally produced” in front of LPG would lead to the reverse case through this legal loophole and yet again, another round of needless quagmire.

“Experts have repeatedly pointed out that of all the petroleum products listed in that gazette, why was LPG singled out for the phrase “locally produced?” Why not gasoline, and diesel, which we don’t produce and yet import over 100 times more quantity than LPG.

“The FGN recently launched a drive for Autogas using LPG/propane. How can the gas industry grow Autogas when VAT is applied to increase gas cost but a humongous tax subsidy remains on the competing gasoline/PMS? Who is going to switch when gas prices are increasing as a result of this needless tax?’

“For too long, the LPG sector had suffered from many problems, including policy inconsistency, inadequate funding, and low domestic utilisation, which needs to be fully addressed by the current administration”, he added.

He also disclosed that the planned introduction of VAT on LPG could culminate in the reversal of gains already made in the Federal Government Gas Expansion Programme, targeted at achieving rapid development of the sector.

According to him, while a litre of government subsidised petrol, under extant price regime, actually retails for between N165 and N200 per litre, depending on different parts of the country, the average deregulated retail price per litre of LPG delivered to Abuja – FCT falls between N100/Litre for propane specification to N195/Litre for butane specification.

“The cheaper of the two, being Propane spec LPG, is the industry-approved standard for Autogas in Nigeria, which portends huge savings for families and businesses.

“Autogas use with deep market penetration with a reasonable switch from PMS and AGO will save Nigeria huge foreign exchange spend on fuel importation; expand Nigeria’s domestic energy mix with improved accessibility for LPG as a cleaner and cheaper energy source with multiple applicable uses.

“This will in great measure help the consumers especially the low-income Nigerian families with their fast-eroding purchasing power in an increasingly difficult economic environment.

“Apart from savings on the unit price per litre or kg of gas, there is also much savings on gas, with respect to engine servicing and overall maintenance cost, compared to petrol or diesel engine maintenance cost. And it is environmentally friendlier than petrol and diesel, in terms of greenhouse gas emissions”, he said.

He added: “Autogas use will help trigger the much-needed demand intensive use of gas, with the multiplier benefit effect on improved in-country production and supply sources, with the attendant reduction in gas flaring, with a marked increase in foreign direct investments in LPG production plants, trading and distribution infrastructure and equipment manufacturing in Nigeria, which has been on the decline in recent years.”

News Power
October 5, 2021 No Comments

FG attracts $16.6 billion foreign investments to trade zones in 20 years

The Oil and Gas Free Trade Zones Authority has stated that it attracted $16.6bn foreign direct investment into the economy within a 20-year period spanning 2001 to 2020.

During the same period, the Authority also attracted N255.33bn local investments into the country.

The Managing Director of OGFZA, Okon Umana, disclosed this during an interview with journalists in Abuja, on Sunday.

He added that between January and May this year, OGFZA generated N9.41bn as revenue through the free trade zones.

A breakdown of the revenue revealed that N2.1bn was generated in January, while February, March, April and May had N1.45bn, N4.39bn, N1bn and N453.98m respectively.

He said this was achieved through dedicated leadership as well as the commitment and exceptional quality of members of staff of the authority.

This, he stated, had resulted in huge interests by both local and foreign investors in the zones.

The OGFZAs boss stated that currently, there were about N6.1bn investments that were expected to materialise in the Liberty Oil and Gas Free Zone.

He said: “To grow investment also means looking at the structures within our zones because as I said, you can only attract Foreign Direct Investment if you are globally competitive.

“We took a number of steps; we reviewed our standard of operation, and we came out with a timeline for delivery of our services.

“For example, in the past, we did not have a specific timeline for renewal of licence or to reissue new licences or even to process cargos.

“We came up with specific timelines – we say for example that we will take only 48 hours to clear cargos if the cargos were consigned in Free Zones.

“It will take seven days to renew the licence when all the requirements have been met and 21 days to issue a new licence under the same circumstances.”

In terms of job creation, the OGFZA boss stated that the investments have been able to unlock many direct and indirect jobs thereby empowering many Nigerians.

He said between 2005 and 2015, the authority had created 40,508 direct jobs and indirect jobs with conservative estimates at about 160,000.

He said, “These incentives are applied for activities within zones meaning that when they move items from the zone to any other place, all the taxes will be applied.”

Umana added that between 2005 and 2015, the authority created 40,508 direct jobs with indirect jobs conservatively estimated at 160,000.

Power
April 26, 2021 No Comments

Local content should drive linkages, look beyond economic rents

Notwithstanding the growth witnessed in local content development in the country, indigenous participation in the oil and gas sector needs to look beyond the simple generation of economic rents, and instead focus on the development of linkages that will endear more growth and economic development.

This was the view of an oil and gas expert, Dr. Wisdom Enang while speaking on Nigerian oil and gas local content policy: Gains, improvement, opportunities, and imperatives for the future, at the just-concluded 4th Lawyers in Oil and Gas Conference and Awards.

Enang noted that local content has increased indigenous participation in crude production and exploration as well as a rise in the number of rigs and marine vessels owned by Nigerians from 3% to 40%.

Enang said: “With Nigerians developing competence in jobs that were the exclusive preserve of expatriates, most of the jobs that were executed outside Nigeria are now being performed by Nigerians and in Nigeria. This has led to the retention of a large chunk of the industry expenditure in-country, with the attendant positive impact on employment generation and growth of Gross Domestic Product (GDP).”

He however decried that a notable factor militating against local content development in Nigeria, remains insufficient funds for indigenous companies from Nigerian banks that impede the companies from participating effectively and efficiently.

Although the local content policy has led to increased opportunities for small and medium-sized enterprises (SMEs) in the industry, Enang noted that there are still several bottlenecks to the award of contracts to small businesses in the form of tedious prequalification and tender processes.

“The issue of non-compliance remains a highly debatable topic, with some schools of thought arguing that some multinationals continue to violate provisions of the Nigerian Content Policy through the use of expatriates from foreign technical centres, who perform job functions that Nigerians have the capacity to execute”, he added.

To bring about further development, Dr Enang said for the government to achieve the local content target, it must adopt initiatives to create an enabling environment for increased involvement of Nigerians in the oil and gas industry.

“To achieve full implementation of the local content policy, the government needs to embark on a series of market-oriented policy reforms to integrate the economy towards achieving competitive economic growth and globalization through the use of private sector-led socio-economic initiatives.

“The government must also encourage industrial development by granting liberal tax incentives and strengthening support for local institutions. The role of the small and medium scale enterprises, in realizing the effective implementation of the Nigerian local content policy cannot be ignored. They need to be encouraged and strengthened in terms of finance and operational regulations, because of the critical role they play in the development of the economy.

“The Nigerian local content policies need to look beyond the simple generation of economic rents, and instead focus on the development of linkages that will endear more growth and economic development of the oil-producing regions and the nation. Enforcing local content depends on the availability of an industrial-supply base that can act as growth levers”.

Enang also disclosed the need for a private-public partnership to reinforce the implementation of human capital development through the constant acquisition of skills and technical know-how. The Nigerian Content Research and Development Fund is a good starting point that can advance skills acquisition; however, the expertise of a broad range of research-intensive private and public universities should be actively leveraged to its maximum potential.”

He, however, added that actualizing the goals of the Nigerian local content policy cannot be at the expense of quality, hence, indigenous companies must continue to invest in improving the quality of their products and services, and deliver the same to the Nigerian market at competitive prices.

Source: Guadian

News Power
March 23, 2021 No Comments

NNPC says to expect petrol from Port Harcourt Refinery after 18 months

The Nigerian National Petroleum Corporation (NNPC) said on Monday that the Port Harcourt refinery being rehabilitated for $1.5 billion will start refining gasoline (petrol) within 18 months of the project.

The Group Managing Director (GMD), NNPC, Mele Kyari, who said this in Abuja on Monday, clarified that the approved fund was for complete rehabilitation and not turnaround maintenance.

According to a report by the News Agency of Nigeria (NAN), Kyari said: “During rehabilitation, by the 18th month, part of this plant will begin to produce particularly the gasoline plants.

“What it means in a technical sense is that in 18 months, we will see production coming from that plant; we will follow it plant by plant until we are completely done,” Kyari said.

The NNPC GMD also said that the process of rehabilitation started about 10 years ago but was slowed down due to a number of mistakes and interferences.

He was hopeful the refinery would work optimally for the next 15 years after the rehabilitation.

Source: Daily Trust

News Power Production
March 23, 2021 No Comments

Dangote expects Lagos refinery to be completed by end of 2021

President, Dangote Group, Alhaji Aliko Dangote yesterday said the multi billion dollars and 650,000-barrel per day (bpd) integrated refinery and petrochemical project will be completed by the end of this year, just as granulated urea fertiliser plant at Ibeju Lekki corridor will begin production of fertiliser products next week.

This was even as the Lagos State Governor, Mr Babajide Sanwo-Olu promised to support the ongoing multi-bilion dollars investments on the axis with massive road infrastructure to further open up the economy of the axis and create a more conducive environment for the industries springing up in the area.

The duo spoke with journalists during Governor Sanwo- Olu’s two-day working visit to the Lagos Free Zone, saying that the investments would turn around the state and the nation’s economy.

Speaking on the economic potential of the refinery, Dangote also added that though the Africa’s biggest oil refinery and the world’s biggest single-train facility expected to generate about 230,000 indirect jobs would be completed by the end of this year, production of petroleum products would commence by first quarter of 2022.

The Africa’s richest man disclosed this while fielding questions from journalists after the tour of the project by the Lagos State Governor, Mr. Babajide Sanwo-Olu who went on a two – day working visit with members of his cabinet to the burgeoning industrial hub located in Lekki area of the state. He also stated that the granulated urea fertiliser plant at Ibeju Lekki corridor will commence production of fertiliser products next week.

He said: “OK the fertilizer you will actually see fertilizer within the next one week. The refinery will be finished by the end of this year and product will start coming out by first quarter of next year. ”

He commended the governor for finding time out to visit the refinery during his working visit, saying: “First of all let me thank His Excellency for taking off about five hours to be with us today.

The governor has been around this area for the past two days. Really Mr. Governor we are very grateful for your support for making this place to be investors friendly and all the support you have been giving. Not only to Dangote but to almost everybody and I can assure that this place will be the hub of industrialisation in the country going forward.

On his part, Governor Sanwo-Olu said there is urgent need to assess the level of investment on the Lekki Corridor, saying efforts were being made to address the issues the investors are facing and avert haphazard development in the new Industrial hub informed the working visit.

Sanwo-Olu said the development of Lekki Port being propelled by the operators and owners of Lagos Free zone has gone up to about 60 per cent , saying the state government would ensure that the problems being experienced in Apapa port.

To regulate and guide against haphazard development, Governor Sanwo-Olu said agencies of government would be located in the axis to ensure that the right things are done.

“The ministry of Environment, Physical Planning, Waterfront and Tourism would also have a full presence here.

Physical planning are things we cannot afford to miss out. We need to ensure that the master plan of this area is kept and the new ones we need to look at we will certainly pick them up for approvals that is required so that government can indeed take the position,” he said.

Industry Power
March 23, 2021 No Comments

Nigerian court freezes Shell accounts ahead of $4bn Aiteo lawsuit

A federal court in Lagos, Nigeria has issued an injunction barring Shell’s subsidiares in the country from withdrawing money at 20 local banks until it ringfences potential damages in a lawsuit brought against the supermajor by Aiteo Eastern E&P.

Aiteo is seeking about $4 billion in total over alleged problems with the Nembe Creek Trunk Line (NCTL) pipeline it bought from the Anglo-Dutch group in 2015 and over claims Shell undercounted its oil exports.

Court documents seen by Reuters show that Aiteo is seeking compensation over what it says was the poor condition of the pipeline and associated lost oil sales.

Aiteo also accuses Shell of deliberate improper metering of the Nigerian company’s oil exports from the Bonny Light terminal.

It is seeking $2.7 billion over the pipeline deal plus $1.28 billion for lost oil sales, the court documents show.

A spokesman for the Shell Petroleum Development Company (SPDC) told Reuters the allegations are “factually incorrect”.

“SPDC is working to secure an expeditious discharge of the freezing injunction, which we believe was obtained by Aiteo without any valid basis,” an SPDC spokesman said.

Aiteo declined to comment to Reuters on an ongoing legal case.

The lawsuit is latest in a string of legal headaches for the biggest international oil company operating in Nigeria, Africa’s biggest oil exporter.

A UK court last week cleared the way for local communities to sue the company over oil spills in the West African nation, and last month Shell lost a case brought in the Netherlands by Nigerian farmers and fisherman over pollution claims.

Shell, meanwhile, has initiated international arbitration proceedings against Nigeria over a case relating to oil spills that took place during the 1967-1970 Biafran war.(Copyright)

Power Production
December 17, 2020 No Comments

Nigeria resumes petrol import from China

Nigeria, Africa’s biggest oil producer and exporter, has resumed the importation of petrol from China, the world’s top crude oil importer.

The Asian country shipped 37,000 metric tonnes of petrol to Nigeria in September for the first time since July 2019, data from the General Administration of Customs showed, according to S&P Global Platts.

China, a major exporter of transportation fuels, has extended exports to Africa in recent years.

The first African country to receive Chinese petrol was Togo in April 2018 at 50,000 mt, followed by Nigeria in January 2019 at 51,000 mt, historical GAC data showed.

The most recent diesel exports from China to Africa were in June, with Kenya and South Africa receiving 40,000 mt and 35,000 mt, respectively, according to the data.

China’s annual crude oil imports increased by 0.9 million barrels per day in 2019 to an average of 10.1 million bpd, according to the United States Energy Information Administration.

The EIA said China’s new refinery capacity and strategic inventory stockpiling, combined with flat domestic oil production, were the major factors contributing to the increase in its crude oil imports in 2019.

Last year, China’s refinery capacity increased by 1.0 million bpd, primarily because two new refining and petrochemical complexes came online with capacities of 0.4 million bpd each.

As a result, the country’s refinery processing also increased to an all-time high in 2019, averaging 13.0 million bpd for the year, according to the EIA.

Nigeria has continued to rely heavily on importation for many years to meet its fuel needs as the nation’s refineries remain in a state of disrepair.

Uneven demand recovery in Africa has led to a divergence in support for Asian transportation fuel markets as diesel and jet fuel requirements weaken while demand for petrol remains robust, industry sources said.

The slowdown in Africa’s diesel and jet fuel demand, in particular, has removed a significant pillar of support from Asian middle distillate markets after buoying them for most of the third quarter, the sources said.

The African continent draws most of its petrol and middle distillate imports from the Persian Gulf and the Mediterranean, and an increase in demand typically lends indirect support to Asia, market sources said.

Source: Punch

Power Production
November 10, 2020 No Comments

Improved power supply will lift Nigerians out of poverty – Elumelu

The Chairman of Transcorp and Founder of the Tony Elumelu Foundation (TEF), Mr. Tony Elumelu, has stressed that improving access to electricity remains the single most critical factor for lifting a lot of Nigerians out of poverty and job creation for the teeming youth.

He said this during the announcement of Transcorp Consortium’s 100 per cent acquisition of the 966MW installed capacity Afam Power Plc and Afam Three Fast Power Limited, at an acquisition cost of N105.3 billion.
According to Elumelu, who is also the Chairman of the United Bank for Africa Group, bringing affordable, dependable power to the Nigerian people is core to Transcorp’s mission.

“Our significant investments in the power sector are demonstrations of our contribution to the economic transformation that I know Nigeria is capable of. Power remains the single most critical factor for lifting our people out of poverty and job creation for our teaming youth.

“The acquisition marks a significant milestone for Transcorp in the pursuit of its corporate purpose of improving lives and transforming Nigeria. I am honoured to be working with the federal government and urge it to continue its policy of creating an enabling environment, which sustains the confidence of both local and foreign investors – and delivers the opportunities and aspirations that all Nigerians seek.”

Speaking at the event, Vice President, Prof. Yemi Osinbajo, said: “Today marks a milestone for the country with a return to private sector investment in the power sector.

“This investment by Transcorp in acquiring ‘Afam Power Plc’ and ‘Afam Three Fast Power’ is the first of many new investments planned in the sector across the value chain. We expect that under Transcorp’s ownership the operational capacity of the facility will be raised to its full capacity.”

Speaking on Transcorp’s track record, the Director-General of the BPE, Mr. Alex Okoh said “Transcorp Consortium is one of the success stories of Nigeria’s Privatisation Programme. Through its investments in Transcorp Hotels Plc and Transcorp Ughelli Power Limited, the consortium has consistently achieved its performance targets as contained in the respective post-acquisition plans.”

Source: This day

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